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If group effort is to be effective, people must know what they are expected to
accomplish this is the function of planning.
Planning - involves selecting missions and objectives, and the action to achieve
= It requires making decisions, that is choosing from among alternative
future courses of action.
= It bridge the gap from where we are to where we want to go.
Types of Plans/Hierarchy of Plans:
1) Mission - identifies the basic functions or task of an enterprise or agency or
of any part of it.
2) Objectives or goals are the ends toward which activity is aimed they
are the results to be achieved. They represent not only the end point of
planning but the end toward which organizing, staffing, le4ading and
controlling are aimed.
3) Strategies - means grand plans made in the light of what it is between an
adversary might of not do.
Definitions of Strategies:
General programs of action and deployment of resources to attain
comprehensive objectives.
The program of objectives of an organization and their
resources used to attain these objectives.
the determination of the basic long-term objectives.
The purposes of strategies then is to determine and communicate, through a
system of major objectives and policies, as picture of the kind of enterprise that is
4) Policies - are plans in that they are general statements or understandings
which guide or channel thinking in decision making.
- Define an area within which a decision is to be made and occurs that the
decision will be consistent with, and contribute to an objectives.
- It help to decide an issues before they become a problems.
- Make it unnecessary to analyze the same situation every time it comes up,
and unify plans.
5) Procedures are plans that establish a required method of handling future
activities. They are guides to action, rather than to thinking, and to detail the exact
manner in which certain activities must be accomplished.
6) Rules spell out specific actions or non-actions, allowing no discretion.
- They are usually the simplest type of plan. People frequently confuse with
rules with policies or procedures.

- Rules are unlike procedures in that they guide action without specifying a
time sequence.
7) Programs are complex of goals, policies, procedures, rules, task, assignment,
steps to be taken, resources to be employed and other elements necessary to carry
out the given courses of action.
- They are ordinarily supported by budgets.
8) Budget is a statement of expected results expressed in numerical terms.
- It may be referred to as numberized program.
- It may be expressed either in financial terms or in terms of labor hours,
units of product, machine hours, or any other numerically measurable term.
Steps in Planning
1) Being aware of the opportunity/identification of opportunities and
threats in the light of:
the market our weaknesses
competitor opportunities
what customer wants threats
our strength
2) Establishing Objectives / Setting of Objectives or Goals
The second step it to establish objectives for the entire enterprise and
then for each subordinate or work unit. This is to be done for the long term as well
as for the short term.
- Where we want to be and what we want to accomplish and when?
3) Developing Premises / Considering Planning Premises
The third step in planning is to establish, circulate and obtain
agreement to utilize critical planning premises such as forecast, applicable basic
policies, and existing company plans.
- In what environment internal or external will our plans operate?
Principles of Planning Premises - The more thoroughly individuals charge
with planning, , understand and agree to utilize consistent planning premises th3e
more coordinated enterprise planning will be.
Forecasting is important in premising. What kinds of markets will there
be? What volume of sales? What prices? What products? What technical
developments? What to do? What rates?
4)Determining Alternative Courses / Identifying Alternatives
What are the most promising alternatives to accomplishing our
5)Evaluating Alternative Courses / Comparing Alternatives in Light of
Goals Sought
After seeking out alternative courses and examining their strong and
weak points, the next step is evaluating the alternatives by weighting them in the
light of premises and goals.

- Which alternatives will give us the best choice of meeting our goals
at the lowest cost and highest profit?
6) Selecting a Course / Choosing an Alternatives
This is the point at which the plan is adopted the real point of
decision making.
- Selecting the course of action we will pursue?
7)Formulating Derivative Plans / Formulating Supporting Plans
Derivative plans are almost invariably require to support the basic plan. Such
as plans to:
- buy equipment
- buy materials
- hire and train workers
- develop a new product
8)Numberizing Plans by Budgeting
After decision are made and plans are sets, the final steps in giving
them meaning, as was indicated. Develop such budgets as:
- volumes price of sales
- operating expenses necessary for plans
- expenditures for capital equipments
Objectives - defined as the important ends towards which organizational and
individual activities are directed or aimed.
Verifiable Objectives - that is at the end of a period it should be possible to
determine whether or not the objectives has been achieved.
The Hierarchy of Objectives / Relationship of Objectives and the
Organizational Hierarchy
1)Socio-economic purpose the zenith/height of the hierarchy in the purpose,
which has two dimensions:
There is the purpose of society such as requiring the organization to
contribute to the welfare of the people by providing goods and services at a
reasonable cost.
There is the purpose of the business, which might be to
convenient, low cost transportation for the
average people.
3)Over-all Objectives of the Organization (long-range strategies)
4)More specific over-all objectives (e.g., in key result areas)
These are the areas in which performance is essential for the success
of the enterprise.
Key result areas although there is no complete agreement
in which the
key result areas of a business should be
and they may differ for various
enterprise Peter Drucker suggested the following:

1. market standing
2. innovation
3. productivity
4. physical and financial resources
5. profitability
6. manager performance and development
7. worker performance and attitude
8. public responsibility
5)Division Objectives
6)Department and Unit Objectives
7) Individual Objectives - Performance
- Personal development objectives
The Process of Setting Objectives and the Organizational Hierarchy
Managers at different levels in the organizational hierarchy are
concerned with different kinds of objectives:
1)Board of Directors & Top Managers are very much involve in determining
the purpose, the missi9on and the over-all objectives of the firm, as well as the
more specific over-all objectives in the key results area.
2)Middle-level Managers (the vice-president or managers) - they are involved in
setting key result area objectives, division objectives, and department objectives.
3)Lower-level managers setting objectives of department and units as well as
of their subordinates.
Top-down approach - upper level managers determine the objectives for
Bottom-up approach - subordinates initiate the setting of objectives for their
positions and present them to their superior.
A Network of Objectives
Both objectives and planning programs form a network of desired
results and events. If goals are not interconnected and if they do not support one
another, people very often pursue paths that may seem good for their own
department but may be detrimental to the company as a whole.
Management by Objectives - is a comprehensive managerial system that
integrates many key managerial activities in a systematic manner and that is
consciously directed toward the effective and efficient achievement of
organizational and individual objectives.

Evolving Concept in Management by Objectives (MBO)

1)Early Impetus to MBO no one person can be called the organizer of an
approach that emphasized objectives. Commonsense has told people that group
and individuals expect to accomplish some end results.
2)Emphasis on Performance Appraisal - in the traditional approach, managers
are required to pass judgment in the personal worth of subordinates. Performance
is then evaluated against the present objectives primarily by subordinates
themselves. In this approach, without encourages, self appraisal and selfdevelopment
3)Emphasis on Short-term Objectives and Motivation Performance was
higher when people had specific objectives than when they were simply asked to do
their best. Although goal setting is not the only factor in motivating employees, it is
an important one (other factors are incentives, participation, and autonomy).
4)Inclusion of Long-range Planning in the MBO Process In MBO programs
that emphasized performance appraisal and motivation, the forces tends to be on
short-term objectives.
5)Systems Approach to MBO MBO has undergone many changes, it has been
used in performance appraisal as an instrument for motivating individuals, and
more recently in strategies planning.
How to Set Objectives
Without clear objectives managing his haphazard. No individual and
no group can expect to perform effectively and efficiently unless there is a clear
Quantitative and Qualitative Objectives
To be measurable, objectives must be verifiable. This means one must
be able to answer the questions.
Benefits of Management by Objectives
1)Improvement of Managing the advantages of management by objectives can
be summarized by saying that it results in greatly improved management.
MBO forces the manages to think about planning for results rather than merely
planning activities or work.
= MBO also requires the managers think of the way they will
accomplish results. The organization and personnel they will need to do so, and the
resources and assistance they will require. There is no better incentive for control
and no better way to know the standards for control than a set of clear goals.

2)Clarification of Organization - it forces managers to clarify organizational

roles and structures . Positions should be built around the key results areas
expected of people occupying them.
3)Encouragement of Personal Commitment the great commitment of MBO is
that it encourages people to commit themselves to their goals. They are not just
doing work, following instructions, and waiting for guidance and decisions.
- They are now individuals with clearly defined purposes.
- They have a part in actually setting their objectives.
- They have opportunity to put their ideas into planning programs.
- They understand their area of discretion and their authority.
- They have been ale to get help from their superiors to ensure that
they can accomplish their goals.
4)Development of Effective Controls - The MBO spark more effective planning,
kit also aids in developing results and taking action to correct deviation from plans
in order to ensure that goals are reached.
Weaknesses of Management by Objectives
1)Failure to teach the philosophy of MBO Managers who would put into
practice the MBO must understand and appreciate a good deal about it.
They should explain to subordinates what is it., how it works, why it is being
done, what part of it will play in appraising performance and about all, how
participants can accept it.
- The philosophy is built on concept or self-control and self-direction
that area aimed t making managers professionals.
2)Failure to give guidelines to goal setters - MBO like any other kind of
planning, cannot work if those who are expected to set goals are not given needed
guidelines. Managers must know what the corporate goals are and how their own
activities fits in with them.
3)Difficulty in Setting Goals - verifiable goals are difficult to set, to reduce the
probability of selecting ethical means for achieving results.
Top management must agree to reasonable objectives, clearly state behavioral
expectations, and give in high priority to ethical behavior, rewarding it as well as
punishing unethical activities.
4)Emphasis on Short-term Goals in most MBO program, managers set goals for
short-term, seldom for more than a year and often for a quarter or less. There is
clearly a danger of emphasizing the short-run, perhaps at the expense of the longrange. The supervisors must always assure themselves that current objectives, like
any other short-run plan, are designed to serve longer-range goals.

5)Danger of Inflexibility - Managers often hesitate to change objectives. Goals

may lease to be meaningful if they are changed too often and do not represent a
well-though out and well planned result, it is nonetheless foolish to expect a manger
to serve for a goal that has been made obsolete by revised corporate objectives,
changed premises or modified policies.
6)Other Dangers - There are some dangers and difficulties in management by
objectives. Difficulties may also arise in applying goal-oriented planning in a very
dynamic and complex environment. MBO was rejected because of difficulties with
the following:
converting board organizational objectives into more
organizational unit objectives;
measuring performance and providing feedback.
determining what is meritorious performance and rewarding
individuals accordingly;
stating long-term objectives congruent with short term
goals, and
adjusting to the fast changing environment.