Planning

 Planning involves selecting mission and objectives and

the actions to achieve them,

 it requires decision making, that is, choosing among

alternative future courses of action.

 That is, choosing a goal and developing a strategy to

achieve that goal.

 Planning bridges the gap from where we are to where

we want to go.
 Planning…
 Planning and control are inseparable, that is, the
Siamese twins of management.

 Any attempt to control with out plans is meaningless.

 Controlling means comparing plans with results,

based on that corrective actions or

 new plans will be formed or

 go with the current plan if no deviations.

 Planning…
 Planning is that it encourages the development of task
strategies.

 That is, planning not only encourages people to work

hard for extended periods and to engage in behaviors
directly related to goal accomplishment,

 it also encourages them to think of better ways to do

their jobs.

 Planning has been proven to work for both

companies and individuals.
 The Purpose of Planning
 Planning is essential in modern business.

 Planning affects performance.

 Planning puts focus on objectives.

 Planning is necessary to facilitate control.

 Planning helps in decision making.

 Benefits of Planning
 Focuses attention on Objectives
 Ensures Economical Operation
 Reduce uncertainty
 Facilitates control
 Encourages innovation and creativity
 Improves motivation
 Improves competitive strength
 Achieves better coordination.
 Limitations of Planning
 Lack of reliable data

 Lack of initiative

 Costly process

 Rigidity in organizational working

 Non acceptability of change

 External limitations

 Psychological barriers.
 Measures to overcome limitations
of Planning
1. Setting clear cut objectives
2. Management information system
3. Careful premising
4. Business forecasting
5. Dynamic management
6. Flexibility
7. Availability of resources
8. Cost benefit analysis.
 Types of Plans
Plans can be classified as:
 Purpose or mission
 Objectives or goals
 Strategies
 Policies
 Procedures
 Rules
 Programs, and
 Budgets.
 Types of Plans…
Purpose and Missions:

 It identifies the basic function or task of an enterprise

or agency or any part of it.

 For example, the purpose of a business generally is

the production and distribution goods and services.

 The purpose of a University is teaching, research, and

providing services to the community.
 Types of Plans…
Objectives or Goals:

 Are the ends toward which activity is aimed.

 They represent not only the end point of planning but

also the end toward which organizing, staffing, leading,

and controlling are aimed.

 Types of Plans…
Strategies:

 It is defined as the determination of the basic long

term objectives of an enterprise and

 the adoption of courses of action and allocation of

resources necessary to achieve these goals.

 Types of Plans…
 It refers to the determination of the purpose (or
mission) and the basic long term objectives of an
enterprise, and

 the adoption of courses of action and allocation of

resources necessary to achieve these aims.

 That is the direction in which human and material

resources will be applied in order to increase the
chance of achieving selected objectives.
 Types of Plans…
Policies:

 Policies define an area within which a decision is to

be made and

 ensure that the decision will be consistent with, and

contribute to, an objective.

 Policies help decide issues before they become

problems, thus permitting managers to delegate
authority and maintain control over what their
subordinates do.
 Types of Plans…
 Policies are general statements or understandings
that guide managers thinking in decision making.

 They ensure that decisions fall within certain

boundaries.

 They usually do not require action but are intended

to guide managers in their commitment to the
decision they ultimately take.
 Types of Plans…
Procedures:

 Are plans that establish a required method of

handling future activities.

 They are guides to action, rather than to thinking, and

 they detail the exact manner in which certain

activities must be accomplished.

 Eg: a company policy may grant employees vacations,

 Types of Plans…
 Procedures established to implement this policy will
provide for scheduling vacations to avoid disruption
of work,

 setting methods and rates of vacation pay,

 maintaining records to assure each employee of a

vacation, and

 spelling out the means for applying for a vacation.

 Types of Plans…
Rules:

 It spell out specific required actions or nonactions,

allowing no discrimination.

 The essence of a rule is that it reflects a managerial

decision that some certain action must or must not
be taken.

 Rules allow no discrimination in their application.

 Types of Plans…
Programs:

 Are a complex of goals, policies, procedures, rules,

task assignments, steps to be taken, resources to be
employed, and

 other elements necessary to carry out a given course

of action, and they need to be supported by budgets.
 Types of Plans…
Budgets:

 The budget is the fundamental planning instrument in

many companies.

 That is, it may deal with operations, as the operational

expense budget does, or

 it may reflect capital outlays, as the capital

expenditure budget does, or

 it may show cash flow, as the cash budget does.

Steps in Planning
Being aware of Opportunity
In light of –
The market
Competition
What customers want
1 Our Strength
Our Weakness

Setting objectives or Goals

Where we want to be and
2 what we want to accomplish and
when

Considering planning Premises

In what environment
3 – Internal or external –
will our plans operate?
 Steps in Planning…
Identifying Alternatives
4 What are the most promising alternatives to accomplish our
objectives?

Comparing alternatives in Light of Goals Sought

5 Which alternative will give us the best chance of meeting our
goals at the lowest cost and highest profit?

Choosing an Alternative
6 Selecting the best course of action that we will pursue
 Steps in Planning…

Formulating Supporting Plans

Such as plans to:
7 Buy equipment
Buy materials
Hire and train workers
Develop a new product

Numberizing Plans by Making Budgets

Develop such budgets as:
8 Volume and price of sales
Operating expenses necessary for plans
Expenditures for capital equipment
 Planning From Top to Bottom
 Planning works better when the goals and action
plans at the bottom and middle of the organization
support the goals and action plans at the top of the
organization.

 That is, panning works best when everybody pulls in

the same direction.
Planning From Top to Bottom
Planning From Top to Bottom…
 Top management is responsible for developing
long term strategic plans,

 that make clear how the company will serve

customers and position itself against competitors in
the next two to five years.

 Strategic planning begins with the creation of an

organizational purpose.
Planning From Top to Bottom…
 Purpose statement, which is often referred to as an
organizational mission or vision, is a statement of a
company’s purpose or reason for existing.

 Purpose statements should be brief, not more than

two sentences.

 They should also be long lasting, inspirational, clear,

and consistent with widely shared company beliefs
and values.
Planning From Top to Bottom…
 A clear mission can also help employees prioritize
better and work more efficiently.

 The strategic objective, which flows from the

purpose, is a more specific goal that unifies company
wide efforts,

 stretches and challenges the organization, and

possesses a finish line and a time frame.
Planning From Top to Bottom…
 Once the strategic objective has been accomplished, a
new one should be chosen.

 However, the new strategic objective must grow out

of the organization’s purpose, which does not change
significantly over time.

 Middle management is responsible for developing

and carrying out tactical plans to accomplish the
organization’s strategic objective.
Planning From Top to Bottom…
 Tactical plans specify how a company will use
resources, budgets, and people to accomplish specific
goals related to its strategic objective for the next
two years.

 Whereas strategic plans and objectives are used to

focus company efforts over the next two to five
years,

 tactical plans and objectives are used to direct

behavior, efforts, and attention over the next six
months to two years.
Planning From Top to Bottom…
 Management by objectives (MBO) was first proposed
by Peter Drucker can be defined as a management
model that attempts to devise a common objective
that is acceptable for both the management and
employees, which will improve the overall
performance of the organization.

 That is, it is often used to develop and carry out

tactical plans.

 It is a four step process in which managers and their

employees:
Planning From Top to Bottom…
 (1) discuss possible goals;

 (2) collectively select goals that are challenging,

attainable, and consistent with the company’s overall
goals;

 (3) jointly develop tactical plans that lead to the

accomplishment of tactical goals and objectives; and

 (4) meet regularly to review progress toward

accomplishment of those goals.
Planning From Top to Bottom…
The benefits of MBO are:

 Motivation: Due to the participative goal setting

employees are better empowered. This raises the job
satisfaction and commitment.

 Clarity of objectives: Due to the participative goal

setting, the goals are better understood across the
organization.
Planning From Top to Bottom…
 Better communication: Reviews and constant
interactions with managers and employees aids in a
better relationship between them and helps
coordination.

 Drive to achieve: As goals are set by them for them,

they will have more urge to achieve the objectives.

 Objectives can be set at all levels and for all functions.

Planning From Top to Bottom…
Limitations of MBO are:

 The product quality can be adversely affected as

employees will try to achieve the production targets
ignoring the product quality.

 In addition, the process may be time consuming, that

is,

 need a lot of meetings and too many reports to be

prepared, which add to the responsibilities and
burden the managers.
Planning From Top to Bottom…
 Lower level managers are responsible for
developing and carrying out operational plans,

 which are the day to day plans for producing or

delivering the organization’s products and services.

 Operational plans direct the behavior, efforts, and

priorities of operative employees for periods ranging
from thirty days to six months.

 There are three kinds of operational plans: single use

plans, standing plans, and budgets.
Planning From Top to Bottom…
 Unlike single use plans that are created, carried out
once, and then never used again,

 standing plans save managers time because after the

plans are created, they can be used repeatedly to
handle frequently recurring events.

 There are three kinds of standing plans: policies,

procedures, and rules and regulations.
Planning From Top to Bottom…
 Policies indicate the general course of action that

company managers should take in response to a

particular event or situation.

 Procedures are more specific than policies because

they indicate the series of steps that should be taken

in response to a particular event.

Planning From Top to Bottom…
 Rules and regulations are even more specific than

procedures because they specify what must happen

or not happen.

 Budgeting is quantitative planning because it forces

managers to decide how to allocate available money

to best accomplish company goals.

Management by Exception (MBE)
 It is a practice where only significant deviations from
a budget or plan are brought to the attention of
management.

 The idea behind it is that management's attention will

be focused only on those areas in need of action.
 When they are notified of variance, managers can
concentrate on that specific issue and let staff handle
everything else.
 If nothing is brought up, then management can
assume everything is going according to plan.
 Management by Exception (MBE)…
The process requires few objectives, that is

 setting the objectives or norms,

 assessing the performance of the chosen objectives,

 analyzing the possible deviations, and

 solving the exceptions/deviations.

 Management by Exception (MBE)…
 The main advantage of management by exception is
that problematic issues are identified rapidly and

 managers is able to use their time and energy more

wisely for important issues rather than for less
important ones that could provoke delays in their
daily operations.

 As managers take fewer decisions, employees have

more responsibility, which increases their motivation.
 Management by Exception (MBE)…
 This concept is based on the existence of a budget
against which actual results are compared.

 If the budget was not well formulated, there may be a

large number of variances, many of which are
irrelevant, and

 which will waste the time of anyone investigating

them.
 Management by Exception (MBE)…
 The concept requires the use of financial analysts
who prepare variance summaries and present this
information to management.

 Thus, an extra layer of corporate overhead is

required to make the concept function properly.

 Also, an incompetent analyst might not recognize a

potentially serious issue, and will not bring it to the
attention of management.
 Management by Exception (MBE)…
 The concept assumes that only managers can correct
variances.

 If a business were instead structured so that front

line employees could deal with most variances as
soon as they arise,

 there would be little need for management by

exception.
 Forecasting
 Forecasting is the process of predicting changing
conditions and future events that may significantly
affect the business of an organization.

 It is important to both planning and decision making.

 It is used in a variety of areas such as, production

planning, budgeting, strategic planning, sales analysis,
inventory control, marketing planning, logistics
planning and purchasing.
 Decision Making
 It is the process of choosing a solution from available
alternatives.

 The problem can be large or small but it is the

manager who has to decide what action to take.

 So, the quality of managers decisions is the bench

mark of their effectiveness and value to the
organization.

 That is, decision making is a typical form of planning.

 Decision Making…
Every decision making process consists of four
interrelated phases,

 explorative (searching for decision occasions),

 Speculative/predict (identifying the factors affecting

the decision problem),

 evaluative (analysis and weighing alternative courses

of action and

 selective (choice of the best course of action).

 Characteristics of Decision Making
 Decision making is based on rational thinking.

 That is, the manager tries to foresee various possible

effects of a decision before deciding a particular one.

 It is a process of selecting the best from among

alternatives available.

 The selection of best alternative will be made only

when pros and cons of all of them are discussed and
evaluated.
Characteristics of Decision Making…
 Decision making is the final product because it is
preceded by discussions and deliberations.

 Decision making is aimed to achieve organizational

goals.

 It also involves certain commitment from the

managers.

 That is the manager is committed to every decision

he/she takes.
 References
 Koontz, H., & Weihrich, H. Essentials of Management, McGraw Hill Publishers.

 Williams. Management, (International edition) South-western Cengage Learning.

 Stoner, Freeman, Gilbert Jr. (2014). Management (6th edition), New Delhi: Prentice
Hall India.

 Daft, R. L. (2009). Principles of Management (1st edition), Cengage Learning.

 Gupta, R.S., Sharma, B.D., & Bhalla. N.S. (2011). Principles & Practices of Management
(11th edition). New Delhi: Kalyani Publishers.

 John R. Schermerhorn. Management,Wiley-India

 L M Prasad, (2007). Principles and Practices of Management, Himalaya Publishing

House

 Rao, P.S. (2009). Principles of Management, Himalaya Publishing House.

 Moshal, B.S. Principles of Management,Ane Books.

Thank You…

Dr. Ajai Krishnan G