UNIT 2

The Nature and Purpose of

planning

Successful managers deal

with foreseen problems and
unsuccessful managers
struggle with unforeseen
problems.Terry

Goal inputs of claimants

5.
1. Employees
Governments
6.
2. Consumers
Community
7. Other
3. Suppliers
4. Stock
holders

EXTERNAL
ENVIRONMENT

Managerial Knowledge,
Goals of claimants and
use of inputs(

EXTERNAL
ENVIRONMENT

PLANNING (Part
2)
Organizing (Part
3)

Reenergizin
g the
system

Staffing (Part 4)

Leading (Part 5)

Controlling (Part
6)

Inputs

1.Human
2.Capital
3.Managerial
4.Technologica
l

Facilitated by
communicatio
n that also
link the
organization
with the
external
environment
(Part 1 & 7.
Domestic and
internal
environment)

EXTERNAL
ENVIRONMENT

SYSTEM APPROACH TO MANAGEMENT

To produce outputs
EXTERNAL
ENVIRONMENT

Planning
Defined in two directions by management
thinkers.
Based on futurity
As an intellectual function

Based on futurity:
Planning is a trap laid down to capture the future
(Allen)
Deciding in advance what is to be done in future
(Koontz)
Informed anticipation of future( Haimann)
Anticipatory decision making (R L Ackof)
4

 As an intelligence function:
Planning is a thinking process, an
organized foresight, a vision based on fact
and experience that is required for
intelligent action( Alford & Beatty)
Deciding in advance what to do, how to do
it, when to do it and who has to do it
( Koontz & O Donnell)

Planning thus involves looking into the future, anticipating it, and attempting
to influence it through anticipatory decisions, so that the desired goals are
achieved with maximum possible efficiency and effectiveness. Outcome of
planning is a plan, which is a document that specifies the course of action
the organization will take.

Planning- A bridge

Where we are

Planning

Where we want to
be

Elements of Planning are:

1. What will be done- what are the objectives in the short
and in the long run.
2. What resources will be required-this involves
estimation of the available and potential resources,
estimation of resources required for the achievement of
objectives, and filling the gap between the two, if any.
3. How it will be done-it involves two things: (i)
determination of tasks, activities, projects, programs, etc
(ii) formulation of strategies, policies, procedures, methods,
standards and budgets for the above purpose.
4. Who will do it- it involves assignment of responsibilities
to various managers by breaking down of the total
enterprise objectives into segmental objectives resulting
into divisional, departmental, sectional and individual
objectives.
5. When it will be done-It involves determination of the
timing and sequence.

Importance of Planning
Provides direction
Creates a unifying frame work
Leads to economical utilization of
resources
Reduces the risks of uncertainty
Facilitates decision making
Encourages Innovation & Creativity
Facilitates control
8

Types of Plans
Long range Vs Short range
Strategic Vs Operational
Corporate Vs Functional
Proactive Vs Reactive
Standing Vs Single Use

Long range Vs Short range

Long range plan

Point of
distinction

Short range plan

Covers many years &

Meaning
affects many departments
of an organization

Covers less than one year

and is more specific &
detail

5 yrs or more

Time

Up to one year

Organizations linkage
with external factors

Primary
focus

Linkage with various

parts of an organization

Mission ,long term goals

and strategies

Deals with Current operations of

organization

Top management

Prepared
by

Lower level executives

10

Long Range Planning

Product diversification
Management development
Research and Development
Cultivation of new markets
Increasing the market share
Reducing the cost of capital by
modifying the capital structure
Expansion of plant capacity

Strategic Vs Operational
Strategic Plan

Point of
distinction

Operational Plan

5 years or more

Time
horizon

Under one year

Adapt to external
environment based on
internal strengths

Purpose

Implement internal goals

Total institutional
performance

Activity
controlled

Internal tasks &

Operations

Top management

Level
involved

Middle & lower level

Primarily judgmental

Basis for
planning

Exact data & Standards

used
12

Corporate Vs Functional
Corporate Plan:
A comprehensive plan that outlines the
broad objectives of a company as a whole
and develops plans to achieve those
objectives
Holistic and Unified focus
Focus on organizational performance

Functional Plan:
Is unit planning and deals with different
departments in an isolated manner.
Focus on departmental performance
13

Proactive Vs Reactive
Proactive Planning:
Managers challenge the future,
anticipating future contingencies and
get ready with alternative routes for
unforeseen circumstances
Reactive Planning:
Organizations react to events as and
when they arise

14

Standing Vs Single Use

Standing Plans
Developed for
activities that
recur regularly
over a period of
time
Ex:
Objectives, Policies,
Procedures,
Methods, Rules

Single Use plans

Developed to
carry out a
course of action
that is not likely
to be repeated in
future
Ex:
Programmes,
Schedules, Projects,
Budgets
15

SINGLE-USE PLANS
Program

Plans for attaining a one-time organizational goal

Major undertaking that may take several years to complete

Large in scope; may be associated with several projects

Examples:

Building a new headquarters

Converting all paper files to digital

Project

Also a set of plans for attaining a one-time goal

Smaller in scope and complexity than a program; shorter time

horizon

Often one part of a larger program

Examples:

Renovating the office

Setting up a company intranet

STANDING PLANS
Policy

Broad in scope a general guide to action

Based on organizations overall goals/strategic plan

Defines boundaries within which to make decisions

Examples:

Drug-free workplace policies

Rule

Narrow in scope

Describes how a specific action is to be performed

May apply to specific setting

Example:

No-smoking rule in areas of plant where hazardous materials are stored

Procedure

Sometimes called a standard operating procedure (SOP)

Defines a precise series of steps to attain certain goals

Examples:

Procedures for issuing refunds

Procedures for handling employee grievances

The Planning Process

Forecasting
Determination of
objectives
Determination of means
for attainment the
objectives (Strategies, policies,
procedures, schedules, methods,
standards and budgets)

Determination of resources
required (Financial resources,
equipment & facilities, Materials, supplies
& services and manpower)
18

Forecasting
It involves careful study of past data & present
scenario. Intelligent and informed estimating
or predicting the future internal and external
environment of the enterprise.
Purpose:
To estimate the occurrence, timing or magnitude
of future events.
These Forecasts relate to various aspects of
business, particularly general economic conditions,
sales, technology, population growth and structure,
social norms and values, political and legal
conditions and so forth.

Types of forecasting:
1.Economic Forecasting
2.Sales Forecasting
3.Technological Forecasting

15

Economic Forecasting
Mainly relates to the estimates of
employment, growth in national income and
its distribution and price level. Three
methods may be used to estimate the
impact of economic forecasts for the
companys future business:
Lead and lag method
Overshoot method
Weighing of opposite factors
A forecast in economic changes is related with
the industrys demand, latter with the
demand for the companys product.

Lead and Lag method: In order to estimate

the effect of future economic forecasts on the
companys business, the past relationship of
general economic conditions with the
conditions of business is ascertained.
Overshoot method: Based on the assumption
whenever business activity rises above
normal, a recession is bound to set in.
Weighing of opposite factors: Listing of
factors for and against expansion or
contraction of general economic activity.

Sales Forecasting

Jury of Executive Opinion method

Sales Force composite Estimates
Polling
Mathematical projection
Market Research

Technological Forecasting
Graphic Charting method: Used by chemical,
aerospace & computer industries to forecast future
technological developments by plotting past
developments on a logarithmic scale and
extrapolating it.
Delphi method: A panel of experts, usually both from
inside and outside is selected. These experts are
individually asked to forecast future developments in
specified areas.
Goal oriented Forecast: A goal is first determined
and technological requirements for attaining the goal
are identified.
Matrix method: A matrix is prepared with
technological developments, product functions and
time factors shown on each of its three dimension.