UNIT I Part II Planning

Planning
Instructor:Dr S.Natarajan
Professor, Dept of ISE
PESIT
Dr S.Natarajan and Sri

09/13/10 N.Ramesh Babu 1
PLANNING
“Successful managers deal with

foreseen problems and unsuccessful
managers struggle with unforeseen
problems”….Terry
2
Planning
Planning:
Nature
Importance and purpose of planning
process
Objectives
Types of Plans (Meaning only)
Decision Making
Importance of Planning
Steps in Planning and Planning premises
Hierarchy of Plans
Dr S.Natarajan and Sri N.Ramesh

09/13/10 Babu 3
SYSTEM APPROACH TO MANAGEMENT EXTERNAL
ENVIRONMENT Inputs
Goal inputs of claimants 1.Human
Managerial Knowledge, 2.Capital
1. Employees 5. Governments Goals of claimants and 3.Managerial
2. Consumers 6. Community use of inputs(Part1 The 4.Technological
3. Suppliers 7. Other Basis of Management
4. Stock holders Theory and Science)
PLANNING (Part
2) Facilitated by
communicatio
Organizing (Part n that also
ENVIRONMENT
EXTERNAL
3) link the
ENVIRONMENT
EXTERNAL
organization
Reenergizin with the
g the Staffing (Part 4)
external
system environment
(Part 1 & 7.
Leading (Part 5) Domestic and
internal
environment)
Controlling (Part
6)
To produce outputs
EXTERNAL
ENVIRONMENT
4
What is Planning?
• Deciding in advance what to do, how to do it ,
when to do it and who has to do it.
• A forecast for accomplishment.
• Predetermined course of action.
• To produce a scheme for future action and to bring
about specified results at a specified cost in a
specified period of time.
5
Definition
• 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 Ackoff)
6
Nature of Planning
 Provides basic foundation from which all
future management functions arise.
 Goal oriented
 All pervasive
 Intellectual exercise
 Continuous process
 Futuristic
 Integrated Process
7
Planning- A bridge
Planning Where we want to

Where we are
be
8
Nature of Planning
1. Planning is the beginning of the Management process
2. Planning is an intellectual process

Involves thinking in advance
Managers should “think before acting”
what, when where and how to do it
Decision making is part of planning

Process of choosing from alternatives
3. Planning is continuous process

Managers should constantly watch progress of their plans
Principle of navigational change (by Koontz and O’Donnell)

Constantly monitor changes in and out of organization to determine changes in plans
Plan must be flexible

Ability to adapt to changing situation (plan)
Areas: Technology (product mix), market (geography),

finance, personnel (one job to another) and organization
09/13/10 Dr S.Natarajan and Sri N.Ramesh 9
Babu
4. Planning is an all pervasive function
Planning used by managers of all levels
Managers involvement
1. Time Period covered
Top level -- years
Lower level -- days, months or a year
2. Time spent in planning

Top level -- more
Lower level -- less

1. Minimizes Risk and Uncertainty
Rational and fact based procedures
1. Leads to Success
2. Focuses Attention on the Organization’s Goals
3. Facilitates Control

The Foundation for Planning
 Mission
 Purpose or Goal
 Objectives
 Strategies

Planning Mission Statement
 What do we want to do

Planning Goal Statement
 Why?
 What do we do?
 For whom do we do it?

Planning Goal Statement
 Gives purpose and direction
 Used as continual point of

reference for questions regarding
scope or purpose

 Provides direction
 Creates a unifying frame work
 Leads to economical utilization of resources
 Reduces the risks of uncertainty
 Facilitates decision making
 Encourages Innovation & Creativity
 Improves morale
 Facilitates control
16
Planning Objectives
 More detailed goal statement
 Clarifies goal
 How do we go about it?
 To (action verb)
 Consistent with organization

Characteristics of objectives
 Objectives
 are multiple in numbers
 are either tangible or intangible
 have a priority
 are generally arranged in a hierarchy
 some times clash with each other

Objectives are multiple in
numbers
 Drucker’s Objectives for Organizational

Survival
 Market Share
 Innovation
 Productivity
 Physical and Financial Resources
 Manager Performance and Development
 Worker Performance and Attitude
 Profitability
 Social Responsibility
Objectives are either tangible or
intangible
 Tangible : quantifiable (Sales,

Marketing)
 Intangible : Not quantifiable
(performance, morale, social
responsibility)

Objectives have a priority
 The accomplishment of one objective
is relatively more important than of
others
 Objectives are arranged in a
hierarchy
 Corporate objectives followed by
divisional objectives

Objectives:
Objectives
Goals or Aims which the management wishes organization to achieve
Characteristics of Objectives
1. Objectives are multiple in nature
2. Objectives are tangible or intangible
3. Objectives have priority
4. Objectives are generally arranged in hierarchy
5. Objectives sometimes clash with each other
Requirements of Sound Objectives

1. Objectives must be both clear and acceptable
2. Objectives must support one another
3. Objectives must be precise and measurable
easy to decide how to achieve, better motivators,
easy to verify success and failure
4. Objectives should always remain valid (Review and update)

Advantages of Objectives
1. Basis for planning
2. Act as motivators for individuals and departments
3. Eliminate haphazard action
4. Facilitate coordinated behaviour of groups
5. Basis for managerial control
6. Better management of enterprise
7. Lessen misunderstanding and conflict

Objectives some times clash with each
other
The process of allocating objectives among
various units creates the problem of
potential goal conflict and sub optimization,
wherein achieving the goals of one unit may
jeopardize achieving the goals of another
09/13/10 Dr S.Natarajan and Sri N.Ramesh 24

Babu
Standing plans
• These are the policies, procedures, rules and

methods of any organization
• Policy: Provides frame work
• Procedure :guide lines to carry out the policies
• Rules : detailed and recorded instruction
• Methods : part of procedure

Babu 25
Planning & Control – Siamese
Twins
Controlling: No undesirable
Implementation comparing deviations from
Planning of Plans plans with plans
results
Undesirable
deviations
Corrective
action
26
Forms of Planning
1. Strategic Planning
• Deciding major goals of entire organization and policies to achieve set goals
• Done at Higher level
• Long term plans
• Relies heavily on external data
i.e. market analysis, estimates of cost, technology etc
• Since data is imprecise, strategic planning less certain
2. Tactical Planning
• Deciding specifically how to use resource to achieve goal (Strategic Plan)
• Done at Lower level
• Short term plans
• Relies on past performance
• Less uncertain
• Involves day to day operations

Types of Plans
Hierarchy of Organizational Plans
Objectives
Strategies
For Non Repetitive For Repetitive

Activities Activities
Single use Plans Standing Plans
(Programmes (Policies, Procedures,
and budgets) Methods and Rules)

Strategy
• First attested in English 1810, the word strategy derives
from the French stratégie, which is the romanization of
the Greek "στρατηγία" (strategia), "office of general,
command, generalship, in turn from "στρατηγός"
(strategos), "leader or commander of an army, general” [
Strategy
Plan which takes factors into account and provides an
optimal match between firm and environment

Babu 29
Strategies
Strategy formulation activities
1. Environmental Appraisal
Analyzing environment identifies threats and opportunities
Environment of a company (Andrew)

Pattern of all external influences, that affect its life and development
Environment Factors
a) Political and legal factors
Stability of government
Taxation
Monetary and fiscal policies
Restriction on capital movement

b) Economic factors
Level of economic development and distribution of personal income
Trend in prices, exchange rates
Supply of labour and raw material
c) Competitive factors
Identification of principal competitors
Analysis of their performance
d) Social and cultural factors

Literacy levels of population
Religious and social characteristics
2. Corporate Appraisal
Analysis of company’s strengths and weaknesses
Company must plan to exploit the strengths to maximum and try to overcome weakness.

Modes of Strategy
1. Planning mode
Combining activities to deliver a unique mix of value (different from rival)
Eg: Strategy to sell two products are different
1. Entrepreneurial mode (Inside Out mode)

Proactive, bold plan is used to seek new opportunities on the basis of intuition
Greatest constraint is Company’s mindset
1. Adaptive mode (Outside In mode)

Reactive and timid
Solve problems as they come
Managers plan according to company’s strengths and weaknesses
Eg: Finance : mode1

Marketing : mode2
Personnel : mode 3

Standing Plans
Standing Plans:
Standardized approach used for recurring situations
Types of Standing Plans

1. Policies
2. Procedures
3. Methods
4. Rules

Standing plans
Policies Procedures
 General guidelines of  General guidelines at
the organization the action level
 Top level activity  Departmental activity
 Policies fulfill the  Procedures guide the
organization’s way to implement the
objectives policies
 Policies are often  Procedures are always
made without any made after through
study or analysis study and analysis of
work
Policies
George R Terry
policy is a verbal, written or implied overall guide, setting up boundaries that supply the
general limits and direction in which managerial action will take
• General guideline for decision making

• Sets boundary around decision (those that can be and can’t be made)
• Deal with “how to do” (framework) and doesn’t dictate
• Policies are means to achieve objective
Eg:
Recruitment policy:
Select meritorious people (subordinates decide who are meritorious)

Advantages:
1. Ensure uniformity of action. Actions are predictable
2. Speeds up decisions at lower level
3. Superior can delegate more authority to subordinates. As decisions will be within boundary
4. Policies give practical shape to objectives

Types of Policies
1. Classification on the basis of sources
1. Originated policies
Made by top managers
to guide subordinates and own
1. Appealed policies
Arise from appeal from subordinate to superior (to handle situation)
Become precedents for future action
Eg: Discount 2% to 2.5%
1. Implied policies
Neither stated in writing or verbal. Watch superiors and understand (30 - 35)
1. Externally imposed policies

Imposed by external agencies
Eg: Govt. policies, Association policies etc.
(reducing interest rates, Limiting production, Promoting internal candidates)

2. Classification on the basis of functions
a) Production
Method of production, research etc.
a) Sales
Pricing, packaging, distribution channel etc.
a) Finance
Capital structure, working capital, internal financing etc.
a) Personnel
Recruitment, training, working conditions etc.
3. Classification on basis of organizational level

Policies made at different levels(Major and minor policies)

Guidelines for effective policy making
1. Should be in writing and clear to people who implement
2. Should reflect objectives of company. And define methods, actions and specify limits of
freedom for people who participate
3. Policy formulation by top manages and people who implement them(Participate)
4. Reasonable balance between stability and flexibility
5. Policies should not pull in different directions
6. Policies must be comprehensive (have contingency)

Eg: Hiring people
1. Periodically reviewed

Procedures
Procedure:
Detailed guidelines to carry out policies
Have sequence of steps to do a job (used for job every time)
Eg: Purchasing raw materials, Recruitment process
Difference between Policy and Procedure
1. General guidelines for thinking 1. General guides to action (lower

and action (Higher level) level)
2. Helps fulfilling objectives of 2. Shows the way to implement
enterprise policies
3. Generally broad, has some latitude 3. Specific and do not allow latitude
in decision making
4. Established after thorough study
4. Established without study and and analysis
analysis

Advantages
1. Standard way of performing a task. Uniformity of performance
2. Work simplification. Eliminates unnecessary steps
3. Control over performance
4. Enable employee to improve efficiency
Limitations
1. Limit scope for innovation, improvement of performance
2. Result into duplication, overlapping and conflict
(procedures across departments Eg: Widening roads)
Overcome
1. Management reviews
2. Appraises procedures periodically

Methods
Method
A prescribed way in which one step of a procedure is to be performed
Eg:
Procedure : Recruitment process
Method : Technique of conducting written test
a) Methods helps to increase effectiveness and usefulness of procedures
b) Methods should be periodically reviewed and modified
c) Improving methods: reduced fatigue, better productivity, low cost achieved
Methods improvement
1. Manual methods replaced by mechanical means
2. Existing mechanised process improved
3. Work simplified (with time and motion study)
Rules
Rules
Detailed instructions that specify actions must or must not be performed in a given
situation
Why Rule?
Avoid repeated reference to higher level for authorization on routine matters
Advantages
1. Predictability
2. Uniformity in efforts and results

Single Use Plans
Single Use Plans

Developed to achieve specific ends
Types:
1. Programmes
2. Budgets

Programmes
Programme
Precise plans or definite steps in proper sequence to discharge a task
Eg: New bank branches
Made of Policies, Procedures, Budgets etc.
Essential ingredients
Time phasing : Lay down dates for completion
Budgeting : Finance the programme
Schedule
Specifies time when each of a series of actions should take place

Budgets
Institute of Costs and Works Accountants

A Financial and /or quantitative statement prepared prior to definite period of time, of
the policy to be pursued during that period
Plans for future containing statements of expected results in numerical terms

i.e. rupees, man-hours
Eg: Sales budget, production budget, expense budget

Steps in Planning
1. Establishing Verifiable Goals or Set of Goals to be achieved
Eg: Growth rate, Sales volume, New product
Factors: Values of manager, Actual and potential ability of company
1. Establishing Planning Premises

Establishing assumptions about Future
Eg: Population trend, economic conditions, material availability etc.
Managers at various levels give different views
a) Internal and External Premises

Internal: sales forecast, policies, programmes, labour skill etc.
External:
Business environment,
factors affecting Product demand and
factors affecting availability of resource

b) Tangible and Intangible Premises
Tangible: Capital and resource investment, industry demand
Intangible: Political stability, business and economic environment
c) Controllable and Uncontrollable Premises

Controllable : Labour skill, Company policy, availability of
resources
Uncontrollable : Strikes, wars natural calamities etc.
3. Deciding Planning Period

Plan to anticipated future
Other Factors:
a) Lead Time in development and commercialization of a new product
b) Time required to recover capital investments or the pay-back period
c) Length of commitments already made

4. Finding Alternative Courses of Action
Search for and examine alternative courses of action
Eg: Selling directly or through agencies
5. Evaluating and Selecting a Course of Action

Select the best, considering premises and goals
6. Developing Derivative Plans

Goals translated in to day to day activities is called Derivative plans
Done by Middle and lower level managers
Includes plans, programmes and budgets (for sub units)
7. Measuring and Controlling the Progress

Steps in Planning
Being Aware of Opportunity
Setting objectives or Goals
Considering planning
premises
Identifying Alternatives
Comparing alternatives in light of

goals sought
Choosing an Alternative
Formulating supporting plans
Numerizing plans by Marking Budgets

50
Steps in Planning
Being Aware of Opportunity Comparing alternatives in light of
In light of: goals sought
The Market Which alternative will give us the
Competition best chance of meeting our goals at
What customer want the lowest cost and highest profit?
Our strengths
Our weaknesses
Choosing an Alternative
Setting objectives or Goals Selecting the course of action we
Where we want to be and what will pursue
we want to accomplish and
when
Formulating supporting plans

Such as plan to
Considering planning Buy equipment
premises Buy materials
In what environment – internal Hire and train workers
or external – will our plans Develop a new product
operator?
Numerizing plans by Marking

Budgets
Identifying Alternatives Develop such budgets as:
What are the most promising Volume and price of sales
alternatives to accomplishing Operating expenses
our objectives? Necessary for plans
Expenditures for capital 51
Equipment
Purpose of Planning
1. Reduces risk
By identifying risks early on, we are likely to contain them.
2. Reduces uncertainty
A project evolves as it develops. Providing a plan that allows for
change reduces uncertainty regarding the final outcome of the project.
3. Supports better decision making

A good plan allows for making better, more informed decisions.
4. Establishes trust
The stakeholders have more trust in one another.
5. Conveys information
A good plan conveys schedules, cost, features, risk, etc.
Decision
Choice from two or more alternatives.
Choosing
Have alternatives
Purpose

Decision making
• The process of choosing among alternatives

• Decision making is part of all the functions
of the management

Types of Decisions
1. Programmed and Non Programmed

2. Major and Minor decisions
Factors
• Degree of Futurity of Decision
• Impact of decisions on other functional areas
• Recurrence of decisions
1. Routine and Strategic decisions
2. Individual and Group decisions
3. Simple and Complex decisions

Advantages of Group decisions
1. Increased acceptance
2. Easier coordination
3. Easier communication
4. More information processed
Disadvantages of Group decisions

1. Group decisions take longer
2. Groups can be indecisive
3. Groups can compromise
4. Groups can be dominated

Two new techniques for group discussions
1. Nominal Group Technique
2. Delphi Technique

Simple and Complex decisions
No. of variables involved
1) Mechanistic
problem is simple, high degree of certainty
Eg: operating procedures
1) Judgmental
problem is simple, low degree of certainty
Eg: Marketing (promoting)
1) Analytical
problem is complex, high degree of certainty
Eg:
4) Adaptive
problem is complex, high degree of certainty
Eg: Change in corporate plans and policies

Decision Making
 Types of decision
 Programmed and non programmed
 Individual and collective

Nominal group technique and Delphi
technique
 Minor and major decisions
 Temporary and permanent

Decision Making
 Steps in decision making
 Recognition of problem/opportunity
 Deciding priorities among problem
 Problem diagnosis
 Development of alternative solutions
 Studying and comparing the consequences
 Implementation into action
 Study the result

Decision Making

Decision Making
 Problems for the managers
 Incomplete information
 Non-conducive environment
 Opposition by subordinates
 Improper communication
 Wrong timing
 Statutory regulations
 Govt. policies
 External influence and lack of support
Steps in planning and planning
premises
 Being aware of opportunities
 Establishing objectives
 Developing planning premises
 Internal and external premises
 Tangible and intangible premises
 Controllable and uncontrollable premises
 Deciding the planning period
 Lead time in development and commercialization of
new product
 Time required to recover capital investments or the
pay-back period
 Lengths of commitments already made
Steps in Planning and Planning
premises
 Determination of alternative courses
 Evaluating the alternative and select the best course
of action
 Formulating the derivative of plan
 Monitoring and controlling the plan

Making planning effective
 Coordination
 Communication
 Participation
 Proper climate

Planning skills
 Ability to think ahead
 Ability to define company objectives
 Ability to forecast future
environments trends
 Ability to frame correct strategies
 Ability to monitor the implementation
of strategies

Hierarchy of plans
 Top Mgmt Goal &

objectives
strategies
 Middle MgmtSingle use Stan
plans ding
plans
 Low Action plans

Management
Hierarchy of Plans
Purpose
or Mission
Objectives
Strategies
Policies: Major or Minor
Procedures
Rules
Programs: Major or minor and supporting
Budgets: numberized programs
68
Relationship of objectives and the
organizational Hierarchy
1. Socio-
economic
purpose Board of
directors
2. Mission
3. Overall objectives of the

organization (long-rage, Top-level
strategic) management
4. More specific overall objectives

(e.g, in key result areas (Some)
5. Division objectives Middle – level

(Some) managers
6. Department and Unit objectives
7. Individual objectives Lower-level

• Performance managers
• Personal development objectives
Hierarchy objectives organizational Hierarchy

69

UNIT I Part II Planning

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Planning

Dr S.Natarajan and Sri

“Successful managers deal with

Dr S.Natarajan and Sri N.Ramesh

Planning Where we want to

2. Planning is an intellectual process

Decision making is part of planning

3. Planning is continuous process

Principle of navigational change (by Koontz and O’Donnell)

Plan must be flexible

Areas: Technology (product mix), market (geography),

2. Time spent in planning

Dr S.Natarajan and Sri

2. Focuses Attention on the Organization’s Goals

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri

 For whom do we do it?

Dr S.Natarajan and Sri

 Used as continual point of

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri

 Drucker’s Objectives for Organizational

 Tangible : quantifiable (Sales,

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri

Requirements of Sound Objectives

Dr S.Natarajan and Sri

1. Basis for planning

2. Act as motivators for individuals and departments

3. Eliminate haphazard action

4. Facilitate coordinated behaviour of groups

5. Basis for managerial control

6. Better management of enterprise

7. Lessen misunderstanding and conflict

Dr S.Natarajan and Sri

09/13/10 Dr S.Natarajan and Sri N.Ramesh 24

• These are the policies, procedures, rules and

Dr S.Natarajan and Sri N.Ramesh

Dr S.Natarajan and Sri

For Non Repetitive For Repetitive

Dr S.Natarajan and Sri

Dr S.Natarajan and Sri N.Ramesh

Environment of a company (Andrew)

Dr S.Natarajan and Sri

d) Social and cultural factors

Dr S.Natarajan and Sri

1. Entrepreneurial mode (Inside Out mode)

1. Adaptive mode (Outside In mode)

Eg: Finance : mode1

Dr S.Natarajan and Sri

Types of Standing Plans

Dr S.Natarajan and Sri

• General guideline for decision making

Dr S.Natarajan and Sri

1. Ensure uniformity of action. Actions are predictable

2. Speeds up decisions at lower level

4. Policies give practical shape to objectives

Dr S.Natarajan and Sri

1. Externally imposed policies

Dr S.Natarajan and Sri

3. Classification on basis of organizational level