What Is Planning?Planning

– involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work

– informal planning - nothing is written down• little or no sharing of goals• general and lacking in continuity

– formal planning - written• defines specific goals• specific action programs exist to achieve goals

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Planning is the function that answers four basic questions:Where are we now?Where do we want to be?Gap?How can we get there from here?

How Do Managers Plan?The Role of Goals and Plans in Planning

– goals - desired outcomes• provide direction for all management decisions• represent the criteria against which actual work

accomplishments can be measured– plans - outline how goals are going to be met

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– Types of Plans

• strategic plans - apply to the entire organization

–establish organization’s overall goals

–seek to position the organization in terms of its environment

• operational plans - specify the details of how the overall goals are to be achieved

–tend to cover short time periods

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Types Of Plans

Breadth

StrategicOperational

Specificity

DirectionalSpecific

Frequency of Use

Single useStanding

Time Frame

Long termShort term

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• directional plans - flexible plans that set out general guidelines

–provide focus without limiting courses of action

• standing plans - ongoing plans that provide guidance for activities performed repeatedly

–include policies, procedures, and rules

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Purpose or mission

Policies

Programs

Budgets

Rules

Procedures

Strategies

Objectives

HIERARCHY OF PLANS

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Purposes or MissionPurposes or Mission• Basic function or task Basic function or task • Reflects overall philosophy of managementReflects overall philosophy of management• Indicates the line of business of an org. & its Indicates the line of business of an org. & its

long term commitmentlong term commitment

Ex. Business-production & distribution of goods Ex. Business-production & distribution of goods & services& services

State highway department-design, building & State highway department-design, building & operation of a system of state highwaysoperation of a system of state highways

University-Teaching & researchUniversity-Teaching & research

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A mission is the very reason and justification for the existence of a firm. It is usually expressed in terms of the benefits the firm provides to its customers. An organisation's mission statement states what it is, why it exists and the unique contribution it can make. Mission statements are characterised by the following:

1. Customer-oriented

2. Future-oriented

3. Dynamic

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Mission statements

The Tata Group - Our purpose is to improve the quality of the communities we serve.The Tata name is a unique asset representing leadership with trust.

Aditya Birla GroupOur vision-to be a premium conglomerate with a focus at every business level

Our mission-To pursue the creation of value.

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Objectives or goalsObjectives or goals• Ends towards which activity is aimedEnds towards which activity is aimed• Are not only end point of planning but the Are not only end point of planning but the

end towards which organizing, staffing, end towards which organizing, staffing, leading & controlling are aimedleading & controlling are aimed

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StrategiesStrategies• Have a competitive implication--is a special plan Have a competitive implication--is a special plan

prepared for meeting the challenge posed by the prepared for meeting the challenge posed by the activities of competitors & other environmental activities of competitors & other environmental forces.forces.

• Reflect broad area of org,s. operationsReflect broad area of org,s. operations• links the resources of the organization with the links the resources of the organization with the

risks & challenges posed by the outside world.risks & challenges posed by the outside world.• Provides answers to the following questionsProvides answers to the following questions

What business are we in?What business are we in? What should be our business?What should be our business? Who are our customers?Who are our customers? What do they buy & why?What do they buy & why? Why should society accept us?Why should society accept us?

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Policies

A policy is a basic statement that guides decision-making. It tells people what they may or may not do. It directs the way in which activities are to be achieved.

Ex. promotions to be based on merit only

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Policies set behavioral limits.

They are restrictive in the sense that they define the boundaries within which decisions ought to be made. At the same time, they give enough room for subordinates to use their discretion.

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Procedures

A procedure is a well thought out course of action.

It prescribes the specific way in which a piece of work is to be done.

Procedures are called 'action guidelines'. They are generally derived from policies.

The basic purpose of a procedure is to spell out clearly, the way one is to go about doing something.

Procedures are used in all major functional areas.

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Rules

A rule is a very specific and detailed guide to

action.

It is established to direct or restrict action in a

fairly narrow manner.

There is no scope for discretion or judgment.

Rules must be followed precisely and

observed strictly.

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One important advantage with rules is that they

permit managers to simplify the decision-

making process.

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Programmes

A programme is a comprehensive plan that includes a complex set of goals, procedures, rules, work assignments resource flow and generally covers a large 'territory'.

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Budgets

Budget is a numerised programme designed

primarily to allocate the resources of an

organization.

• It is a statement in terms of money or

quantity or both,

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•It is prepared for a definite future period,

•It is prepared in advance, and

•It aims at achieving a given objective.

•The use of a budget to monitor and regulate the operational work of an organization in a systematic way is called 'budgetary control'.

Planning In The Hierarchy Of Organizations

StrategicPlanning

OperationalPlanning

TopExecutives

Middle-LevelManagers

First-LevelManagers

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Steps in the Planning ProcessBEING AWARE OF OPPURTUNITY

In Light ofThe market

What customers wantOur strengths

Our weaknesses

SETTING OBJECTIVES OR GOALSWhere we want to be

What we what to accomplish & when

CONSIDERING PLANNING PREMISES

In what environment –internal or external –will our plans operate

IDENTIFYING ALTERNATIVESWhat are the most

promising alternatives to accomplish our

objectives

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COMPARING ALTERNATIVES IN LIGHT OF GOALS SOUGHTWhich alternative will give us the best chance to meet our goals at the lowest cost &

highest profit

CHOOSING AN ALTERNATESelecting the course of action we will pursue

FORMULATING SUPPORTING PLANSSuch as plans toBuy equipmentBuy materials

Hire & train workersDevelop a new product

NUMERIZING PLANS BY MAKING BUDGETS

– - desired outcomes• provide direction for all management decisions• represent the criteria against which actual work

accomplishments can be measured• Objectives give meaning and purpose to the

organization. Without objectives, without something to achieve, organization would be purposeless and chaotic.

– plans - outline how goals are going to be met

Objectives and Goals

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The terms 'objective' and 'goal' indicate an end result to be sought and accomplished. Three widely quoted definitions of objectives are given below: Objectives are goals established to guide the efforts of the company and each of its components. An organizational goal is a desired state of affairs which the organization attempts to realize. Objectives indicate the 'end point of a management programme'.

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Characteristics of Objectives

Objectives have the following features:

Objectives form a hierarchy

Objectives form a network

Multiplicity of objectives

Long and short-range objectives

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Objectives form a hierarchy

Socio-economic purpose

Overall objectives of the organization

Mission

Division objectives

Department & unit objectives

Individual objectives•Performance•Personal development objectives

More specific overall objectives(e.g. in key result areas)

Board of directors

Top levelmanagers

Lower level managers

Middle level managers

Bot

tom

up

appr

oach

Top down approach

Hierarchy of objectivesOrganizational hierarchy

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Areas that need objective:

(1)market standing,

(2)productivity,

(3)physical and financial resources,

(4)profitability,

(5)innovation,

(6)managerial performance and development,

(7)worker performance and attitudes, and

(8)public and social responsibility.

Establishing Goals– Approaches to Establishing Goals

• traditional goal setting - overall goals established at the top of the organization

– overall goals broken down into sub goals for each level of the organization

» higher-level goals must be made more specific at lower levels

» network of goals creates a means-ends chain– sub goals constrain subordinates’ behavior

» assumes that top managers know what is best for the organization

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• management by objectives (MBO) -MBO provides a systematic and rational approach to management MBO is based on the assumption that people perform better when they know what is expected of them and can relate their personal goals to the organizational objectives.

• specific performance goals are jointly determined by employees and their managers

MBO emphasizes participation in setting goals that are tangible, verifiable and measurable.

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MBO focuses attention on what must be MBO focuses attention on what must be accomplished (goals) accomplished (goals) rather than how it is to be rather than how it is to be accomplished (methods).accomplished (methods).

MBO, by concentrating on key result areas MBO, by concentrating on key result areas translates the abstract philosophy of translates the abstract philosophy of management into concrete results.management into concrete results.

progress toward accomplishing these goals is progress toward accomplishing these goals is periodically reviewedperiodically reviewed

rewards are allocated on the basis of this progressrewards are allocated on the basis of this progress MBO consists of four elements MBO consists of four elements

o goal specificitygoal specificityo participative decision makingparticipative decision makingo explicit time periodexplicit time periodo performance feedbackperformance feedback