Copyright © 2002, Authors

MANAGEMENT text and cases, V S P Rao, V Hari Krishna Excel Books

 It is a predetermined course of action.

 It is today's projection for tomorrow's activity.

To bring about specified results, at A specified cost, in A

specified period of time.
 Features of Planning
Planning has a number of characteristics:
 Planning is goal-oriented
 Planning is a primary function
 Planning is a mental exercise
 Planning is a continuous process
 Planning involves choice
 Planning is forward looking
 Planning is flexible
 Planning is an integrated process
 Planning includes efficiency and effectiveness dimensions
 Planning Questions
 Where are we now?
 Where do we want to be?
 Gap?
 How can we get there from here?
 Steps in the Planning Process
 Establishing objectives
 Developing premises (Assumptions about the environment,
Tangible and intangible, Internal and external)
 Evaluating alternatives and selection (cost, risk , benefits)
 Formulating derivative plans (supporting plans for all the
departments)
 Securing cooperation and participation (suggestions,
complaints and cooperation)
 Providing for follow-up (continuous evaluation)
 Forms of Planning
Long-Range Planning (LRP) vs. Short-Range Planning (SRP)

Long-range Planning Point of Distinction Short Range Planning

5 Years or more. Time factor Upto one year.

Mission, Long-term goals and Deals with Current operations of an organisation.

strategies.

Organisation's linkage with Primary Focus Linkage with various parts of an

external factors. organisation.

Demands changes in the Impact Operates within the existing structure

structure, resource allocation. and resources.

It goes too far into the future; the Uncertainty The time horizon is limited and the risk
risk and uncertainty level is high. associated with uncertainty level is low.

Top Management. Prepared by Lower level executives.

 Operational Planning vs. Strategic Planning
Feature Strategic (Long-range) Operational (Short-range)
Time horizon 5 years or more Under 1 year
Purpose Adapt to external environment Implement internal goals
based on internal strengths
Activity controlled Total institutional performance Internal tasks and operations

Decision range Relatively long Short-term

Organisational level Top management Middle and lower management

involved
Basis for planning Primarily judgmental Exact data and standards used

Predictability Uncertain Highly certain

Anticipated accuracy Within 25 per cent Within 2 or 3 per cent

Management Planning and forecasting Control primarily

functions involved dominant
Management control Slight; contingency plans Almost complete; single-option
of outcomes required plans used
 Formal and Informal Planning

Formal planning
Well documented plan. It is a written record of what the organization intends to do
within a time frame.
It is systematic and rational.

Informal planning
It does not offer a written record.
It is carried out without any direction.
Unhealthy tendencies like carelessness in planning and implementation,
haphazard actions etc,.
Functional and Corporate Planning

Proactive and Reactive Planning

 Objectives

 Objectives are established to guide the efforts of the

company and each of its components.

 An organizational goal is a desired state which the organization

attempts to achieve.

 Objectives indicate the 'end point of a management program'.

 Establishing Objectives: Two Approaches
Traditional View
Top Management set goals(One
Environmental goals
Way Process) as they can see the
Output goals
‘big picture’
System goals
Middle level management divide Product goals
the goals to the lower level Derived goals
employees
Stated vs. operational goals
For ex. Sufficient profit

Modern View (MBO)

Goals are products of a series of negotiations between internal and

external groups.
Each group will try to influence the goals.
 MANAGEMENT BY OBJECTIVES
A systematic and rational approach

Assumption
People perform better when they know what is expected from them
(relation between individual and organizational objective)

Features
 participation in setting goals

 Goals- tangible, measurable

 It focuses on what must be accomplished (goals) rather than how

it is to be accomplished (methods).
 Process

 Goal-setting
 (clear, accurate, consistence with policy, within the competence of
man, interesting, motivating and challenging)
 Action plan
 Appraising performance (Final Review)
 MBO Benefits
Clear goals
Better planning
Facilitates control
Objective appraisal
Motivational force
Better morale
Result-oriented philosophy
 MBO Limitations

1. Pressure-oriented
2. Time consuming
3. Increases paperwork
4. Goal-setting problems
5. Organizational problems
Suggestions for Improving the Effectiveness of MBO

Organizational commitment
Training
Adequate time and resources
Take care of the necessary mechanics
Timely feedback
Politics
 Standing and Single Use Plans

Standing plans are put to use, again and again, over a long period of time.
Once established, they continue to apply until they are modified

Single use plans are non-recurring in nature and deal with problems that
probably will not be repeated in the same form in future.
 Policies
A policy is a basic statement that guides decision-making. It tells people
what they may or may not do. It directs the way in which activities are to be
achieved.
Policies set behavioural limits. They are restrictive in the sense that they
define the boundaries within which decisions ought to be made. At the
same time, they give enough room for subordinates to use their discretion.
 Advantages of written policies

 Clear guidance for Decision Making

 Uniform actions are possible

 Members are confident about action

 Dependable behavioral pattern lead to improved performance

Phases of Policy making and Policy use

 Policy formulation
 Policy communication
 Policy application
 Policy review and appraisal
Difficulties in Policy Making and Implementation

 Policies are not easy to express

 Conflicts between implied and expressed policy statements
 Inconsistency
 Communication bottlenecks
 Costly (Managers being liberal)
 Failure to interpret correctly using sound judgment
 Characteristics of an Effective Policy

Developing effective policies is a top management responsibility. While

developing such policies management should observe the following things:
 Related to objectives
 Easy to understand
 Precise
 Stable as well as flexible
 Based on facts
 Number
 Thorough knowledge of internal as well as external factors
 Just, fair and equitable
 Reasonable
 Review
 Differences between Policies and Objectives

Objectives Policies

 Objectives are basic to the existence  Policies are not basic to the existence
of an organization. of an organization.

 They are the ends toward which  Policies are the routes or means for
organizational efforts are directed. the accomplishment of goals.

 Set by top management .  Formulated at top and middle levels.

 Determine what is to be done.  Determine how the work is to be

 Objectives are single-use plans. They done.

outline a course of action to fit a  Policies are standing plans designed

specific situation and are finished to be used by operating personnel
when the goal is reached. over and over again.
 Procedures

Procedures are called 'action guidelines'.

They are generally derived from policies.

The basic purpose of a procedure is to spell out clearly, the way one is to go about
doing something.

They indicate the steps to be accomplished as well as the required time and order of
preference.

Procedures help in integrating organizational efforts and facilitate control process.

 Policies vs. Procedures

Policies Procedures

 Guides to decision-making;  Guides to action .

 Indicate the broad area of action. A  Procedures specify a route through the
company may have a policy of promoting broad area of policy.
people from within.  They always specify a rigid course of
 More flexible than a procedure. action.

 Policies are formulated at the top and  Procedures are derived from policies and
middle level. subservient to them, in the sense that
they are formulated at a relatively low
level of management.
 Methods

Methods are sub-units of a procedure;

They show clearly as to how a step of procedure should be performed.
They indicate the techniques to be employed to make the procedure
effective.
 Rules
A rule is a very specific and detailed guide to action. (What to do and what
not to do)

There is no scope for personal judgment.

Rules must be followed precisely and observed strictly.

Rules can be positive and negative

They permit managers to simplify the decision-making process.

 Programmes and Schedules

A programme is a comprehensive plan that includes a complex set of goals,

procedures, rules, work assignments resource flow and generally covers a
large 'territory'.
Schedules are often combined with programmes to ensure a sequence of
activities.
Basic Steps in Programming

A six-step process for effective programming:

 Step-wise division of work
 Relationship and sequence between steps
 Fixing responsibility
 Arranging for resources
 Scheduling
 Data sheets for each task
 Projects

A project is a small programme.

A project has the following features:

 The activity has a clear objective.
 Somewhat unique and unfamiliar to the existing organisation.
 The activity is complex and critical to the organisation.
 The activity is temporary with respect to duration of need.

Project structure can be be phased out.

The best available talent can be pooled to accomplish it.

 Budgets
Budget is a numerised programme designed primarily to allocate the
resources of an organisation.
The basic features of a budget may be stated thus:
 It is a statement in terms of money or quantity or both,
 It is prepared for a definite future period,
 It is prepared in advance, and
 It aims at achieving a given objective.

The use of a budget to monitor and regulate the operational work of an

organisation in a systematic way is called 'budgetary control'.
Policies, Procedures, Methods and Rules: Distinguished

Point of Policies Procedures Methods Rules

distinction

1 Definition Guides to decision Guides to action. One best way of Govern

making. doing things behaviour.

2 Nature Indicate the broad Specify a route It is one step of a Define what
area of action. through the broad area procedure limited in should and should
of policy. More scope. not be done.
detailed than a policy.
3 Relationship Provide standing Time sequence is Concerned with a Specify no time
with time answer to recurring indicated with given piece of sequence.
sequence questions. Can be work to be finished
applied under by an individual
different situations. within a specific
time period.
4 Formulation Generally Formulated at a Methods are Rules are
formulated at the relatively low level of formulated after formulated by
top. management. They careful research, managers after
are derived from experimentation and finding out what is
policies. analysis good or what is
bad for an
employee/organis
ation.
Cont…
5 Discretion Require judgement Tell the subordinate Tell the subordinate Require action
and interpretation. exactly what to do in a exactly what to do in or non-action in
particular situation; a particular situation; a rigid or
used only when we do used only when we inflexible
not want people to use do not want people to manner. There
discretion. use discretion. is no room for
discretion or
interpretation.
6 Example We encourage Promotion procedure What is the best way No
promotion from may indicate the basis to measure the discrimination
within. for promotion in the employee's skills or on the basis of
form of qualifications, competence? caste, sex or
experience, religion, etc.
specialisation,
competence, etc.