Chapter_4.pptx

Copyright © 2017 by McGraw Hill Education (India) Private Limited
Principles of Management, 6e
P C Tripathi & P N Reddy
Chapter 4
Planning
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Learning Objectives
 Describe the nature and importance of planning
 Present the various types of plans
 Explain the steps in planning and the strategic planning process
 Identify the limitations of planning and suggest ways to make it
effective
 List the skills required for effective planning
 Understand strategic planning in Indian industry

Nature of Planning
 Planning is the beginning of the process of management
 Planning is an intellectual process
 Planning is a continuous process
 Planning is an all-pervasive function
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Importance of Planning
 Minimizes Risk and Uncertainty
 Leads to Success
 Focuses Attention on the Organization's Goals
 Facilitates Control
 Trains Executives
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Types of Plan
 Vision
 Mission
 Objectives
 Strategies
 Operational Plans
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 Minimises Risk and Uncertainty
 Focuses Attention on the Organisation's Goals
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 Minimises Risk and Uncertainty
 Focuses Attention on the Organisation's Goals
Hierarchy of Organizational Plans

Vision
 A vision describes a firm’s aspirations, beliefs and values, and
shapes organization's strategy.
 A vision should be brief, focused, clear and inspirational to an
organization's employees.
 It should be linked to customers’ needs and convey a general
strategy for achieving the mission.
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Mission
 Mission is the unique aim of an organization that sets it apart from
others of its type.
 It is an organization's specialization in some area—service, product or
client, which decides the organization's scope of business.
 A firm’s mission guides the development of strategies.
 It establishes the context within which daily operating decisions are
made and sets limits on available strategic options.
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Objectives
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 Objectives are goals or aims that the management wishes the
organization to achieve in pursuit of its mission.
 These are the end points or pole-star towards which all business
activities like organizing, staffing, directing and controlling are
directed.
 Objectives are the specific targets to be reached by an organization.
They are the translation of an organization's mission into concrete
terms against which results can be measured.

Characteristics of Objectives
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 Objectives are multiple in number
 Objectives change over time
 Objectives are either tangible or intangible
 Objectives have a priority
 Objectives are generally arranged in a hierarchy
 Objectives sometimes clash with each other

Requirement of Sound Objectives
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 Objectives must be both clear and acceptable
 Objectives must support one another
 Objectives must be precise and measurable
 The more precise and measurable the goal, the easier it is to
decide how to achieve it.
 Precise and measurable goals are better motivators of people
than general goals.
 Precise and measurable goals make it easier for lower level
managers to develop their own plans for actually achieving those
goals.
 It is easier for managers to ascertain whether they are
succeeding or failing if their goals are precise and measurable.
 Objectives should always remain valid

Advantages of Objectives
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 They provide a basis for planning and for developing other type of plans such as
policies, budgets and procedures.
 They act as motivators for individuals and departments of an enterprise by
pointing the way to desired performance.
 They eliminate haphazard action which may result in undesirable consequences.
 They facilitate coordinated behaviour of various groups which otherwise may
pull in different directions.
 They function as a basis for managerial control by serving as standards against
which actual performance can be measured.
 They facilitate better management of the enterprise by providing a basis for
leading, guiding, directing and controlling the activities of people of various
departments.
 They lessen misunderstanding and conflict and facilitate communication among
people by minimizing jurisdictional disputes.
 They provide legitimacy to organization’s activities.

Strategies
 Strategy is a term which connotes a response to a competitive
environment. In a competitive situation, it is not enough to build plans
logically from goals unless the plans take into account the
environmental opportunities and threats and the organizational
strengths and weaknesses.
 A corporate strategy is a plan that takes these factors into account and
provides an optimal match between the firm and the environment.
 Two important activities involved in strategy formulation are:
 Environmental Appraisal
 Corporate Appraisal
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Environmental Appraisal
Components of External Environment
 Political and legal components
 Economics component
 Competitive component
 Social and cultural component
Attributes of External Environment
 Turbulence
 Hostile
 Diverse
 Restrictive
 Technically complex
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Corporate Appraisal
Corporate appraisal involves an analysis of the company’s strengths
and weaknesses.
Modes of Strategy Formulation
 Planning mode
 Entrepreneurial mode
 Adaptive mode
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Operational Plans
 Operational plans act as means of implementing the organization’s
strategy.
 They provide the details of how the strategy will be accomplished.
 There are two main types of operational plans:
i. Standing Plans
ii. Single-use Plans
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Standing Plans
 These plans are designed for situations that recur often enough
to justify a standardised approach.
 The major types of standing plans are:
 Policies
 Procedures
 Methods
 Rules
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Policy: Advantages and Disadvantages
A policy is a general guideline for decision-making. It sets up boundaries
around decisions, including those that can be made and shutting out those
that cannot.
Advantages of Policies
 Policies ensure uniformity of action in respect of various matters at
various organisational points.
 Policies speed up decisions at lower levels.
 Policies make it easier for the superior to delegate more and more
authority to his subordinates
 Policies give a practical shape to the objectives
Disadvantages of Policies
 Policies with broad areas of discretion and initiative lead to inconsistent
interpretations and make the very delegation of authority difficult which
they are intended to implement.
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Types of Policies
1. Classification on the basis of sources
 Originated policies
 Appealed policies
 Implied policies
 Externally imposed policies
2. Classification on the basis of function
3. Classification on the basis of organizational level
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Guidelines for Effective Policy-Making
 Policies should, as far as possible, be stated in writing and should be clearly
understood by those who are supposed to implement them.
 Policies should make their purpose clear, define the appropriate methods,
action and responsibilities and delineate the limits of freedom of action
permitted to those whose actions are to be guided by them.
 To ensure successful implementation of policies, the top managers and the
subordinates who are supposed to implement them must participate in
their formulation.
 A policy must strike a reasonable balance between stability and flexibility.
Conditions change and policies must change accordingly.
 Different policies in the organization should not pull in different directions
and should support one another.
 Policies should not be detrimental to the interest of society.
 Policies must be comprehensive to cover as many contingencies as possible.
 Policies should be periodically reviewed.
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Procedures
 Policies are carried out by means of more detailed guidelines called
“procedures”.
 A procedure provides a detailed set of instructions for performing a
sequence of actions involved in doing a certain piece of work.
 The same steps are followed each time that activity is performed.
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Difference between Procedures and Policies
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Policies Procedure
Policies are general guides to both
thinking and action of people at
higher level.
Procedures are general guides to
action only usually for people at
lower levels.
Policies help in fulfilling the
objectives of the enterprise.
Procedures show us the way to
implement policies.
Policies are generally broad and
allow some latitude in decision-
making.
Procedures are specific and do not
allow latitude.
Policies are often established
without any study or analysis.
Procedures are always
established after thorough study
and analysis of work.

Advantages and Limitations of Procedures
Advantages
 They indicate a standard way of performing a task. This ensures a high level
of uniformity of performance in the enterprise.
 They facilitate executive control over performance.
Limitations
 By prescribing one standard way of performing a task, they limit the scope
for innovation or improvement of work performance.
 By cutting across department lines and extending into various other
departments they sometimes result into so much duplication, overlapping
and conflict that the actual work does not get done properly and resources
are wasted.
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Methods
 A method is a prescribed way in which one step of a procedure is
to be performed.
 The method that is selected for discharging a particular step under
the existing conditions may become outdated in due course of
time because of the discovery of better and more economical
methods.
 The need for better and more economical methods of operation is
great because of the pressure of competition.
 Methods help in increasing the effectiveness and usefulness of the
procedure.
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Rules
 Rules are detailed and recorded instructions that a specific action
must or must not be performed in a given situation.
 Rules bring in predictability.
 A rule is different from a policy, procedure or method.
 They allow simple screening of violations and legitimize
punishment when violated.
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 These plans, are developed to achieve a specific end; when that
end is achieved, the plan is dissolved.
 The major types of these plans are:
 Programmes
 Budgets
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Single-Use Plans

Business Plan
 It is an important document prepared by an entrepreneur as a
start-up strategy to prove to private investors, customers,
suppliers and distributors that he is in a position to articulate and
manage the diverse aspects of his business.
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Steps in Planning
1. Establishing Verifiable Goals or Set of Goals to be Achieved
2. Establishing Planning Premises
3. Deciding the Planning Period
4. Finding Alternative Courses of Action
5. Evaluating and Selecting a Course of Action
6. Developing Derivative Plans
7. Establishing and Deploying Action Plans
8. Measuring and Controlling the Progress
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Strategic Planning Process
 The planning mode in which a corporate strategy is actively formulated is
called strategic planning.
 Following are the eight steps:
Step 1: Evaluate and improve last year’s strategic plan process by building into it
the deployment lessons learned during last year.
Step 2: Reaffirm the organization's vision, mission, values and objectives, which
form the foundation for the strategic plan.
Step 3: Review organization's operational performance for the prior year to know
its key strengths and weaknesses.
Step 4: Evaluate the external environment to prepare for each environmental
element (such as products, service, competitive advantage and marketing and
technological approach) a list of potential opportunities and threats.
Continued…
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Step 5: Conduct SWOT analysis based upon the issues identified in steps 1, 3 and 4
and forecast the results of continuing the existing strategy.
Step 6: Identify, evaluate and select alternative approaches if a change in the
existing strategy appears necessary. Thus, new markets may be entered, key
products may be redesigned to enhance quality or reduce cost, new investments
may be undertaken or old ones terminated and so on. In choosing among the
available possibilities, the organization should select the alternatives that utilize
the existing strength and not those that are non-existing and need both time and
money to be built-up.
Step 7: Deploy the modified plan. Communicate it to all departmental heads and
stakeholders for aligning their actions, measures and goals via derivative plans,
programmes and budgets.
Step 8: Provide for updates and tracking to be conducted throughout the year.
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Difference Between
Strategic Planning and Tactical Planning
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Strategic Planning Tactical Planning
It deals with long-term concept of the
organization, which is based on its mission,
vision and objective
It deals with short-term allocation of
resources for implementing the strategy
Its emphasis is on doing the right things, i.e.,
effectiveness
Its emphasis is on doing things rightly, i.e.,
efficiency
It is done by top-level corporate managers It is done by lower-level managers
Its success depends on the judgement,
experience, intuition and the well guided
discussion of the top-management team
Its success depends on staff work and
mathematical models.
It is more prone to unanticipated factors that
may erupt to change the situation
It has greater element of certainty

Limitations in Planning
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1. Planning is an expensive and time-consuming process
2. Planning sometimes restricts the organization to the most
rational and risk-free opportunities
3. The scope of planning is said to be limited in the case of
organizations with rapidly changing situations
4. Establishment of advance plans tends to make administration
inflexible
5. There is the difficulty of formulating accurate premises
6. Planning may sometimes face people’s resistance

Making Planning Effective
 Coordination
 Communication
 Participation
 Proper Climate
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Planning Skills
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1. Ability to think ahead
2. Ability to define company objectives
3. Ability to forecast future environmental trends
4. Ability to frame correct strategies
5. Ability to monitor the implementation of strategies
6. Ability to provide an appropriately timed, intermeshed
network of derivative and supporting programmes

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