PLANNING

Learning outlines
 The Concept of Planning
 Nature of Planning
 Types of Planning
 Steps in Planning
 Principles of Planning
 Advantages and limitations of planning.
 Concept of Planning

Very simply put, planning is setting the direction

for something -- some system -- and then
guiding the system to follow the direction.
What is Planning?

 Planning is a search problem that requires to find an efficient

sequence of actions that transform a system from a given
starting state to the goal state
 Planning is the starting point of the management process
 Predetermines what the business proposes to accomplish and
how it intends realizing its goals
What Is Planning?

 Planning
 A primary managerial activity that involves:
 Defining the organization’s goals

 Establishing an overall strategy for achieving those goals

 Developing plans for organizational work activities.

 Types of planning
 Informal: not written down, short-term focus; specific to an

organizational unit.
 Formal: written, specific, and long-term focus, involves

shared goals for the organization.

Why Do Managers Plan?

 Purposes of Planning
 Provides direction
 Reduces uncertainty
 Improves Coordination
 Minimizes waste and redundancy
 Sets the standards for controlling
Features of planning

 Planning focuses on achieving objectives

 Planning is a primary function of management
 Planning is pervasive
 Planning is continuous
 Planning is futuristic
 Planning involves decision making
 Planning is a mental exercise
Exhibit 7–2 Types of Plans
Types of Plans

 Strategic Plans
 Apply to the entire organization.
 Establish the organization’s overall goals.
 Seek to position the organization in terms of its environment.
 Cover extended periods of time.
 Operational Plans
 Specify the details of how the overall goals are to be achieved.
 Cover short time period.
Types of Plans (cont’d)

 Long-Term Plans
 Plans with time frames extending beyond three years
 Short-Term Plans
 Plans with time frames on one year or less
 Specific Plans
 Plans that are clearly defined and leave no room for interpretation
 Directional Plans
 Flexible plans that set out general guidelines, provide focus, yet
allow discretion in implementation.
Exhibit 7–3 Specific Versus Directional Plans
Types of Plans (cont’d)

 Single-Use Plan
 A one-time plan specifically designed to meet the need of a
unique situation.
 Standing Plans
 Ongoing plans that provide guidance for activities
performed repeatedly.
 Types of Plans
 OBJECTIVES: OBJECTIVES ARE VERY BASIC TO THE
ORGANISATION AND THEY ARE DEFINED AS ENDS WHICH
THE MANAGEMENT SEEKS TO ACHIEVE BY ITS
OPERATIONS.THEY SERVE AS A GUIDE FOR OVERALL
BUSINESS PLANNING.

 STRATEGY: STRATEGY IS A COMPREHENSIVE PLAN FOR

ACCOMPLISHING AN ORGANISATION OBJECTIVES. THIS
COMPREHENSIVE PLAN WILL INCLUDE THREE DIMENSIONS, 
(A) DETERMINING LONG TERM OBJECTIVES, 
(B) ADOPTING A PARTICULAR COURSE OF ACTION, AND 
(C) ALLOCATING RESOURCES NECESSARY TO ACHIEVE THE
OBJECTIVE.
Types of Plans

 POLICY: THEY ARE GUIDES TO MANAGERIAL ACTION AND

DECISIONS IN THE IMPLEMENTATION OF STRATEGY.

 PROCEDURE: PROCEDURES ARE ROUTINE STEPS ON HOW TO

CARRY OUT ACTIVITIES. PROCEDURES ARE SPECIFIED STEPS
TO BE FOLLOWED IN PARTICULAR CIRCUMSTANCES.

 METHOD: METHODS PROVIDE THE PRESCRIBED WAYS OR

MANNER IN WHICH A TASK HAS TO BE PERFORMED
CONSIDERING THE OBJECTIVE. IT DEALS WITH A TASK
COMPRISING ONE STEP OF A PROCEDURE AND SPECIFIES HOW
THIS STEP IS TO BE PERFORMED.
Types of Plans

 RULE: RULES ARE SPECIFIC STATEMENTS THAT INFORM

WHAT IS TO BE DONE. THEY DO NOT ALLOW FOR ANY
FLEXIBILITY OR DISCRETION.

 PROGRAMME: PROGRAMMES ARE DETAILED STATEMENTS

ABOUT A PROJECT WHICH OUTLINES THE OBJECTIVES,
POLICIES, PROCEDURES, RULES, TASKS, HUMAN AND
PHYSICAL RESOURCES REQUIRED AND THE BUDGET TO
IMPLEMENT ANY COURSE OF ACTION.

 BUDGET: IT IS A PLAN WHICH QUANTIFIES FUTURE FACTS

AND FIGURES. IT IS A FUNDAMENTAL PLANNING INSTRUMENT
IN MANY ORGANISATIONS.
 Steps in Planning
1. Define organizational objectives

2. Establishing planning premises

3. Deciding the planning period

4. Finding alternative courses of action

5. Evaluating & selecting a course of action

6. Developing derivative plans

7. Measuring & controlling the process

 Define Organizational Objectives
The first step in planning is to establish the enterprise objectives and it
is most often done by upper level or top managers. objectives
must be specific, informative and clear enough to indicate what is
to be done.

Establishing Planning Premises

Making certain assumptions about the future on the basis of
which the plan will be ultimately formulated
 Deciding the planning period
Time horizon may vary from years to decades.

Finding Alternative Courses of Actions

Searching and examining available alternatives
 Evaluating & Selecting a Course of
Action
Evaluating alternative courses in the light of the premises and
selecting the best course or courses of action

Developing Derivative Plans

Middle and lower level managers draw up the appropriate plans,
programmes and budgets for their sub-units.
Measuring & Controlling the Process
Managers check the progress of plans for taking necessary remedial
action and changing any unrealistic plan
Forecasting

 Intelligent and informed estimating or predicting the future

internal and external environment of enterprise is called
Forecasting.
 Forecasting of three crucial elements are:
a) Economic Forecasting
b) Sales Forecasting
c) Technological Forecasting
Economic Forecasting
 Economic forecasts are widely used at the firm, industry, and
economy-wide level. For a firm, economic forecasts facilitate
planning for future production, expansion, or reduction.

 For example, a retailing firm that has been in business for the last
25 years may be interested in forecasting the likely sales volume
for the coming year. Similarly, the auto industry may want to know
the total demand for vans in the coming model year.
Both production plans and the extent of competition in the
automobile industry may depend on the magnitude of the
forecasted auto demand.
Sales Forecasting
 To raise the necessary cash for investment and operations
 to establish capacity and output levels
 to acquire and stock the right amount of supplies
 to hire the required number of people

Methods of Sales forecasting are:

a) Jury of executive opinion Method
b) Sales Force Composite estimates.
c) polling
d) Mathematical projection
e) Market Research
Technological Forecasting

Technology forecasting is forecasting the future characteristics of

useful technological machines, procedures or techniques.

Items which depend on popular tastes rather than on

technological capability are excluded. Thus commodities,
services or techniques intended for luxury or amusement are
excluded from the domain of technological forecasting.
Why Forecast Technology?

 For purposes of production and/or inventory control.

 To assure adequate staffing.
 To develop administrative plans/policy internal to an
organization (e.g., personnel or budget).
Principles of Planning

 Principle of contribution to objectives

    Every plan has to contribute positively toward the accomplishment
of enterprise objectives.
 
 Principle of efficiency of plans
     Efficiency is measured by the contribution of the plan to objectives
of the enterprise minus the costs and unsought for consequences in
formulating and implementing the plan.
 
 Principle of primacy of planning
Planning is the primary prerequisite for all other functions of
management. Every action of the manager follows a planning step.
 Principles of Planning
 Principles Applicable to Structure of plans

 Principle of planning premises

If more people in an organization use common and consistent planning
premises, the enterprise planning will be more coordinated.
 
 Principle of policy framework
If more policies, appropriate to the organization, are expressed in clear terms
and form and if manages understand them, the plans of the enterprise will be
more consistent.
 
 Principle of timing
If plans are structured to provide a network of derivatives plans in sequence,
there will be more effectiveness in attainment of enterprise objectives. 
Principles of Planning

Principles Applicable to Process of Planning

Principle of alternatives
Select the plan which is the most effective and the most efficient to the
attainment of a desired goal.
Principle of limiting factor
          Consider limiting factor in generating alternatives and selection from
alternatives.
The commitment Principle
          Planning can cover a period over which commitment of resources can be
clearly visualized.
 
 
Principles of Planning
Principles Applicable to Process of Planning

The flexibility Principle

 Building flexibility in planning is beneficial, but cost of building
flexibility needs to be evaluated against the benefits.
 
The Principle of navigational change
Manager needs to periodically check events of the plan and redraw plans to
maintain the move toward a desired goal.
 
Principle of competitive strategies
 In a competitive arena, it is important to choose plans in the light of what
competitor will or will not do and navigate based on what competitors
are doing or not doing
Benefits
 Focus on objectives
Planning focuses attention of the entire organization, including top
management on objectives, goals and targets. All actions must
become goal oriented and purposeful.
 Orderliness
Planning leads to proper sequence of activities. Raw materials are
ordered in advance, jobs are allotted in time. Machines are kept
ready to run and so on.
 Participation and involvement
The very process of planning involves personnel of different
department and fosters a sense of participation. This helps
motivation.
Benefits
 Dynamism
Planning points to the need for change. It shows the way to adapt the enterprise
to the environment. now-a-days almost every large firm has to look at least
twenty years ahead. such long-term planning is preceded by technological,
economic, social and political surveys.
 Effective and faster achievements
As all the goals and requisite plans to achieve them have been established, this
leads to efficient and effective performance. Short term plans made in
collaboration with long term plans lead to faster achievements.
 Competitive edge
Well executed planning helps to accomplish goals in an efficient and effective
manner. Accomplishment of strategic goals aids in providing the organisation a
competitive edge in the market.
Planning 33
Limitations

Internal Limitations
 Rigidity
 Planning has tendency to make administration inflexible.
 Planning implies prior determination of policies, procedures
and programmes and a strict adherence to them in all
circumstances.
 There is no scope for individual freedom.
 The development of employees is highly doubted because of
which management might have faced lot of difficulties in
future.
 Planning therefore introduces inelasticity and discourages
individual initiative and experimentation.
Limitations

 Misdirected Planning
 Planning may be used to serve individual interests rather
than the interest of the enterprise.
 Attempts can be made to influence setting of objectives,
formulation of plans and programmes to suit ones own
requirement rather than that of whole organization.
 Machinery of planning can never be freed of bias. Every
planner has his own likes, dislikes, preferences, attitudes
and interests which is reflected in planning.
Limitations

 Time consuming
 Planning is a time consuming process because it involves
collection of information, it’s analysis and interpretation
thereof. This entire process takes a lot of time specially
where there are a number of alternatives available.
 Therefore planning is not suitable during emergency or
crisis when quick decisions are required.
Limitations

 Probability in planning
 Planning is based on forecasts which are mere estimates
about future.
 These estimates may prove to be inexact due to the
uncertainty of future.
 Any change in the anticipated situation may render plans
ineffective.
 Plans do not always reflect real situations inspite of the
sophisticated techniques of forecasting because future is
unpredictable.
 Thus, excessive reliance on plans may prove to be fatal.
Limitations

 False sense of security

 Elaborate planning may create a false sense of security to
the effect that everything is taken for granted.
 Managers assume that as long as they work as per plans,
it is satisfactory.
 Therefore they fail to take up timely actions and an
opportunity is lost.
 Employees are more concerned about fulfillment of plan
performance rather than any kind of change.
Limitations

 Expensive
 Collection, analysis and evaluation of different
information, facts and alternatives involves a lot of
expense in terms of time, effort and money
 Accoring to Koontz and O’Donell, ’ Expenses on
planning should never exceed the estimated benefits from
planning. ’
Limitations

External Limitations of Planning

 Political Climate- Change of government from Congress to
some other political party, etc.
 Labour Union- Strikes, lockouts, agitations.
 Technological changes- Modern techniques and equipments,
computerization.
 Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
 Natural Calamities- Earthquakes and floods.
 Changes in demand and prices- Change in fashion, change in
tastes, change in income level, demand falls, price falls, etc
Successful Planning Process

 Everyone participates
 Board and staff educated about planning
 Board and staff explore new ideas
 Board takes advantages of opportunities
 Necessary resources available
 Making Planning Effective

 Linked to Long term objectives

 Everyone participates
 Feasible
 Flexible
 Simple
 Top Management Support
THANKS

Prof. Manali
Agrawal
PIMR,Indore