Principles of Management

Dr. Khalil-ur-Rahmen Khoumbati

Professor
Department of Information Technology
University of Sindh, Jamshoro
[email protected]
Lecture #3
Foundations of Planning

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 What Is Planning?
• Planning
– A primary managerial activity that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those
goals
• Developing plans for organizational work activities
– Formal planning
• Specific goals covering a specific time period
• Written and shared with organizational members

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 Why Do Managers Plan?
• Purposes of Planning
– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling

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 Planning and Performance
• The Relationship Between Planning and
Performance
– Formal planning is associated with:
• Higher profits and returns on assets.
• Positive financial results.
– The quality of planning and implementation
affects performance more than the extent of
planning.
– The external environment can reduce the
impact of planning on performance.

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Cont’d

– Formal planning must be used for several

years before planning begins to affect
performance.

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 How Do Managers Plan?
• Elements of Planning
– Goals (also Objectives)
• Desired outcomes for individuals, groups, or
entire organizations
• Provide direction and evaluation performance
criteria
– Plans
• Documents that outline how goals are to be
accomplished
• Describe how resources are to be allocated and
establish activity schedules.

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 Types of Goals
• Financial Goals
- Are related to the expected internal financial
performance of the organization.
• Strategic Goals
– Are related to the performance of the firm relative to
factors in its external environment (e.g., competitors).
• Stated Goals versus Real Goals
– Broadly-worded official statements of the organization
(intended for public consumption) that may be irrelevant to
its real goals (what actually goes on in the organization).

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 Types of Plans

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 Types of Plans
• Strategic Plans
– Apply to the entire organization.
– Establish the organization’s overall goals.
– Seek to position the organization in terms of its
environment.
– Cover extended periods of time.
• Operational Plans
– Specify the details of how the overall goals are to be
achieved.
– Cover a short time period.

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Cont’d

• Long-Term Plans
– Plans with time frames extending beyond
three years
• Short-Term Plans
– Plans with time frames of one year or less
• Specific Plans
– Plans that are clearly defined and leave
no room for interpretation

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Cont’d
• Directional Plans
– Flexible plans that set out general guidelines
and provide focus, yet allow discretion in
implementation
• Single-Use Plan
– A one-time plan specifically designed to meet
the need of a unique situation.
• Standing Plans
– Ongoing plans that provide guidance for
activities performed repeatedly.

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 Setting Goals and Developing Plans
• Traditional Goal Setting
– Broad goals are set at the top of the organization.
– Goals are then broken into sub-goals for each
organizational level.
– Assumes that top management knows best because
they can see the “big picture.”
– Goals are intended to direct, guide, and constrain
from above.
– Goals lose clarity and focus as lower-level managers
attempt to interpret and define the goals for their
areas of responsibility.

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 The Downside of Traditional Goal Setting

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Setting Goals and Developing Plans
• Maintaining the Hierarchy of Goals
– Means–Ends Chain
• The integrated network of goals that results
from establishing a clearly-defined hierarchy of
organizational goals.
• Achievement of lower-level goals is the means
by which to reach higher-level goals (ends).

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Management By Objectives (MBO)

• MBO is a process whereby the superior

and the mangers of an organization
jointly identify its common goals,
define each individual’s major area of
responsibility in terms of results
expected of him, and use these
measures as guides for operating the
unit and assessing the contribution of
each of its members.

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Cont’d
– Specific performance goals are jointly
determined by employees and managers.
– Progress toward accomplishing goals is
periodically reviewed.
– Rewards are allocated on the basis of
progress towards the goals.
– Key elements of MBO:
• Goal specificity, participative decision
making, an explicit performance/evaluation
period, feedback

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 Steps in a Typical MBO Program
1. The organization’s overall objectives and strategies are
formulated.
2. Major objectives are allocated among divisional and departmental
units.
3. Unit managers collaboratively set specific objectives for their units
with their managers.
4. Specific objectives are collaboratively set with all department
members.
5. Action plans, defining how objectives are to be achieved, are
specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback
is provided.
8. Successful achievement of objectives is reinforced by
performance-based rewards.
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 Steps in Goal Setting
1. Review the organization’s mission statement.
Do goals reflect the mission?
2. Evaluate available resources.
Are resources sufficient to accomplish the mission?

3. Determine goals individually or with others.

Are goals specific, measurable, and timely?

4. Write down the goals and communicate them.

Is everybody on the same page?

5. Review results and whether goals are being met.

What changes are needed in mission, resources, or goals?

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 Steps in Planning
• Being Aware of opportunities.
– It is preliminary look at possible future opportunities.
• The Market , Competition, What Customers want, Our strengths
• Our Weakness, SWOT Analysis
• Establishing Objectives
– Objectives specify the expected result and end points of what is to
be done,
• Developing Premises
• This is to establish, circulate and obtain agreement to utilize critical
planning premises such as forecasts, applicable basic policies and
existing company plans.
• Determining Alternative Courses
– The more common problem is not finding alternatives but reducing
the number of alternatives, so that most promising may be analysed

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 Steps in Planning
• Evaluating Alternative Courses
– When we have alternative courses with us the next step is to
examine their strong and weak points and evaluate by weighing
them in light of premises and goals
• Selecting a Course
– This is the point at which the plan is adopted.
• Formulating Derivative Plans
– Derivative plans are subsidiary plan which would integrate
towards the basic plan
• Quantifying Plans by Budgeting
– The overall budget of an enterprise represents the sum total of
income and expenses with resultant profit or surplus and the
budgets of major balance sheet items such as cash and capital
expenditures.

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Levels of Planning

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Levels of Planning

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 Steps in Planning
• I. Strategic Plan
• A strategic plan is a high-level overview of the entire business,
its vision, objectives, and value.
• The crucial components of a strategic plan are:
– 1. Vision
– Get a bird’s eye view of management
– 2. Mission
– The mission statement is a more realistic overview of the
company’s aim and ambitions.
– 3. Values
– “Inspire. Go above & beyond. Innovate. Exude passion. Stay
humble. Make it fun”
•  

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 Steps in Planning

• II. Tactical Plan

• The tactical plan describes the tactics the organization plans to
use to achieve the ambitions outlined in the strategic plan  
• 1. Specific Goals with Fixed Deadlines
• 2. Budgets 
• 3. Resources 
• 4. Marketing, Funding, etc.
 

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 Steps in Planning
• III. Operational Plan
• The operational plan describes the day to day running of the
company
• 1. Single Use Plans
– These plans are created for events/activities with a single occurrence.
• 2. On-going Plans
– Policy: A policy is a general document that dictates how managers
should approach a problem.
• Rule: Rules are specific regulations according to which an
organization functions.
• Procedure: A procedure describes a step-by-step process to
accomplish a particular objective

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 Contemporary Issues in Planning
• Criticisms of Planning
– Planning may create rigidity.
– Plans cannot be developed for dynamic
environments.
– Formal plans cannot replace intuition and
creativity.
– Planning focuses managers’ attention on
today’s competition not tomorrow’s
survival.

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 cont’d
• Effective Planning in Dynamic Environments
– Develop plans that are specific but flexible.
– Understand that planning is an ongoing process.
– Change plans when conditions warrant.
– Persistence in planning eventually pay off.
– Flatten the organizational hierarchy to foster
the development of planning skills at all
organizational levels.

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Discussion

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