The Nature and Purpose The Nature and Purpose of of

PlanningPlanning

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Planning

Definition :

Planning is the design of a desired future and of effective ways of bringing it about.

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Planning is looking ahead in order to visualize and decide a future course of action to allow to achieve a desired goal.

Purposes of Planning

• In business (and in life ) things are so complex that without proper planning they can not be handled.

• It is a pre- requisite not only to achieve success but even to survive in a complex and competitive world.

• It helps in determining opportunities • It helps in identification of courses of

action.• It helps in proper utilization of resources

effectively.• It helps in working in an organized

manner.

Nature of Planning

1. Planning is the most important function of management.

2. Planning has central role in linking all other managerial functions.

3. Planning is pervasive and oversees all

other managerial functions.

Functions of Managers

•Planning

•Staffing

•Organizing

•Leading

•Controlling

Managerial Skills•Human

•Conceptual

•Design

•Technical

All functions and skills are linked to planning

function.

Benefits of Planning

• Planning leads to success.

• It acts as a bridge between where

we are and where we want to be.

• It helps in saving resources, money

and time.

• Jobs are well coordinated thus

duplication of effort is avoided and

skills and potentials are fully

utilized.

Myths about Planning

• Planning that proves inaccurate is a

waste of management time.

• Planning can eliminate change.

• Planning reduces flexibility.

Plan

Is a pre-determined course of action.

•It brings orderliness.

•Avoids confusion.

•Gives better use of resources.

•Cuts waste.

Plans are changed or modified but

not abandoned.

Effectiveness:

is the achievement of objective.

Efficiency: Is the achievement of objective with least amount of resources.

Effectiveness of Plans

Effectiveness of plan

pertains to the degree to

which it achieves its

objectives.

Efficiency of Plans

Efficiency of plan refers to its

attainment of objective at a

reasonable cost.

Types of Plans • Single use or one time

plans

• Standing Plans

• Specific Plans

• Subject Plans

• Directional Plans

• Short Term Plans

• Long Term Plans

• Operational Plans

• Strategic Plans

Single Use or One Time Plan

It is specifically designed to meet the

needs of a unique situation and is

created in response to non-

programmed decisions that managers

make.

Standing Plans

Ongoing plans that provide guidance for

activities repeatedly performed and are

created in response to programmed

decisions that managers make.

Non-Programmed Decision

Unique decisions that require a

custom-made solution.

Programmed Decision

A repetitive decision that can be handled

by a routine approach.

Specific Plans

These plans are clearly defined and

explicit and leave no room for

interpretation.

Subject Plans

These plans are limited to one

particular aspect of an organization’s

activates.

eg.

Marketing

Production

Recruitment

Financial

Manpower etc

Directional Plans

These are flexible plans that set out

general guide lines and permit

considerable discretion to users.

Short Term Plans

Plans that are formulated to cover a

period of less than one year.

Long–Term Plans

Plans that are formulated to extend

upto beyond five years.

Operational Plans

Plans that specify details on how

overall objectives are to be achieved.

Strategic plans

These plans are organization–wide,

establish overall objectives and

position an organization in term of its

environments.

Cornerstone of Planning

Objectives

Goals

• Multiplicity of objectives

• Stated objectives • Real objectives

• Traditional objective setting

Objective

It is a desired outcome for groups or an entire organization.

Goal

It is a desired out come for an individual.

Stated Objectives

Official statements of what an organization says and what it wants public to believe.

Real Objectives

Objectives that an organization actually pursues, as defined by the action of its Management.

Traditional Objective Setting

Objectives are set at the top and then broken down into sub-objectives for each level in an organization. The top imposes its standards on every one below.

Principle of Planning

The more thoroughly individuals charged with planning understand and agree to utilize consistent planning premises the more coordinated and realistic planning will be.

Components of Plans

Mission

Objectives

Premises

Policies

Procedures

Rules

Budgets

Mission

The purpose of an organization is called its mission.

Policies

Guidelines that establish parameters for making decisions.

Premises

This is the anticipated environment in which plans are expected to operate and include forecasts of the future and conditions that are likely to affect the operation in future.

Procedures

A series of interrelated sequential steps

that can be used to respond to a

structured problem.

Rules

Explicit statements that tells

managers what they ought or ought

not to do.

Structured problem

It is a straightforward, familiar and

easily defined problem.

Non Structured problem

A new problem for which information

is ambiguous or incomplete.

Budget

A budget is a numerical plan for

allocating resources to specific

activities.

A budget is a statement of expected

results expressed in numerical terms.

Types of Budget

Revenue: A budget that projects future sales

Expense: A budget that lists the primary activities by a unit and allocates amount to each

Profit: A budget to determine a unit’s contribution to overall profit of an organization

Cash:A budget that forecasts how much an organization will have and how much it will need to meet expenses

Capital Expenditure:A budget that forecasts investments in property, buildings and major equipment.

Fixed:A budget that assumes a fixed level of sales or production.

Variable:A budget that takes into account those cost that vary with volume of production.

Approaches to Budgeting

Incremental (or traditional)A budget that allocates funds to various activities according to allocations in the pervious period (and adjusted to cater for inflation etc)

Zero-baseA system in which budget requests start form scratch regardless of pervious budgetary allocations.

Steps in Planning

Pre-requisite : Awareness of opportunities

1st: Establishing Objectives2nd:Developing Premises3rd: Determining Alternative Courses4th: Evaluating5th: Selecting Best Course

Post-requisiteDerivative or Supportive Plans

Awareness of Opportunities• Not strictly a step in planning process. But

it is a real starting point.

• Managers must look at possible opportunities

in the light of their organization's strengths

and weaknesses

• Must also look at future environment both

external and internal.

• Setting realistic objectives depends on this

awareness.

1st Step: Establishing Objectives

• Selecting objectives for the entire organization.

• Based on organizational objectives, establishing objectives for

each subordinate work unit.

Organizational objectives give direction to the major plans,

which define objectives for every major department.

Major departmental objectives control objectives of subordinate

departments.

2nd Step: Developing Premises

Developing premises is critical to planning. These include:

. Forecasts

. Basic Policies

. Existing Plans

. Anticipated Environment

3rd Step: Determining Alternative Courses

• There is seldom a plan for which

reasonable alternatives do not exist.

• Common problem is not finding

alternatives but reducing their numbers.

• Most fruitful possibilities must be

looked at.

4th Step: Evaluating Alternative Courses

• Evaluate courses by examining their strong

and weak points.

• Weigh them in the light of premises and

objectives.

• Complex courses can be evaluated with the

help of operational research, mathematical

and computing techniques.

Evaluating AlternativeCourses

1. Establishing criteria

2. SFA test

5th Step: Selecting the Best Course

Selecting the best course is the real point of

decision making.

. By establishing criteria, eg

Achieving objectives at least cost

Requiring least changes

Ensuring maximum return on

investment

. SFA Test