Foundations of Planning

Chapter- 4

1- Planning :A process that involves defining the organizations goals. Establishing an overall strategy for achieving those goals and developing a comprehensive set of plans to integrate and coordinate organizational work.

Why do managers plan? Planning gives direction to managers; it reduces the impact of change and develop appropriate response; managers plan in order to anticipate changes and develop the most effective response to them. Planning reduces overlapping and wasted activities and inefficiencies can be overcome or minimize. Planning establish goals or standards that are used in controlling ; there is a comparison of performance desired and performance achieved ; there is an identification of the deviations and an appropriate corrective actions . Planning & Performance ? Formal planning is associated with high profits,higher return on assets; The quality of planning process and appropriate implementation of plans contribute more to high performance than does the level of planning. Planning/ performance relationship is influenced by planning time frame. Organizations need at least four years of systematic formal planning before performance is impacted.
Mgmt Theory & Prac . Chap- IV 2

4/7/2014

How do managers plan ? Goals : Desired outcomes for individuals, groups or entire

organizations. . Goals are objectives and provide direction for all managerial decisions. :
Plans : Plans are the documents that outline how goals are going to be met , including resource allocation, schedules, and other necessary actions to accomplish goals/ objectives Types of Goals: Stated Goals: Financial Objectives: Strategic Objectives: Faster revenue growth: A bigger market share Faster earning growth A Higher , more secure industry rank Higher dividend (bonus/ extra payment) Higher product quality Wider profit margins Lower cost relative to key competitors High Return on invested capital Broader or more attractive product line Stronger bond and credit ratings A stronger reputation with customers Bigger Cash Flows Superior customer services A more diversified revenue base increased ability to compete in intl markets Stable earning during recession( slump) expanded growth opportunities Real Goals: Goals that an organization actually pursues, as defined by the actions of its members
4/7/2014 Mgmt Theory & Prac . Chap- IV 3

Types of Plans: These include: Breadth Strategic Operational Time Frame Long term Short Term Specificity Directional Specific Frequency of use single use Standing

Strategic Plans: Plans that apply to entire organization, establish the organization's overall goals and seek to position the organization in terms of its environment. These also include formulation of goals. Operational Plans: Plans that specify the details of how the overall goals are to be achieved. These also include short time periods, monthly, weekly and day to day . Long term Plans: Plans with a time frame beyond three years. Short term Plans: Plans covering one year or less Specific Plans: Plans are clearly defined and that leave no room for interpretation. E.g sales targets Directional Plans Plans that are flexible and that set out general guidelines. These provide focus but donot lock managers into specific goals or courses of action. Single use Plans A one- time plan specifically designed to meet the needs of a unique situation. Standing Plans These are ongoing plans that provide guidance for activities performed repeatedly,. These include policies, procedures rules etc. Traditional Goal Setting: An approach to setting goals in which goals are set at the top level of the organization and then broken down into sub goals for each level of the organization. Goals that are established and passed down to each succeeding level of organization serve to direct and guide and in some ways constrain , individual employees work behavior. 4/7/2014 Mgmt Theory & Prac . Chap- IV 4

Management By Objectives (MBO): A management system in which specific performance goals are jointly determined by employees and their managers. Progress towards accomplishing these goals is periodically reviewed and rewards are allocated on the basis of the this progress. Steps in MBO program The organizations overall objectives and strategies are formulated Major objectives are allocated among divisional and departmental units Unit managers collaboratively set specific objectives for their units with their managers Specific objectives are collaboratively set with all department members Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees The action plans are implemented Progress towards objectives is periodically reviewed, and feedback is provided Successful achievement of objectives is reinforced by performance based rewards. Characteristics of Well Designed Goals Written in terms of outcomes rather than actions Measurable and quantifiable Clear as to a time frame Challenging yet attainable Written down Communicated to all necessary organizational members .

1. 2. 3. 4. 5. 6. 7. 8.

4/7/2014

Mgmt Theory & Prac . Chap- IV