Planning Notes PDF

[ Subject Name (Subject code) PGDM-trimester-1 Topic Description: Introduction to planning, Types of plans, Process of planning, Planning tools & techniques, Introduction to controlling, Process of controlling, Relation between planning & contr...

[ Subject Name (Subject code) PGDM-trimester-1 Topic Description: Introduction to planning, Types of plans, Process of planning, Planning tools & techniques, Introduction to controlling, Process of controlling, Relation between planning & controlling Unit No: 2 Introduction to planning Planning is the most basic of all managerial functions which involves establishing goals, setting out objectives and defining the methods by which these goals and objectives are to be attained. It is, therefore, a rational approach to achieving pre-selected objectives. Planning involves determining various types and volumes of physical and other resources to be acquired from outside, allocating these resources in an efficient manner among competing claims and to make arrangement for systematic conversion of these resources into useful outputs. Since plans are made to attain goals or objectives, every plan should lead to the achievement of the organization’s purpose and objectives. An organized enterprise exists to accomplish group objectives through willing and purposeful cooperation. It bridges the gap between where the organization stands currently and wishes to be in future. In the absence of planning, events are left to chance. In words of Koontz & O'Donnell, “Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur. Planning is done by managers at all levels of organisation. Managers at all level plan though the character and breadth of planning may differ at different levels of organisation. For example, while an Assistant Engineer at a work-site plans for the accomplishment of work at his site from day to day or for two or three days in advance, the Chief Project Manager must plan for the Managerial Processes-whole project over a larger period of time. Similarly, a multinational company's top management must plan over a longer time frame for a worldwide market. Features of Planning Planning focuses on achieving objectives by deciding upon the activities to be undertaken. Primary function: Planning is a primary function it precedes all functions of management i.e. organising, staffing, directing& controlling. Pervasive: Planning is pervasive as it is required at all the levels of management, but its scope may vary. Continuous: Planning is continuous as plans need to be made on a continuous basis till an organisation exists. Futuristic: Planning is futuristic as it seeks to meet future events effectively to the best advantage of an organisation. Planning is, therefore, called a forward looking function. Decision making: Planning involves decision-making as it involves rational thinking to choose the best alternative among the various available alternatives in order to achieve the desired goals efficiently and effectively. Mental Exercise: Planning is a mental exercise as it is based on intellectual thinking involving foresight, visualisation and judgement rather than guess work. Importance of Planning The importance of planning as the major constituent in the management process is universally accepted. Planning not only brings stability and certainty to business, but it also brings in a unified sense of direction and purpose for the achievement of certain well-defined objectives. The basic reasons supporting systematic planning by managers are − Sense of Direction − Planning provides a unity of purpose. It brings together all resources towards achieving common goals. Without plans and goals, organizations will respond to everyday events in an ad-hoc manner without considering long-term possibilities. Resource Paucity − Resource crunch is a major challenge for organizations today. Managements are confronted with the task of optimizing outputs with limited human, material, and financial resources through intelligent planning; otherwise, wasteful inefficiencies would lead to higher prices and severe shortages. Uncertainty − Uncertainty is a major challenge even to the most intelligent planner. Organizations continually face micro and macro-economic uncertainty while accomplishing their tasks. Planning helps managers anticipate such changes and meet these challenges. Besides the above, there are several practical reasons for formulating plans.  To focus organizational activity on a set of consciously created objectives.  To provide a systematic guide for future activities.  To increase organizational outcome through efficient operation.  To encourage systematic thinking. Planning facilitates effective delegation of authority, removes communication gaps, and thereby raises overall efficiency. Planning and Organizational Level Planning Process Setting up of organizational objectives: The primary objective of an organization is to establish various objectives and goals that an organization strives to achieve. Objectives determine the various activities and direction of efforts. For an effective planning function, objectives need to be stated clearly, must be precise, and unambiguous. Unclear and ambiguous objectives lead to chaos and wastages. Objectives set under the planning process can be for the entire organization, for each department, units, and employees. Developing planning premises: Planning is about predicting the uncertain future to carry out the business activities. To forecast the future, certain assumptions about the future need to be made by the planning managers. These assumptions serve as the base to create a premise for developing a plan of action. This is called planning premises. Identification of alternative course of action: As objectives setting and making of assumptions is done, various alternative courses of actions are identified to achieve those objectives. This step involves the identification of a maximum number of alternatives based on the type of project. An important project requires detailed and comprehensive identification of alternatives than the general one. Evaluating alternative course of action After identification of various alternative courses of actions, each action is examined in terms of their Planning 59 pros and cons. The positive and negative aspect of each course of actions is evaluated concerning the objectives of an organization. For the selection of course of action, the cost and benefits, feasibility, practicability is examined. Selection of alternative: At this point, the final decision is taken. The best plan in terms of maximum benefits and the minimum cost is adopted for implementation. The plan chosen would be feasible, profitable, and tend to yield higher profits and the least cost. Implementation of the plan: At this stage, various other managerial functions come into the picture as the best-selected plan is implemented. In this stage, the implementation of the action takes place i.e. doing what is required. Follow-up of action: This is the crucial stage as it involves seeing whether selected and implemented plan is working as per plans or not. This stage is essential and requires close monitoring to assess deviation in selection and implementation and to achieve desired objectives. Types of plans The most popular ways to describe organizational plans are breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single use versus standing) Strategic plans are plans that apply to the entire organization and establish the organization’s overall goals. Plans that encompass a particular operational area of the organization are called operational plans. These two types of plans differ because strategic plans are broad while operational plans are narrow. The number of years used to define short-term and long-term plans has declined considerably because of environmental uncertainty. Long-term plans as those with a time frame beyond three years. Short-term plans cover one year or less. Any time period in between would be an intermediate plan. Although these time classifications are fairly common, an organization can use any planning time frame it wants. Specific plans are clearly defined and leave no room for interpretation. A specific plan states its objectives in a way that eliminates ambiguity and problems with misunderstanding. Directional plans are flexible plans that set out general guidelines. They provide focus but don’t lock managers into specific goals or courses of action. Some plans that managers develop are ongoing while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly. Policies, Procedures, and Regulations are the most common example of standing use plans. These plans are usually published and handed out to new hires or posted on the organization’s employee website for easy reference. Policies provide broad guidelines for the smooth operation of the organization. They cover things like hiring and firing, performance appraisals, promotions, and discipline. For example, a company may have a policy to encourage recycling in the workplace or a policy that prohibits personal cell phone use in manufacturing areas. Procedures are steps to be followed in established and repeated operations. Procedures should reflect the policies of the company and support the organization’s long-term goals. Procedures may also detail steps that should be followed to ensure employees are disciplined in a fair and unbiased manner. For example, if employees feel that other employees interacted with them in an inappropriate manner, then they should follow the procedure for bringing this to management’s attention. or the organization may establish procedures for what to do in cases of emergencies, such as a fire or toxic spill. Regulations refer to what is allowable and what is prohibited in an organization. In other words, a regulation is a kind of rule that addresses general situations. In many hospitals and laboratories, for example, there are safety regulations against wearing open-toed shoes or shoes with slippery soles. Budgets an organization’s budget is a document that details the financial and physical resources allocated to a project or department. They are single-use plans because they are specific to a particular period or event. For example, departments may have a hiring budget that allocates a certain number of positions and a total salary value for a calendar year. Forecasting is simply making a prediction about the future. Anyone can make a forecast—the trick is to be right or close enough so that important planning decisions can be based on the forecast. Contingency plan A contingency plan describes what will happen in a possible—but not expected—situation. Usually, contingency plans are designed to handle emergency situations. For example, airports have contingency plans for plane crashes on takeoffs or landings, and popular tourist attractions have begun developing contingency plans in case of terrorist threats. Management by objectives, or MBO for short, is a tool that can be used to improve the performance of an organization by creating clearly defined objectives agreed upon by management and by the employees. Peter Drucker, a prolific author and a leader in management theory, coined the phrase “management by objectives” in 1954. The intent of MBO is to improve employee motivation and organizational communication by focusing on aligning individual goals to corporate objectives. SMART goals are a technique often paired with MBO. SMART stands for specific, measurable, achievable, realistic, and time bound. Benchmarking is looking at performance levels outside of your organization, or sometimes across departments or divisions inside your organization, to evaluate your own performance. Introduction to controlling The Controlling acts as a very useful managerial function or tool as it ensures that the actions conform to the expected results with the help of suitable feedback systems. This process also includes correcting any deviation time in order to see that the results are ensured within the proper time and the costs as per the planned standards. Control or controlling techniques are nothing new to business. They are as old as the business itself. Control implies information combined with action. It is a process of directing a set of variables towards predetermined objectives.: Definitions: By Koontz & O’Donnell, G. Terry, Brech and Donnell “Controlling is the measuring and correcting of activities of subordinates to assure that events conform to plans” Features  Forward looking -Control is forward looking because one can control future happenings and not the past. Control is both an executive process and, from the point of view of the organizations of the system, a result.  Continuous process  Coordinated process-A control system is a coordinated-integrated system. This emphasizes that, although data collected for one purpose may differ from those with another purpose, these data should be reconciled with one another.  Pervasive Function-Every manager working in an organization irrespective of his position has to control and command over the activities of subordinates to produce desired results.  Dynamic Process: Control is dynamic in the sense, not static. It involves review of standards as well as corrective actions which may lead to changes in other managerial functions. Importance  Basis of Execution of Plans: Control is the only means to ensure that the plans are being properly implemented. It measures progress, un-covers deviations indicating corrective steps to be taken to keep things on track.  Achievement of Goals: It keeps activities on the right path because the process of control is goal oriented. If anything goes on the wrong track, remedial steps are undertaken immediately. It helps to minimize wastage and losses.  Decentralization of Authority: An effective control system facilitates the delegation of authority and ensures that the subordinates do not deviate from a predetermined course of action.  Basis for Future Action: The control system provides feedback information and reveals shortcomings in plans. It helps prepare better plans.  Orders and Disciplines: A good control system helps check and diagnose the problems before they turn serious in nature. It keeps the subordinates under check and brings discipline among them.  Promotes Coordination: It facilitates coordination between different departments and divisions by providing them unity of direction. It also plays the role of a bridge between different levels of authority.  Boosting the Morale of the Employees: Every employee knows very well what he is expected to do and what are the standard of performance against which his performance is to be compared. Process of Controlling  Setting Performance Standards - The first step of controlling is to establish performance standards against which the organization's actual performance is measured. An organization should clearly define its standards to the employees and must establish attainable, understandable, and realistic standards to be achieved. Standards can be set in quantitative terms as well as qualitative terms. Besides, the business environment in which an organization works is dynamic and keeps on changing. Therefore, the established standards should be flexible so that they have a scope for change whenever the business environment changes.  Measurement of Actual Performance-Once the organization has established the standards, the second step of the process of controlling is to measure the actual performance in a reliable and objective manner. The actual performance of an organization can be measured through different techniques such as sample checking, personal observation, etc., and should be measured in the same units in which the standards are fixed to make the comparison easy.  For example, an electrical appliance organization can check the parts before assembling them together to ensure the final product is not defective. Comparison of Actual Performance with Standards The third step of the process of controlling is to compare the actual performance of the organization with the established standards (in the first step). By comparing the actual performance with the standards, an organization can determine the deviation between them. When the standards are expressed in quantitative terms, it becomes easy for the organization to make comparisons as there is no subjective evaluation required. For example, it is easy for an organization to compare the number of units sold in a month against the set standard. However, the comparison between the set standard for the motivation of employees with its actual performance is difficult. Analyzing Deviations The actual performance and set standards of an organization rarely match each other. Usually, there is always some variation between the expected and actual performance. Therefore, the fourth step of the process of controlling is to analyze the deviations. To do so, an organization must fix an acceptable range of deviations in performance. Besides, an organization should focus more on the significant deviations and less on the minor deviations. For this, managers of an organization usually take the help of Critical Point Control and Management by Exception. Taking Corrective Action The last and final step of the process of controlling is to take corrective action. If the deviations are within the acceptable limits set by the managers, then there is no need to take corrective action. However, if the deviations go beyond the set acceptable limit in the key areas, then proper and immediate managerial actions are required. An organization can easily rectify the defects in the actual performance through the corrective steps. Deviation It means the difference between the actual performance and standard performance can be Positive and Negative. Positive Deviation: It is a kind of deviation when the actual performance is better than the standard performance. Negative Deviation: It is a kind of deviation when the actual performance is less than the standard performance. Relationship between Planning and Controlling Planning and controlling are like two sides of a coin and cannot be separated from each other. Both Planning and Controlling are Interrelated and Interdependent Planning and controlling are interdependent as planning is useful only when the controlling function is performed, and the controlling function starts and ends with a new plan. Controlling is based on planning and Planning without controlling is useless. Planning is Prescriptive and Controlling is Evaluating As the planning process prescribes a firm the course of action it should take to accomplish the organizational objectives, it is prescriptive in nature. However, controlling evaluates the actual performance of the organization Both are Backward-looking as well as Forward-looking Functions It is usually said that planning is a forward-looking function, as it provides a plan and is based on future forecast conditions, and controlling is a backward-looking function, as it measures the actual performance of the organization and compares it with the pre-determined or fixed standards. However, planning is also a backward-looking function because the plans of an organization are prepared after taking past experiences into consideration. Similarly, controlling is also a forward-looking function of management because its basic aim is to improve the future performance of an organization by taking experience into consideration. Therefore, planning and controlling are both forward-looking as well as backward looking.