Elements of Management Planning Lecture Notes PDF

AFE BABALOLA UNIVERSITY, ADO-EKITI FACULTY OF BUSINESS AND SOCIAL SCIENCES DEPARTMENT OF BUSINESS ADMINISTRATION MAN 105: ELEMENTS OF MANAGEMENT LECTURE NOTE I ON PLANN...

AFE BABALOLA UNIVERSITY, ADO-EKITI FACULTY OF BUSINESS AND SOCIAL SCIENCES DEPARTMENT OF BUSINESS ADMINISTRATION MAN 105: ELEMENTS OF MANAGEMENT LECTURE NOTE I ON PLANNING Compiled by Prof. P.O. Oladele V.G. Jemilohun O.F. Folayan The Nature and Scope of Planning Definition: Planning is the function of management which is of systematically making decisions about the goals to be achieved and activities or actions needed to achieve those goals that an individual, a group, a work unit, or the overall organization will pursue in the future. Planning is generally the process of deciding where an organization will be at a future date (ends) and steps to be taken to achieve those ends (means). It can be formally defined as the “systematic development of action programmes aimed at reaching agreed business objectives by the process of analyzing, evaluating, selecting among the opportunities which are foreseen. It encompasses defining the organizations goals or objectives, establishing an overall strategy for achieving these goals and developing a comprehensive hierarchy of plans to integrate and coordinate activities” Planning is thus an organization-wide process of deciding in advance, the objectives to be pursued, how to pursue these objectives and the resource implications. It provides answers - within the limits imposed by the internal and external environment to four critical questions of:  Where are we now? This involves an analysis of the status quo (and this requires starting from the past).  Where will we be? At the rate we are moving, where we shall be in a given period say 12 months later.  Where should we be? Is the answer to question two satisfactory? If we like where we will be, then there is no problem. If not we have to decide where we should like to be (goals and objectives)  How do we get there? What do we need to do to get to where we like to be (Strategies, tactics, Policies) and what are the resource implications (budgeting). Even though planning may be informal, we are here concerned with the formal process of determining what should be done and the resource implications. You should note the difference between planning (the process-coordinated set of activities involved as organizations prepare their plans) and plan (the outcome; the document which results from the planning process). Plans Plans are developed for the entire organizational unit and individuals for certain period of time. Its activities include:  Analyzing current situations.  Anticipating the future.  Determining the organizational objectives.  Deciding the activities to be involved.  Choosing strategies.  Determining resources to achieve organizational goals Features/Characteristics and Perspectives of Planning 1. Planning is the primary management function: Planning precedes the execution of other managerial functions and tasks because it has to first of all establish the objectives towards which all other managerial duties and organizational efforts are directed. Furthermore, all the managerial functions/tasks-marketing, finance, organizing- also require planning. This is referred to as the primacy of planning. 2. Planning is an organization-wide affair: It involves the whole organization. Plans are prepared by all members of the organization-to different extents, direct/indirect; for the whole organization, implemented by the whole organization and impacts-positively or negatively- on the whole organization. 3. Planning involves all levels of management: though to different extents. In terms of general participation, top management is more involved than lower level managers while in terms of time span, top level managers are more involved in long-term plans while the lower officials are more involved in very short term plans [tactical and operational]. 4. Planning is the Means to an End: It is not an end in itself. The main purpose of a plan is to enable the organization achieve some specific, predetermined objectives. If you plan for the sake of planning, or fall into the trap of plan worshiping, then you are on the wrong track. Planning only has a meaning if it helps to achieve those goals and if it is perceived and treated as such. It performs instrumental roles. 5. Planning is about the Futurity of Current Decisions: Planning is about designing a desired future and identifying ways to bring it about. It “looks at the chain of cause and effect consequences over time of an actual or intended decision that a manager is going to make. If the manager does not like what is seen ahead, the decision can be readily changed. It also looks at the alternative courses of action that are open in the future and when choices are made among the alternatives, it becomes the basis for making current decisions. 6. Planning is implication of current decisions. According to Drucker (1974), the critical question is what do we have to do today to be ready for an uncertain future? The decisions have to be taken in the present but they have future implications. 7. Planning is a Process and a System: Planning is a process with identifiable steps that are performed in a relatively given sequence. This process broadly involves setting  organizational aims, defining strategies and policies to achieve them and developing detailed plans to ensure that the strategies are achieved. It is also a system in that it is organized and conducted on the basis of understood regularity 8. Planning is a Philosophy: It is also an attitude and a way of life that requires dedication to the philosophy of constantly acting on the basis of the future and doing so as an integral part of management. In this instance, planning becomes a mindset, a philosophy of management and not just a set of standardized procedures and techniques. 9. Planning is Structural: Planning has a structure, linking the strategic, medium and short term. It also links the various divisional plans with the head office. 10. Planning is concerned about Efficiency-not Just Effectiveness. The plan should be able to achieve its objectives, but this should also relative to the direct and indirect costs of executing the plan, which must be ‘reasonable’. This reasonableness is measured in terms of cost, time, production and individual or group satisfaction. The resource utilization must be optimal. 11. Planning Creates a Dilemma/Vicious Circle: Planning is easiest when the environment changes least (relatively stable) but it is most useful when the environment changes most (unstable). Of course, if the environment is stable or changes marginally, planning may not even be needed. So the more the environment changes (speed, extent) the more difficult it is to plan but the more useful the plan becomes. It also creates a circle in which the faster the rate of change, the more difficult it is to plan and the more useful the planning thereby leading to over-lengthening of the planning period and more risks. Dimensions of Planning Planning has four Major Dimensions. These dimensions are: Dimension Description Type of plan Repetitiveness the extent to which the plan is used time after time Single use Standing Time the length of time covered by the plan Long term Short term Scope the portion of total management which the plan is aimed at Directional Specific Level the levels of the organization which the plan is aimed at Strategic Tactical Classification of Planning (i) Formal planning system: This is an organized and developed system, specific objectives are defined. It is written down for organizational members to see and follow. It follows a system of clear and land-down procedures. (ii) Informal planning system: This is based on past experience of the manager. Nothing is written down for anyone to see and follow, and there is little or no shaving of objectives with others in the organization. (iii) Strategic Planning: This planning is done at the corporate level of the organization. It applies to the whole organization. Strategic establishes its overall objectives and seeks to position the organization in terms of its environment. It covers a longer time period. (iv) Tactical/Operational Planning: This involves the selection of the means of attaining specific objectives. Operational planning assumes the existence of objectives. It tends to cover a shorter time period (v) Short-term planning: This does not give more than one year period. (vi) Long-term planning: This extends beyond five years. (vii) Specific Planning: This has clearly defined objectives. It leaves no room for interpretation and ambiguity. Specific procedures and schedules of activities to reach objectives are established. (viii) Directional planning: This is a flexible planning strategy that set out general guidelines. It is better to use this when uncertainty is high because it does not lack a manager specific objectives or course of action. (ix) Single – use planning: This is a one-time planning method that is specifically designed to meet the needs of a unique situation and created in response to non-programme decisions that manager make, e.g. mergers and acquisition or the introduction of a new product. (x) Stranding plan: This kind of planning is created in response to programmed decisions that managers make. It provides guidance for activities repeatedly performance in the organization e.g. replenish stock every Monday. The Planning Process The planning process comprises the steps that managers take in identifying and selecting appropriate goals and courses of action for an enterprise. The steps involve the determination of an organization’s mission, goals and objectives; strengths, weaknesses, opportunities and threats (SWOT) analysis, formulation of strategy and implementation of strategy. Determination of mission, goals and objectives Implementation of strategy Formulation of strategy SWOT analysis, appraisal of internal and external Result environment Figure 1: The Planning process The Planning Process (1) Determination of mission, Goals and objectives This is the first step in planning and probably the most significant. A mission statement describes an organisation’s overriding purpose; this statement is intended to identify an organisation’s products and customers as well as distinguish the organization in some ways from its competitors in the industry. In order to determine on organization, managers must first define the business in terms of who the customers are as well as what and how customers’ needs are being satisfied. Establishment of objectives gives a sense of direction or purpose to the organization. An organization must ensure that the statement of objective is clear and understandable to those who have the responsibility for developing operational strategies for achieving them. Objective must be realistic. (2) SWOT Analysis This is a step in which manager’s identify organizational strengths and weaknesses in terms of resources capabilities, and organizational opportunities and threats in the environment. Before an organization can establish attainable goals and objectives, it must search for and identify potential opportunities and threats in its external environment which may affect the organization changes in the external environmental forces in the form of economic factors, competitor government legislation or political instability can produce opportunities that an organization might make advantage of and threats that may harm its current situation. Managers must also identify an organisation’s strengths and weaknesses; strength in terms of high quality personnel, adequate cash flow and fantastic marketing; weaknesses such as increasing debt rising debts, rising operational cost and obsolete technology. This analysis will enable the organization strengthen its strengths and weaken its weaknesses. (3) Strategy Formulation This involves managers analyzing an organisation’s current situation and then developing strategies to accomplish its mission and achieve its goals (Andrews, 1971). The strategy formulation stage involves developing strategies and designs them to suit the objective to be achieved. The strategies must be flexible to accommodate changes occurring in the environment. All strategies must be clearly defined in terms of their cost benefit implications. An effective strategy ensures that objectives are achieved at minimum cost, at the time scheduled for their achievement and that optimum benefits are derived therefore (Osaze, 1991). (4) Strategy Implementation Strategy implementation is a 5-step process viz; (i) Allocating responsibility implementation to the appropriate individuals groups; (ii) Drafting detailed action plans that specify how a strategy is to be implemented; (iii) Establishing a timetable for implementation that includes precise measureable goals linked to the attainment of action plan; (iv) Allocating appropriate resource the responsible individuals or groups; and (v) Holding specific individuals or groups responsible for the attainment of corporate, divisional, and functional goals. Benefits of Planning 1. Gives a sense of direction and purpose to an organization. 2. Enables an organization to take advantage of opportunities and contain threats in the operating environment. 3. Provides awareness of a changing environment so that an organization can adapt better to 4. Helps an organization to concentrate resources on areas of best potentials. 5. Assists management in providing a method of ascertaining early financial and other resource requirements. 6. Provides an organization some criteria for measuring corporate and employee performance. 7. Enables management to take calculated business risks and think ahead. 8. Helps co-ordinate managers of the different functional areas of an organization to ensure they all move in the same direction. 9. Helps an organization to achieve steady growth and development. 10. Helps a weak and tired organization to pick up pace. Pitfalls in Planning Although the importance of planning cannot be overemphasized, many organizations still do not achieve the desired results because of pitfalls in planning owing to the following reasons: (i) Too much time and effort of top management being spent on current problems, learning little or no time for long-range planning, (ii) Failure to develop meaningful and realistic goals and objectives. (iii) Lack of commitment to planning and the belief that top management can delegate the planning function to a planner. (iv) Personnel inertia to changes brought about by planning activities. (v) Too much formality and lack of flexibility in the system which hinders creativity. (vi) Failure to involve major line managers in the planning process. (vii) Inadequacy or lack of necessary resources for planning implementation. (viii) Overreliance of top management on reflective thinking and experience. (ix) Failure to create an organizational climate that is conducive and not resistant to planning (x) Failure to use plans as standard for evaluating managerial performance. GOAL SETTING A goal is defined as what an individual is trying to accomplish; it is the object or aim of an action. A goal is a future state an organization or individual strives to achieve. Goals state the end toward which effort is directed. They are usually a reflection of an organization problem or of a desire to capture an opportunity to improve or advance the organization. Reasons for setting organization’s goals 1. It helps to channel time, effort and ideas 2. It is a source of positive attitude 3. It defines an organization mission 4. It gives direction and helps to avoid chaos 5. Goals are sources of motivation for employees 6. It helps in planning ahead and readiness for emergencies 7. It is a basis of recognizing and measuring accomplishment and necessities 8. It helps in delegating of responsible Guidelines for setting goals 1. Identify employees key job tasks 2. Establish specific and challenging goals for each key task 3. All employees to actively participate in the goal setting 4. Prioritize the goals 5. Build a feedback mechanism to assess progress 6. Link rewards to goal attainment Criteria for goal setting effectiveness For goals to be effective, they must be: 1. Specific: This means it must not be ambiguous 2. Difficulty: goals should be challenging to achieve but not impossible 3. Acceptance: goals should be accepted to all employees. It must be fair and consistent with organization’s objectives. 4. Commitment: employees must be committed and dedicated to accomplishing the goals. Types of goals 1. Strategic goals: goals set at top management and aligned with the mission and vision of the organization 2. Tactical goals: goals set at the various units, departments and divisions of the organization. They must be aligned with the strategic goals. 3. Operational goals: goals set at the line management level, where each employee is assigned a specific goal to achieve. These goals will be aggregated to form the operational goals. 4. Super-ordinate goals: these are goals that are important to more than one unit. They are often used to resolve conflict between groups. Corporate objectives Objectives are the end-result of planned activities. They state what is to be accomplished by whom and should be quantified if possible. Corporate objective should specifically show how goals are operational definition of the goals of the organization. They are the parameters of evaluating the performance of the organization it has a time dimension and demonstrate the progress that are made in achieving its goals. Roles of corporate objective (i) It defines the organization relationship with it internal and external environment: employees, distributors, competitors etc. (ii) it help organization to pursue it mission and vision (iii) it provides basis for strategic decision making (iv) it provides standard for performance appraisal Characteristics of objectives (i) Understandable by those who have to achieve them. (ii) Specific and concrete (iii) Measureable and achievable (iv) Challenging and motivating (v) Compete with other departments or functional areas of the organization (vi) Consider internal and external constraint References Akeke, N.I. (2010). Management: Principles and practice. Lagos: Harry–Don Ventures. Oladele, P.O., & Akeke, N.I. (2010). Principles and practice of management. Lagos: Rakson Nigeria Limited Robbins, S.P., & DeCenzo, D.A. (2008). Fundamentals of management, 6 th Ed. New Jersey, USA: Pearson Education Inc.