3 Reasons for Planning Set Control Standards Growing complexities ProvideDirectionReasonsfor PlanningRapid socio-EconomicchangesNeed forR&D activityPlanning is defining organizational goals, establishing a strategy for reaching those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities. It can be either formal or informal, depending on the time frame and amount of documentation. Managers should plan for four reasons. First, planning coordinates effort by giving direction to managers and non-managers. Second, planning reduces uncertainty by forcing managers to look ahead, anticipate change, and develop appropriate responses. Third, planning reduces redundancy. Fourth, planning sets standards or objectives that facilitate control over the process of achieving goals.MinimizeWaste /RedundancyGrowth oftrade unionReduce theImpact ofChange
4 What Planning Accomplishes /Benefits of Planning Allows decisions to be made ahead of time.Permits anticipation of consequences.Provides direction and a sense of purpose.Provides a unifying framework; avoiding piecemeal decision making.Improves competitive strengthAchieves better coordinationHelps identify threats and opportunities and reduces risks.Facilitates managerial control through the setting of standards for monitoring and measuring performance.Encourages innovation & creativity
5 Arguments Against Strategic Planning Rigid Assumptionsof StabilityEnvironmentalTurbulenceIntuitionand CreativityFocus on Today’sCompetitionFormal planning has been popular in business since the 1960s, but critics have observed the following:• Planning may create rigidity. Assuming that conditions will remain relatively stable, formal plans lock organizational units into specific goals and time frames.• Plans can’t be developed for a dynamic environment. Managing chaos and turning disasters into opportunities requires flexibility, not rigid, formal plans.• Formal plans can’t replace intuition and creativity. Developing strategy depends as much on intuition and creativity as it does on formal analysis. Because most successful strategies are visions, not plans, merely following a systematic framework will not yield incisive thinking.• Planning focuses a manager’s attention on today’s competition, not on tomorrow’s survival. Formal planning stresses capitalizing on existing opportunities, not reinventing or creating an industry.• Formal planning reinforces success, which may lead to failure. Success can breed failure. Since change is motivated by problems, success may not motivate managers to challenge the status quo.Preoccupation withCurrent Success
6 Does Planning Improve Performance? Financial resultsEnvironmental concernsQuality and implementationThe evidence is mostly positive and suggests several conclusions.1. Formal planning in an organization is frequently associated with positive financial results.2. In those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit.3. The quality of the planning process and the implementation of the plans affect performance more than does the extent of the plans.
7 Why Do Managers Plan? / Importance of planning Purposes of PlanningPlanning is the primary management function that establishes the basis for all other management functionsPlanning establishes coordinated effortPlanning reduces uncertaintyPlanning reduces overlapping and wasteful activitiesManage complexities & competitionPlanning establishes goals andstandards used in controllingTo increase org effectiveness
8 Why Do Managers Plan? (cont.) Planning and PerformanceGenerally speaking, formal planning is associated with:Higher return on assetsHigher profitsQuality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planningExternal environment may undermine the effects of formal planningPlanning/performance relationship is influenced by the planning time frame
9 Definition of Planning Weihrich & Koontz “Planning involves selecting missions and objectives and the actions to achieve them; it requires decision making, that is, choosing from among alternative future courses of action”.McFarland “Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing & controlling the nature &direction of change”.Terry “Planning is the selection & relating of fact & making & using of assumption regarding the future in the visualisation & formation of proposed activities believed necessary to achieve desired result.”
10 Features/ nature of planning Planning is an intellectual processPlanning determines the future course of actionPrimarily concerned with looking into futureInvolves selection of suitable course of action, means there are several alternatives for achieving objectivesAll levels are concerned with the determination of future course of action.Planning is the most basic to all mgmt functionsPlanning is pervasive function of mgmtPlanning is flexible because future is always dynamicPlanning is a pervasive & continuous managerial function involving complex processes of perception, analysis, conceptual thought, communication, decision,& action
11 Benefits of planning Reduces uncertainty Encourage innovation & creativityImproves motivationAchieve better coordinationFacilitates controlPlanning leads to successFocuses attention
12 Hierarchy Of Plans (1) Mission or Purposes, (2) Objectives or goals, (3) Strategies,(4) Policies,(5) Procedures,(6) Rules,(7) Programs, and(8) BudgetsHierarchy Of Plans
13 Hierarchy of Plans (cont..) Plans can be classified as(1) mission or purposes,(2) objectives or goals,(3) strategies,(4) policies,(5) procedures,(6) rules,(7) programs, and(8) budgets
14 Hierarchy of Plans (cont..) The mission, or purpose, identifies the basic purpose or function or tasks of an enterprise or agency or any part of itObjectives, or goals, are the ends toward which activity is aimedStrategy is the determination of the basic long‑term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goalsPolicies are general statements or understandings that guide or channel thinking in decision makingProcedures are plans that establish a required method of handling future activities
15 Hierarchy of Plans – cont. Rules spell out specific required actions ornon actions, allowing no discretionPrograms are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of actionA budget is a statement of expected results expressed in numerical terms
16 Steps in Planning 1. Being Aware of Opportunities 2. Establishing Objectives or Goals3. Developing Premises4: Identify / Determining Alternative Courses5. Evaluating Alternative Courses6. Selecting a Course7. Formulating Derivative Plans8. Quantifying Plans by Budgeting
17 Being aware of opportunity :In light of Market, Competition Customer desire, Our strengths Our weaknessesSetting objectives or goals: Where we want to be& what we want to accomplish & when Considering planning premises: In what environment will our plans operate Identifying alternatives: What are the most promising alternatives to accomplishing our objectives Comparing alternatives in light of goals sought Which alternative meets our goals at lowest cost &at highest profit Choosing an alternative Selecting the course of action Formulating derivative plans such plans as to :- Buy equipment Buy materials, Hire& train workers,Budgets: Develop such budgets as Volume & price of sales, operating expenses necessary for plans, Capital expenditureSTEPS IN PLANNING
26 Principles of planning based on Purpose and Nature Of Planning . Principle of contribution to objectives: Purpose of every plan & all supporting plans is to promote accomplishment of enterprise objectives. Principle of objectives: If objectives have to be meaningful to people, they must be clear, attainable, & verifiable. Principle of primacy of planning.:... Planning logically precedes all other managerial functions. Principle of efficiency of plans: Efficiency of a plan is measured by the amount it contributes to purpose & objectives as offset by the costs required to formulate and operate it and by unsought consequences.
27 Principles--the Structure Of Plans . Principle of planning Premises: The more thoroughly the individuals who are charged with planning, understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be. Principle of the strategy and policy frame work: The more strategies and policies are clearly understood and implemented in practice, the more consistent and effective will be the frame work of enterprise plans
28 . Principle of limiting factor: In choosing among Principles--the Process Of Planning. Principle of limiting factor: In choosing amongalternatives, the more accurately individuals can recognize andsolve for those factors which are limiting or. critical to attainment ofdesired goals, the more easily and accurately they can select themost favorable alternative. The commitment principle: Logical planning should cover a period of time in the future necessary to foresee as well as possible, through a series of actions, the fulfillment of commitments involved in a decision made today
29 Principles--the Process Of Planning (Cont..) . Principle of flexibility...:. Building flexibility into plans will lessen danger of losses incurred through unexpected events, but cost of flexibility should be weighed against its advantages. Principle of navigational change: The more that planning decisions commit individuals to a future path, the more important it is to check on events and expectations periodically and redraw plans as necessary to maintain a course toward a desired goal
35 Barriers to effective planning Difficulty of accurate premisingProblems of rapid changeInternal inflexibilitiespolicy & procedural inflexibilitycapital investmentExternal inflexibilitypolitical climatetrade unionstechnology changesTime & cost factorsFailure of people in planning
36 How Do Managers Plan? The Role of Goals and Plans in Planning goals - desired outcomesprovide direction for all management decisionsrepresent the criteria against which actual work accomplishments can be measuredplans - outline how goals are going to be metTypes of Goalsall organizations have multiple objectivesno single measure can evaluate whether an organization is successfulfinancial goals - relate to financial performancestrategic goals - relate to other areas of performance7-36
41 Traditional Objective Setting IndividualEmployee’sObjectiveTopManagement’sDepartmentManager’sDivision“Increase profits, regardlessof the means”“I want to see asignificant improvementin this division’s profits”“We need to improvethe company’s performance”“Don’t worry aboutquality: just work fast”
47 Principles of Goal-Setting Set SMART goals—make them specific, measurable, attainable, relevant, and timely. Choose areas (sales revenue, costs, and so forth) that are relevant and complete.Assign specific goals.Assign measurable goals.Assign doable but challenging goals.Encourage participation.Use executive assignment action plans, or management by objectives.