Unit-3: Planning

Dr. Belay K
Planning: An Introduction
• We plan to go on a holiday trip, plan our careers,
and plan our investments and so on.
• Planning is the basic process by which we use to
select our goals and determine the means to
achieve them.
• Lot of information has to be gathered and
processed before a plan is formulated.
• “Planning is deciding in advance what to do,
how to do it, when to do it and who is to do it.”
– Koontz and O’Donnell
Cont’d
• Planning is necessarily forward looking. It is
looking into the future. It bridges the gap
between where we are and where we want to go.
• It involves visualizing a future course of action
and putting it in a logical way.
• “Failure to plan is planning to fail”.
• “Planning is getting ready to do something
tomorrow”.
Cont’d
• Planning is deciding in the present, what is to be
done in future.
• It is the process of thinking before doing.
• A plan is a specific, documented intention
consisting of an objective and an action
statement.
• The objective portion is the end, and the action
statement represents the means to that end.
Cont’d
• Stated another way, objectives give management
targets to shoot at, whereas action statements
provide the arrows for hitting the targets.
• Properly conceived plans tell what, where and
how something is to be done.
Types of Plans
• Plans commit individuals, departments,
organizations, and the resources of each to
specific actions for the future.
• Effectively designed organizational goals fit
into a hierarchy so that the achievement of
goals at low levels permits the attainment of
high-level goals.
Cont’d
• Three major types of plans can help managers achieve their
organization's goals: strategic, tactical, and operational.
• Operational plans lead to the achievement of tactical plans,
which in turn lead to the attainment of strategic plans.
• Achievement of Operational goals-- tactical goals-- >strategic
goals.
• Strategic goals are the responsibility of top management,
tactical goals that of middle management, and operational
goals that of first-line supervisors and workers.
• In addition to these three types of plans, managers should also
develop a contingency plan in case their original plans fail.
Operational plans
• The specific results expected from departments,
work groups, and individuals are the
operational goals.
• These goals are precise and measurable.
Examples:
 (a) Process 150 sales applications each week
 (b) Publish 20 books this quarter

• Thus an operational plan is one that a manager

uses to accomplish his or her job
responsibilities.
Cont’d
• Supervisors, team leaders, and facilitators
develop operational plans to support tactical
plans.
• Operational plans can be a single-use plan or an
ongoing plan.
• (a) Single-use plans: These plans apply to
activities that do not recur or repeat.
• A onetime occurrence, such as a special sales
program, is a single-use plan because it deals
with the who, what, where, how, and how much
of an activity.
Cont’d
• Example: A budget: Because it predicts sources
and amounts of income and how much they are
used for a specific project.
• (b)Continuing or ongoing plans: These are
usually made once and retain their value
over a period of years while undergoing
periodic revisions and updates.
• Examples:
• (i) A policy:
is a broad guideline for managers to
follow when dealing with important areas of
decision making.
Cont’d
• Policies are general statements that explain
how a manager should attempt to handle routine
management responsibilities.
• Typical human resources policies [employee hiring,
terminations, performance appraisals, pay increases, and
discipline].
Cont’d
• (ii) A procedure: explains how activities or
tasks are to be carried out.
• For example, in purchasing supplies and
equipment, the procedure usually begins with a
supervisor completing a purchasing requisition.
The requisition is then sent to the next level of
management for approval.
Cont’d
• The approved requisition is forwarded to the
purchasing department.
• Depending on the amount of the request, the
purchasing department may place an order, or
they may need to secure quotations and/or bids
for several vendors before placing the order.
• By defining the steps to be taken and the order in
which they are to be done, procedures provide a
standardized way of responding to a repetitive
problem.
Cont’d
• (iii) A rule: tells an employee what he or she can
and cannot do.
• Rules are “do” and “don’t” statements put into
place to promote the safety of employees and
the uniform treatment and behavior of
employees.
 For example, rules about tardiness and
absenteeism permit supervisors to make discipline
decisions rapidly and with a high degree of
fairness.
Tactical plans
•A tactical plan is concerned with what
the lower level units within each division
must do, how they must do it, and who is
in charge at each level.
• Tacticsare the means needed to activate a
strategy and make it work.
• Tacticalplans are concerned with shorter
time frames and narrower scopes than are
strategic plans.
Cont’d
• Tactical plans usually span one year or less
because they are considered short-term goals.
• It is the middle manager’s responsibility to
take the broad strategic plan and identify
specific tactical actions.
 Strategic plans
• A strategic plan is an outline of steps designed
with the goals of the entire organization as a
whole in mind, rather than with the goals of
specific divisions or departments.
• Strategic planning begins with an
organization's mission.
• Strategic plans look ahead over the next two,
three, five, or even more years to move the
organization from where it currently is to where
it wants to be.
Cont’d
• Require multilevel involvement and harmony
among all levels of management within the
organization.
• Top-level management develops the directional
objectives for the entire organization, while
lower levels of management develop compatible
objectives and plans to achieve them.
• Top management’s strategic plan for the entire
organization becomes the framework and sets
dimensions for the lower level planning.
Contingency plans
• Contingency planning involves
identifying alternative courses of action
that can be implemented if and when the
original plan proves inadequate because
of changing circumstances.
• Management develop alternatives to the
existing plan and ready them for use
when and if circumstances make these
alternatives appropriate.
Steps in the Planning Process
• Establishing objectives: The first step in the
planning process is to identify the goals of the
organization.
• The internal and external conditions affecting
the organization must be examined before
setting objectives.
• The objectives must indicate what is to be
achieved, where action should take place, who is
to perform it, how it is to be undertaken and
when is it to be accomplished.
Cont’d
• Developing premises: After setting objectives,
it is necessary to outline planning premises.
• Premises are assumptions about the environment
in which plans are made and implemented.
 Thus, assumptions about the likely impact of important
environmental factors such as market demand for goods,
cost of raw materials, technology to be used, population
growth, government policy, etc. on the future plans are
made.
 Plans should be formulated by the management, keeping
the constraints imposed by internal as well as external
conditions in mind.
Cont’d
• Evaluating alternatives and selection:
• After establishing the objectives and planning
premises, the alternative courses of action have to be
considered.
• Changesin government policy, technology,
competition, etc. pose several alternatives before
manufacturers, regarding the product they should
manufacture. Alternatives have to be evaluated
against costs, risks involved, benefits arise, etc.
 The pros and cons as well as the consequences of each
alternative course of action must be examined thoroughly
before a choice is made.
Cont’d
• Formulating derivative plans: After selecting
the best course of action, the management has to
formulate the secondary plans to support the
basic plan.
• The plans derived for various departments,
units, activities, etc., in a detailed manner are
known as ‘derivative plans’.
• To ensure the success of a basic plan, the
derivative plans must indicate the time schedule
and sequence of performing various tasks.
Cont’d
• Securing cooperation and participation:
• The successful implementation of a plan depends, to
a large extent, on the whole-hearted cooperation of
the employees.
• In view of this, management should involve
operations people in the planning activities.
Suggestions, complaints and criticisms from
operating personnel help management rectify the
defects in plans and set things right in the beginning
itself.
• Participation motivate employees to carry out the
plan to the best of their ability.
Cont’d
• Providing for follow-up: Plans have to be reviewed
continually to ensure their relevance and effectiveness.
• In the course of implementing plans, certain facts may come
to light that were not even thought of earlier. In the light of
these changed conditions, plans have to be revised. Without
such a regular follow-up, plans may become out-of-date and
useless.
• Moreover, such a step ensures the implementation plans
along right lines. Management can notice shortcomings in
time and initiate suitable remedial steps.
• A continuous evaluation of plans also helps to develop
sound plans in future, avoiding mistakes that have surfaced
while implementing the previous plans.
Characteristics of Planning
• Planning is goal-oriented: All plans arise from
objectives. Objectives provide the basic
guidelines for planning activities. Planning has
no meaning unless it contributes in some
positive manner to the achievement of
predetermined goals.
• Planning is a primary function: Planning is the
foundation of management. It is a parent
exercise in management process. It is a preface
to business activities.
Cont’d
• Planning is all-pervasive: Planning is a
function of all managers. It is needed and
practiced at all managerial levels. Planning is
inherent in everything a manager does.
Managers have to plan before launching a new
business.
• Planning is a mental exercise: Planning is a
mental process involving imagination, foresight
and sound judgment. Planning compels
managers to abandon guesswork and wishful
thinking.
Cont’d
• Planning is a continuous process: It is a never-
ending activity. Once plans for a specific period
are prepared, they are translated into action.
• Planning involves choice: Planning essentially
involves choice among various alternative
courses of action.
• Planning is forward looking: Planning means
looking ahead and preparing for the future. It
means peeping into the future, analyzing it and
preparing for it.
Cont’d
• Planning is flexible: Planning is based on a
forecast of future events. Since future is
uncertain, plans should be reasonably flexible.
• Planning is an integrated process: Plans are
structured in a logical way wherein every lower-
level plan serves as a means to accomplish
higher level plans. They are highly
interdependent and mutually supportive.
 05/16/2022
Management by Objectives

• Management by objectives (MBO) is a method

whereby managers and employees define goals
for every department, project, and person and
use them to monitor subsequent performance.
• Four major activities must occur in order for
MBO to be successful:
• 1.Set goals. Setting goals involves employees at
all levels and looks beyond day-to-day activities
to answer the question “What are we trying to

Dr. Belay Kinati

accomplish?”

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Cont’d
•A good goal should be concrete and realistic, provide
a specific target and time frame, and assign
responsibility.
•Goals may be quantitative or qualitative.
•Quantitative goals are described in numerical
terms[e.g., Salesperson Jones will obtain 16 new
accounts in December].
•Qualitative goals use statements [e.g., marketing will
reduce complaints by improving customer service
next year].

Dr. Belay Kinati

•Mutual agreement between employee and supervisor
creates the strongest commitment to achieving goals.

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Cont’d
• 2.Develop action plans. An action plan defines
the course of action needed to achieve the stated
goals. Action plans are made for both individuals
and departments.
• 3. Review progress. A periodic progress review
is important to ensure that action plans are
working. These reviews can occur informally
between managers and subordinates, where the
organization may wish to conduct three-, six-, or

Dr. Belay Kinati

nine month reviews during the year.

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Cont’d
• Periodic checkup allows managers and
employees to see whether they are on target
or whether corrective action is needed.
• Managers and employees should not be
locked into predefined behavior and must
be willing to take whatever steps are
necessary to produce meaningful results.
• The point of MBO is to achieve goals. The

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action plan can be changed whenever goals
are not being met.

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Cont’d
• 4. Appraise overall performance.
• The final step in MBO is to carefully evaluate
whether annual goals have been achieved for
both individuals and departments. Success or
failure to achieve goals can become part of the
performance appraisal system and the
designation of salary increases and other
rewards. The appraisal of departmental and
overall corporate performance shapes goals for

Dr. Belay Kinati

the next year. The MBO cycle repeats itself on
an annual basis.

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Benefits of MBO

Manager and employee efforts are

focused on activities that will lead to
goal attainment.
Performance can be improved at all
company levels.
Employees are motivated.
Departmental and individual goals

Dr. Belay Kinati

are aligned with company goals.

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Problems with MBO

• Constant change prevents MBO from taking

hold.
• An environment of poor employer-employee
relations reduces MBO effectiveness.
•Strategic goals may be displaced by
operational goals.
Mechanistic organizations and values that
discourage participation can harm the MBO

Dr. Belay Kinati

process.
Too much paperwork saps MBO energy.

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Review Questions
• Explain the process of Management by Objectives. Also
bring out the relative merits and demerits of MBO.
Thanks !