ninth edition

Chapter
STEPHEN P. ROBBINS MARY COULTER

2 The Planning
Function
PowerPoint Presentation by Charlie Cook
The University of West Alabama
 Introduction
• Planning is concerned with the future impact of today’s
decisions. It is the fundamental function of management
from which the other four stems. The need for planning is
often apparent after the fact. However, planning is easy to
postpone in the short run. Postponement of planning
especially plagues labor oriented, hands on managers.
• Planning is important at all levels of management.
However, its characteristics vary by level of management.

Planning 1–2
 Objectives:
• At the end of this chapter you will be able to
Understand what planning is and explains its
relationship with goals.
Explain the concept of organizational mission,
objective, goal and purpose.

Planning 1–3
 2.1. Nature and purpose of planning
• Planning is an activity, which is performed before any action is
taken. The action we take is based on the plan. Thus, it is
anticipatory decision making a process and improves
performance. Planning allows integrated, consistent and
purposeful action.
• Planning is the primary function of management. The chief
function of management is to attain the objectives of the
enterprise. For this, it is to plan not only in the beginning but
throughout the operations. Planning involves deciding a best
course of action from among a number of alternatives which
would help the enterprise to achieve its objectives most
expeditiously & economically.
Planning 1–4
 What is planning?
• Planning has as many definitions as management, be which
many authors gave to it. However, these definitions are mutually
supportive or complementary to each other. Several of the
definitions are:
• Determining specified objectives & how to accomplish them.
• The process by which managers set objectives, assess the future,
& develop courses of action to accomplish these objectives.
• The process of preparing for change coping with uncertainty by
formulation future courses of action.
• Planning is deciding in advance what to do, how to do it, when to
do it, and who is to do it.
Planning 1–5
 What is planning?
• Thus, it is clear from the various definitions given above that planning
involves two things.
• Determining the aims and objectives
• Selecting on the bases of past experience, present facts and circumstances
and future possibilities, the best course of action to realize the planning
objective.
• Planning involves selecting missions and objectives and the actions to
achieve the; it requires decision making, i.e., choosing future course of
action from among alter natives. Planning is determining in advance what is
to be accomplished and how it is to be accomplished.
• Because planning paves the way for all downstream management functions,
by serving as a bridge between the present & the future, it is regarded as the
primary function of management.
Planning 1–6
 2.2. Nature/Characteristics of Planning
• (i) The Primacy of planning The primacy of planning means that the
function of planning precedes all other managerial functions. Since the
other management functions are performed to facilitate the
achievement of goals that are set in facilitate the achievement of goals
that are set in planning process, planning logically precedes all other
managerial functions.
• Although in practice all the managerial functions inter-match as a
single system of action, planning is unique in that it establishes the
objective necessary for all group effort. And, of course, all the other
managerial functions must be planned if they are to be effective. That is, the
managerial functions are inseparable; especially, planning and controlling are often
referred as the Siamese twins. This is because, controlling, by definition, is the
comparison of actual performance with the planned. It is the planned performance,
which
Planning is controlled. 1–7
 ii) Pervasiveness of planning
• Planning is pervasive or universal in the sense that:
• (a) It is the function of all managers regardless of the level they
belong, the time spent on planning the significance, the characteristic,
etc.
• (b) Planning exists in all organizations regardless of their type and
size.
• iii) Contribution to purpose & objective
• This implies that the purpose of any plan and all its supportive & derivative plans is
to facilitate the accomplishment and the achievement of the purposes and the
objectives of the organization. Managerial planning seeks to achieve a consistent,
coordinated structure of operations focused on desired ends. Without planning,
actions much become merely random activity, producing nothing but chaos.

Planning 1–8
 iv) Planning is directed towards efficiency
• The efficiency of a plan is measured by its contribution to purpose
& objectives, offset by the costs and other unsought factors
required to formulate & operate it. Plans are efficient if they
achieve their purpose at reasonable costs, when cost is
measured not only in terms of time, money, or production but also
in the degree of individual & group satisfaction.
• v) It concerns future activity
• Since planning is deciding currently about the future, it involves
forecasting and decision making. The essence of planning is
looking ahead & is concerned with deciding in the present what is
to be done in the future.
Planning 1–9
 vi) It has dynamic aspects (it is flexible & continuous)
• A manager plans on the basis of some assumptions, which may
not come true in the future. Therefore, he had to go on revising,
modifying and adjusting plans in the light of the prevailing
realities/circumstances. Thus, planning is not only the primary
function of management, but it is also a continuous function of
management. Planning is flexible as it is based on future
conditions which are always dynamic.
• In sum, every business plan must have the following
characteristics: objectivity, futurity, flexibility, stability,
comprehensiveness, clarity & simplicity.

Planning 1–10
 2.3. Importance/purpose of planning
• i) To offset uncertainty Future is always full of uncertainties and
charges which make planning a necessity because planning foresees
the future and makes provisions for it thereby giving an added strength
to the organization for continuous growth and steady prosperity.
• ii) To focus attention on objectives Because, all planning efforts are
directed towards achieving enterprise objectives, the very act of
planning focuses attention on these objectives. Well considered overall
plans unify interdepartmental activities.
• iii) To gain economical operation Planning minimizes costs because
of its emphasis on efficient operation and consistency. It substitutes joint
directed effort for uncoordinated piecemeal activity, even flow of work
for uneven flow, and deliberate decisions for snap judgments.
Planning 1–11
 iv) To facilitate control
• Planning and controlling are inseparable, and commonly referred
to as the Siamese twins. This is because; unplanned action
cannot be controlled, for control involves keeping activities on
course by correcting deviations from plans. Any attempt to control
without a plan would be meaningless, since there is no way for
people whether they are going where they want to go (the task of
control), unless they first know where they want to go (the task of
planning), plans thus furnish the standards of control.
• Generally, a coordinated sense of action, managerial perspective,
improved decision making, increased efficiency, improve control &
performance are also benefits of planning.

Planning 1–12
 2.4. The Planning Process
1.Identifying and defining the real problem
2.Establish clear-cut objectives
3.Establishing the planning Premise
4.Identify Alternative Courses of Action
5.Evaluating Alternative Courses
6.Selecting a course of action /best Alternative
7.Formulating Derivative Plans
8.Budgeting
Planning 1–13
 2.5. Types of Plans
• Planning can be classified in different ways in different basis:
• 1. Duration /Time dimension/
• Some plans are in effect for short periods, whereas others stretch decades into the
future. An important component of any plan is the planning horizon: i.e., the length
of time the plan specifies for activities to be implemented / the time that elapses
between the formulation and the execution of a planned activity. Hence, there are
three planning horizons that can be identified for classifying plans.
• Short range plans: a plan for a year or less one year E.g. Annual plan of sales,
revenue, production material requirement, operating expenses budget, etc. are
short range plans.
• Intermediate range plans: plan between a year and five years. P5 years E.g.
Development of new products, modernization of facilities are considered as
intermediate range plan.
• Long range plans: Plan for five or more years. E.g. Long term leases on
production or ware house facilities
Planning 1–14
 2. Scope dimension
• Planning can be classified in to two based on the scope or breadth of
activities they represent.
• A. Strategic Plans
• These plans are comprehensive in scope & reflect long-term needs &
direction of the organization. Strategic plans/top management plans
include the development of overall company objectives. They are
primarily concerned with solving long-term problems associated with
external, environmental influences. They establish the mission of the
organization. Strategic planning is a process that involves the
assessment of market conditions, customer needs, competitive
strengths and weakness; sociopolitical, legal and economic conditions;
technological developments and the availability of resources that lead
to the specific opportunities or threats facing the organization
Planning 1–15
 Strategic plans include:- Mission/purpose, Objectives and Strategies
•• i) Mission Every kind of organized operation has or at least should have,
if it is to be meaningful purposes or missions.
•• In every social system, enterprises have a basic function or task which is
assigned to them by society – This is the mission of the organization
• E.g. the purpose of a business generally is the production & distribution of goods
and services.
• ii) Objectives/Goals
• The ends toward which activity is
•• Objectives are a desired future results
•• They represent not only the end of planning but the end toward which
organizing, staffing, leading and controlling are aimed.
•• While enterprise objectives are the basic plan of the film, a department may
also have its own objectives.

Planning 1–16
 2.6. Organizational Objectives
• The setting of organizational objectives begins with the definition
of mission. A mission is the organization's reason for existence. It
describes the organization's values, aspirations and reason for
being. A well-defined mission is the basis for development of all
subsequent objectives and plans. A mission statement - mission
in writing - is used to guide managers, work units, and individual
employees throughout the organization: For instance, "to become
the nation's most profitable producer of children's shoes.
• Once the organization's mission is articulated managers can
begin developing specific mission related objectives at every
managerial level to reflect the responsibilities applicable to each.

Planning 1–17
 What is an Objective?
• An objective is an end result upon which the existence of an
organization depends. It is the desired outcome organizations hope to
attain eventually. An objective provides a standard for the
measurement of success. An objective helps determine technologies
required and set the basis for specialization of effort, authority pattern,
communication and decision net- works and other structural
relationships.
• Managers are directly concerned with organizational objectives. Top
managers generally establish broad organizational objectives that help,
relate the organization to its environment. Managers, then, translate
these broad objectives into operational objectives and provide means
of control to measure the extent of accomplishment. They must
continually deal with goal conflicts and find a means of satisfying the
interests of many internal and external individuals and groups.
Planning 1–18
 Classification of Objectives
• Objectives may be classified as strategic, tactical and operational or long-term,
intermediate and short-term. These classifications are made based on the levels of
decision making authority and time the objectives cover.
 Hierarchy of Objectives
• Strategic Objectives
• Strategic objectives are broad statements describing where the
organization wants to be in the future. They pertain to the organization
as a whole rather than a specific department or division. They focus on
such issues as profitability, market positioning and managerial
performance and attitude and public responsibility.
• Example: - To achieve a 10% net profit
• - To improve market share 15-20% over next three years.
• The top-level management has the responsibility and authority to make
strategic objectives.
Planning 1–19
 Tactical Objectives
• Tactical objectives are set by the middle management level. These
objectives define the outcomes that major departments and divisions
must achieve in order for the organization to reach overall objectives.
For example, a company may have a tactical objective of
"communicating in writing with clients and customers via, newsletter
once a month." This tactical objective is one part of achieving the
strategic objective and of communicating effectively with clients and
employees.
• Operational Objectives
• Operational objectives are specified and measurable results expected
from departments, first-level managers, work groups and individuals
within an organization. Examples: -Setting daily, weekly and monthly
sales targets for each product category, Process 200 sales applications
each week, Reduce overtime by 10% next month.
Planning 1–20
 Time Frame Objectives
• Time frame objectives imply that an organization's
activities are guided by different objectives depending on
the duration of the action being planned.
• Long-term Objectives These objectives extend up to 5
years. They must be accomplished to ensure the long-
term survival of the organization.
• Intermediate Objectives These objectives cover a time
period between the short-term objectives and long-term
objectives- probably 1-3 years.
• Short-term Objectives These objectives can be
accomplished in less than a year.
Planning 1–21
 2.6.2. Characteristics of Sound Objectives
• Specific and Measurable
• Not all objectives can be expressed in numeric terms, but they
should be quantified when possible. Specific outcomes are easier
to focus on than general ones, and performance can be more
easily measurable when the task is defined.
• Example:
• Increasing profit by 5%
• Decreasing scrap by 1%
• Increasing average teacher effectiveness ratings from 3.5 to 3.7.

Planning 1–22
 Challenging but Realistic
• Objectives should be challenging but not unreasonably
difficult, i, e, objectives should be challenging but
attainable, given the resources and skills available. The
best objectives require people to search their abilities. On
the other hand, when objectives are unrealistic, they set
employees up for failure and lead to decreasing
employee morale causing demotivation. However, if
objectives are too easy, employees may not feel
motivated.

Planning 1–23
 Cover Key Result Areas
• Objectives cannot be set for every aspect of employee
behavior or organizational performance; if they were, their
sheer number would render them meaningless. Instead,
managers should identify a few key result areas. Key result
areas are those activities that contribute most to company
performance.
• Example: focus on key results-sales, profits, production, or
quality-that affect overall performance.

Planning 1–24
 Defined Time Period:
• Objectives should specify the time period over which they
will be achieved. A time period is a deadline specifying
the date on which objective attainment will be measured.
The period should be realistic and productive. Short-term
objectives should complement long-term objectives. For
example a strategic sales objective could be established
on a three-year time horizon with a 100, 000 targets in
year one, 150,000 in year two and 200,000 in year three.

Planning 1–25
 Linked to Reward
• The ultimate impact of objectives depends on the extent
to which salary increases, promotions and awards are on
objective achievement. People who attain goals should
be rewarded. Rewards given meaning and significance to
objectives and help commit employees to achieve
objectives. However, attainment of objectives may fail
due to variables outside of the control of the employees.
Still reward may be appropriate if the employee partially
achieved objectives under difficult circumstances.

Planning 1–26
 2.6.3. Management by Objectives (MBO)
• Management by objectives was first popularized by management
expert Peter Drucker. MBO addresses the need to involve managers at
all levels in the goals setting process. MBO may be defined as a
process whereby the superior and the subordinate managers jointly
establish objectives, define areas of responsibility in terms of expected
results, and use these measures as guides for operating the unit and
assessing the contribution of each member of the organization. The
essence of MBO is the practice of goal setting at every level of
management. MBO, programs are designed to improve employees’
motivation through their participation in setting their objectives and
knowing in advance precisely how they will be evaluated. MBO usually
results in employees more committed to the achievement of the
objectives than they may be if they were not involved in setting them.
Planning 1–27
 2.6.3. Management by Objectives (MBO)
• While employees are working toward the accomplishment of their
objectives, managers (supervisors) should hold periodic review
sessions. A supervisor may authorize modifications to the
objectives or their timetables as circumstance dictate. At the end
of agreed time period, the manager and subordinate hold a final
review session to evaluate the results and repeat the process.
The subordinate is evaluated on the basis of whether the
objectives were accomplished, how effectively and efficiently they
were achieved and what was learned in the process. Rewards
are usually linked to each of these elements.

Planning 1–28
 Steeps in MBO Process
• Since MBO is a method whereby managers and employees define
goals for every department, project, and person and use them to
monitor subsequent performance, it involves the following steps:
• 1. Setting goals
• A goal that should be concrete, realistic that provides a specific
target and time frame and assign responsibility.
• Goals that can be quantitative – described in numerical terms or
qualitative expressed with the use of statements.
• 2. Developing action plans
• An action plan defines the course of action and resources needed
to achieve the stated goals. An action plan is a detailed plan made for
both departments and individuals.
Planning 1–29
 3. Reviewing progress
• A periodic progress review is important to insure those
action plans are working. This review can occur informally
between managers and subordinates, where the organization
may wish to conduct three, six or nine month's review during a
year. This periodic review allows managers and employees to
see whether they are on target or whether corrective action is
necessary.
• 4. Appraising overall performance
• Careful evaluation should be made to see whether annual goals
have been achieved for both departments and individuals.
Success or failure to achieve goals can become part of the
performance appraisal system and the designation of salary
increases and other rewards. The specific application of MBO
must fit the needs of each company.
Planning 1–30
 benefit of MBO
• The benefit of MBO is the linking of objective setting with
individual motivation. Since the employee participates in
own goals setting there is commitment to them.
Improved morale may also result regular face-to-face
communications between subordinates and superiors.
Furthermore, appraisal is more objective since
subordinates are evaluated on the extent to which their
goals have been met. It forces think for results.

Planning 1–31
 Problems with MBO
• MBO may fail due to one or more of the following problems.
1. Lack of adequate resources: It has to be made sure that a person who is held
responsible for results has access to the resources needed to achieve them.
2. Since every manager at every level runs his/her own objectives, there may not be
support and involvement by top management.
3. Lack of optimal coordination - because everyone strive for the attainment of his/her own
unit goals.
4. Over emphasis on appraisal.
5. Over emphasis of paper work.
6. Failure to teach the philosophy of MBO.
7. Failure to give guidelines to goal setters.
8. Difficulty of setting verifiable goals.
9. Emphasis on short-term objectives strategic goals may be displaced by operational
goals.
10. Constant change prevents MBO from taking hold.

Planning 1–32
 iii) Strategies:
• Derived from Greek word ‘strategos’, meaning 'general'
• General programs of action and deployment of resources to
attain comprehensive objectives
• The program of objectives of an organization and their
changes, resources used to attain these objectives, and
policies governing the acquisition, use, and disposition of
these resources and
• The determination of the basic long-term objectives of an
enterprise and the adoption of courses of action and allocation
of resources necessary to achieve these goals

Planning 1–33
 Strategies
• Generally, it is concerned with the direction in which human and
material resources which human and material resources will be
applied in order to increase the chance of achieving selected
objectives.
• It is the choice of the means by which the enterprise's forces may
be employed most effectively in order to accomplish its intended
goal.
• Strategy indicates the pattern of the organizations response to its
environment overtime; i.e., strategy links the human and material
resources of an organization on one hand, with the challenges &
risks posed by the outside world on the other.
Planning 1–34
 B. Operational /Tactical plans
• These are plans used to implement strategic plans. These plans are more
limited in scope & address those activities & resources required to implement
strategic plans.
• These tactical plans deal more with the allocation of resources & scheduling
of actual work activities than with the selection of strategies.
• I. Use dimension
• Based on their use dimension these plans can be classified in to
• (i) Single use plans (ii) Standing plans
• Standing Plans: are used to guide activities that occur over a period of time.
These are plans that are designed to be used again and again.
• Standing plans exist in the form of
• a) Policies
• b) Procedures/ Standard operating procedures
• c) Rules & Regulations
Planning 1–35
 a) Policies
• These are standing plans in that they are general statements or
understandings which guide or channel thinking in decision
making.
• Policies define an area with in which a decision is to be made and
ensure that the decision will be consistent with, and contribute to,
an objective.
• They allow some discretion / freedom
• Policies help decide issues before they become problems. E.g.
hiring policy- "All employees of the organizations must have a
college degree/diploma, Purchasing policy

Planning 1–36
 b) Procedures
• Are standing plans that establish a required method of handling future activities?
• They are guides to action rather than thinking
• Are plans that describe a series of action to be taken in a given situation
• Their essence is chronological sequence for a required action.
• Companies have hundreds of procedures for example, telling how to perform a
job.
• E.g. many companies have a policy of a least partially reimbursing their
employees for educational expenses. When this occurs the employee will have to
follow a set procedure in order to be reimbursed.
 He/she may have to fill a form
 attach a copy of his/her grades
 take both documents to personnel for processing
 Wait for the check in the mail.

Planning 1–37
 c) Rules and Regulations
• Are plans that describe exactly how one particular situation is to be handled?
• are statements of actions that must be taken or not taken
• rules are must restricting device
• There is no room for flexibility
• E.g. No smoking at an employee's desk or all employees must be at their desks at
8:00 A.M. in the morning.

Where policies and procedures provide guidelines for decision making, rules &
regulations are statements that designate specific required action. Rules and
regulations are the most explicit and specific forms of & standing plan
procedures are different from rules & regulations in that they designate specific
steps one is to perform in a situation. Policies provide a room for discretion for
our decision but rules do not allow any discretion in their application.
Planning 1–38
 Single Use Plans
• Single Use Plans: are plans that are used once, and
then discarded. This type of plans is designed to meet the
needs of a unique or single situation; such as for special
project or task. These plans are formulated to achieve a
specific goal & usually within a shorter period of time.
Non- repetitive unique situations call for the formulation of
single use plans. They are also called one-time plans.
Under these plans, we have
Program (project)
Budget
Planning 1–39
 A. Program:
• Programs are a complex of goals, policies, procedures,
rules, task assignments, steps to be taken, resources to
be employed and other elements necessary to carry out a
given course of action; they are ordinarily supported by
budgets.
• A program is a comprehensive plan that includes future
use of different resources in an integrated pattern and
establishes a sequence of required actions, time
schedules for each in order to achieve stated objectives.

Planning 1–40
 B. Budgets:
• Budgets are statements of expected results or resources set aside for
specific activities expressed in numerical or quantitative terms.
They are primary devices to control an organization activity and are
thus important components of programs and projects.
It is referred to as a "Numberized" plan /program
It is a single use plan that specifics allocation of financial resources
required to support specific activities within a given time period.
Budgets are important devices for controlling activities by setting
limits on the amount of expenditures.
A budget may be expressed either in financial terms or in terms of
labor hrs., units of products, machine hours, in any other numerically
measurable term.
Planning 1–41
 ……end of chapter 2….
Questions or comments

Planning 1–42