Lecture No 3_Chapter No 4

8/3/2019 Lecture No 3_Chapter No 4

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PLANNINGPLANNING

Essentials of PlanningEssentials of Planning&&

Managing by ObjectivesManaging by ObjectivesChapterChapter

44

Lecture TopicsLecture Topics

Planning:Definition Purposes Benefits

Relationship of Planning & Controlling

Types of PlansComplete description of each type

Steps in Planning

Management by Objectives (MBOs)

SelectingSelectingmissionsmissionsandandobjectivesobjectivesas well asas well asthetheactionsactionsto achieve them, which requireto achieve them, which require

decision making.decision making.

PLANNINGPLANNING Expanded PlanningExpanded Planning DefinitionDefinition

Selectingmissionsandobjectivesaswell as theactionsto achieve them,

which require decision making, that is ,that is ,

all alternatives.all alternatives.


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Planning IntroductionPlanning Introduction

The most basic of ALL functions

Most essential task of a Manager: To ensure that every one understands:

Mission

Objectives

Methods

Planning involves: Selecting missions, objectives and actions

Choosing the best among alternatives

Purposes of Planningurposes of Planning Business/ life: Things are complex & without

proper planning difficult to handle Pre- requisite

to achieve success to survive in a competitive world

It helps in: determining opportunities/ threats identification of courses of action proper utilization of resources working in an organized manner

OrganizingOrganizing

Nature of PlanningNature of Planning

MostMostimportantimportantfunctionfunction

PlanningPlanning LeadingLeading

StaffingStaffing

ControllingControlling CentralCentralrolerole: Links: Linksall otherall otherfunctionsfunctions

Benefits of PlanningBenefits of Planning

Is a pre-determined course of action

It brings orderliness

Avoids confusion

ves etter use o resources

Cuts waste

Plans are changed or modified but not abandoned


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Benefits of PlanningBenefits of Planning

Planning leads to success.

It acts as a bridge between where we are and

where we want to be.

It hel s in savin resources mone and time.

Jobs are well coordinated thus duplication of

effort is avoided and skills and potentials are

fully utilized.

Relationship of Planning & ControllingRelationship of Planning & Controlling

Planning and Controlling are inseparable

(The Siamese Twins of Management)(The Siamese Twins of Management)

Plans provide the standards of Control

meaningless

No way for people to tell whether or not theyare going where they want to go (the task of

Controlling) unless they first know where

they want to go (the task of Planning)

Controlling

NoNodeviationsdeviations

fromfrom

Planning & ControllingPlanning & Controlling

ann ng Implementation Comparing withPlans

Corrective

Action

PlansPlans

DeviationsDeviations

Levels of PlanningLevels of Planning

Strategic planningStrategic planning: determining how to pursuelonglong--termterm goals with available resources.

Intermediate planningIntermediate planning: determining subsub--unitsunitscontributioncontribution with allocated resources

Operational planningOperational planning: determining how toaccomplish specific tasksspecific tasks with availableresources.


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Relationship of Managerial & Planning LevelsRelationship of Managerial & Planning Levels Types of PlansTypes of Plans

1.1. Missions/Missions/ PurposesPurposes

2.2. Objectives/Objectives/ GoalsGoals

3.3. StrategiesStrategies

..

5.5. ProceduresProcedures

6.6. RulesRules

7.7. ProgramsPrograms

8.8. BudgetsBudgets

MissionMission

TheThe basic purposebasic purpose or function of anor function of an

enterprise or agency or any part of it.enterprise or agency or any part of it.

Guidelines for MissionGuidelines for Mission

A clear, formally written, and publicizedstatement that guides the organization by:

defining the organization for keystakeholders.

establishing key priorities

stating a common goal and fostertogetherness

generating enthusiasm and a can doattitude

empowering organization members.


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ObjectiveObjective

TheThe endend towards whichtowards which

ac v yac v y s a me .s a me .

StrategyStrategy

The determination of the basic long

term objectives of an enterprise and

e a op on o course o ac on an

allocation of resources required to

achieve these goals.

PoliciesPolicies

General statementsGeneral statements oror

understandings thatunderstandings that guideguide oror

channelize thinking inchannelize thinking in decisiondecision

makingmaking..

Planning PremisesPlanning Premises

Assumptions about the

environment in which plans are to

.


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ProceduresProcedures

Plans that establish aPlans that establish a requiredrequired

methodmethod of handling activities.of handling activities.

RulesRules

Rules spell outRules spell out specificspecific requiredrequired

actionsactions oror nonnon--actionsactions allowingallowing nono

discretion.discretion.

DosDos DontsDonts

ProgramsPrograms

AA complexcomplex of:of:

Goals, policies, procedures, rules,Goals, policies, procedures, rules,

, ,, , ,,

ResourcesResources to be employedto be employed, &, &

Other elements necessaryOther elements necessary to carryto carry

outout a given course of action.a given course of action.

BudgetBudget

A statement ofA statement of expectedexpected

resultsresults expressed inexpressed in

numerical termsnumerical terms..


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Steps in PlanningSteps in Planning

1. Awareness of Opportunities2. Establishing Objectives3. Developing Premises4. Determinin Alternative Courses5. Comparing alternatives6.6. Selecting Best CourseSelecting Best Course7. Formulating Supportive Plans8. Quantifying Plans by Making

Budgets

Awareness of OpportunitiesAwareness of Opportunities

A real startingstarting point Look at possible opportunities in the

light of:

StrengthsStrengths

Market, Competition, Customers - Environment

Must also look at futurefuture environment

both externalexternal and internalinternal.

Setting realisticrealistic objectives depends on

this awareness.

SSTRENGTHSTRENGTHSActivities an organization doeswell or resources it control

WWEAKNESSESEAKNESSESActivities an or anization does not

SWOTSWOT AnalysisAnalysis

do well or resources it needs butdoes not have

OOPPORTUNITIESPPORTUNITIESPositive external environmental factors

TTHREATSHREATSNegative external environmentalFactors

Awareness of OpportunitiesAwareness of Opportunities

SS T R E N G T HT R E N G T H WW E A K N E SE A K N E S

OOP

P

R

T

U

N

MAXI-MAXI MINI-MAXI

Market, Competition, Customers - Environment

I

T

E

S

TTH

R

E

A

T

MAXI-MINI MINI-MINI


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Establishing ObjectivesEstablishing Objectives

Selecting objectives for:

Entire organization & each subordinate workunit

Long Term/ Short term

Specifying expected results & indicateend- points

Organizational objectives give direction to theOrganizational objectives give direction to themajor plans, which define objectives for everymajor plans, which define objectives for every

major department and so on . !major department and so on . !

Developing PremisesDeveloping Premises

Assumptions about the environment in

which plans are to be carried out

AllAll Managers MUST agree to

assump ons

Assumptions regarding:

Forecasts

Basic Policies

Existing Plans

Anticipated Environment

Principle of Planning PremisesPrinciple of Planning Premises

The more thoroughlythoroughly individuals, charged withplanning, understand and agreeagree to utilizeconsistentconsistent planning premises the morecoordinated and realisticrealistic planning will be.

What kinds of Markets? Which Technology?What kinds of Markets? Which Technology?Volume of sales? Bank Loans? Wages rate?Volume of sales? Bank Loans? Wages rate?

Tax rates? Policies? Plans? New Plants?Tax rates? Policies? Plans? New Plants?

Raw Material? Dividend policy? ExpansionRaw Material? Dividend policy? ExpansionPlan? Long term needs? Debt servicing? ..Plan? Long term needs? Debt servicing? ..

etcetc

Determining Alternative CoursesDetermining Alternative Courses

Alternatives exists for almost allPlans

Problem their numbers to minimumforis not to find alternatives butreducing analysis and evaluation.

Preliminary examination todiscover most fruitful possibilities


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Evaluating Alternative CoursesEvaluating Alternative Courses

Evaluate courses by examining theirstrong and weak point

Weigh them in the light of premisesand objectives

Complex courses can be evaluatedwith the help of operational research,mathematical and computing

techniques

Selecting the Best CourseSelecting the Best Course

Real Decision MakingReal Decision Making

By establishing Criteria, e.g.Criteria, e.g.:

Achieving objectives at least cost

Requiring least changes

Max RoI (Return on Investment) etc !

Backup/ Contingency PlanBackup/ Contingency Plan

Formulating Derivative PlansFormulating Derivative Plans

After Decision making:

Planning is not complete

Needs Supportive Plans for Basic

Plan

Quantifying Plans by BudgetingQuantifying Plans by Budgeting

After Decision making and Plans setting:After Decision making and Plans setting:

Final StepFinal Step Giving meaning to them

uant yuant y y convert ng nto u getsu gets

Sum Total of Income & Expenses

Balance Sheets Cash Flow Statements

Profit/ Loss Statements etc etc .


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ObjectivesObjectives

Management by ObjectivesManagement by Objectives

Management by Objectives (MBO)Management by Objectives (MBO)

Peter DruckerPeter DruckerA famous Management Consultant

Author of 39 Books

Management by Objectives (MBO)Management by Objectives (MBO) A comprehensive management system based

on measurable participatively set objectives,that leverages the motivational power ofobjectives

World wide used by many organizations

HIERARCHY OF OBJECTIVESHIERARCHY OF OBJECTIVES

1.1. SocioSocio--EconomicEconomicPurpose (Vision)Purpose (Vision)

2.2. MissionMission

3.3. Overall objectivesOverall objectives4.4. Specific mainSpecific main

Vision/ MissionVision/ Mission

Strategic ObjectivesStrategic Objectives

objectivesobjectives

5.5. Division objectivesDivision objectives6.6. DepartmentDepartment

objectivesobjectives7.7. Unit objectivesUnit objectives

8.8. Individual objectivesIndividual objectives

Tactical ObjectivesTactical Objectives

Operational objectivesOperational objectives

MissionMission: : Board Of DirectorsBoard Of Directors

Strategic ObjectivesStrategic Objectives : Top Level ManagementTop Level Management

HIERARCHY OF OBJECTIVESHIERARCHY OF OBJECTIVES

Tactical ObjectivesTactical Objectives : Middle level Management: Middle level Management

Operational ObjectivesOperational Objectives : Supervisory or Low LevelSupervisory or Low LevelManagementManagement


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How to Set ObjectivesHow to Set Objectives

Vision/ Mission

Overall ObjectivesBoard ofDirectors

Vision/ Mission Overall/ Specific/ Division

Top Level

Top DownTop DownApproachApproach

ectves

Division level Department/ Unit Level

ObjectivesMiddle Level

Department/ Unit levelobjectives

Individual Objectives

Lower LevelManagers

Bottom UpBottom UpApproachApproach

Characteristics of ObjectivesCharacteristics of Objectives

To be verifiable:

Quantitative

Qualitative

Simple & clearly understandable

r en

SMARTSMART

S: SpecificS: Specific

M: Measurable (Verifiable)M: Measurable (Verifiable)

A: Appropriate (Relevant)A: Appropriate (Relevant)

R: RealisticR: RealisticT: TimeT: Time--boundbound

Writing Good ObjectivesWriting Good Objectives

Writing Good ObjectivesWriting Good ObjectivesSome main points:

What specific result is to be achieved?

How the result is to be measured?

Who will be responsible for achieving theresult?

Checklist available on Page No 103

Examples : ObjectivesExamples : Objectives To make a reasonable profit To achieve RoI of 12% at the end of the current fiscal year To improve communication To issue a two page monthly newsletter beginning 1 July, 10

involving not more than 40 man-hours of preparation time. To improve productivity of the production department To increase production output by 5% by 31 Dec 10 without

additional costs while maintaining the existing qualitystandards

To develop better managers To design and conduct a 40-hour in-house Management

training program to be completed by 31 Oct, 10 withinduction of 20 managers, involving not more than 200

working hours.


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Managerial Focus in MBOManagerial Focus in MBO

MBO managers focus on the result, not

the activity. They delegate tasks by

"negotiating a contract of goals"with

detailed roadmap for implementation.

MBO is about setting yourself objectivesand then breaking these down into morespecific goals or key results

Advantages & Disadvantages of MBOAdvantages & Disadvantages of MBO

AdvantagesAdvantages MBO programs continually emphasize what should be

done in an organization to achieve organizational goals. MBO process secures employee commitment to

attaining organizational goals. sa van agessa van ages The development of objectives can be time consuming,

leaving both managers and employees less time inwhich to do their actual work.

The elaborate written goals, careful communication ofgoals, and detailed performance evaluation required inan MBO program increase the volume of paperwork inan organization.

Main Reason of Failure of MBOMain Reason of Failure of MBO

In both the public & privatepublic & privatesector:

Absence of a fully committed and involvedtop managementtop management.

development of management objectives

ParticipativeParticipative element ignoredignored and justimplemented the AppraisalAppraisal portion of MBO

Where & When to Use MBOWhere & When to Use MBO

The MBO style is appropriate for:

Knowledge based companies

when your staff is competent.

build employees management & self-leadership skills

tap their creativity, knowledge and initiative.

Also used by CEOs of multinational

corporations (MNCs) for their countrymanagers abroad

Lecture No 3_Chapter No 4

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