UNIT III

FUNCTIONS OF MANAGEMENT : Planning & Organizing

Desired Learning Outcomes

By the end of the unit, the students must have:
1. Defined the stages of strategic planning; and
2. Applied the hierarchy of plans and competitive strategies.
3. Designed and created a formal organization.

The Nature of Planning

There are many instances when managers are overwhelmed by various activities
which at times becloud his judgement. This must be expected since anybody who is
confronted by several situations happening simultaneously will lose sight of the more
important concerns. To minimize mistakes in decision-making, planning is undertaken.
A plan, which is the output of planning, provides a methodological way of achieving
desired results. In the implementation of activities, the plan serves as a useful guide. Without
the plan, some minor tasks may be afforded major attention which may, later on, hinder the
accomplishment of objectives.

Planning Defined
According to Nickels and others, planning refers to the management function that
involves anticipating future trends and determining the best strategies and tactics to achieve
organizational objectives. On the other hand, Aldag and Stearns defined planning as the
selection and sequential ordering of tasks required to achieve an organizational goal.
Moreover, the definition of Cole and Hamilton provides a better guide on how to effectively
perform this vital activity, according to them, planning is deciding what will be done, who will
do it, where, when and how it will be done, and the standards to which it will be done.
Planning function has four different dimensions, namely:
1. Planning is Philosophy – Looking ahead is a way of thinking, a concern about the
future effects today’s action. Planning involves a state of mind that recognizes the need for
orderliness and the value of direction. Individual planners may sway between optimism and
pessimism, but they dare not stray too far from reality.
2. Planning is Integration – Both long- and short-range plans provides a unified
structure to give purpose to the organizational units involved. Broader plans consider the
client, the supplier and other peripheral contact of the company.
3. Planning is a Process - Goals and objectives are the most obvious consequence
of the planning process. A loose objective of survival or of making profit is a poor guideline
clearly inadequate for steering an enterprise. A winning plan includes : the strategy that
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defines how much has to be done to achieve the objectives, the sequence of events that
satisfies those strategies, and the assignment that lead to the accomplishment of the events.
4. Planning is a Collection of Procedures - All companies make plans ahead to some
extent and apply their own methods of doing so. In small company, one person may do it all,
but larger companies have standard procedures for formulating and carrying out plans.

Planning at Various Management Levels

It will be useful for engineer managers to know some aspects of planning undertaken
at the different management levels. Planning activities undertaken at various levels are as
follows:
1. Top Management Level – Strategic planning
2. Middle Management Level – Intermediate planning
3. Lower Management Level – Operational planning

Strategic Planning – it refers to the process of determining the major goals of the
organization and the policies and strategies for obtaining and using resources to achieve
those goals. The whole company is considered, specifically its objective and the current
resources. The output of strategic planning is the strategic plan which spells out “the decision
about long-range goals and the course of action to achieve these goals”.
Intermediate Planning – it refers to the process of determining the contributions that
sub-units can make with allocated resources. The goals of the sub-unit are determined, and
a plan is prepared to provide a guide to the realization of the goals. The intermediate plan is
designed to support the strategic plan.
Operational Planning – it refers to the process of determining how specific tasks can
best the accomplished on time with available resources. It must be performed in support of
the strategic plan and the intermediate plan.

The Planning Process

The process of planning consists of various steps depending on the management
level that performs the planning task. Generally, planning involves the following:
1. Setting organizational, divisional, unit goals – the first tasks of the engineer
manager is to provide a sense of direction to his firm (if he is the chief executive), to his
division (if he heads a division), or to his unit (if he is a supervisor). The setting of goals
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provides an answer to the said concern. If everybody in the firm is aware of the goals, there
is a big chance that everybody will contribute his share in the realization of such goals.
2. Developing strategies or tactics to reach those goals – the next task is to devise
some means to realize them. The ways to realize the goals are called strategies and this will
be the concern of top management. The middle and lower management will adapt their own
tactics their plans. A tactic is a short-term action taken by management to adjust to negative
internal or external influences. They are formulated and implemented in support of the firm’s
strategies. The decision about short-term goals and the courses of action are indicated in
the tactical plan.
3. Determining the resources needed – when sets of strategies or tactics have been
devised, the engineer manager will, then, determine the human and non-human resources
required by such strategies or tactics. Even if the resource requirements are currently
available, they must be specified.
4. Setting standards – the standards for measuring performance may be set at the
planning stage. When actual performance does not match with the planned performance,
corrections may be made, or reinforcements given. A standard may be defined as a
quantitative or qualitative measuring device designed to help monitor the performances of
people, capital goods, or processes.

Types of Plans
Plans are of different types. They may be classified in terms of functional areas, time
horizon, and frequency of use.

Functional Area Plans – Plans may be prepared according to the needs of the different
functional areas. Among the types of functional area plans are the following:
1. Marketing Plan – this is a written document or blueprint for implementing
and controlling an organization’s marketing activities related to a particular marketing
strategy. The structure and content of marketing plans vary depending on the nature of the
organizations adapting them. William Cohen maintains that the following must be included
in the marketing plan:
a. The Executive Summary – which presents an overall view of the marketing
project and its potential.
b. Table of Contents
c. Situational Analysis and Target Market
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d. Marketing Objectives and Goals

e. Marketing Strategies
f. Marketing Tactics
g. Schedules and Budgets
h. Financial Data and Control
2. Production Plan – this is a written document that states the quantity of output
a company must produce in broad terms and by product family. The production plan must
contain the following:
a. The amount of capacity the company must have
b. How many employees are required
c. How much material must be purchased
3. Financial Plan – it is a document that summarizes the current financial
situation of the firm, analyzes financial needs, and recommends a direction for financial
activities. The components of financial plan are as follows:
a. An analysis of the firm’s current financial condition as indicated by an
analysis of the most recent statements
b. A sales forecast
c. The capital budget
d. The cash budget
e. A set of pro forma (or projected) financial statements
f. The external financing plan
4. Human Resource Management Plan – it is a document that indicates the
human resource needs of a company detailed in terms of quantity and quality and based on
the requirements of the company’s strategic plan. The human resources plan must contain
the following:
a. Personnel requirements of the company
b. Plans for recruitment and selection
c. Training plan
d. Retirement plan
Plans With Time Horizon – consists of the following:
1. Short-range Plans – these are plans intended to cover a period of less than
one year. First line supervisors are mostly concerned with these plans.
2. Long-range Plans – these are plans covering a time span of more than one
year. These are mostly undertaken by middle or top management.
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Plans According to Frequency of Use – may be classified as:

1. Standing Plans – these are plans that are used again and again and they
focus on managerial situations that recur repeatedly. Standing plans may be further classified
as follows:
a. Policies- they are broad guidelines to aid managers at every level in making
decisions about recurring situations of function.
b. Procedures – they are plans that describe the exact series of actions to be
taken in each situation.
c. Rules – they are statements that either require or forbid a certain action.

2. Single- Use Plans – these plans are specifically developed to implement

courses of action that are relatively unique and are unlikely to be repeated. Single-use plans
may be further classified as follows:
a. Budgets – according to Weston and Brigham, it is a plan which sets forth the
projected expenditure for a certain activity and explains where the required funds will come
from.
b. Programs – it is a single-use plan designed to coordinate a large set of
activities.
c. Projects – it is usually more limited in scope than a program and is
sometimes prepared to support a program.

Making Planning Effective

Planning may be made successful if the following are observed:
1. Recognize the planning barriers, such as:
a. Manager’s inability to plan
b. Improper planning process
c. Lack of commitment to the planning process
d. Improper information
e. Focusing on the present at the expense of the future
f. Too much reliance on the planning department
g. Concentrating on the controllable variables only
2. Use of aids to planning, such as:
a. Gather as much information as possible
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b. Develop multiple sources of information

c. Involve others in the planning process

Organizing Defined
It refers to the structuring of resources and activities to accomplish objectives in an
efficient and effective manner. In effective organizing, steps are undertaken to breakdown
the total job into more manageable man-size jobs. Doing these will make it possible to assign
particular tasks to particular reasons. In turn, these will help facilitate the assignment and
authority, responsibility and accountability for certain functions and tasks.

The Purpose of the Structure

The structure serves some very useful purposes, such as:
1. It defines the relationship between tasks and authority for individuals and
departments.
2. It defines formal reporting relationships, the number of levels in the hierarchy of the
organization, and the span of control.
3. It defines the groupings of individuals into departments and departments into
organizations.
4. It defines the system to effect, coordination of effort in both vertical (authority) and
horizontal (tasks) directions.

When structuring of organization, the engineer manager must be concerned with the
following:
1. Division of Labor - determining the scope of work and how it is combined in a job.
2. Delegation of Authority - the process of assigning various degrees of decision-
making authority to subordinates.
3. Departmentalization - the grouping of related jobs, activities, or processes into major
organizational sub-units.
4. Span of Control - the number of people who report directly to a given manager.
5. Coordination - the linking of activities in the organization that serves to achieve a
common goal or objective.
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The Formal Organization

It is the structure that details lines of responsibilities, authority, and position. It is a
planned structure and it represents the deliberate attempt to establish patterned
relationships among components that will meet the objectives effectively.
The formal structure is described by management through:
1. Organization Chart - is a diagram of the organization’s official positions and formal
lines of authority
2. Organization Manual - provides written descriptions of authority relationships, details
the functions of major organizational units, and describes job procedures.
3. Policy Manuals - it describes personnel activities and company policies.

Informal Groups
There are instances when members of an organization spontaneously form a group
with friendship as a principal reason for belonging. This group is called an informal group. It
is not a part of the formal organization and it does not have a formal performance purpose.
Informal groups are oftentimes very useful in the accomplishment of major tasks,
especially if these tasks conform with the expectations of the members of the informal
group.

Types of Organizational Structures

Before the commencement of activities, the decision-makers in an organization will
have to decide on what structure to adapt. Depending on the size and type of operations, a
certain structural type may best fit the requirements.
Organizations may be classified into three types, such as:
1. Functional Organization – this is a form of departmentalization in which everyone
engage in one functional activity, such as engineering or marketing, is grouped into one unit.
2. Product or Market Organization – this refers to the organization of a company by
divisions that brings together all those involved with a certain type of product or customer.
3. Matrix Organization – an organizational structure in which each employee reports
to both a functional or division manager and to a project or group manager.
The different types of organizations has their own distinct advantages and
disadvantages.
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Types of Authority
The delegation of authority is a requisite for effective organizing. It consists of three
types:
1. Line Authority – a manager’s right to tell subordinates what to do and then see that
they do it. Line departments perform tasks that reflect the organization’s primary goal and
mission.
2. Staff Authority – a staff specialist’s right to give advice to a superior. Staff
departments include all those that provide specialized skills in support of line departments.
Staff officers may be classified into the following:
a. Personal Staff – those individuals assigned to a specific manager to provide
needed staff services.
b. Specialized Staff – those individuals providing needed staff services for the
whole organization.
3. Functional Authority – a specialist’s right to oversee lower-level personnel involved
in the specialty, regardless of where the personnel are in the organization. This authority is
given to most budget officers of organizations, as well as other officers.

The Purpose of Committees

When certain formal groups are deemed inappropriate to meet expectations,
committees are often-times harnessed to achieve organizational goals. Committees are very
useful most especially to engineering and manufacturing firms. When a certain concern, like
product development, is under consideration, a committee is usually formed to provide the
necessary line-up of expertise needed to achieve certain objectives.
Committees may be classified as follows:
1. Ad hoc committee – one created for a short-term purpose and have a limited life.
2. Standing committee – it is a relatively permanent committee that deals with issues
on an on-going basis.
In short, committees are used as a supplement to the existing formal organization.

References:
Chang, C.M. (2005). Engineering Management: Challenges in the New Millenium. Upper Saddle River, New Jersey:
Pearson PrenAce Hall. (TA190.C52 2005 CIRC)
Riggs, J.L. et.Al. (1980). Industrial Organiza9on and Management (6th ed.). McGraw-Hill Co. Inc. (HD31.I548 1979 CIRC)
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RESEARCH WORK 03
1. What is meant by company mission?
2. What are the specific activities that should be done in your company so that your
services will be delivered efficiently?
3. What is a Gantt Chart?
4. Interview a general manager of an industry same as your company. Inquire about
the planning activities undertaken by the firm.

WORKSHOP 03 – Planning & Organizing

1. Delegation of authority is the key to effective management. Hence, the manager
of the group will assign his/her members to various management levels in planning. Decide
what type of organizational structure that you want to adapt, then illustrate your chart.
2. The head of each management level will create the planning & organizing
activities that must be undertaken in their level by following the planning process.
3. From item no. 2 on Research Work 02, create a Gantt chart that will forecast the
logical sequence of activities in a limited time framework.