UNIT I Part II Planning

8/8/2019 UNIT I Part II Planning

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Planning

Instructor:Dr S.Natarajan

Professor, Dept of ISEPESIT

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Successful managers deal with

foreseen problems and unsuccessfulmanagers struggle with unforeseenproblems.Terry

PLANNING


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Goal inputs of claimants

1. Employees

2. Consumers

3. Suppliers

4. Stock holders

5. Governments

6. Community

7. Other

Inputs1.Human

2.Capital3.Managerial

4.Technological

EXTER

NAL

ENVIRON

MENT

EXTERNAL

ENVIRONMENT

EXTERNAL

ENVIRONMENT

Managerial Knowledge,Goals of claimants anduse of inputs(Part1 TheBasis of Management

Theory and Science)

PLANNING (Part2)

Organizing (Part3)

Staffing (Part 4)

Leading (Part 5)

Controlling (Part6)

Toproduce outputs

Facilitated bycommunicatio

n that alsolink the

organizationwith theexternal

environment(Part 1 & 7.

Domestic andinternal

environment)

Reenergizing the

systemEXTERNAL

ENVIRONME

NT

SYSTEM APPROACH TO MANAGEMENT


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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 aspecified period of time.


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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)


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Nature of Planning Provides basic foundation from which all

future management functions arise.

Goal oriented All pervasive

Intellectual exercise

Continuous process Futuristic

Integrated Process


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Planning- A bridge

Where we are Where we want tobe

Planning


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Nature of Planning1. Planning is the beginningof the Management process

2. Planning is an intellectualprocessInvolves 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 processManagers should constantly watch progress of their plans

Principle of navigational change (by Koontz and ODonnell)

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

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Importance of Planning

1. Minimizes Risk and Uncertainty

Rational and fact based procedures

1. Leads to Success

2. Focuses Attention on the Organizations Goals

3. Facilitates Control

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Planning Mission Statement

What do we want to do

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N.Ramesh Babu


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Planning Goal Statement Why?

What do we do?

For whom do we do it?


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Planning Goal Statement Gives purpose and direction

Used as continual point ofreference for questions regardingscope or purpose


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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

Improves morale

Facilitates control


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Planning Objectives

More detailed goal statement

Clarifies goal

How do we go about it?

To (action verb)

Consistent with organization


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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

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Objectives are multiple innumbers

Druckers Objectives for OrganizationalSurvival Market Share Innovation Productivity Physical and Financial Resources Manager Performance and Development Worker Performance and Attitude Profitability Social Responsibility


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Objectives are either tangible orintangible

Tangible : quantifiable (Sales,Marketing)

Intangible : Not quantifiable(performance, morale, socialresponsibility)


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Objectives have a priority

The accomplishment of one objectiveis relatively more important than of

others Objectives are arranged in a

hierarchy

Corporate objectives followed bydivisional objectives


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ObjectivesObjectives:

Goals orAims 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 hierarchy5. 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)

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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


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Objectives some times clash with each

otherThe 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

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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

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Planning & Control Siamese

Twins

Planning Implementationof Plans

Controlling:

comparingplans with

results

Corrective

action

No undesirable

deviations fromplans

Undesirable

deviations


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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


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Types of Plans

Objectives

Strategies

Single use Plans(Programmes

and budgets)

Standing Plans

(Policies, Procedures,

Methods and Rules)

Hierarchy of Organizational Plans

For Non Repetitive For Repetitive

Activities Activities


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First attested in English 1810, the wordstrategy derives

from the Frenchstratgie, which is the romanization of

the Greek"" (strategia), "office of general,

command, generalship, in turn from ""

(strategos), "leader or commander of an army, general [

Strategy

Plan which takes factors into account and provides anoptimal match between firm and environment

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Strategy
http://en.wikipedia.org/wiki/French_languagehttp://en.wikipedia.org/wiki/Romanizationhttp://en.wikipedia.org/wiki/Greek_languagehttp://en.wikipedia.org/wiki/Greek_languagehttp://en.wikipedia.org/wiki/Romanizationhttp://en.wikipedia.org/wiki/French_language


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Strategies

Strategy formulation activities1. 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


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b) Economic factors

Level of economic development and distribution of personal income

Trend in prices, exchange ratesSupply 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 AppraisalAnalysis of companys strengths and weaknesses

Company must plan to exploit the strengths to maximum and try to overcome weakness.


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Modes of Strategy

1. Planning modeCombining 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 Companys mindset

1. Adaptive mode (Outside In mode)

Reactive and timid

Solve problems as they come

Managers plan according to companys strengths and weaknesses

Eg: Finance : mode1

Marketing : mode2

Personnel : mode 3


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Standing PlansStanding Plans:

Standardized approach used for recurring situations

Types of Standing Plans

1. Policies

2. Procedures3. Methods

4. Rules


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Standing plans

Policies

General guidelines ofthe organization

Top level activity Policies fulfill the

organizationsobjectives

Policies are oftenmade without anystudy or analysis

Procedures

General guidelines atthe action level

Departmental activity Procedures guide the

way to implement thepolicies

Procedures are alwaysmade after throughstudy and analysis ofwork

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PoliciesGeorge 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 cant be made)

Deal with how to do (framework) and doesnt dictate

Policies are means to achieve objective

Eg:

Recruitment policy:

Select meritorious people (subordinates decide who are meritorious)


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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


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Types of Policies1. Classification on the basis of sources

1. Originated policiesMade 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 actionEg: Discount 2% to 2.5%

1. Implied policies

Neither stated in writing or verbal. Watch superiors and understand (30 - 35)

1. Externally imposed policiesImposed by external agencies

Eg: Govt. policies, Association policies etc.

(reducing interest rates, Limiting production, Promoting internal candidates)


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Guidelines for effective policy making1. Should be in writingand 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 betweenstability and flexibility

5. Policiesshould not pull in different directions

6. Policies must be comprehensive (have contingency)

Eg: Hiring people

1. Periodically reviewed


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Procedures

Procedure:

Detailed guidelinesto carry out policiesHavesequence 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 forthinking

and action (Higher level)

2. Helps fulfilling objectives of

enterprise

3. Generally broad, has some latitudein decision making

4. Established without study and

analysis

1. General guides to action (lower

level)

2. Shows the way to implement

policies

3. Specific and do not allow latitude

4. Established after thorough study

and analysis


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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 performance2. Result into duplication, overlapping and conflict

(procedures across departments Eg: Widening roads)

Overcome

1. Management reviews

2. Appraises procedures periodically


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RulesRules

Detailed instructions that specify actions must or must not be performed in a givensituation

Why Rule?

Avoid repeated reference to higher level for authorization on routine matters

Advantages

1. Predictability

2. Uniformity in efforts and results


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Single Use Plans

Single Use Plans

Developed to achieve specific ends

Types:1. Programmes

2. Budgets


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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


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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


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Steps in Planning

1. Establishing Verifiable Goals or Set of Goals to be achieved

Eg: Growth rate, Sales volume, New productFactors: 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


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b) Tangible and Intangible Premises

Tangible: Capital and resource investment, industry demandIntangible: Political stability, business and economic environment

c) Controllable and Uncontrollable Premises

Controllable : Labour skill, Company policy, availability ofresources

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


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4. Finding Alternative Courses of Action

Search for and examine alternative courses of actionEg: 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


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Steps in PlanningBeing 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

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Steps in PlanningBeing Aware of Opportunity

In light of:

The Market

Competition

What customer want

Our strengths

Our weaknesses

Setting objectives or Goals

Where we want to be and what

we want to accomplish and

when

Considering planning

premises

In what environment internal

or external will our plans

operator?

Identifying Alternatives

What are the most promising

alternatives to accomplishing

our objectives?

Comparing alternatives in light of

goals sought

Which alternative will give us the

best chance of meeting our goals atthe lowest cost and highest profit?

Choosing an Alternative

Selecting the course of action we

will pursue

Formulating supporting plans

Such as plan to

Buy equipment

Buy materials

Hire and train workers

Develop a new product

Numerizing plans by Marking

Budgets

Develop such budgets as:

Volume and price of sales

Operating expenses

Necessary for plans

Expenditures for capital

Equipment


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Purpose of Planning1. 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 forchange 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.


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Decision

Choice from two or more alternatives.

Choosing

Have alternativesPurpose


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Decision making

The process of choosing among alternatives

Decision making is part of all the functions

of the management

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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


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Advantages of Group decisions

1. Increased acceptance

2. Easier coordination

3. Easier communication4. More information processed

Disadvantages of Group decisions

1. Group decisions take longer

2. Groups can be indecisive3. Groups can compromise

4. Groups can be dominated


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Two new techniques for group discussions

1. Nominal Group Technique

2. Delphi Technique


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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) Adaptiveproblem is complex, high degree of certainty

Eg: Change in corporate plans and policies


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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

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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

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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

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Steps in planning and planningpremises

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

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Making planning effective

Coordination

Communication

Participation

Proper climate

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Planning skills

Ability to think ahead

Ability to define company objectives

Ability to forecast futureenvironments trends

Ability to frame correct strategies

Ability to monitor the implementationof strategies

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Hierarchy of plans

Top Mgmt

Middle Mgmt

LowManagement

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Single use

plansStan

ding

plans

Goal &

objectives

Action plans

strategies


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Purpose

or Mission

Procedures

Strategies

Policies: Major or Minor

Rules

Objectives

Programs: Major or minor and supporting

Budgets: numberized programs

Hierarchy of Plans

Relationship of objectives and the


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Relationship of objectives and theorganizational Hierarchy

1. Socio-

economic

purpose

3. Overall objectives of theorganization (long-rage,

strategic)

4. More specific overall objectives

(e.g, in key result areas

5. Division objectives

2. Mission

6. Department and Unit objectives

7. Individual objectives

Performance

Personal development objectives

Board of

directors

Top-level

management

Middle level

managers

Lower-level

managers

(Some)

(Some)

UNIT I Part II Planning

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