Chapter Two: The Planning Function PDF

CHAPTER TWO THE PLANNING FUNCTION  2.1. MEANING, NATURE AND IMPORTANCE OF PLANNING 2.1.1. The Meaning of Planning Planning is the dynamic process of making decisions today about future actions and it is a selection or choice among alternatives. It bridges the gap between w...

CHAPTER TWO THE PLANNING FUNCTION  2.1. MEANING, NATURE AND IMPORTANCE OF PLANNING 2.1.1. The Meaning of Planning Planning is the dynamic process of making decisions today about future actions and it is a selection or choice among alternatives. It bridges the gap between where we are now and where we want to be. Preparing today for tomorrow; it is the activity that allows managers to determine what  CONT’D Planning Answers six basic questions in regard to any intended activity: What (the goal or goals). When (the time frame in which it will be accomplished) Where (the place or places where the plans or planning will reach its conclusion). Who (which people will perform the tasks). How (the specific steps or methods to reach the goals). What resources (resources necessary to reach the goals). 2.1.2. Nature of Planning The contribution of planning to purpose and objectives  Purpose of any plan and its derivatives or supporting plans is to facilitate the accomplishment of organizational objectives. The primacy of planning  Planning precedes the execution of all other managerial functions, because all other managerial functions must be planned if they are to be effective.  CONT’D The pervasiveness /Universality of planning Planning is a function of all managers. It is difficult to call a person a manager if he or she doesn't plan. Planning and information Basically no plan exists without information. To plan managers have to gather relevant information from around the environment.  CONT’D Planning is a continuous process  Planning deals with the future and the future is full of uncertainties and subject to revision. Planning is a means to an end  Planning is not an end by itself, it is a means to an end (meeting objectives). Plans are arranged in a hierarchy  Pans are first set for entire organization. corporate plan then provides the framework for the formulation of divisional, departmental, and  2.1.3. Importance of Planning It provides direction and sense of purpose  Plans focus attention on specific targets and direct employees effort toward important outcomes. It reduces uncertainties and anticipates the future/ preparing for change  Using systematic and careful forecasts of future states of the economy, markets, technology, etc to reduce uncertainties.  Planning answers “what-if” questions.  CONT’D It provides basis for controlling  Standards /controlling mechanisms/ are developed during planning. It forces managers to see the organization as a system  one part (department) affects the operation of the whole organization (interdependent). It promotes efficiency  Planning provides the opportunity for a greater utilization of the available organizational resources.  CONT’D It provides the base for cooperative and coordinated efforts  Through defining the objectives of the organization and the means for their achievement. It provides guideline for decision making  Serve as standard or benchmark for measuring performance  Specifying the actions necessary to accomplish the goals of the organization  Limitations of Planning Planning is risky Because of uncertainties in the future and absence of accurate and adequate data. It is a difficult and complicated task Rapid changes in technology and customers’ tastes and preferences make planning difficult and exceptionally complex.  CONT’D It is expensive and time consuming Planning requires resource (financial, physical, human) The collection of the necessary data Organizing and interpreting data consume time It is affected by external factors  External impositions, government intervention, natural calamities, import-export policies, taxation and labor laws 2.2.Organizational objectives Objectives are the important ends toward which organizational and individual efforts or activities are directed. Objectives are essential starting points in planning because they provide direction for all other managerial activities. The basic plan of the firm, department may also have its own objectives.  Tip on goal and objectives A goal is an achievable outcome that is generally broad and longer term while an objective is shorter term and defines measurable actions to achieve an overall goal. While different, the two terms are often used in unison./AGREEMENT/ This is because both are essential to planning and executing a project./activity Goals can be intangible and non-measurable, but objectives are defined in terms of tangible targets. For example, the goal to "provide excellent customer service" is intangible, but the objective to "reduce customer wait time to one minute" is tangible and helps in achieving the main goal. Goals are big-picture ideas about where you want to go. Objectives are concrete steps that move you towards your goals.  2.2.1.Nature of Objectives Objective are predetermined or stated in advance Objective should be specific and measurable. If possible, goals should be expressed in quantitative terms. Objective should have defined time period. Objectives should be continually adjusted in light of environmental changes.  CONT’D Objectives have hierarchy (strategic, tactical, and operational)  Strategic Objectives -are broadly defined targets or future end results set by top-level management.  Tactical Objectives - are targets or future end results usually set by middle management for specific departments or units.  Operational Objectives -set by lower management that address specific, measurable outcomes required from lower levels. Primacy of objectives- Objectives are the very reason for the existence of an organization.  2.2.2.Benefits of Objectives Basis for the performance of all managerial functions Objectives can limit employee activities. They serve to prescribe what ‘should be done’ and ‘what should not be done’ by the employees. Serve as a source of employee motivation. Objectives provide performance standards and bases for control. 2.3.The planning process Planning has its own processes or series of steps. These steps are interrelated and there is no rigid boundary between or among these steps, and one is the base for the other. 1.Establishing objectives Specify the expected results and indicate the end points of what is to be done. Involves assessing the present situation, anticipating future conditions, and then setting the  CONT’D 2. Developing premises Planning premises are assumptions about the environment within which the plan is to be carried out (examining the external and internal factors or SWOT analysis) 3. Determining alternative courses of actions Generating alternatives courses of actions that are available to a manager to reach a goal. 4. Evaluating alternative courses of action Assessing the cost and benefits associated with  CONT’D 5. Selecting a course of action Select the best out of the alternative. The finally selected course of action should help for optimum use of the available resources. 6. Formulating derivative plans Prepare the subsidiary or derivative plans to support the basic plan.  CONT’D 7. Number zing plans by budgeting Converting them into budgets and adding various plans together and set important standards. 8. Implementing the plan Develop an action plan to implement it (motion or real operation). 9. Controlling and evaluating the results Monitor the progress that is being made, evaluate the reported results, and make any modifications necessary.  2.4. Types of plans Plans can be classified on different bases or dimensions. These are:  Scope/breadth dimension,  Time dimension, and  Use/repetitiveness 1. Scope/Breadth Dimension Based on the level of management where plans are formulated. Based on scope/breadth we can classify plans into: Strategic, tactical and operational.  CONT’D A. Strategic Plan Organization wide plan that is formulated or developed by top-level management It applies to the entire organization. Looks ahead over the next five or more years. Develops the direction for the entire organization.  CONT’D B. Tactical Plan Is an intermediate plan that helps to reduce long range planning into intermediate Increasing the amount of specificity and making the actions goal oriented. Specific and more goal oriented than strategic plans. Concerned with what the lower level units within each division must do, how they must do it, and who will have the responsibilities for doing it.  CONT’D C. Operational Plan Concerned with the day to day activities of the organization Made at the lower level management in consultation with middle level management. Operational plans spell out specifically what must be accomplished to achieve specific/operational goals. E.g. What production technique is best? What materials are needed for operation?  CONT’D 2. Time Dimension  Time dimension refers to the time periods for which the planning is intended:  It can be long-range (five years or more), medium- range (between one and five years) and short-range plans (one year or less).  All strategic plans are long-range plans.  All tactical plans are medium-range plans.  All operational plans are short-range plans.  CONT’D 3. Use Dimension Frequency of use i.e. based on how repeatedly/frequently a given plan is used. Based on this dimension we do have two types of plans: Standing plans and single use plans. A. Standing Plans Standing plans are plans that are used again & again; followed each time.  CONT’D Designed to deal with organizational issues or problems that recur frequently. It allow managers to conserve time used for planning and decision-making in a predetermined, consistent manner. The major types of standing plans are policies, rules and procedures.  Policies : are general statements or understandings that guide or channel thinking  CONT’D Rules: are the simplest and strictest type of standing plan found in organizations. Spell out specific required action or non-actions, i.e., actions that must be or must not be taken, allowing no discretion, in a given situation. E.g. No smoking, cheating is prohibited. Procedures: outline chronological sequences of required actions/ activities or sequentially arranged rules or actions that need to be done  CONT’D 2. Single use plans Plans aimed at achieving a specific goal that, once reached, will most likely not recur in the future and dissolved when these have been accomplished. The major types of single use plans are programs, projects, and budgets. A. Programs: is a comprehensive plan that coordinates a complex set of activities related to a major non-recurring goal.  CONT’D Are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed and other elements necessary to carryout a given course of action. B. Projects: is a plan that coordinates a set of limited scope activities that do not need to be divided into several major projects in order to reach a major non-recurring goal. Projects are the smaller and separate portions of programs. C. Budgets: are statements of expected results expressed in numerical terms. It may be referred to as a “numberize” program  2.4.1. Characteristics of a Good Plan Every sound business plan must have these characteristics: Objectivity: It should be directed to achieving organizational goals rather than personal objectives. Futurity: Since a plan is a forecast of some future action, it must foresee with reasonable accuracy the nature of future events affecting the industry and the firm. Flexibility: Because no one can foresee the future, plans must have flexibility. The more difficult it is to predict the future, the more flexible the plans must be.  CONT’D Comprehensive: A plan must be comprehensive enough to provide adequate guidance, but not in such detail that it inhibits initiative. Simplicity and clarity: Although a good plan must be comprehensive, it should also be simple. A plan should not be ambiguous. Lack of clarity makes understanding and implementation difficult.  CONT’D Contingency planning: is the development of alternative plans for use in the event that environmental conditions evolve differently than anticipated, rendering original plans unwise or unfeasible. Planning staff- is a small group of individuals who assist top-level managers in developing the various components of the planning process.