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CHAPTER TWO
PLANNING
1
Practice planning every day!

Practice Planning Every Day! 2
 To introduce the concept and definition of planning.
 Analyze the nature and importance of planning.
 Discuss various types of planning.
 Explain steps in planning.
Learning Objectives

What Is Planning?
• Planning
– A primary managerial activity that involves:
• Defining the organization’s goals and objectives
• Establishing an overall strategy for achieving those goals
• Developing a comprehensive set of plans to integrate and
coordinate organizational work.
– Is a blueprint of future course of action
Informal and formal planning
• Informal: not written down, short-term focus; specific to
an organizational unit.
• Formal: written, specific, and long-term focus, involves
shared goals for the organization.

Cont’d
• Planning is deciding in advance what to do, how to do
it, when to do it, and who is to do it.
• It bridges the gap from where we are and where we
want to go. /Koontl and O’Donnel/
• Planning involves the selection of objectives, policies,
procedures and programs from among alternatives.

Planning answers 6 basic questions?
1. The What (what to do?): the short-term or long-term
goal we want to achieve
2. The When (when to do?): Time schedule
3. The Where (where to do?): the place where the plan is
executed.
4. The Who (who does it): individuals/units performing
activities.
5. The How (how it is done): The strategy/methods for
achieving the goal.
6. The How much (How much is required to do):
Expenditure of resources.

Key Elements of Planning
• Planning has four elements;
a. Objectives
b. Actions
c. Resources
d. Implementation
Practice Planning Every Day! 7–6

a. Objectives
• Objectives are goals or targets that the firm wishes to
reach within a stated amount of time.
• Planning requires managers to anticipate/for.c/ what is
likely to happen in the future.
• It is the future destination of the organization, which all
employees directed by.
• The where will we want to be in the future!

b. Actions
• Are the specific steps the firm intends to take to
achieve the desired objectives.
• The activities or tasks the firm thinks to
undertake to achieve the objectives.
• It is about “how we will get where we want to
be?”

c. Resource Allocation
• Plan identifies what resources are required, where they come
from, and how they will be arranged.
• A manager should be aware of resource constraints
and how it would be efficiently used.
• Decisions regarding resource allocation determine
whether the goals can be realistically achieved.
• The “how much it costs”

d. Implementation Guidelines
• Plan consists of implementation guidelines the
specify how the intended actions will be carried
out.
• It involves
– Division of tasks among different actors,
– Specification of reporting relationships
– Establishing the timeline for accomplishing each task.

IMPORTANCE OF PLANNING
• Planning is important for the following reasons
 Primacy of Planning: first and foremost function of
management
 It reduces risk & uncertainty: planning helps to cope up with
& prepare for changing env’t.
 To focus attention on objectives: planning focuses on
organizational objectives and how to achieve these objectives.
 Sets the standards for controlling : control can be exercised
if there are plans (standards or goals)

Cont’d…
 To increase organizational effectiveness: achieving
organizational objectives within the given resources.
 Coordination of efforts: plan helps manager
coordinate different independently acting efforts.
 Establishment of priorities: plan shows the
prioritization of problems and issues.
 Ensuring the availability of adequate resources

Limitations of Planning
• Poor forecasts of future conditions
– Business environment is changing faster than ever. Even
most sophisticated planning techniques may not expect
accurately what is likely to happen in the future.
• Plans imposed from above
– Sometimes plan generator is different from plan
implementer
– Plans that are not from the wisdom and experience of
those at the operational levels within the firm.
• Planning as a self-contained activity
– Planning task may be given to separate units (planning
staff) from the rest of the organization.
• Planning do not allow employees flexibility

TYPES/CLASSIFICATION OF PLANS
•Plans can be classified on the bases of the following
dimensions;
1. Breadth (Scope)
2. Time Frame (Duration of the Plan)
3. Frequency (Repetitiveness)
4. Specificity
5. Formulation

Exhibit 2.1

Types of plans based on scope/breadth
1. Strategic Plans
Apply to the entire organization.
Establish the organization’s overall goals.
Seek to position the organization in terms of its
environment.
It is developed by top level managers and cover
extended periods of time.
It answers three basic questions
1. Where are we now?
2. Where do we want to go?
3. How do we get there?

2. Tactical Plans
o Is concerned with what the lower level units within
each division must do, how they must do it, and who
will have the responsibilities for doing it.
o Developed to implement specific parts of strategic plans
o Is a process of developing action plans to execute
strategies.
o Mostly short-term in its time frame ( one year or less)
and narrower in scope than strategic plans
o It is mostly carried out by departmental managers
(middle level managers).

3. Operational Plans
• Also called administrative plans are those a manger uses
to accomplish his/her job responsibilities
• It can be a single use plan like a program or standing
plan like policy.
• Focuses on carrying out tactical plans to achieve
operational goals.
• Mainly short range and more specific and detailed.
• Concerned with day to day; week to week activities of
the organizations.
• These plans are developed by Supervisory level
managers.

1. Long-range Plans
– Plans with time frames extending beyond three years (5-10
years) depending on the size & nature of the organization
2. Intermediate - range Plans
– Ranges b/n long & short range plans
– Plans with time frame of 1-3 years depending on the size &
nature of the organization.
3. Short – range Plans
– Are not developed separately
– Are operational plans derived from long-range or intermediate
plans
– Plans with time frames of less than 1 year depending on the
size & nature of the organization.
Time frame

1. Single-Use Plan
– A one-time plan specifically designed to meet the
need of a unique situation.
- Single use plans are commonly three types.
a. Programs
- Are single use plans
- They are complex & encompasses goals, policies,
procedures, rules, task assignments, resources, and
budgets.
- Eg: purchasing new machines or introducing new
product
1.frequency of use repetitiveness

2) Projects
- Are smaller portion of a program.
- Are less comprehensive & narrower in focus than
programs.
- They have predetermined time schedule for
completion.
3) Budgets
- Is the resources required in numerical terms
- It is a quantitative statement of the resources allotted
to specific programs or projects for a given period.
- It serves as a benchmark for controlling.

2. Standing Plans
– Ongoing plans that provide guidance for activities
performed repeatedly.
– Are plans that are used again & again; followed
each time; and designed to deal with organizational
issues or problems that recur frequently.
– Standing plans includes;
A) Purpose or Mission
- It identifies the basic function or task of an
enterprise.
- It describes what an organization stands for and its
reason for existence.

B) Goals or Objectives
- Are single use plans that specifies the end
towards which business activity is directed.
- Once objectives are achieved, we do not use
them again but we tend to develop another
objectives.
- Objectives have the following characteristics;
 Objectives are multiple: ( objectives set in
various key areas)

 Objectives can be tangible or intangible: (objectives
in the physical resources are tangible whereas
managerial performance and workers morale can be
intangible objectives)
 Objectives have a priority: (one objective can be more
important than the other)
 Objectives are hierarchical: (corporate, departmental
and sectional objectives at different organizational
levels)

C) Strategies:
- Are complex plans for bringing organizations from a given
position to a desired position in the future.
D) Policies:
- Is a standing plan that channels the decision making of employees.
- It guides thinking and action rather than a specific course of
action.
- Eg: recruitment policy, pricing policy, advertisement policy,
customer care policy….

3. Contingency Planning
- Involves identifying alternative courses of action that can be
implemented if and when the original plan proves inadequate
because of changing conditions.
- Unexpected problems and events frequently occur. When they
do, managers may need to change their plans. Anticipating
change during the planning process is best in case things don’t
go as expected.
- Contingency planning is necessary at each level of management
and for strategic, tactical, and operational planning.

THE PLANNING PROCESS
• There are 10 steps in planning
Step 1: Understanding the existing situation
- Understanding both the internal as well as external
environment.
- Identifying external factors ; opportunities & threats
- Identifying internal factors; strengths & weaknesses
Step 2: Forecasting
- Assumptions about what the future looks like since the future
is full of uncertainties.

Step 3: Establishing Objectives
- Objectives are end results established for the organization and
for each work units.
- Objectives give direction to the major plans.
Step 4: Determine alternative courses of action
- Searching for and examining alternative courses of action
(strategies).
- The number of alternative should be managed.
Step 5: Evaluation alternative course of action:
- Carefully assessing the alternatives by considering them in
light of goals
- Examining the advantage and disadvantage of each alternative
courses of action.

Step 6: Selecting a course of action
- is the point at which the plan is approved.
- It is the real point of decision making.
Step 7: Formulating derivative plans
- Derivative plans are those which support the main plan.
Step 8: budgeting:
• At this point, all necessary resources are determined for
each units, tasks and individuals.
Step 9: Implementing the plans
- Developing action plans to implement plans.
Step 10: Controlling & evaluating the results
- Evaluate reported results and make necessary adjustments

Characteristics of Well-Designed
Goals/objectives
• Written in terms of outcomes,
not actions
– Focuses on the ends, not the
means.
• Measurable and quantifiable
– Specifically defines how the
outcome is to be measured
and how much is expected.
• Clear as to time frame
– How long before measuring
accomplishment.
• Challenging yet attainable
– Low goals do not
motivate.
– High goals motivate if
they can be achieved.
• Written down
– Focuses, defines, and
makes goal visible.
• Communicated to all
– Puts everybody “on the
same page.”

Summary
• What is planning?
• What are the elements of Planning?
• Why planning is important?
• What are the types of planning
• What are the steps in planning process?
7–31

Thank you for your attention!!
32

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