UNIT 2 Planning

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Deemed to be University
Unit II
Planning
Fundamental Management Function
Excellence and Service

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Deciding Beforehand

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What is to be done?
When it is to be done?
Who is going to do?
How it is to be done?

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● Intellectual Process
● Lays down organizational goals and objectives
● Develops various courses of action

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PLANNING
• Planning is the fundamental management function, which

involves deciding beforehand, what is to be done ?, when
is it to be done?, How it is to be done? and Who is going
to do it?
• It is an intellectual process which lays

down an organisation’s Goals & Objectives and develops
various courses of action, by which the organisation can
achieve those objectives. It chalks out exactly, how to
attain a specific goal.
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• Planning is nothing but thinking before the action takes place.
• It helps us to take a peep into the future and decide in advance the way to
deal with the situations, which we are going to encounter in future. It
involves logical thinking and rational decision making.

Characteristics of Planning
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• Managerial function: Planning is a first and foremost managerial function

provides the base for other functions of the management, i.e. organising,
staffing, directing and controlling, as they are performed within the
periphery of the plans made.
• Goal oriented: It focuses on defining the goals of the organisation,

identifying alternative courses of action and deciding the appropriate
action plan, which is to be undertaken for reaching the goals.
• Pervasive: It is pervasive in the sense that it is present in all the segments

and is required at all the levels of the organisation. Although the scope of
planning varies at different levels and departments.
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• Continuous Process: Plans are made for a specific term, say for a month,
quarter, year and so on. Once that period is over, new plans are drawn,
considering the organisation’s present and future requirements and
conditions. Therefore, it is an ongoing process, as the plans are framed,
executed and followed by another plan.
• Intellectual Process: It is a mental exercise at it involves the application of

mind, to think, forecast, imagine intelligently and innovate etc.

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• Futuristic: In the process of planning we take a sneak peek of the future. It

encompasses looking into the future, to analyse and predict it so that the
organisation can face future challenges effectively.
• Decision making: Decisions are made regarding the choice of alternative

courses of action that can be undertaken to reach the goal. The alternative
chosen should be best among all, with the least number of the negative
and highest number of positive outcomes.

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Importance of Planning
• It helps managers to improve future performance
By establishing objectives and selecting a course of action, for the benefit of

the organisation.
• It minimises risk and uncertainty

By looking ahead into the future.
• It facilitates the coordination of activities.

Reduces overlapping among activities and eliminates unproductive work.
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• Provides direction for action.

It states in advance, what should be done in future
• It uncovers and identifies future opportunities and threats.
● It sets out standards for controlling.

It compares actual performance with the standard performance and efforts
are made to correct the same.

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Planning is present in all types of organisations, households, sectors, etc. We need to plan
because the future is highly uncertain and no one can predict the future with 100%
accuracy, as the conditions can change anytime. Hence, planning is the basic requirement
of any organization for the survival, growth and success.

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Types of Plans
Strategic Planning
E-g Increasing the revenue, Brand reputation

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Strategic plan
● A strategic plan is the company’s big picture.

● It defines the company’s goals for a set period of time, whether that’s one year or ten, and
ensures that those goals align with the company’s mission, vision, and values.
● Strategic planning usually involves top managers, although some smaller companies choose to
bring all of their employees along when defining their mission, vision, and values.

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Tactical Plan
E-g Marketing Campaign, Recruitment, Promotion

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Tactical Plan
● The tactical strategy describes how a company will implement its strategic plan.
● A tactical plan is composed of several short-term goals, typically carried out within one year,
that support the strategic plan.
● Generally, it’s the responsibility of middle managers to set and oversee tactical strategies, like
planning and executing a marketing campaign.

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Operational Plans
E-g work schedules, policies, rules, or regulations that set standards for employees, Addressing
absence

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Operational Plan
● Operational plans encompass what needs to happen continually, on a day-to-day basis, in

order to execute tactical plans.
● Operational plans could include work schedules, policies, rules, or regulations that set
standards for employees, as well as specific task assignments that relate to goals within the
tactical strategy, such as a protocol for documenting and addressing work absences.

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Contingency plan
E-g natural disaster, malfunctioning software, or the sudden departure of a C-level executive.

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Contingency plan
● Contingency plans wait in the wings in case of a crisis or unforeseen event.
● Contingency plans cover a range of possible scenarios and appropriate responses for issues
varying from personnel planning to advanced preparation for outside occurrences that could
negatively impact the business.
● Companies may have contingency plans for things like how to respond to a natural disaster,
malfunctioning software, or the sudden departure of a C-level executive.

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Levels of Planning

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Steps in Planning

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Making effective plans

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Consciousness for Planning

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Initiative at top level

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Proper Communication

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Participation in planning

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Emphasis on long term and short term planning

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Peter F. Drucker proposed this concept

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General Electric to be the first organization that implemented ---------.

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Corporate
Department Department Department
Individual Individual Individual

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Management By Objective(MBO)
According to Peter Drucker: MBO is regarded as a system for

improving performance, both of individual manager and enterprise
as a whole by setting of goals at the corporate, departmental and
individual manager's level.
MBO is a process through which specific goals are set

collaboratively for the organization as a whole and every unit and
individual within it.

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Basic Principles of MBO
1. Clarification of Organizational and departmental objectives

2. Specific Objectives for each member.
3. Participative Decision Making
4. Explicit time period
5. Performance Evaluation and feedback

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Process of MBO
1. Setting objectives
2. Setting Employees' Targets
3. Monitoring Performance
4. Evaluating Performance
5. Performance Based Incentives

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Advantages of MBO
• Since Management by objectives (MBO) is a result-oriented process and

focuses on setting and controlling goals, it encourages managers to do
detailed planning.
• Both the manager and the subordinates know what is expected of them
and hence there is no role ambiguity or confusion.
• In addition, the responsibilities and authority of the personnel is clearly

established.

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• It makes individuals more aware of the company goals. Most often the
subordinates are concerned with their own objectives and the environment
surrounding them. But with MBO, the subordinates feel proud of being
involved in the organizational goals.
• Management by objectives (MBO) often highlights the area in which the

employees need further training, leading to career development, that
improves their morale and commitment.
• The system of periodic evaluation lets the subordinates know how

well they are doing. Since MBO puts strong emphasis on quantifiable
objectives, the measurement and appraisal can be more objective,
specific and equitable.
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Disadvantages of MBO
• MBO can only succeed if it has the complete support of the top management.
• Management by Objectives (MBO) may be resented by subordinates. They may

be under pressure to get along with the management when setting goals and
objectives and these goals may be set unrealistically high. This may lower their
morale and they may become suspicious about the philosophy behind MBO.
• It takes too much of the manager’s time. Too many meetings and too many
reports add to the manager’s responsibility and burden. Some managers may
resist the program because of this increased paperwork.

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● The emphasis is more on short-term goals. It is difficult to do long-range

planning because all the variables affecting the process of planning cannot be
accurately forecast due to the constantly changing socio-economic and
technological environment which affect the stability of goals.
● Most managers may not be sufficiently skilled in interpersonal interaction such

as coaching and counseling, which is extensively required.

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Nature of item Deviation from Annual Business

Plan (ABP)
Revenue 50% of ABP or falls below 100

crore whichever is lower
Expenses 40% of ABP or exceeds 50 crore
whichever is higher

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Strategy in which managers will only step in when there are significant
deviations from planned outcomes. These can be either operational or
financial outcomes.
MANAGEMENT BY EXCEPTION (MBE)

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Process of Management By Exception(MBE)
1. Identifying and Specifying KRAs

2. Setting Standards and outlining permissible deviations, especially for K.R.A.'s
3. Comparing actual results with the Standards
4. Computing and analyzing deviations
5. Strategizing and taking corrective actions

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Advantages of Management By Exception(MBE)
● It saves time. Manager attends to real problems at a particular point of time.
● Concentrated efforts are possible, as this system enables the manager to decide when
and where he should pay his attention. It identifies crisis and critical problems.
● Lesser number of decisions is required to be taken, which enables the manager to go

into detail.
● It facilitates delegation of authority

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Limitations of Management by Exception
● It requires a comprehensive observing and reporting system.
● The system is silent till the problem becomes critical.
● May demotivate some employees

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STRATEGY & POLICY

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STRATEGY
Derived from Greek word- Strategos
Meaning – General
Strategy means the art of general.

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STRATEGY
Strategy is the determination of long-term goals of an enterprise, and the

adoption of course of action and the allocation of resources necessary for
carrying out these goals.

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To become the cheapest provider in the smartphone market
Goal
Negotiate with suppliers to reduce the costs of the electronic components

used in production
Large scale of production
Searching for the availability of cheap labours
Outsourcing
Course of Action (COA)
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Men
Machine
Money
Material
Allocation of resources

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POLICY
Derived from Latin word- Politis
Meaning- Polished
Policy means to say clear.

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A statement which provides guidelines in decision making to

members of an organization in respect to any course of action.
Policy

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Levels of Strategy

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Corporate strategy defines the markets and businesses

in which a company will operate.
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● Business strategy defines the basis on which firm will compete. It is a business-unit
level strategy, formulated by the senior managers of the unit. This strategy
emphasizes the strengthening of a company’s competitive position of products or
services.

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Marketing HR Finance Production
A functional strategy is, in reality, the departmental/division strategy designed for each
organizational function. Thus, there may be marketing strategy, human resource
strategy, financial strategy, production strategy.

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HR
Recruitment Training Compensation Welfare
Operating strategy :
The operating managers/field-level managers develop an operating strategy to achieve
immediate objectives.

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Forecasting
✓ Forecasting is the process of mapping out corporate actions based on
past and present data trends.
✓ Forecasting is about predicting the future as accurately as possible, given

all of the information available, including historical data and knowledge of
any future events that might impact the forecasts.
✓ Since forecasts are predictions of future events, plans often use forecasts
in order to support the decision making process.

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Type of Forecasting

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The Delphi method
1. A panel of experts is assembled.

2. Forecasting tasks/challenges are set and distributed to the experts.
3. Experts return initial forecasts and justifications. These are compiled and summarised in
order to provide feedback.
4. Feedback is provided to the experts, who now review their forecasts in light of the feedback.
This step may be iterated until a satisfactory level of consensus is reached.
5. Final forecasts are constructed by aggregating the experts’ forecasts.

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Decision Making
• A decision is the selection of a right course of action (or decision)

out of many available alternatives.
• Philip Kotler: “A decision may be defined as a conscious choice
among alternative courses of action.”
• Peter F. Ducker: “Whatever a manager does he does through making
decisions.”
• Franklin G. Moore: “Decision making is the blend of thinking,
deciding and acting.”
• Koontz & O’Donnel: “Decision is the selection from among
alternatives of a course of actions.”

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Characteristics of Decision Making
1. Decision-making is based on rational thinking. The manager tries

to foresee various possible effects of a decision before deciding a
particular one.
2. It is a process of selecting the best from among alternatives

available.
3. It involves the evaluation of various alternatives available. The

selection of best alternative will be made only when pros and cons of all
of them are discussed and evaluated.

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4. Decision-making is the end product because it is preceded by

discussions and deliberations.
5. Decision-making is aimed to achieve personal and organizational

goals.
6. It also involves certain commitment. Management is committed to

every decision it takes.

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NATURE OF DECISION MAKING
Alternatives

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Uncertainly

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High Risk Consequences

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Complexity

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Interpersonal Issues

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Self Study
https://www.yourarticlelibrary.com/decision-making/decision-making-7-essential-nature-of-decision-making-
explained/25655

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NATURE OF DECISION MAKING

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Types of Decision
● Strategic
● Tactical
● Operational
Self study
https://www.businessmanagementideas.com/management/7-main-
types-of-decisions-management/10011

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Managers make decisions with various amounts of information
Certain environment
• offers complete information on possible action alternatives and

their consequences
Risk environment
• lacks complete information but offers probabilities of the likely

outcomes for possible action alternatives
Uncertain environment
• lacks so much information that it is difficult to assign

probabilities to the likely outcomes of alternatives

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Imagine that you are about to open a shop or a new branch of your business in a new
location and there’s no information about that location online, or in nearby registries. You
are the decision-maker, and so far you’ve only heard rumors that it’s a high potential
location.
a) Do you decide for opening that branch without prospecting it or not? Will it bring good
revenue? (If you do it right away, there’s a lot of uncertainty here and your decision is
likely to backfire)
b) You send someone to prospect the area and gather as much information as possible.
After that, it comes to light that there are logistic challenges, due to road access, in the
rainy season, goods deliveries cost higher. (If you decide to go ahead, at least now you
know what Risk you need to mitigate and you’re better equipped to deal with it and
succeed)

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Decision Making Process

UNIT 2 Planning

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CHRIST

Fundamental Management Function

Excellence and Service

Excellence and Service

Excellence and Service

● Lays down organizational goals and objectives

● Develops various courses of action

Excellence and Service

• Planning is the fundamental management function, which

• It is an intellectual process which lays

• Planning is nothing but thinking before the action takes place.

Excellence and Service

• Managerial function: Planning is a first and foremost managerial function

• Goal oriented: It focuses on defining the goals of the organisation,

• Pervasive: It is pervasive in the sense that it is present in all the segments

• Intellectual Process: It is a mental exercise at it involves the application of

Excellence and Service

• Futuristic: In the process of planning we take a sneak peek of the future. It

• Decision making: Decisions are made regarding the choice of alternative

Excellence and Service

• It helps managers to improve future performance

By establishing objectives and selecting a course of action, for the benefit of

• It minimises risk and uncertainty

• It facilitates the coordination of activities.

• Provides direction for action.

• It uncovers and identifies future opportunities and threats.

● It sets out standards for controlling.

Excellence and Service

Excellence and Service

Excellence and Service

● A strategic plan is the company’s big picture.

Excellence and Service

Excellence and Service

Excellence and Service

Excellence and Service

● Operational plans encompass what needs to happen continually, on a day-to-day basis, in

Excellence and Service

Excellence and Service

● Contingency plans wait in the wings in case of a crisis or unforeseen event.

Excellence and Service

Excellence and Service

Excellence and Service

Making effective plans

Excellence and Service

Consciousness for Planning

Initiative at top level

Excellence and Service

Excellence and Service

Emphasis on long term and short term planning

Excellence and Service

Peter F. Drucker proposed this concept

Excellence and Service

General Electric to be the first organization that implemented ---------.

Excellence and Service

Excellence and Service

Department Department Department

Individual Individual Individual

Individual Individual Individual

Individual Individual Individual

Individual Individual Individual

Excellence and Service

According to Peter Drucker: MBO is regarded as a system for

MBO is a process through which specific goals are set