Unit 3

Planning
A plan is a forecast for accomplishment. It is a predetermined course of action. It is today’s
projection for tomorrow’s activity. In other words, to plan is to produce a scheme for future
action, to bring about specified results at a specified cost, in a specified period of time.

Management thinkers have defined the term, basically, in two ways:

1. Based on futurity:
“Planning is a trap laid down to capture the future” (Allen).
“Planning is deciding in advance what is to be done in future” (Koontz).
“Planning is informed anticipation of future” (Haimann).
“Planning is ‘anticipatory’ decision-making” (R.L. Ackoff).
2. As a thinking function:
“Planning is a thinking process, an organized foresight, a vision based on fact and
experience that is required for intelligent action” (Alford and Beatty)
“Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.”
– Koontz and O’Donnell
 Importance of Planning
1. To manage by objectives: All the activities of an organisation are designed to achieve
certain specified objectives. However, planning makes the objectives more concrete by
focusing attention on them.
2. To offset uncertainty and change: Future is always full of uncertainties and changes.
Planning foresees the future and makes the necessary provisions for it.
3. To secure economy in operation: Planning involves, the selection of most profitable course
of action that would lead to the best result at the minimum costs.
4. To help in co-ordination: Co-ordination is, indeed, the essence of management, the
planning is the base of it. Without planning it is not possible to co-ordinate the different
activities of an organization.
5. To make control effective: The controlling function of management relates to the
comparison of the planned performance with the actual performance. In the absence of
plans, a management will have no standards for controlling other's performance.
6. To increase organizational effectiveness: Mere efficiency in the organization is not
important; it should also lead to productivity and effectiveness. Planning enables the
manager to measure the organizational effectiveness in the context of the stated objectives
and take further actions in this direction.
 Advantages of Planning

1. All efforts are directed towards desired objectives or results. Unproductive work and
waste of resources can be minimized.
2. Planning enables a company to remain competitive with other rivals in the industry.
3. Through careful planning, crisis can be anticipated, and mistakes or delays avoided.
4. Planning can point out the need for future change and the enterprise can manage the
change effectively.
5. Planning enables the systematic and thorough investigation of alternative methods or
alternative solutions to a problem. Thus, we can select the best alternative to solve any
business problem.
6. Planning maximizes the utilization of available resources and ensures optimum
productivity and profits.
7. Planning provides the groundwork for laying down control standards.
8. Planning enables management to relate the whole enterprise to its complex environment
profitably.
 Steps in the Planning Process
1. Analysis of External Environment: The external environment covers uncontrollable and
unpredictable factors such as technology, market, socio-economic climate, political conditions
etc., within which our plans will have to operate.
2. Analysis of Internal Environment: The internal environment covers relatively controllable
factors such as personnel resources, finance, facilities etc., at the disposal of the firm. Such an
analysis will give an exact idea about the strengths and weakness of the enterprise.
3. Determination of Vision: The “vision" should describe the fundamental reason for the existence
of an organization. It will give firm direction and make out activities meaningful and interesting.
4. Determination of Objectives: The organizational objectives must be spelled out in key areas of
operations and should be divided according to various departments and sections. The objectives
must be clearly specified and measurable as far as possible. Every member of the organization
should be familiar with its objectives.
5. Forecasting: Forecasting is a systematic attempt to probe into the future by inference from
known facts relating to the past and the present. Intelligent forecasting is essential for planning.
The management should have no stone unturned in reducing the element of guesswork in
preparing forecasts by collecting relevant data using the scientific techniques of analysis and
inference.
 6. Determining Alternative course of Action: It is a common experience of all thinkers that an action can
be performed in several ways, but there is a particular way which is the most suitable for the
organisation. The management should try to find out these alternatives and examine them carefully in
the light of planning premises.
7. Evaluating Alternative Courses: Having sought out alternative courses and examined their strong and
weak points, the next step is to evaluate them by weighing the various factors.
8. Selecting the Best: The next step - selecting the course of action is the point at which the plan is
adopted. It is the real point of decision-making.
9. Establishing the sequence of activities: After the best programme is decided upon, the next task is to
work out its details and formulate the steps in full sequences.
10. Formulation of Action Programmes: There are three important constituents of an action plan:
• The time-limit of performance.
• The allocation of tasks to individual employees.
• The time-table or schedule of work so that the functional objectives are achieved within the
predetermined period.
11. Reviewing the planning process: Through feedback mechanism, an attempt is made to secure that
which was originally planned. To do this we have to compare the actual performance with the plan and
then we have to take necessary corrective action to ensure that actual performance is as per the plan.
 Types of Plans
• Operational plans: The specific results expected from departments, work groups, and individuals
are the operational goals. These goals are precise and measurable.
• Tactical plans: A tactical plan is concerned with what the lower-level units within each division
must do, how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work.
• Strategic plans: A strategic plan is an outline of steps designed with the goals of the entire
organization as a whole in mind, rather than with the goals of specific divisions or departments.
Strategic planning begins with an organization's mission. Strategic plans look ahead over the next
two, three, five, or even more years to move the organization from where it currently is to where it
wants to be. Requiring multilevel involvement, these plans demand harmony among all levels of
management within the organization.
• Contingency plans: Intelligent and successful management depends upon a constant pursuit of
adaptation, flexibility, and mastery of changing conditions. Strong management requires a
“keeping all options open” approach at all times - that’s where contingency planning comes in.
Contingency planning involves identifying alternative courses of action that can be implemented if
and when the original plan proves inadequate because of changing circumstances.
 Designing Organizational Structure

• Organizing: Arranging and structuring work to accomplish the organization’s goals

• Organizational Structure: The formal arrangement of jobs within an organization
• Organizational Design: Creating or changing an organization’s structure
 Organisation Structure
• An organization structure shows the authority and responsibility relationships between
the various positions in the organization by showing who reports to whom.
• Organization involves establishing an appropriate structure for the goal seeking activities.
It is an established pattern of relationship among the components of the organization.
• March and Simon have stated that- "Organization structure consists simply of those
aspects of pattern of behavior in the organization that are relatively stable and change
only slowly."
• The structure of an organization is generally shown on an organization chart.
• It shows the authority and responsibility relationships between various positions in the
organization while designing the organization structure, due attention should be given to
the principles of sound organization
 Organisational Design
• Organization design may be defined as a formal, guided process for integrating the
people, information and technology of an organization.
• Organization design involves the creation of roles, processes, and formal reporting
relationships in an organization.
• One can distinguish between two phases in an organization design process: strategic
grouping, which establishes the overall structure of the organization, (its main
sub-units and their relationships), and operational design, which defines the more
detailed roles and processes.
• Organizational design, a process that involves decisions about six key elements:
• Work specialization,
• Departmentalization,
• Chain of command,
• Span of control,
• Centralization and Decentralization, and
• Formalization
 Work Specialization

• Dividing work activities into separate job tasks

• To meet daily output goals, the workers specialize in job tasks such as molding,
stitching and sewing, lacing, and so forth. This is an example of work specialization,
which is dividing work activities into separate job tasks.
• Individual employees “specialize” in doing part of an activity rather than the entire
activity in order to increase work output. It’s also known as division of labor.
 Departmentalization

• After deciding what job tasks will be done by whom, common work
activities need to be grouped back together so work gets done in a
coordinated and integrated way. How jobs are grouped together is called
departmentalization.
• Five common forms of departmentalization are used
1. Functional Departmentalization
2. Geographical Departmentalization
3. Product Departmentalization
4. Process Departmentalization
5. Customer Departmentalization
 Chain of Command

• The chain of command is the line of authority extending from upper organizational
levels to lower levels, which clarifies who reports to whom.
• Managers need to consider it when organizing work because it helps employees with
questions such as “Who do I report to?” or “Who do I go to if I have a problem?”
• To understand the chain of command, we have to understand three other important
concepts:
1. Authority,
2. Responsibility, and
3. Unity of command.
 Authority
• Authority refers to the rights inherent in a managerial position to tell people what to do and to expect
them to do it.
• Authority could be delegated downward to lower-level managers, giving them certain rights while also
prescribing certain limits within which to operate.
• Acceptance Theory Of Authority (Chester Barnard), says that authority comes from the willingness of
subordinates to accept it.
1. They understand the order.
2. They feel the order is consistent with the organization’s purpose.
3. The order does not conflict with their personal beliefs.
4. They are able to perform the task as directed.
• The early management writers also distinguished between two forms of authority: line authority and
staff authority
• Line authority entitles a manager to direct the work of an employee. It is the employer–employee
authority relationship that extends from the top of the organization to the lowest echelon, according
to the chain of command.
• As organizations get larger and more complex, line managers find that they do not have the time,
expertise, or resources to get their jobs done effectively. In response, they create staff authority
functions to support, assist, advise, and generally reduce some of their informational burdens.
• Responsibility: When managers use their authority to assign work to employees, those
employees take on an obligation to perform those assigned duties. This obligation or
expectation to perform is known as responsibility.
• Unity Of Command: Finally, the unity of command principle (one of Fayol’s 14 management
principles) states that a person should report to only one manager. Without unity of command,
conflicting demands from multiple bosses may create problems.
 Span of Control
Span of control: The number of employees a manager can efficiently and effectively manage
Centralization
and
Decentralization
• One of the questions that needs to be answered
when organizing is “At what organizational level
are decisions made?”
• Centralization is the degree to which decision
making takes place at upper levels of the
organization. If top managers make key decisions
with little input from below, then the organization is
more centralized.
• On the other hand, the more that lower-level
employees provide input or actually make decisions,
the more decentralization there is. As organizations have become more flexible and responsive to
• Keep in mind that centralization-decentralization is environmental trends, there’s been a distinct shift toward
not an either-or concept. The decision is relative, decentralized decision making. This trend, also known as
not absolute—that is, an organization is never employee empowerment, gives employees more authority
completely centralized or decentralized (power) to make decisions.
 Formalization

• Formalization refers to how standardized an organization’s jobs are and the

extent to which employee behavior is guided by rules and procedures.
• In highly formalized organizations, there are explicit job descriptions,
numerous organizational rules, and clearly defined procedures covering work
processes.
• Formal Organization: The intentional structure of roles in a formally
organized enterprise.
• Informal Organization: A network of interpersonal relationship that arise
when people associate with each other
Mechanistic and
Organic Structures
• The mechanistic organization (or
bureaucracy) was the natural result of
combining the six elements of
structure. Adhering to the
chain-of-command principle ensured
the existence of a formal hierarchy of
authority, with each person controlled
and supervised by one superior.
• The organic organization is a highly
adaptive form that is as loose and
flexible as the mechanistic
organization is rigid and stable. Rather
than having standardized jobs and
regulations, the organic organization’s
loose structure allows it to change
rapidly as required.
 Traditional Organizational Designs
and
Contemporary Organizational Designs
 Traditional Organizational Designs
• In designing a structure to support the efficient and effective accomplishment of organizational goals,
managers may choose to follow more traditional organizational designs. These designs—the simple
structure, functional structure, and divisional structure—tend to be more mechanistic.
• Simple Structure: An organizational structure with low departmentalization, wide spans of control,
authority centralized in a single person, and little formalization.
• Functional Structure: An organizational structure that groups similar or related occupational
specialties together.
• Divisional Structure: An organizational structure that consists of separate business units or
divisions.
 Contemporary Organizational Designs
In response to marketplace demands to be lean, flexible, and innovative, managers are developing
creative ways to structure and organize work and to make their organizations more responsive to
the needs of customers, employees, and other organizational constituents.
• A virtual organization has elements of a traditional organization, but also relies on recent
developments in information technology to get work done. Thus, the organization could consist of a
small core of full-time employees plus outside specialists hired on a temporary basis to work on
opportunities that arise. The virtual organization could also be composed of employees who work from
their own home offices—connected by technology but perhaps occasionally getting together face to
face.
• Another structural option for managers wanting to minimize or eliminate organizational boundaries is
the network organization, which is a small core organization that outsources major business functions.
This approach allows organizations to concentrate on what they do best and to contract out other
activities to companies that specialize in those activities.