Chapter Two

2. Planning
2.1. INTRODUCTION

Definition: planning is refers to the determination of specified objective and how to

accomplish them.

Planning involves determination of objective formulation of programs and courses of

action for their attainment. Development of schedules and timing of action, and
assignment of responsible for their implementation.

Planning answer six basic question in regard to any intended activity- what when,
where, who how and how much.

2.2. Nature and Importance of planning

2.2.1. Nature of Planning

1. The primacy of planning: the primacy of planning means that the function of
planning precedes all other managerial function. Since the other management
functions are performed to facilitate the achievement of goals that are set in
planning process, planning logically precedes all other managerial functions.

Although in practice all other managerial function interact as a single system of

action, planning is unique in that is establishes that 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 to as the Siamese twins. This is b/c
controlling by definition is the comparison of actual performance with the planning
performance, which is controlled.

2. Pervasiveness of Planning: Planning is pervasive /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 characteristics etc.

B. Planning exists in all organizations regardless of their type and size.

3. Plans are arranged in a Hierarchy: plans are first set for the entire
organization called the corporate plan. The corporate plan provides the framework
for the formulation of divisional, departmental, and sectional goals. Each of these
organizational components sets its plan laying down the programs. Projects,
budgets, resources requirements, etc. the plans of each lower component are
aggregated in to the plans of successively higher component until the corporate
plan integrates all component plans in to a composite whole.

4. Contribution to purpose and Objective: This implies that the purpose of any
plan and all its supportive and derivatives plans is to facilitate the accomplishment
and the achievement of the purposes and the objectives of the organization.
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Managerial planning seeks to achieve a consistent coordinated structure of
operations focused on desired ends. Whiteout planning actions become merely
random activity producing nothing but chaos.

5. Planning is Directed towards Efficiency: the efficiency of a plan is measured

by its contribution to purpose and objectives, offset by the costs and other unsought
factors required formulate and operate it plans are efficient if they achieve their
purpose at a reasonable cost, when cost measured not only in terms of time, money,
or production but also in the degree of individual and group satisfaction.

6. 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 and is concerned with deciding in the present what is to be done in
the future.

7. It has Dynamic Aspects (it is flexible and continuous): A manager plan 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 primarily function of
management it is also a continuous function of management. Planning is flexible as
it is based on future conditions that are always dynamic.

2.2.2. Importance /Purpose of Planning

I. Minimizing Risk and Uncertainty: by providing a more rational, fact based

procedure for making decision, planning allows managers and organizations to
minimizing risk and uncertainty.

II. Leads to Success: Planning does not guarantee success, but studies have
shown, often things being equal, companies which plan not only outperform the non-
planners but also out perform their own past results.

III. Focuses Attention on the Organization’s Goals: Planning helps the

managers to focus attention on the organization’s goals and activities. Well-
considered overall plans unify interdepartmental activities.

IV. Facilitates Control: in planning the manager gets goals and develops plans to
accomplish these goals. These goals and plans then become standards or bench
marks against which performance can be measured. The function of control is to
insure that the activities conform to the plans. Thus, controls can be exercised only
if there are plans.

2.3. TYPE OF PLAN

Plans can be classified on different basis or dimensions. The following are the
importance once.

 Repetitiveness
 Time dimension, and
 Scope/ breadth dimension.

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2.3.1. Classifications of plans based on Repetitiveness.

Based on repetitiveness plans can be classified in to two as:

I. Standing and
II. Single use
I. Standing Plans: standing plans are those plans that can be used again
and again. They are plans that are followed each time a given situation is
encountered. Standing plans include mission/ purpose, goal/objective,
strategy, policy, method and rule.
A. Mission /purpose: Identifies the basic function or task of an enterprise or
agency or any party of it. Example: the purpose of Jijiga University is teaching
and research.
B. Objective or goals: the ends, to ward which activity is aimed. They represent
not only the end point of planning but also the end to ward which organizing,
staffing, leading/directing and controlling are aimed.
C. Strategies: strategies are ways and means to achieve the established
objectives strategies are the major courses of action that the organization
plans to take in order to achieve objectives. Every objective must have at least
one strategy
D. Policies: policies also are plans in that they are general statements or
understanding the guide or channel thinking in decision making. Policies
define an area with in which a decision is to made and ensure that the
decision will be consistent with and contribute to an objective.
Example: - policies of hiring only university trained engineers
- Promoting from within (the organization).
E. Procedures: procedures show the sequence of activities. They are
chronological sequences of required actions. They are guides to action, rather
than thinking, and they detail the exact manner in which certain activities
must be accomplished procedures help in the implementation of policies.
Example: telling how to perform a job
F. Methods: a method is even more detailed. Whereas a procedure shows a
series of steps to be taken, a method is only concerned with the single
operation, with one particular step and it tells exactly how this particular step
is to be performed.
Example: how venders (suppliers) are selected.
G. Rules: rules spell out specific required actions, or non-action, allowing no
discretion. They are usually the simplest type of plan.
Example: no smoking
 The essence of a rule is that it reflects a managerial decision that some
certain action must o-or must-not be taken
II. Single use plans: single use plans are those plans that are not used up
once the objective is accomplished. They are used only once and not over
and over again. Single use plans include programs, projects and budgets.
A. Programs: programs are complex goals, policies, procedures, rules, task,
assignments, steps to be taken recourse to be employed and other elements
necessary to carry out a given course of action; they are ordinarily supported
by budgets.
Example: the expansion program of a hospital.
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 B. Budgets: A budget is a statement of expected results expressed in numerical
terms. It may be referred as “Rubberized program”. In fact. The financial
operating budget is often called a “profit plan”. Budget is a fundamental
planning instrument in many companies. A budget force a company to make
in advance whether for a week or for 5 years – a numerical compilation of
expected cash flow, expenses and revenues, capital out lays, or labor, or
machine hour utilization. The budget is necessary for control but it cannot
serve as a sensible standard of control unless it reflects plans. There are three
types plans:
i. Variable or flexible budget: budgets that vary according to the
organization’s level of output.
ii. Program budget: in this the organization and each department within the
organization identify goals, develop detailed programs to meet the goals,
and estimate the cost of each program.
iii. Zero-based budget: here a manager thinks of the goals and the
programs needed to achieve them as a “ work package, “as though the
programs were started from scratch, or “base zero
C. Project: considered a part of a general program a part that can be planned
and fulfilled as a distinct project itself. Although intrinsically connected with a
major program a project can be handled by itself.

2.3. 2 Classification of plane based on time

 Long range planning

 Short range planning
 Intermediate -Range planning

I. Long –Range planning: has longer time horizontal usually range from 5 -10
years

II. Short Range Planning: they consistent the steps towards the time
implementation of long range plans the years is generally ( 1) year but sometimes it
can go to (2) years

III. Intermediate -Range planning: range between long and short range planning

2.4 Classification of planning based on scope or Breath

Based on their scoop or breadth plans can be classified in to three categories as

I. Strategic planning

II .Tactical planning and

III. Operation planning

I. Strategic Planning strategic planning is the process of analyzing and deciding

on the organization mission’s objective major course of action (strategy and major
threats and opportunities and internal strength and weaknesses

Strategic planning is:

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  Performed by top level mangers
 Mostly long range in its time frame
 Expressed in relatively general nonspecific terms
 A types of planning that provides general direction to the organization

II .Tactical planning Tactical planning: refer to the process of developing action

plans though which strategies are stringiest are executed.

Departmental management in organization are often involved in tactical planning

Example: of tactical planning is

 Developing annual budget for each department, division project

 Choosing specific means of importance strategic planning
 Deciding course on course of action for improving current operation

III. Operational planning operational planning is more specific and detail it is

made at the operational level and is concerned with the day to day week to week
activities of the organization it is mainly of short range and more specific and
detailed

Example: production schedule sales plans lesson plane

2.4.1. A Hierarchy of Objective

Objective form a hierarchy ranging from the broad aim to specific individual
objective

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Figure 3.1 relationships of objectives and the organizational hierarchy

Purpose of mission board of

directors

C Over all objectives top level

managers

D More specific overall objective

Division objective

Middle level manager

Departmental and unit objective

Individual objective First level mange

1. Letter A indicates the highest peak point i.e. the Scio-economic purpose of
society such as requiring the organization to contribute to the welfare of the
people by providing goods and services at a reasonable cost
2. Letter B indicates that purpose of the business which might be to provide
convenient low cost transportation for the average person. At any rate, these
aims are in turn translated in to general overall objectives and strategies (letter
C)
3. Letter D indicates that, over all objective which are more specific such as those
in key areas. These are the areas in which performance is essential for the
success of the enterprise. Example: to obtain a 10% return on investment by the
end of the calendar year 2001; and other example regarding Jijiga University is-to
increase the number of fresh student who join the university by30% by the first
calendar year of 2002.
Note: The objectives have to be further translated in to division, department,
and unit objectives down to the lowest level of the organization.
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Although individual objectives. Consisting of performance and development of goals,
are shown at the bottom of the hierarchy. Manager at higher levels also should set
objectives for their own performance and development.

Approaches of Determining Objectives

1. The Top-Down Approach: upper level managers determine the objectives

for subordinates.
2. The Bottom-Up Approach: subordinates initiate the setting of objectives for
their position and present them to superiors.

Note:- choosing from the two approaches depends on the situation including
such factors as the size of the organization, the organizational culture, the
preferred leadership style of the executive and the urgency of the plan.

II.4.2. A Net Work of

Objectives
Bothe objectives and planning programs form a network of desired results and
events.

Managers must make sure that the components of the network “fit one another”.
Fitting is a matter not only having the various programs carried out but also of
timing their completion, since undertaking one programs often depend on first
completing another. If goals are not interconnected and if they do not support
one another, people very often pursue paths that may seem good for their own
department but may damage the company as a whole.

II.4.3. Multiplicity of
Objectives

At every level in the hierarchy of objectives, goals are likely to be multiple. At the
same time, manager might pursue simultaneously as many as ten or fifteen
significant objectives. However it would be wise to state the relative importance
of each objective. At any rate, the number depends on how much the managers
will do them selves and how much they can assign to subordinates, there by
limiting their role to one of assigning, supervising, and controlling.

II.5.THE PLANNING PROCESS (STEPS IN PLANNING)

The process of planning indicates the major steps that are taken in planning.
Generally there are ten (10) steps in the process.

A. Understanding the Existing Situation

The awareness of the external environment in terms of its opportunities and
threats to the organization as well as understanding the internal environment
(possibility of identifying the strengths weaknesses of the organization)
B. Forecasting
The manager can only plan against an established background of estimated
future facts. Thus, although the future is full of uncertainties, the manager

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 must make certain assumptions about it in order to plan properly. These
assumptions are based on forecasts of the future.
C. Establishing Objectives
The next step in planning is establishing of objectives for the entire
organization (enterprise) and for each subordinate work unit. This is to be
done for the long-term as well as for the short-range.
D. Determining Alternative Course of Action
Searching for and examining alternative courses of action. In this step the
most problem is not finding alternatives but reducing the number of
alternatives so that the most.
E. Evaluating Alternatives Course of Action
After seeking out alternative courses and examining their strong and weak
point, the next step is to evaluate the alternatives by weighting them in light
of premises and goals. There are so many alternative courses in most
situations and many variables and limitations to be considered that evaluation
can be exceeding difficult.
F. Selecting a Course of Action
This is the point at which the plan is adopted the real point of decision making.
Occasionally, an analysis and evaluation of alternative courses will disclose
that two or more are advisable, and the manager may decide the follow
several courses rather than the one best course.
G. Formulating Derivative plans
When a decision is made, planning is seldom complete, and a seventh step is
indicated. Derivative plans are almost invariably required to support the basic
plan.
H. Number zing plans by Budgeting
Each department or program of a business or some of other enterprise can
have its own budgets, usually of expenses and capital expenditures, which tie
into the overall budget. If done well, budget become a means of adding
together the various plans and also set important standards against which
planning progress can be measured.
I. Implementing the Plan
After the optimum alternative has been selected, the manager needs to
develop an action plan to implement it.
J. Controlling and Evaluating the Results.
Once the plan is implemented, the manager must monitor the progress that is
being made evaluate the reported results, and make any modifications
necessary.

2.6. PRINCIPLES OF PLANNING

Planning depends on the production technology, human, financial and physical

resources work environment of the organization and is environment forces.
Nevertheless, certain principles underlie sound planning. These principles are:

i. Principles of contribution to Objectives: the soundness of plans

depends on the existent to which they contribute to the efficient and
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 effective achievement of corporate objectives. Objectives are the basic
criteria underlying the formulation of plans, and also for evaluating the
result of operating plans.
ii. Principle of Sound and Consistent Premising: plans are made on the
bases of premises (assumption regarding the environment) about the
future and their soundness depends on the accuracy of these premises.
iii. Principles of limiting Factors: The limiting factors are those elements in
a company’s internal (Eg. Government policy of price regulation,
competitive action, etc) situation, which should be removed or modified if
plans are to be formulated for the achievement of its objectives.
iv. Principle of Commitment: This principle relates to the time period of
planning and provides the criterion for the period to be covered by the long
range plans. According to this principle, the planning period should
encompass the period during which the resources expended on the
implementation of plans are fully recovered.
v. Principle of Coordinated Effort: This principle advocates that all the
plans of the company should be coordinated with one another so as to
produce an integrated plan. Thus, short and long-range plans should be
coordinated with one another.
vi. Principle of Timing: since corporate plans consist of a number of major
and derivative plans, it is important that all these plans should be
synchronized as to the timing of the implementation. All the plans be
arranged in a time of hierarchy, and the timing of initiation and completion
of each derived plan should be determine, and form part of the total plan.