planning 03022011

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PLANNING

� Determination of objectives & thinking of ways & means to achieve them

� Filling up the gaps between where we are

and where we want to go� What is to be done, when is it to be done,

how it is to be done & who is to do it

� It is required at all levels of organisation,for any size of an organisation & for any

purpose of an organisation

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Definitions

� Terry & Franklin: ³Planning is selectinginformation & making assumptionsregarding the future to formulate activitiesnecessary to achieve organisationalobjectives´

� Koontz & Weihrich: ³Planning involvesselecting missions, objectives & the

actions to achieve them, it requiresdecision-making, i.e, choosing fromalternative future courses of action.´

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Features of Planning

� Basic function of management

� Adaptive to environment

� Future oriented

� Intellectual process

� Flexible activity

� Planning & Decision-making

� Planning & Control

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Importance of Planning

� It establishes the objectives

� To offset uncertainty & change

� To focus attention on objectives

� To help in coordination

� To helps in control� Increase organisational effectiveness

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Types of Plans

� Pur pose or Mission statements- purpose of existence� Objectives/goals-specific components that turn the

missions into reality.

� Strategies ± general programs of action & deploymentof resources to attain objectives.

� Policies ± general statements or understandings thatguide or channel thinking in decision making.

� Procedures ± method of handling future activities.Chronological sequence of required actions.

� Rules ±specific required actions or non-actions, allowing

no discretion.� Programs ±a set of clear instructions in a clear & logical

sequence to perform a particular task.

� Budgets ± a statement of expected results expressed innumbers.

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STEPS IN PLANNING

� Awareness about opportunities

� Establishing objectives

� Developing premises

� Determining alternative courses

� Evaluating alternative courses

� Selecting a course

� Formulating derivative plans

� Numerating plans by budgeting

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Hierarchy of Objectives

� Socio-economic purpose

� Mission

� Overall objectives(long-range, strategic)� Specific overall objectives(Key result

areas)

� Division objectives� Department & unit objectives

� Individual objectives

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MBO (Management by

Objectives)-Drucker It is a system for achieving organisational

objectives, enhancement of employee

commitment and participation. A comprehensive managerial system that

integrates many key managerial activities

in a systematic manner, consciously

directed toward the effective & efficient

achievement of organizational & individual

objectives.

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MBO«««««««««contd

An appraisal tool

A motivational technique

A planning & control technique

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Features of MBO

� An approach and a philosophy -particular way of thinking about Management.MBOaffects every management practice in theorganisation

� It works as an integrating device ± jointapplication of a number of principles andtechniques

� Emphasis on Objectives ± verifiableobjectives are set at all levels of management

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Features of MBO«««contd

� Participation in goal setting ± clarifies the

role in terms of what one is expected to

achieve

� Periodic review of performance- basis for

future planning and corrective actions

� Provides guidelines for appropriate

system and procedures- resource

allocation, delegation of authority

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PROCESS OF MBO

1. Setting Organisational Purpose &Objectives

± Defining the purpose

± Long-range and strategic objectives

± Short-term organisation objectives

± Division /deptt. Objectives

± Individual manager¶s objective

2. Key Result Areas: these indicate thepriorities for organisational performancelike- profitability, market standing,productivity, innovation

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PROCESS OF MBO««««contd

3. Setting subordinates objectives- subordinatesobjectives are set by mutual negotiationbetween superior and subordinate

4. Matching resources with Objectives- proper allocation of resources ensures objectiveachievement

5. Appraisal ± ongoing process to see whether subordinate is achieving his objectives or notand to remove any deficiencies promptly

6. Recycling ± reviewing will always affect theobjectives of some other departments also

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BENEFITS OF MBO

Better Managing� clarity of objectives

� periodic reviews

� commitment and motivation� Result-oriented planning

Clarification of organisation structures &roles

Encouragement of personal satisfaction Basis for organisational change

Development of effective controls

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DRAWBACKS of MBO

� Failure to teach MBO philosophy

� Time & cost

� Problems in objective setting

� Emphasis on setting short-term goals

� Inflexibility

� Frustration among Managers

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STRATEGIES

Definitions

Chandler-1962 : Strategy is the determination of

the basic long-term goals and objectives of an

enterprise and the adoption of the course of action & the allocation of resources necessary

for carrying out these goals.

Stanford Research Institute (USA): Strategy is a

way in which the firm, reacting to its environmentdeploys its principal resources and marshals its

main efforts in pursuit of its purpose.

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STRATEGIES«««««contd

³ Strategy is a course of action through which anorganisation tries to relate itself with itsenvironment to develop certain advantageswhich help in achieving its objectives´

Features-relates the organisation to internal and externalenvironment

-help managers plan by guiding operatingdecisions

-strategies must be supported by effectivetactics - action-plans through which strategiesare executed

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Strategy For mulation Process

1. Determine inputs to the organisation:

-include human resources, capital,managerial & technical skills

-stakeholders goals-employees

-consumers

-suppliers

-stockholders-government

-society

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«..contd

2. Industry Analysis: evaluating theattractiveness of an industry by analysing theexternal environment factors.

3. Organisation Profile: where the organisation is& where it should go

i. Executive orientation, values & vision

ii. Mission & overall-objectives

4. Assessing present & future externalenvironment

- threats & opportunities

- competition & economic, social, political,legal, demographic, geographic factors

- technology developments

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«..contd

5. Assessing internal environment

i. resources & weaknesses

ii. strengths in R&D, production,

operations, procurement, marketing,products & services

iii. human & financial resources, co. image,organisation structure, systems etc.

6. Development of alternative strategiesexamples: develop core competencies,diversify, international, joint venture/alliances, liquidation

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«..contd

7. Evaluation & choice of strategies- risk involved

-timing

8. Implementation

-development of short term goals/actionplans, operational programmes

-structure the organisation according to theneeds of the strategy

-staffing the structure

-providing leadership control

9. Periodic review of strategy

-change in environment

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TOWS MATRIX

INTERNAL STRENGTHS

(S)

INTERNAL WEAKNESS

(W)

EXTERNAL

OPPORTUNITIES

(O)

SO MAXI-MAXI

Most sucessful strategy.Used to take advantage of

the opportunities

WO MINI-MAXI

Minimise the weakness andmaximise the opportunity

EXTERNAL

THREATS

(T)

ST MAXI-MINI

Maximise strengths to cope

with threats or to avoidthreats

WT MINI-MINI

Minimise both your threats

& weaknesses

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Types of Strategies/Levels

� Corporate level strategy± Growth strategy: diversification,

concentration, vertical integration

± Stability strategy± Defensive strategy: harvest, turnaround,

bankruptcy

± Combination strategy: liquidation

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� Business level Strategy: Michael porter called these generic strategies

± Cost leadership strategy : minimizing the costof its products & reducing the selling price

± Differentiation: make some changes in thebasic features of the product

± Focus strategy: focuses on a particular section of the market, area or group of customers

� Functional level Strategy:± support the business-level strategies

± More precise & specific

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POLICIES� ³A policy is a verbal, written or implied guide

setting up boundaries that lay down the generallimits & direction in which managerial action willtake place´

Types of policies:

Formulated Policy: corporate policies,department policies

Implied Policy: not stated but implied bybehaviour

Imposed Policy: influence of outside agency

Appealed policy: appeal made by a subordinateto his superior

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PREMISES

� ASSUMPTIONS or Forecasts about futurewhich provide a base for planning in

present are referred to as planning

premises.

� Premises give estimates about

± Future markets

± Consumer preferences

± Political & economic environment

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Types of Premises

� Internal : strengths & weaknesses, organisationstructure, management system

� External : economic, political-legal,technological, socio-cultural, competitive

� Controllable : organisation policies, structure,systems, procedures

� Uncontrollable : economic growth, populationgrowth, taxation policy of the government

� Semi-controllable : controlled but not wholly� Tangible : expressed in quantity

� Intangible : qualitative in nature

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FORECASTING

� Business forecasting refers to thestatistical analysis of the past & currentmovement in the given time series so as toobtain clues about the future pattern of

those movements� Forecasting

± relates to future

± probability of happening of future events

± analyzing the past & present relevant events

± use of statistical tools and techniques

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Benefits of Forecasting

� Managers think ahead and plan for it� Opens the areas where necessary control islacking/ identifies the critical areas

� Coordinates and unifies the plans

DELPHI TECHNIQUE ± Olaf Helmer

� Panel of experts

� Experts make a forecast anonymously

� Compilation & results fed-back to the panel

� Further estimates are made� Process is repeated several times

� When opinions converge ,results are used as anacceptable forecast

planning 03022011

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