Management Chapter 4 3/15/2014

PLANNING

Essentials of Planning
Chapter &
Managing by Objectives
4

Five Managerial Functions

Leading

Planning Controlling
Management
Functions

Organizing Staffing

Five Managerial Functions

Leading

Planning Controlling
Management
Functions

Organizing Staffing

1
Management Chapter 4 3/15/2014

PLANNING
Selecting missions and objectives as
well as the actions to achieve them,
which require decision making.

Expanded Planning Definition

Selecting missions and objectives as

well as the actions to achieve them,
which require decision making.

that is , choosing a course of

action amongst all alternatives.

Purposes of Planning …?

Why should we do it …?

2
Management Chapter 4 3/15/2014

Why Do Managers Plan?

• Purposes of Planning
– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling

Nature of Planning

Organizing

• Most important
function
Controlling Planning Leading
• Central role:
• Links all other
functions
Staffing

Relationship of Planning & Controlling

• Planning and Controlling are inseparable

– (The Siamese Twins of Management)
• Plans provide the standards of Control
• Controlling without referring to plans is
meaningless

No way for people to tell whether or not they

are going where they want to go (the task of
Controlling) unless they first know where
they want to go (the task of Planning)

3
Management Chapter 4 3/15/2014

Planning & Controlling

No
Controlling deviations
Planning Implementation Comparing with from
Plans
Plans

Deviations

Corrective
Action

Relationship of Managerial & Planning Levels

Levels of Planning
Strategic planning:
determining how to pursue long-term goals with
available resources.

Intermediate planning:
determining sub-units’ contribution with allocated
resources

Operational planning:
determining how to accomplish specific tasks
with available resources.

4
Management Chapter 4 3/15/2014

Lets go back ….. !

Do you think the long term planning (Strategic

Planning) has to do something with Stability
in Environment

…?

System in Operational Approach

ENVIRONMENT

Transformation
input output
process

Feedback (Reenergizing the system)

System Boundary

Organization as a System receives Input, transforms it

through a Process for Output and Operates in an
Environment (economic, social, regulatory & other forces)

Organisation & External Environment

Technological
Economic

Ecological Organisation Ethical

Political &
Social
Legal

5
Management Chapter 4 3/15/2014

Industry in Pakistan….. !

Finding it very hard to carry out

Planning Process ….!

Types of Plans

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

6
Management Chapter 4 3/15/2014

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

7
Management Chapter 4 3/15/2014

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

Types of Plans
1. Missions/ Purposes

2. Objectives/ Goals

3. Strategies

4. Policies

5. Procedures

6. Rules

7. Programs

8. Budgets

Mission
The basic purpose or function of an
enterprise or agency or any part of it.

8
Management Chapter 4 3/15/2014

Guidelines for Mission

• A clear, formally written, and publicized
statement that guides the organization by:
– defining the organization for key
stakeholders.
– outlining how the vision will be accomplished
– establishing key priorities
– stating a common goal and foster
togetherness
– generating enthusiasm and a “can do”
attitude
– empowering organization members.

Example of Mission
Mobilink's Vision:
"To be the leading telecommunication
services Provider in Pakistan by offering
innovative Communication solutions for
our Customers while exceeding
Shareholder value & employee
expectations".
http://www.mobilinkgsm.com/about/vision.php

Example of Mission
Telenor Vision:
“ Our vision is simple: We're here to help
We exist to help our customers get the full
benefit of communications services in their
daily lives.
The key to achieving this vision is a mindset
where every one of us works together: Making it
easy to buy and use our services. Delivering on
our promises. Being respectful of differences.
Inspiring people to find new ways.”
http://www.telenor.com.pk/about/vision.php

9
Management Chapter 4 3/15/2014

Example of Mission

Ufone Mission:

“To be the best cellular option for U”.

http://www.ufone.com/about_MissionStatement.aspx

Objective

The end towards which activity is

aimed.

Strategy
The determination of the basic long term objectives of
an enterprise and the adoption of course of action and
allocation of resources required to achieve these goals.

10
Management Chapter 4 3/15/2014

Policies
General statements
or understandings
that guide or
channelize thinking
in decision making.

Procedures
Plans that establish a required method
of handling activities.

Rules
Rules spell out specific required actions
or non-actions allowing no discretion.

Do’s Dont’s

11
Management Chapter 4 3/15/2014

Programs
A Complex of:

– Goals, policies, procedures, rules,

tasks, assignments, to be taken,

– Resources to be employed, &

– Other elements necessary to carry

out a given course of action.

Budget
A statement of
expected results
expressed in
numerical terms.

Steps in Planning

12
Management Chapter 4 3/15/2014

Steps in Planning
1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making Budgets

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

Awareness of Opportunities

• A real starting point

• Look at possible opportunities in the light of:

– Strengths
– Weaknesses

• Must also look at future environment both external

and internal.

• Setting realistic objectives depends on this

awareness.

Market, Competition, Customers - Environment

13
Management Chapter 4 3/15/2014

SWOT Analysis
STRENGTHS
Activities an organization does well or resources it
control
WEAKNESSES
Activities an organization does not do well or
resources it needs but does not have
OPPORTUNITIES
Positive external environmental factors
THREATS
Negative external environmental Factors

Strengths & Weaknesses

• Strengths and Weaknesses: Internal
• Relate to :
– resources, programs and organization
• Key areas:
– Sales - marketing - distribution - promotion - support;
– Management - systems - expertise - resources;
– Operations - efficiency - capacity - processes;
– Products - services - quality - pricing - features - range -
competitiveness;
– Finances - resources - performance;
– R&D - effort - direction - resources;
– Costs - productivity - purchasing;
– Systems - organization - structures.

Threats & Opportunities

• Relate to external
• Following areas:
• The marketplace which may be altering due to:
– Economic or social factors
– Customers; distribution channels;
– Political & environmental factors
• Competition: creating new threats or opportunities
– Identities, performances, market shares, likely plans,
aggressiveness, strengths & weaknesses
• New technologies: Causing fundamental changes in
products, processes, etc.
– Substitute products, alternative solutions, shifting channels,
cost savings etc.

14
Management Chapter 4 3/15/2014

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

Establishing Objectives
• Selecting objectives for:

– Entire organization & each subordinate work unit

– Long Term/ Short term

• Specifying expected results & indicate end points

Organizational objectives give direction to the

major plans, which define objectives for every
major department and so on …. !

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

15
Management Chapter 4 3/15/2014

Planning Premises
Assumptions about the environment in
which plans are to be carried out.

Developing Premises
• All Managers MUST agree to these
assumptions

• Assumptions regarding:
– Forecasts
– Basic Policies
– Existing Plans
– Anticipated Environment

Principle of Planning Premises

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

What kinds of Markets? Which Technology?

Volume of sales? Bank Loans? Wages rate?
Tax rates? Policies? Plans? New Plants?
Raw Material? Dividend policy? Expansion
Plan? Long term needs? Debt servicing? …..
etc…

16
Management Chapter 4 3/15/2014

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

Determining Alternative Courses

• Alternatives exists for almost all Plans

• Problem is not to find alternatives but reducing their
numbers to minimum for analysis and evaluation.
• Preliminary examination to discover most fruitful
possibilities

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

17
Management Chapter 4 3/15/2014

Evaluating Alternative Courses

• Evaluate courses by examining their strong
and weak point
• Weigh them in the light of premises and
objectives
• Complex courses can be evaluated with the
help of operational research, mathematical
and computing techniques

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

Selecting the Best Course

Real Decision Making

– By establishing Criteria, e.g.:

• Achieving objectives at least cost

• Requiring least changes

• Max RoI (Return on Investment)

…etc !

– Backup/ Contingency Plan

18
Management Chapter 4 3/15/2014

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

Formulating Derivative Plans

After Decision making:

• Planning is not complete

• Needs Supportive Plans for Basic

Plan

Steps in Planning

1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative
Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making
Budgets

19
Management Chapter 4 3/15/2014

Quantifying Plans by Budgeting

After Decision making and Plans setting:

• Final Step – Giving meaning to plans

• Quantify by converting into Budgets

• Sum Total of Income & Expenses

• Balance Sheets – Cash Flow Statements

• Profit/ Loss Statements etc ….

Objectives

Management by Objectives

Management by Objectives (MBO)

• Peter Drucker
– A famous Management Consultant
– Author of 39 Books
– MBO Approach given in 1954
• Management by Objectives (MBO)
– A comprehensive management system based on
measurable participatively set objectives, that
leverages the motivational power of objectives
– World wide used by many organizations

20
Management Chapter 4 3/15/2014

7–61 © 2005 Prentice Hall

Inc. All rights reserved.

Management by Objectives
Management by Objectives (MBO)
• A program that encompasses specific goals,
collectively set, for an explicit time period, with
feedback on goal progress.

Key Elements
1. Goal specificity
2. Participative decision making
3. An explicit time period
4. Performance feedback

7–62 © 2005 Prentice Hall

Inc. All rights reserved.

Cascading of Objectives

Overall
organizational
objectives

Divisional
objectives

Departmental
objectives

Individual
objectives

7–63 © 2005 Prentice Hall

Inc. All rights reserved.

21
Management Chapter 4 3/15/2014

Cascading of Objectives

7–64

HIERARCHY OF OBJECTIVES

1. Socio-Economic Vision/ Mission

Purpose (Vision)
2. Mission
Strategic Objectives
3. Overall objectives
4. Specific main
objectives
5. Division objectives Tactical Objectives
6. Department
objectives
7. Unit objectives
Operational objectives
8. Individual objectives

HIERARCHY OF OBJECTIVES

Mission: : Board Of Directors

Strategic Objectives : Top Level Management

Tactical Objectives : Middle level Management

Operational Objectives : Supervisory or Low Level

Management

22
Management Chapter 4 3/15/2014

How to Set Objectives

Top Down
Approach

Board of • Vision/ Mission

Directors • Overall Objectives

• Vision/ Mission
Top Level
• Overall/ Specific/ Division
Managers Objectives

• Division level
Middle Level • Department/ Unit Level
Objectives

• Department/ Unit level

Lower Level objectives
Managers • Individual Objectives

Bottom Up
Approach

Characteristics of Objectives
• To be verifiable:
– Quantitative
– Qualitative
• Simple & clearly understandable
• Written
• SMART
– S: Specific
– M: Measurable (Verifiable)
– A: Appropriate (Relevant)
– R: Realistic
– T: Time-bound

Writing Good Objectives

• Writing Good Objectives
– Some main points:
• What specific result is to be achieved?
• When is the result to be achieved?
• How the result is to be measured?
• Who will be responsible for achieving the
result?
• Checklist available on Page No 103

23
Management Chapter 4 3/15/2014

Examples : 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 quality
standards
• To develop better managers
• To design and conduct a 40-hour in-house Management
training program to be completed by 31 Oct, 10 with
induction of 20 managers, involving not more than 200
working hours.

Managerial Focus in MBO

• MBO managers focus on the result, not the activity.
They delegate tasks by "negotiating a contract of
goals" with their subordinates without dictating a
detailed roadmap for implementation.
• MBO is about setting yourself objectives and then
breaking these down into more specific goals or key
results

Advantages & Disadvantages of MBO

Advantages
• MBO programs continually emphasize what should be
done in an organization to achieve goals.
• MBO process secures employee commitment to
attaining organizational goals.

Disadvantages
• The development of objectives can be time
consuming, leaving both managers and employees
less time in which to do their actual work.
• The elaborate written goals, careful communication of
goals, and detailed performance evaluation required in
an MBO program increase the volume of paperwork in
an organization.

24
Management Chapter 4 3/15/2014

Main Reason of Failure of MBO

• In both the public & private sector:
– Absence of a fully committed and involved
top management.
– Dictatorial rather than participatory
development of management objectives
– Participative element ignored and just
implemented the Appraisal portion of MBO

Where & When to Use MBO

• The MBO style is appropriate for:
– Knowledge based companies
– when your staff is competent.
– When you wish to
• build employees‘ management & self-leadership skills
• tap their creativity, knowledge and initiative.
• Also used by CEOs of multinational
corporations (MNCs) for their country managers
abroad

“It's just another tool. It is not the

great cure for management
inefficiency….. MBO works if you
know the objectives, and 90% of
the time you don't.”

(Peter Drucker)

25
Management Chapter 4 3/15/2014

Attendance

26