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PRINCIPLES OF MANAGEMENT

Planning & Organizing

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PLANNING

Types of Plans

OperationalPlans

TacticalPlans

StrategicPlans

Specify actions toachieve tactical plans

(very short-term)

Steps for achieving strategic objectives(usually one year or

less)

Establish long-rangeobjectives

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Types of Plans

Mission / Purpose (Strategic Plans)The ‘reason for existence’ of an organization

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Type of Plans Objectives/ Goals

The end towards which activity of an organization is aimed, e.g.○ For a Business enterprise – profit, surplus creation;○ For an vocational NGO – to provide means of

livelihood to maximum people in the area they are serving

StrategiesDetermination of the long term objectives and

adoption of a course of actionGives a frame work for linked action-plans,

communicated systematically to guide thinking and actions.

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Policies“Plans” that are general directional statements (or

understandings) that guide/help in decision making:○ Repeat decisions taken ‘reflexively’;○ Delegation of tasks without loss of control

Some discretion is permissible depending on circumstances thus encouraging initiative within limits and situational adjustments;

Issues with “Policy”○ Seldom documented in writing○ Subject to interpretations

Type of Plans

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ProceduresPlans that are chronological sequences of required

actions: task-oriented in nature;

Cuts across department boundaries (sub-systems) in an organization: e.g. attendance, applying for leave

Procedures and policies are inter related: e.g. authorization for paid leave

RulesSpecific actions or non-actions allowing no discretionWhat is acceptable and what is not?

Type of Plans

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ProgrammesAction plans (mainly non-routine or for changed activities)

including, task assignments, steps to be taken, resources to be deployed etc. to achieve a (new/renewed) goal;○ Primary program may require supporting programs,

spreading across the enterprise;○ Perfect coordination between supporting & primary programs

essential to avoid delays, unnecessary costs and expected roll-out.

Programs are a complex of (sub)goals, policies, rules and other elements necessary for the course of action e.g. obtaining ISO certification.

Type of Plans

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BudgetsA statement of expected results expressed in

“Numerical terms” e.g. financial operating budget = “profit plan”;

Budgets enforce precision in thinking:○ Making a budget is ‘planning’ by itself;○ Encourages innovation – a “different” way to work

Budgets serve for ‘Control’:○ Enforces discipline in execution of plans;○ Instills cost consciousness;○ Makes people (constantly) plan!

Type of Plans

Steps in Planning

Being aware of challenges /opportunity

Market, Customer’s wants, Competition,Own strengths & weakness

Setting Goals/Objectives

What to accomplish& when

Planning premises

Internal & externalEnvironment/conditions

Identifyingalternatives

Comparing & choosing analternative

Decisionmaking

Budgeting(Quantifying Plans)

e.g., Sales budgetOperational Expense budget,Capital expenditure budget

Formulating Supporting

plans

e.g., plan to buyNew machines, recruit & trainEmployees, develop product etc

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Planning PeriodShort term plans e.g. raw material buying plan in a

factoryLong term plans e.g. product development plan,

plant/production facility installation;

Steps in Planning

Being aware of Opportunity

Considering Market,Competition, Customer’s wants, Own strengths & weaknesses

Setting Goals/Objectives

What to accomplish& when

Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.

Hierarchy of Objectives

Mission

Overall Objectives &

Key Result Areas

Divisional Objectives

Departmental Objectives

Individual Objectives

Objectives set end results – they need to be supported by a hierarchy of sub-objectives, duly networked through the organization to avoid discord and wasted effort.

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The Organizational Objectives get trickled down into the objectives of :Divisions Departments Individual objectives;The ‘cascade’ principle: seamless flow

Mutual support & interlocking of goals is essentialManagers must ensure that the components of

the network fit each other;Departments/divisions can be ‘blind-sided’

Hierarchy of Objectives

Planning Premises & Strategies

Setting Goals/Objectives

What to accomplish& when

Planning premises

Internal & externalenvironment

Identifyingalternatives

Comparing & choosing analternative

Decisionmaking

Strategic Planning Process

Strategy = determination of the purpose / the basic long-term objectives; the adoption of courses of action and allocation of resources required to achieve the aims.

Planning Premises & StrategiesStakeholderWishes &Shareholderdemands

ManagementOrientation

EnterpriseProfile

Purpose &Major objectivesof enterprise

CurrentExternalsituation

Currentresourcesituation

ForecastExternalsituation

ExternalOpportunity& Threat

InternalStrengths &Weakness

Key success factors & Alternative Strategies

Strategicchoice

The Strategic Planning Process

Planning Premises

Porter’s Five Forces : a model for analysis of theexternal influences

Planning Premises: forecast of demand

Estimate of future demand is made by qualitative methods, time-series methods and/or causal methods: Qualitative relies on judgment of experts to translate to quantities; Time-series statistically interpolate demand on historical data; Causal method seek co-relation on cause and effect basis between two

(or more) variables to quantify demand; However, all forecasting methods are limited by:

Handling of un-quantifiable factors e.g. national pride Unrealistic assumptions fuelled by a desire to succeed Excessive data required (often unobtainable) to make accurate forecasts Uncertainty with environmental changes: Technology, Govt. Policy, International

alignments, New materials/sources, Climate etc. Coping with uncertainties require:

Sensitivity analysis & “What if” scenarios (trust instinct!); Planning for contingencies – with defined cut-in milestones.

Planning Premises & Strategies

Decision Making = is the core of the planning process; a plan does not come into being unless a ‘decision’ i.e. certain commitments of resources, managerial time and money are made and risks are taken.

Comparing & choosing analternative

Decisionmaking

Budgeting(Quantifying Plans)

Say, Sales budgetOperational Expense budget,Capital expenditure budget

Formulating Supporting

plans

Say, plan to buyEquipment, recruit & trainEmployees, develop product etc

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ORGANISING

Organising

Organising is the process of defining and grouping activities and establishing authority relationships among them to attain organizational objectives.

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Importance of Organizing

Plan implementation Assignment of authority, responsibility, and

accountability Division of work Establish relationships among individuals,

groups & departments Allocation and deployment of organizational

resources

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Chain of Command

A R

AUTHORITY < RESPONSIBILITY

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Chain of Command

A R

AUTHORITY > RESPONSIBILITY

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A R

Chain of Command

AUTHORITY = RESPONSIBILITY

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Span of Control

Span of 8

(Classical)

Span of 4

(Contemporary)

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Classical Viewpoint

SPAN OF 8

Base level = 4096

Managers (levels 1-4)

= 585

1

8

64

512

4096

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Contemporary Viewpoint

1

4

16

64

256

1024

4096

SPAN OF 4

Base level = 4096

Managers (levels 1-6)

= 1365

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Centralization & Decentralization

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Centralization & Decentralization

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CENTRALIZATIONDECENTRALIZATIO

N

Environment is stable Environment is complex, uncertain

Lower level managers (LLM) are not as capable or experienced at making

decisions as upper level mangers

LLM are capable and experienced a making decisions

LLM do not want to have a say in decisions

LLM want a voice in decisions

Decisions are significant Decisions are relatively minor

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CENTRALIZATIONDECENTRALIZATIO

N

Organization is facing a crisis or the risk of company failure

Corporate culture is open to allowing managers to have a say in what

happens

Company is large Company is geographically dispersed

Effective implementation of company strategies depends on managers retaining say over what happens

Effective implementation of company strategies depends on managers

having involvement and flexibility to make decisions

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Departmentalization

Putting specialists together Direction of a manager Departmentation

ProcessSetting up and establishing departments

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Organizing Process

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Identify Activities

Selling

Accounting

Delivery

Quality Control

Advertising

Compensating

Training

Production

Purchasing

Budgeting

Recruitment

Maintaining Personnel

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Classify Activities in Departments

>Selling>Advertising>Delivery

>Production>Purchasing>Quality control

>Accounting>Budgeting>Compensating

>Recruitment>Training>Maintaining personnel

MARKETING OPERATIONS FINANCEHUMAN

RESOURCES

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Purpose of the Structure

Defines relationships between tasks and authority

Defines formal reporting relationships, levels of hierarchy, span of control

Defines individual departments Defines systems that affects the organization

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Formal System

Planned structure Lines of responsibility, authority, and

position Establish patterned relationships among

components Can be described through:

Organizational ChartPolicy ManualDepartments

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Based on needs, sentiments, and interests of people

Vulnerable to expediency, manipulation and opportunism

More subtle and invisible in the organizational chart

Can be classified as:Horizontal = same department or same levelVertical = different levelsMixed = combination of both

Informal System

Formal vs Informal Organizations

FORMAL INFORMAL

Have planned structure Deliberate attempts to

create patterned relationships

Usually shown by a chart

Advocated by traditional theory

Not formally planned Arise spontaneously as

a result of interactions Not depicted in a chart Stressed by human

relation theory