PLANNING

Definition

“Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.”

(Koontz and O’Donnel)

Planning Encompasses:

• Defining the organization’s objectives or goals.

• Establishing an overall strategy for achieving

those goals.

• Developing a comprehensive hierarchy of plans to

integrate and coordinate activities.

Planning questions

• Where are we now?

• Where do we want to be?

• Gap?

• How can we get there from here?

Nature

• Planning is goal oriented

• Primary function

• All pervasive: every department and levels

• Mental exercise: imagination,foresight and sound judgement

• Continuous process

• Involves choice

• Forward looking

• flexible

Advantages of Planning

• Planning provides direction

• Planning provides a unifying framework

• Planning is economical: eliminate wastages

• Planning reduces risk of uncertainity

• Planning establishes objectives or standards that

facilitate control.

• Planning facilitates decision making: different

alternatives

• Planning encourages innovation and creativity

Disadvantages of Planning

• Planning may create rigidity i.e. it prevents innovation

• Plans can’t be developed for a dynamic environment.

• Formal plans can’t replace intuition and creativity.

• Planning focuses managers’ attention on today’s

competition, not on tomorrow’s survival i.e.

managerial deficiencies.

• Formal planning reinforces success, which may lead

to failure.

• Planning is costly and time consuming.

Steps for Effective planning(Koontz and O’Donnell)• Climate

• Top management support

• Participation

• Communication: Goals,premises,policies

• Integration: Plans must be properly balanced

• Monitoring: As per the external environment

Exhibit 4-1 Types of Plans

Breadth Time frame Specificity Frequency

of use

Strategic Long term Directional Single use

Tactical Short term Specific Standing

Strategic and Tactical Plans

• Strategic plans are plans that apply to the entire organization,

establish the organization’s overall objectives, and seek to

position the organization in terms of its environment.

• Tactical plans (sometimes referred to as operational plans)

are concerned with the implementation of strategic plans by

coordinating the work of different departments in the

organisation.

• Strategic and tactical plans differ in three primary ways—

their time frame, scope, and whether they include a known

set of organizational objectives.

Short-term and Long-term Plans

• Short-term plans are plans that cover less than one year.

• Long-term plans are plans that extend beyond five years.

• Their differences lie in the length of future commitments and

the degree of variability organizations face.

Specific and Directional Plans

• Specific plans have clearly defined objectives and leave no room

for misinterpretation.

• Directional plans are flexible plans that set out general guidelines.

Single-use and Standing Plans

• Single-use plans are used to meet the needs of particular or

unique situation.

e.g.development of a product.

• Standing plans are ongoing, and provide guidance for

repeatedly performed actions in an organization.

Planning process

• Establishing objectives:identify goals, internal as well as external conditions,Objectives should state what is to achieved, where action needs to be taken, who is to perform it, how it is undertaken , when it is to be accomplished.

• Developing premises: assumptions about the environment in which plans are made.

• Evaluating alternatives and selection• Formulating derivative plans: The plan derived for various departments,

units, activities etc in a detailed manner.• Securing cooperation and participation of employees.

What Is MBO?

• MBO is a system in which specific performance

objectives are jointly determined by subordinates

and their supervisors, progress toward objectives

is periodically reviewed, and rewards are

allocated on the basis of that progress.

Cascading of Objectives

Overall organizational objectives

Divisional objectives

Departmental objectives

Individual objectives

The Common Elements in a MBO Program

• Goal specificity

• Participative decision making

• An explicit time period

• Performance feedback.

How does a manager set employee objectives?

• Identify an employee’s key job tasks.

• Establish specific and challenging goals for each key task.

• Allow the employee to actively participate.

• Prioritize goals.

• Build in feedback mechanism to assess goal progress.

• Link rewards to goal attainment.

Potential Problems

• Employees tend to focus on the goals by which they will be judged.

• Specific goals encourage individual achievement rather than a

team focus.

• Specific goals may have a tendency to limit employees’ potential

and discourage efforts for continuous improvement.

Identify the organization’s current mission, objectives, andstrategies

Analyze theenvironment

Identify opportunities and threats

Analyze theorganization’sresources

Identify strengths andweaknesses

Reassess theorganization’smission and

objectives

Formulate strategies

Implementstrategies

Evaluateresults

The Strategic Management Process

1.

2. 3.

4. 5.

6.

7. 8. 9.

• Environmental scanning refers to screening large amounts of

information to detect emerging trends and create a set of scenarios.

• Competitive intelligence refers to accurate information about

competitors that allows managers to anticipate competitors’ actions

rather than merely react to them.

SWOT Analysis

• Opportunities are positive external environmental factors, and threats are negative ones.

• Strengths are internal resources that are available or things that the organization does well.

• Weaknesses are those resources that an organization lacks or activities that it does not do well.

• Core competency refers to any of the strengths that represent unique skills or resources that can determine the organization’s competitive edge.

Organization’s

resources

Opportunities in the

environment

Organization’s opportunities

1.The growth strategy

A strategy in which an organization attempts too increase the level of its operates; can take the form of increasing sales revenue, number of employees, or market share.

2.The stability strategy

A strategy that is characterized by an absence of significant change.

3.Retrenchment strategy

A strategy is reducing its size, usually in an environment of decline.

4.Combination strategy

A strategy that is the simultaneous pursuit by an organization of

two or more of growth, stability, and retrenchment strategies.

Grand Strategies

1. Cost leadership strategy(low-cost producer)

The strategy an organization follows when it wants to be

the lowest-cost producer in its industry.

2. Differentiation strategy

The strategy an organization follows when it wants to be

unique in its industry within a broad market.

3.Focus strategy

The strategy an organization follows when it wants to

establish an advantage in a narrow market segment.

Competitive strategies