Fundamentals of Management – MGT 501

Planning: As a managerial function

-- By Prof. Dr. Sharmina Afrin

Learning Objectives: After completing this topic, you will

be able to learn:
▪ What Planning is
▪ Purposes or Importance of Planning
▪ Goals and Types of Goals
▪ Strategy and strategic management
▪ Plans and Types of Plans
▪ Management by Objectives

1 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

Definition of Planning

Planning means deciding in advance what is to be done in future. It involves

defining the organization’s goals, establishing an overall strategy for achieving
those goals, and developing a comprehensive set of plans to integrate and
coordinate organizational work (it means how the activities of the organization to
be completed for the achievement of goals).

Planning is concerned with both ends (what is to be done) and means (how it is to
be done).

Planning may be either formal or informal. You will learn formal planning.

• Formal Planning: In formal planning, specific goals covering a period of

years are defined.

2 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

Purposes or importance of Planning

Planning is often called the primary management function because it establishes

the basis for all other functions that managers perform.

The purposes or importance of planning is as follows:

1. Planning provides direction: Planning provides direction to managers and

non-managers alike. When employees know what they must contribute to
reach goals, they can coordinate their activities, cooperate with each other,
and do what it is necessary to accomplish those goals.

2. Planning reduces uncertainty: When managers do planning, they are

forced to look ahead, anticipate change, consider the impact of change, and
develop appropriate responses.
Uncertainty cannot be eliminated but can be reduced through appropriate
planning.

3. Planning reduces overlapping and wasteful activities: When work

activities are coordinated according to established plans, redundancy can be
minimized, inefficiencies become obvious and can be corrected and
eliminated.

4. Planning sets the standards used in controlling: Planning establishes the

goals and standards that are used in controlling. In planning, managers
develop the goals and plans, and through controlling, they compare actual
performance against the set goals, identify any significant deviations and
take necessary corrective actions.

So, planning is a very important management function.

3 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

Goals and Types of Goals

Planning involves two important elements:

• Goals
• Plans

Goals: Goals are desired outcomes for individuals, groups of people, or entire
organization. Goals are objectives, and these two terms are used interchangeably.

Goals provide direction for all management decisions. So, they are often called the
foundation of planning.

Types of goals:
There are two types of goals –

• Stated Goals: These goals are written down and shared with others. They
are stated in different official statements of what an organization says and
what the organization wants its various stakeholders to believe.

• Real Goals: Goals that an organization actually pursues. These goals are
not stated or written down in official statements. They are understood from
the actions or behavior of the organization’s members.

4 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

Strategy and Strategic Management

Strategy: The decisions and actions which determine how the organization will
move from its present business to the business it wants to be in. That means how
the organization will move from its current position to its expected future position
(which explains how the organization will create its place / position among the
competitors).

For example: The rank of a Private University ‘A’ is 19 th among the 100 Private
Universities. In the next 5 years, the University ‘A’ wants to be one of the top 10
Private Universities. That means it wants to move from its current position (19 th) to
its expected future position (10th). So, the decisions and actions will be taken to
create the University ‘A’s place / position among the other Private Universities
(competitors), which is called Strategy.

Strategic Management: The set of managerial decisions and actions that

determines the long-run performance of an organization.

For example: To move to that expected future position (10 th), the University ‘A’
must bring changes to its following matters:

- It must bring changes to the existing admission procedure. Admission test

must be introduced to judge the quality of the intakes.

- The University must improve / develop the current physical facilities

provided to the students.

- The University must appoint more qualified faculty members. To appoint

qualified faculty members, the University must offer attractive remuneration
package to them.

- The University must take care to establish / develop its own campus.

5 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

Plans and Types of Plans

Plans: Plans are documents that outline how goals are going to be met. It includes
resource allocations, schedules of activities and other necessary actions to
accomplish / achieve the goals.

Types of Plans: Plans are divided in four broad groups and each broad group
has two types of plans. They are as follows:

6 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

1. Plans based on Breadth:
There are two types of plans based on Breadth (Width):

i) Strategic Plans: Plans that apply to the entire organization, establish

the organization’s overall goals, and seek to position the organization
in terms of its environment.

ii) Operational Plans: Plans that specify the details of how the overall
goals are to be achieved.

2. Plans based on Time Frame:

There are two types of plan based on Time Frame:

i) Long Term Plans: Plans with a time frame beyond three years, i.e.
the implementation period of the plan takes more than three years.

ii) Short Term Plans: Plans covering one year or less, i.e. the
implementation period of the plan is one year or less than one year.

3. Plans based on Specificity:

There are two types of plans based on Specificity:

i) Directional Plans: Plans that are flexible and that set out general
guide lines. There is scope to bring change in these types of plans.

ii) Specific Plans: Plans that are clearly defined and that leave no room
for interpretation. It means there is no scope to bring any change in
these types of plans.

7 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT

 4. Plans based on Frequency of use:
There are two types of plans based on Frequency of use:

i) Single-use Plan: A one-time plan specifically designed to meet the

needs of a unique situation.

ii) Standing Plans: Ongoing plans that provide guidance for activities
performed repeatedly, i.e. these plans are used for activities performed
for more than one time.

Management by Objectives (MBO)

It is an approach of goal setting and a management system in which specific

performance goals are jointly determined by employees and their managers,
progress towards accomplishing those goals is periodically reviewed, and rewards
are allocated on the basis of these progress.

MBO consists of four elements and they are:

1. Goal specificity
2. Participative decision-making
3. An explicit time period, and
4. Performance feedback

MBO increases employee performance and organizational productivity because

there is motivation behind individuals’ work efforts.

8 Prof. Dr. Sharmina Afrin, Department of Management, Faculty of Business, BUBT