Part Two; Planning and

Decision Making
Chapter Three; Planning and
Plans
Chapter Three; Planning
and Plans
 objectives of the
•
chapter
When you study and understand this chapter,
you will be able to:
• Know what we mean by planning.
• Know the necessity and importance of
planning.
• Understand and determine the main factors
that affect the planning effectiveness level.
• Distinguish and figure out the main steps to
be followed in planning.
• Figure out the different types of plans.
 1.Planning: Its
•
Meaning
Definition of Planning

• Planning is the process by which an individual

or organization decides in advance on some
future course of action (Omran, 2002, p. 68).

•Planning is the process of determining how the

organization can get where it wants to go (Certo,
2000,
p.126).
 Plannin
•
g
Planning is ascertaining prior to what to do
and how to do. It is one of the primary
managerial duties.

• Before doing something, the manager must

form an opinion on how to work on a specific
job.

• Hence, planning is firmly correlated

with discovery and creativity.
 Plannin
•
g
Planning is an essential step what managers
at all levels take.

• It requires making decisions since it

includes selecting a choice from
alternative ways of performance

• Planning is definitely significant as it directs us

where to go, it furnishes direction and
decreases the danger of risk by making
predictions
 Plannin
g
What is to be
done When it is
How it is to be
to be
done done
Where it BY whom it
is to be is to be
done done
 Importance of
Planning

Decrease
Planning Set
Planning To Focus overlappin Encourage Aid
decrease standard
attention g and s decisio
the for
provides of wasteful innovative n
chance of controllin
Objectives activities ideas Making
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n
 2 .Importance of
planning
1. Planning provides directions:
• Planning assures that the objectives are certainly
asserted so that they serve as a model for
determining what action should be taken and in
which direction.

• If objects are well established, employees are

informed of what the company has to do and
what they need do to accomplish those
purposes.
 Importance of
planning
2. Planning decreases the chances of risk:

• Planning is an activity which permits a

manager to look forward and predict
changes.

• By determining in prior the tasks to be

completed, planning notes the way to deal
with changes and unpredictable effects
 Importance of
planning
3. To Focus Attention on Objectives

• Because all planning is directed toward

achieving enterprise objectives, the very act
of planning focuses attention on these
objectives.
 Importance of
planning
4 Planning decreases overlapping and wasteful
activities:
• Planning works as the foundation of
organizing the activities and purposes of
distinct branches, departments, and people.
It assists in avoiding chaos and confusion.
• Since planning guarantees precision in
understanding and action, work is conducted
on easily without delays.
 Importance of
planning
5 Planning encourages innovative ideas:
• Since it is the primary function of
management, new approaches can take the
form of actual plans.

• It is the most challenging project for the

management as it leads all planned actions
pointing to growth and of the business.
 Importance of
planning
6. Planning aids decision making:

• It encourages the manager to look into the

future and make a decision from amongst
several alternative plans of action.

• The manager has to assess each option and

pick the most viable plan
 Importance of
7
planning
Set standards for controlling
• Planning involves the setting of goals and these
predetermined goals are accomplished with the help
of managerial functions like planning, organizing,
staffing, directing and controlling.

• Planning provides standards against which actual

performance is measured.

• Without standards, the actual performance of each

individual, department, and division cannot be
measured.
 Importance of
•
planning
With the help of standards, deviations in the
performance are found and such deviations
become the basis of effective planning for
future planning.

• Planning provides a basis to bring the desired

output under controlling function and result
of controlling function provides guidelines for
effective planning.
3.Steps in Planning
process

Follow Up Action

Implementing the Plan

Selecting One Best Alternative

Evaluating Alternative Course of Action

Identifying Alternative Courses of Action

Considering the Planning Premises

Establishing Objectives

Being Aware of Opportunity

 Steps in planning process
1 Being Aware of Opportunity
•
Although preceding actual planning and therefore not
strictly a part of the planning process, awareness of an
opportunity is the real starting point for planning.

• Being aware of opportunities in

light of:
-The marke
Competition t
- customers nee want
-What d ?
-Our
Our strength
weaknesses s
 Steps in planning process
• It includes a preliminary look at possible
future opportunities and the ability to see
them clearly and completely, knowledge of
where we stand in the light of our strengths
and weaknesses, an understanding of why we
wish to solve uncertainties, and a vision of
what we expect to gain.
 Steps in planning process
• Setting realistic objectives depends on
this awareness.

• Planning requires realistic diagnosis

of theopportunity situation.
 Steps in planning process
2 Establishing Objectives

• The first step in planning itself is to establish

objectives for the entire enterprise and then for
each subordinate unit.

• Objectives specifying the results expected indicate the

end points of what is to be done, where the primary
emphasis is to be placed, and what is to be
accomplished by the network of strategies, policies,
procedures, rules, budgets and programs.
 Steps in planning process
• Objectives specifying the results expected
indicate the end points of what is to be
done, where the primary emphasis is to be
placed, and what is to be accomplished by
the network of strategies, policies,
procedures, rules, budgets and programs
 Steps in planning process
• An objective can be defined as the end
point goal toward which management
directs its efforts and resources. (Sisk,
1993, p. 112).
•
The statement of an objective is in effect a
statement of purpose, and when applied to
a business organization becomes the
statement of that firm’s reason for existing
 Steps in planning process
However, there are four outstanding benefits that
result from the statement of objectives, these
are:

a) Objectives provide direction

b) Objectives serve as motivators

c)Objectives contribute to the

management process
 Steps in planning process
• d) Objectives are the basis for
management philosophy

e) Objectives serve as a guide for

organizational consistency
 Steps in planning process
3 Considering the Planning Premises/assumptions

Another logical step in planning is to establish,

obtain agreement to utilize and disseminate critical
planning premises.
• These are forecast data of a factual nature,
applicable basic policies, and existing company
plans.

• Premises, then, are planning assumptions – in other

words, the expected environment of plans in
operation. This step leads to one of the major
principles of planning.
 Steps in planning process
• Forecasting is important in premising; for example

• What kind of markets will there be?

•
• What quantity of sales?
•
• What are the products and its prices?
•
• What are the technical developments
required?
 Steps in planning process
•What are the costs?

• What are the required policies?

• How will expansion be financed?

•What is the expected nature of political

and social environment?
 Steps in planning process
4.0 Identifying Alternative Courses of Action

• Once objectives are set, assumptions are made.

• Then the next step is to act upon them.
• There may be many ways to act and
achieve objectives.
• All the alternative courses of
action should be identified
 Steps in planning process
5. Evaluating Alternative Course of Action
• In this step, the positive and negative aspects
of each alternative need to be evaluated in
the light of objectives to be achieved.

• Every alternative is evaluated in terms of

lower cost, lower risks, and higher returns,
within the planning premises and within the
availability of capital
 Steps in planning process
6. Selecting One Best Alternative
• The best plan, which is the most profitable
plan and with minimum negative effects, is
adopted and implemented.

• In such cases, the manager’s experience and

judgment play an important role in selecting
the best alternative
 Steps in planning process
7. Implementing the Plan

• This is the step where other managerial functions

come into the picture.
• This step is concerned with “DOING WHAT
IS REQUIRED”.
• In this step, managers communicate the plan to the
employees clearly to help convert the plans into
action.

• This step involves allocating the resources, organizing

for labor and purchase of machinery.
 Steps in planning process
8 Follow Up Action
• Monitoring the plan constantly and taking
feedback at regular intervals is called follow-up.
• Monitoring of plans is very important to ensure
that the plans are being implemented according
to the schedule.
• Regular checks and comparisons of the results
with set standards are done to ensure that
objectives are achieved
 Steps in planning process
9.0 Make A Review
• Finally, reviewing the implemented plan (s) is the last step
of the planning process. It is the step to check whether
the implemented plan is working or not in course of
organizational goal achievement.

• Only implementation might not get the expected results

because of uncertainties in the Business environment.

• So reviewing the plan’s progress is as equally important

as making the one. It makes it possible to take corrective
action if any and ensure the right direction of the plan
toward the desired goals achievement
 4.Features of
planning
• Planning is a primary function
• Planning is goal-oriented
• Planning is continuous
• Planning is futuristic or future oriented
• Planning focuses on achieving the
objectives
 Features of
planning
Primary function

Goal oriented

It is continuous process

Future oriented

Focus on Achieving the

objectives
5.Types of
plan
Strategic plan

Operational plan

Tactical plan

Contingency
 Types of
planning
1 Strategic planning
‘• is a management process for defining
company's long-terma vision, direction, and
actions. It is a strategy to figure out what
potential business opportunities exist for the
company.
• It helps to align different initiatives, and get
people focused on a single goal
 Types of
planning
• Strategic looks at the long-
issues of the organization,
planning term and helps develop
a plan for growth or change of business
function.

• Goals developed at the strategic planning-

level are often increased by dividing them
into tactical and operational levels
 Types of Planning

• It’s big picture, long-term thinking.

• It starts at the highest level defining

with mission and casting a vision. a

• Strategic planning includes a high-level overview

of the entire business.
• It’s the foundational basis of the organization
and will dictate long-term decisions.
 Types of
planning
• The scope of strategic planning can be
anywhere from the next two years to the
next 10 years.

• Important components of a strategic plan are

vision, mission and values
 Types of
•
planning
A good example of strategic planning is when
an organization wants to expand their
business globally.

• They will first need to define their

current situation which might include
• mapping out all their resources,
• setting goals for what they want to
achieve,
.
 Types of
planning
• assessing how much resources are available
in various regions.

• Once they have all this information, they can

then create a map of where they want to
expand and what steps need to be taken in
order for them to get there
 Types of
planning
2 Operational Planning
• Operational plans are about how things need
to happen
• This type of planning typically describes the
day-to-day running of the company.

• Operational plans are often described

as single use plans or ongoing plans.
 Types of
planning
• Single use plans are created for events and
activities with a single occurrence (such as a
single marketing campaign).

• Ongoing plans include policies for

approaching problems, rules for specific
regulations and procedures for a step-by-
step process for accomplishing particular
objectives
 Types of
planning
• Operations planning focuses on day-to-day
issues, such as staffing levels or inventory
quantities.

• Operational-level planning includes more

detailed objectives with concrete deadlines
and task assignments.
 Types of
planning
• In practice, operational planning is the
process of deciding what tasks need to be
done to create a product or service.

• It can be defined as the detailed routing of

resources, efforts, and time in the production
of goods and services.
 Types of
planning
3.0 Tactical Planning

• Tactical plans are about what is going

to happen,”

• Basically at the tactical level, there are many

focused, specific, and short-term plans,
where the actual work is being done, that
support the high-level strategic plans.
 Types of
planning
• Tactical planning supports strategic planning.

• It includes tactics that the organization plans

to use to achieve what’s outlined in the
strategic plan.

• Often, the scope is less than one year and

breaks down the strategic plan.
 Types of
plan
• Tactical planning is different from operational
planning in that tactical plans ask specific
questions about what needs to happen to
accomplish a strategic goal;

• operational plans ask how the organization

will generally do something to accomplish the
company’s goal
 Types of
•
plan
Tactical planning is used to reach the goals set
out by strategic and operational planning.

• Tactical planning includes short-term objectives

and tasks designed to create specific results
within a limited time span.

• Tactical plans often include operational level

plans, and make way for the development of
contingency level plans
 Types of
plan
• Tactical planning means figuring out what
needs to be done in order to achieve a goal,
which team member can do it, and when
they can get it done.
• The tactical planning process begins with a
strategic plan.
• The strategic plan establishes the goals for an
organization or business unit.
 Types of
plan
• These goals are then translated into tactical
plans by identifying processes, and necessary
tasks required to achieve these goals.

• Tactical plans are assigned to individual team

members who prioritize their tasks, in order
for these tasks to be completed in the most
effective manner possible
 Types of
plan
4 Contingency Planning

• Contingency plans are made when something

unexpected happens or when
something
needs to be changed.
• Business experts sometimes refer thes
to plans as a special type of e
planning.
 Types of
plan
• Contingency planning can be helpful in
circumstances that call for a change.

• Although managers should anticipate changes

when engaged in any of the primary types
of planning, contingency planning is
essential in moments when changes can’t be
foreseen.
 Types of
• As the
plan
business world becomes more
complicated, contingency planning becomes
more important to engage in and
understand.

• Contingency-level planning includes more

detailed action items with specified
responses in case of unexpected events or
emergencies, such as natural disasters or
extreme weather events that disrupt
business operations.
 Strateg
y
Strategy
formulation
 Strateg
y
• Strategy can be defined as “A general
direction set for the company and its various
components to achieve a desired state in the
future

• A strategy describes how the ends (goals) will

be achieved by the means (resources).
 Strateg
y
• .It involves activities such as strategic
planning and strategic thinking

• A plan of action designed to achieve a long-

term or overall aim
 Strateg
y
• Strategy refers to basic directional decisions,
that is, to purposes and missions.

• Strategy consists of the important

actions necessary to realize these directions.
 Strateg
y
Strategy generally involves
• setting goals and priorities,

• determining actions to achieve the goals,

•
• and mobilizing resources to execute
the actions.
 Strateg
y
• A strategy refers to an organization's
long- term goals and how it plans to reach
them.

• In other words, it shows the path to achieve

the defined vision.
 Types of
strategy

business Operational transformational

 Three types of
strategy
• Business strategy.
• Operational strategy.
• Transformational
strategy.
 Strategy
formulation
• Strategy formulation is the process by which
an organization chooses the most
appropriate courses of action to achieve its
defined goals.

• This process is essential to an organization’s

success, because it provides a framework
for the actions that will lead to the
anticipated results.
 Strategy
•
formulation
Strategic plans should be communicated to
all employees so that they are aware of the
organization’s objectives, mission, and
purpose.

• Strategy formulation forces an organization to

carefully look at the changing environment
and to be prepared for the possible changes
that may occur.
 Phases of strategy
formulation
Diagnosis

Formulation

Implementatio
 Phases of strategy
formulation
• Strategy formulation is considered as part of
a strategic management process that
comprises three phases:
• diagnosis,

• formulation, and

• implementation.
 Phases of strategy
formulation
• Strategic management is an ongoing process
to develop and revise future-oriented
strategies that allow an organization to
achieve its objectives, considering its
• capabilities,
• constraints,
• the environment in which it operates
 Phases of strategy
formulation
1 Diagnosis

(a) performing a situation analysis (analysis of

the internal environment of the organization),
including identification and evaluation of
current mission, strategic objectives, strategies,
and results, plus major strengths and
weaknesses;
 Phases of strategy
•
formulation
(b) analyzing the organization's external
environment, including major opportunities
and threats (SWOT), and

• (c) identifying the major critical issues,

which are a small set, typically two to five,
of major problems, threats, weaknesses,
and/or opportunities that require
particularly high priority attention by
management.
 Phases of strategy
formulation
2 Formulation,
The second phase in the strategic management
process, produces a clear set of
recommendations, with supporting justification,
that revise as necessary the mission and
objectives of the organization, and supply the
strategies for accomplishing them.
 Phases of strategy
formulation
• In formulation, we are trying to modify the
current objectives and strategies in ways to
make the organization more successful.

• This includes trying to create "sustainable"

competitive advantages -- although most
competitive advantages are eroded steadily
by the efforts of competitors
 Phases of strategy
formulation
3. Implement the strategy to achieve the
intended result
Strategic
planning
 Strategic
planning
• A strategic plan is essential for every
business.

• It tells you and your team where you’re

going as a company and how to get there.

• Road –map
 Strategic
planning
• Strategic planning is a management
technique that helps organizations set future
goals and. objectives to achieve more stable
and predictable growth.

• Strategic planning also identifies the. actions

required to reach these goals.
Steps in Strategic planning
process
• There are myriad different ways to approach
strategic planning depending on the type of
business and the granularity required.

• Most strategic planning cycles can

be summarized in these five steps:
 Steps in strategic
planning
Up –
date
Implement
Develop
prioritize
Identify
 Steps in strategic
planning
1. Identify.
• A strategic planning cycle starts with the
determination of a business's current strategic
position.

• This is where stakeholders use the existing

strategic plan -- including the mission statement
and long-term strategic goals -- to perform
assessments of the business and its
environment.
 Steps in strategic
planning
• These can a
assessments
assessment include a (strengths
needs
or weaknesses,, opportunities
SWOT and threats)
analysis to understand state of
the
business and the path the
ahead
 Steps in strategic
planning
2. Prioritize.
Next, strategic planners set objectives and
initiatives that line up with the company
mission and goals and will move the business
toward achieving its goals.
There may be many potential goals, so
planning prioritizes the most important,
relevant and urgent ones.
 Steps in strategic
planning
• Goals may include a consideration of
resource requirements -- such as budgets
and equipment -- and they often involve a
timeline and business matrix or KPIs for
measuring progress.
 Steps in strategic
planning
3 Develop.
This is the main thrust of strategic planning in
which stakeholders collaborate to formulate
the steps or tactics necessary to attain a stated
strategic objective.

This may involve creating numerous short-term

tactical business plans that fit into the
overarching strategy.
 Steps in strategic
planning
4 . Implement.
• Once the strategic plan is developed, it's time to
put it in motion.
• This clear communication across
the organization to set responsibilities,
requires
investments,
make adjust policies and processes, and
establish measurement and reporting.
• Implementation typically includes strategic
management with regular strategic reviews to
ensure that plans stay on track
 Steps in strategic
planning
5 Update.
A strategic plan is periodically reviewed and
revised to adjust priorities and re evaluate
goals as business conditions change and new
opportunities emerge.
Policies, Procedures ,
Methods and Rules
Making planning
effective
 Policies,
Procedures
• A policy defines a rule, and the

• Procedure defines who is expected to do it ;and

• how they are expected to do it

• .
 Policies,
Procedures
• A procedure is the instructions on how
a policy is followed.

• Procedures are the step-by-step

instructions for how policies are to be
achieved.
 Policies,
• Strategic
Procedures
planning is a process in which an
organization's leaders define their vision for the future
and identify their organization's goals and
objectives.
• The includes establishing the sequence in
which
processthose goals should be so the
organization
realized can reach its stated vision that

• The strategic plan will also have policies,

procedures, methods and rules for its effective
implementation
 Policies,
• The
Procedures
purpose of policies and procedures is to
bring uniformity to corporate operations and
therefore reduce the risk of an unwanted event.
• First, policy and procedure bring order to
operations.
• They tell employees what to do and how to do
it.

• With that consistency, the business can run

more efficiently.
 Policies,
• You
Procedures
get the idea. Policies and procedures
mobilize the organization’s human talent to
help the business to evade obstacles and hit
goals.

• Not every policy and procedure will be easy

or fun, but over the long term, having
policies and procedures benefits the
organization in all sorts of ways
 The Benefits of Policies and
Procedures
• Those risk challenges will diminish because
policies and procedures bring consistency to
employee behavior.
• That’s the benefit a business gains by having
them.

• At the least, the company will have

defensible standards that it can cite should
compliance, litigation, or reputation risks
arise.
 Policies,
Procedures
• So not only are policies and procedures
useful to codify good business practice;
they’re a fundamental requirement for
effective ethics and compliance programs.

• You can’t have an effective program without

them.
 How to Implement Effective Policies

• Orientation and
training

• Assigning Compliance
officer
 Policie
•
s
Equal opportunity policy.
• Workplace health and safety.
• Employee code of conduct policy.
• Attendance,
• vacation and time-off policies.
• Employee disciplinary action policy.
• Employee complaint policies.
• Ethics policy.
• Work schedule and rest period
policies
Barriers to effective
Planning
Barriers to effective
planning
In ability to plan/inadequate planning

Lack of commitment to planning process

Inferior information

Focusing on the present at the expense of the future.

Too much reliance on the organization's planning department.

Concentrating on controllable variables.

 Barriers to effective
Planning
• Various barriers can inhibit successful
planning.
• In order for plans to be effective and to yield
the desired results, managers must identify
any potential barriers and work to overcome
them.

• The common barriers that inhibit successful

planning are as follows;
 Barriers to effective
Planning
1. Inability to plan or inadequate planning.

• Managers are not born with the ability to

plan.
• Some managers are not successful planners
because they lack the background, education,
and/or ability.
 Barriers to effective
Planning
• Others may have never been taught how
to plan.

• When these two types of managers take the

time to plan, they may not know how to
conduct planning as a process
 Barriers to effective
Planning
2. Lack of commitment to the planning process.

• The development of a plan is hard work;

• it is much easier for a manager to claim

that he or she doesn't have the time to
work through the required planning process
than to actually devote the time to
developing a plan.
 Barriers to effective
Planning
• Another possible reason for lack
of commitment can be fear of failure.

• As a result, managers may choose to do little

or nothing to help in the planning process.
 Barriers to effective
Planning
3. Inferior information.

• Facts that are out‐of‐date, of poor quality,

or of insufficient quantity can be major
barriers to planning.
• No matter how well managers plan, if they
are basing their planning on inferior
information, their plans will probably fail
 Barriers to effective
Planning
4.0 Focusing on the present at the expense of the
future.
• Failure to consider the long‐term effects of a
plan because of emphasis on short‐term
problems may lead to trouble in preparing for
the future.

• Managers should try to keep the big picture —

their long‐term goals — in mind when
developing their plans
 Barriers to effective
Planning
5.0 Too much reliance on the organization's planning
department.

• Many companies have a planning department or a

planning and development team.
• These departments conduct studies, do research,
build models, and project probable results, but they
do not implement plans.
• Planning department results are aids in planning and
should be used only as such.
• Formulating the plan is still the manager's
responsibility.
 Barriers to effective
Planning
6. 0 Concentrating on controllable variables.
• Managers can find themselves concentrating
on the things and events that they can
control, such as new product development,
but then fail to consider outside factors, such
as a poor economy.
• One reason may be that managers
demonstrate a decided preference for the
known and an aversion to the unknown.
Means to overcome the
barriers

Managers need to Acquire solicit the

use effective quality involvement of
communication, information, others
 Means to overcome the
barriers
To plan successfully,
• Managers need to use
effective communication,

• Acquire quality information, and

• solicit the involvement of others.

 Barriers to strategic
Planning
• lack of ownership,
• poor communication,
• lack of alignment, and
• slow adoption.
It's important to understand what's at the core
of these challenges before we dive into
solutions
 Barriers to strategic
Planning
1. Lack of ownership
• An effective strategy requires cross-
departmental and cross-functional feedback
from across the organization.
• However, to avoid creating a disjointed
strategic plan, someone still needs to own
the final compilation, documentation, and
execution of the strategy.
 Barriers to strategic
2.0
Planning
Poor communication
• Poor communication is at the crux of most problems
— both business and personal.

• Effective collaboration is one of the most critical and

challenging parts of the strategic planning process.

• Still, it can be tough to gather all the necessary inputs

you need, especially as your organization scales.
 Barriers to strategic
3.0
Planning
Lack of alignment
• Even the most well-executed strategic plan won't
be useful without strategic alignment.
• A lack of representation from across the
organization is one of the primary causes of
poor strategic alignment.
• "There be input all parts of
from
must organization, at all the so that
levels,
understand the landscape, the youchallenges,
can
and the direction that makes the most sense
 Barriers to strategic
Planning
4.0. Slow adoption
•
• Fast-growing companies often face near-
constant changes to tasks, roles, teams, and
strategies—with innovation at the forefront
of it all.
• All too often, this translates into strategic
plans that have taken weeks to finesse
becoming obsolete soon after their inception.
 Barriers to strategic
Planning
• If your teams are slow to adopt the plan, it
will quickly become outdated and irrelevant
to everyday processes and priorities.
 Ways to avoid strategic planning
problems

1. Some leaders swear by tools like GOST

(Goals, Objectives, Strategies, Tactics) to create
a structured strategic plan:
• With these strategies and tactics set, you can
roll it all up into a comprehensive master
strategic document that's easy to understand
and aligned company-wide to the business's
desired outcomes.
 Ways to avoid strategic planning
problems
2. Create a living, breathing strategy document

3. Use resources with scaling in mind

4. Design and conduct training effectively

 Ways to avoid strategic planning
problems

5.Don't rush it—use data and analysis to build

a solid plan

6. Collaborate and communicate

7.Follow up and review after executing a

strategy
Management by
objective
MBo
 MBO
• MBO is the establishment of a management
information system to compare actual
performance and achievements to the
defined objectives.
 MBO
• Management by objectives (MBO) is a strategic
management model that aims to improve the
performance of an organization by clearly
defining objectives that are agreed to by both
management and employees

• According to the theory, having a say in goal

setting and action plans encourages participation
and commitment among employees, as well as
aligning objectives across the organization
 MBO
• The goal of this model is to improve
overall objective of an organization
the
s
performance by clearly, and
defining its to havethese
been agreed
completely by the management,
to the employees,
and the other members of the organization

objectives
have
 MBO
• In other words, it operates on the
that, if the
assumption of the
goals
organization are aligned with that of
the employees,
achieving these then
goals through
work performance will be more successful
 MBO
• It refers to the process of setting goals for
the employees so that they know what they
are supposed to do at the workplace.

• Management by Objectives defines roles and

responsibilities for the employees and help
them chalk out their future course of action
in the organization.
 Process of MBO

• MBO defines as a comprehensive managerial

system that systematically integrates many
key scheduled activities and that is
consciously directed toward the effective
and efficient achievement of organizational
and individual objective
 6 stages of MBO

• Define the goals of the organization.

• Define the objectives of the employees.
• Continuously monitoring performance
and progress.
• Performance evaluation.
• Providing feedback.
• Appraisal of performance
 6 stages of MBO
1 . Define the Goals of the Organization
• Goals are the most important part of
organizational effectiveness and it serves several
purposes. Every Organization have several
different kinds of goals all of which must be
perfectly managed.
• Defined organizational goal helps manager and
supervisors to guide employee’s effort in a
strategically way and they work to achieve it.
 6 stages of MBO
2 . Define the Objectives of the Employees
• After making sure that employees’ managers
have informed of patient general objectives,
planning and strategies, the manager can then
proceed to work with employees in fixing their
objectives.
• The manager asks the employees which target
they can achieve in the given period of time.
Then they will discuss some issues related to
their goals and try to solve them
 6 stages of MBO
3 . Monitoring Performance and Progress

• Management by Objectives or MBO process

is not only essential for making line
managers in business but also it is equally
important for monitoring the performance
and progress of the employees
 6 stages of MBO
4 . Performance Evaluation
• Under the process of MBO, the concerned manager
reviews the performance. It is used to measure the
amount of value added by an employee in terms of
increased business revenue, in comparison to industry
standards. It helps employees to have self-awareness
about their performance.
• Performance evaluation lets an employee understand
where does he or she stands as compared to other
employees in the organization.
 6 stages of MBO
5. Providing Feedback
• One of the main parts of the MBO process is
taking feedback from valuable clients
allows that
to monitor and correct or
action improve of the
or product
s
increases the organization. It
quality and helps to k now
services of about
the the
product
market standard. or
 stages of MBO
6 . Appraisal of Performance
• A regular review of the performance of the
employee within organizations is called
performance appraisal. It is the last stage of
Management by Objectives. performance
appraisal helps the organization to know
about an employee’s job performance, their
ability for further growth and development.
 stages of MBO
• By the performance appraisal, a supervisor
can review the payment of an employee
according to his performance, targets and
plan.
• The supervisor can guide the employee for
better performance
 Need for Management by
Objectives (MBO)
1 . Helps the employees to understand their
duties at the workplace
• KRAs are designed for each employee as per
their interest, specialization and educational
qualification
• The employees are clear as to what is
expected out of them.
 Need for Management by
Objectives (MBO)
2 . leads to satisfied employees. It avoids job
mismatch and unnecessary confusions later
on
• Employees in their own way contribute to
the achievement of the goals and objectives
of the organization.
• 3 . Ensures effective communication amongst
the employees. It leads to a positive
ambience at the workplace
 Need for Management by
Objectives (MBO)
4. leads to well defined hierarchies at
the workplace. It ensures transparency at all
levels.
5. leads to highly motivated and
committed employees.

6 . sets a benchmark for every employee

 Features of
1 . Goal
MBO
Orientation:

2 . Participation

3
By. KRAs; of key result areas
MBO ensures that (KRAs),
identification due attention is given to the
priority areas which have significant impact on
performance and growth of the organization.
 Features of
MBO
4 . Systems Approach:
MBO is a systems approach of managing
an organization.
• It attempts to integrate the individual with
the organization and the organization with
its environment.
• It seeks to ensure the accomplishment of
both personal and enterprise goals by
creating goal congruence.
 Features of
MBO
6 . Optimization of Resources
The ultimate aim of MBO is secure
optimum utilization of to andthe
physical of the organization.
resources human
MBO sets an evaluative mechanism through
which the con-tribution of each individual can
be measured
 Features of
MBO
7 . Simplicity and Dynamism: MBO is a non-
specialist technique and it can be used by all
types of managers.
• At the same time it is capable of being
adopted by both business and social welfare
organizations.
• MBO applies to every manager, whatever his
function and level, and to any organization,
large or small
 Features of
MBO
8 .
Operational: MBO is an operational process
which helps to translate concepts into practice.
• MBO is made operational through periodic
reviews of performance which are future-
oriented and which involve self-control.
 Features of
MBO
9 . Multiple Accountability:
•
Under MBO, accountability for results is not
centralized at particular points. Rather every
member of the organisation is accountable
for accomplishing the goals set for him.
 Features of
MBO
10 .
Comprehensive: MBO is a ‘total approach’. It
attaches equal importance to the economic
and human dimensions of an organization.
• It combines attention to detailed micro-level,
short range analysis within the firm with
emphasis on macro-level, long range
integration with the environment
 Advantages of MBO

• It forces the manager to simplify the plan

and activities for the best results. It allows
the manager to think about both product
and performance.
• It enables the manager to concentrate on
important and profit influencing tasks instead
of tasks which could have little impact on
ultimate results.
 Advantages of MBO
• Employees commit themselves to give their
best to move its’ achievements.

• It allows employees to work their own

without taking directions and guidance from
their superiors.
 Advantages of MBO
• It helps to establish own standards,
evaluating performance and taking necessary
and immediate action if there are any
deviations.

• It helps the management team to formulate

better management training programs based
on performance reviews.
 Advantages of MBO
• Management by Objectives helps in more
effective planning.
• Management by Objectives aids in developing
effective controls over employees
performance and productions.
• Management by Objectives provides more
confidence in the management in managing
a task
 Weaknesses of
MBO
1. Failure to Teach MBO Philosophy: The
success of MBO will depend upon its proper
understanding by managers.
• When managers are clear about this concept
only then they can explain to subordinates
how
it
works, why it is being done, what will be the
expected results, how it will benefit
participants, etc.
2, Failure to Give Guidelines to Goal setters:
• If the goal setters are not given proper
guidelines for deciding their objectives then
MBO
will
not be a success.
• The managers who will guide in goal setting
should themselves understand the major
policies of the company and the role to be
played by their activity.
• Difficulty in Setting Goals: The main
emphasis in MBO technique is on set ting
objectives. The setting of objectives is not a
simple thing. It requires lot of information
for arriving at the conclusions.
• The objectives should be verifiable so that
performance may be evaluated. Some
objectives may not be verifiable, precaution
should be taken in defining such objectives.
• The objectives should not be set casually
otherwise MBO may prove liability for the
Emphasis on Short Term Objectives:
In most of the MBO programs there
is a tendency to set short-term
objectives.
• Managers are inclined to set goals for a
year or less and their thrust is to give
undue importance to short term goals at
the cost of long term goals.
• They should achieve short term goals in
such a way that they help in the
• Danger Inflexibility
There
of is a tendency to strict to the: objectives
even if there is a need for modification.
Normally objectives will cease to be
meaningful if they are often changed, it will
also be foolish to strive for goals which have
become obsolete due to revised corporate
objectives or modified policies
 Making MBo
effective
• The following four major components of the
MBO process are believed to contribute to
its effectiveness:
(1)setting specific goals;
(2)setting realistic and acceptable goals;
(3)joint participation in goal setting,
planning, and controlling; and
(4)feedback
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