PRINCIPLES AND POLICIES OF MANAGEMENT

LECTURE 4-- PLANNING

MR. FUHAD AMED MOHAMED BANGURA & MR EMMANUEL JOHN BANGURA
LEARNING OUTCOMES:

At the end of this lesson, learners should be able to:

 Define Planning and the basic components of plans
 Explain the types of plan and why should managers plan
 Explain the relationship between performance and planning
 Explain Types of organizational goals
 Explain the planning process
 Analyse The Deming cycle and explain outcome statement
 Understand some of the criticism of formal planning
WHAT IS PLANNING

 Planning involves defining the organization's goals, establishing

an overall strategy for achieving those goals, and developing a
comprehensive set of plans to integrate and coordinate
organizational work.
 Planning is the process by which managers establish goals and
specify how these goals are to be attained.
 Planning involves thinking about organizational strengths and
weaknesses, as well as making decisions about desired states
and ways to achieve them.
WHAT IS PLANNING

Planning is the process by which

managers establish goals and specify
how these goals are to be attained in
the most effective and efficient way.
BASIC COMPONENT OF PLANS

Plans have two basic components

Outcome or goal statements represent the end state.
The targets and outcomes managers hope to attain.
Action statements reflect the means by which
organizations move forward to attain their goals.
TYPES OF PLANNING

Planning can either be formal or informal

Formal Planning:
 specific goals covering a period of years are defined. These goals
are written down and shared with organizational members.
 specific action programs exist for the achievement of these
goals; that is, managers clearly define the path they want to
take to get the organization and the various work units from
where they are to where they want to be.
TYPES OF PLANNING

Informal Planning
In informal planning, nothing is written down, and
there is little or no sharing of goals with others in the
organization. This type of planning often is done in
many small businesses where the owner-
manager has a vision of where he or she wants
the business to go and how to get there.
WHY SHOULD MANAGERS PLAN?

Managers have several reasons for formulating plans for themselves,

their employees, and various organizational units:
 1. To offset uncertainty and change;
 2. To focus organizational activity and resources on a set of objectives;
 3. To provide a coordinated, systematic road map for future activities;
 4. To increase economic efficiency; and
 5. To facilitate control by establishing a standard for later activity.
PURPOSES OF PLANNING

 Planning establishes coordinated effort

 Planning also reduces uncertainty by forcing managers to
look ahead, anticipate change, consider the impact of
change, and develop appropriate responses.
 Planning reduces overlapping and wasteful activities
 Planning establishes goals or targets or standards that are
used in controlling.
RELATIONSHIP BETWEEN PLANNING AND
PERFORMANCE
Numerous studies have been done to test the relationship between planning and
performance. On the basis of these studies, we can draw the following conclusions.
 Formal planning is associated with higher profits, higher return on assets, and
other positive financial results.
 Second, the quality of the planning process and the appropriate
implementation of the plans probably contribute more to high performance
than those that do not plan.
 Next, in those studies in which formal planning didn't lead to higher performance,
the external environment often was the culprit. Governmental regulations,
powerful labor unions, and other critical environmental forces constrain managers'
options and reduce the impact of planning on an organization's performance.
 Finally, the planning/performance relationship is influenced by the planning time
frame. Organizations need at least four years of systematic formal planning
before performance is impacted.
THE ROLE OF GOALS AND PLANS IN PLANNING

 Goals are desired outcomes for individuals, groups, and entire

organizations. Goals are larger objectives. They provide the
direction for all management decisions and form the criterion
against which actual work accomplishments can be measured.
That's why they're often called the foundation of planning.
 Plans are documents that outline how goals are going to be
met and that typically describe resource allocations, schedules,
and other necessary actions to accomplish the goals.
As managers plan, they're developing both goals and plans.
TYPES OF GOALS

At first glance, it might appear that organizations have a

single objective:
 For business firms, to make a profit;
 For not-for-profit organizations, to meet the needs of
some constituent group(s).
 In reality, all organizations have multiple objectives
 Most organizations have financial and strategic goal.
DIFFERENCE BETWEEN FINANCIAL AND STRATEGIC GOAL
Financial Goals Strategic Goals
● Faster revenue growth ● A bigger market share
● Faster earnings growth ● A higher, more secure industry rank
● Higher dividends ● Higher product quality
● Wider profit margins ● Lower costs relative to key
● Higher returns on invested capital competitors
● Stronger bond and credit ratings ● Broader or more attractive product
● Bigger cash flows line
● A stronger reputation with
● A rising stock price customers
● Recognition as a "blue chip" company ● Superior customer service
● A more diversified revenue base ● Recognition as a leader in technology
● Stable earnings during recessionary and/or product innovation
periods ● Increased ability to compete in
international markets
● Expanded growth opportunities
TYPES OF GOALS (CONT…)
 Stated goals
Official statements of what an organization says, and what it wants its
various stakeholders to believe. However, stated goals which can be
found in an organization's charter, annual report, public relations
announcements, or in public statements made by managers are often
conflicting and excessively influenced by what society believes
organizations should do.
 Real goals
These are goals that an organization actually pursues closely
and working on at the moment in time. Actions define priorities.
TYPES OF ORGANIZATIONAL PLANS
1. Hierarchical 5.
Plans 4. Time-Frame Organizational
2. Frequency- 3. Single-Use Plans
Plans Scope Plans
 Strategic of-Use Plans
plans  Business/
 Standing
(institutiona  Short-range divisional-
Plans  Programs
l) level plans
 Policies  Medium-
 Administrati  Projects  Unit/
range
 Rules  Budgets functional-
ve plans  Long-range
 Procedures level plans
 Operating
 Tactical
plans
(technical plans
core)
1. HIERARCHICAL PLANS

 Strategic plans (institutional): Are plans that apply to the entire

organization, establish the organization's overall goals, and seek to
position the organization in terms of its environment. Strategic plans
tend to cover a longer time frame. They also cover a broader view of
the organization.
 Administrative plans: specify the allocation of organizational
resources to internal units of the organization; address the
integration of the institutional level of the organization
 Operating plans (technical core): cover the day-to-day operations
of the organization. Plans that specify the details of how the overall
goals are to be achieved.
2. FREQUENCY-OF-USE PLANS
 Standing Plans
These are ongoing plans that provide guidance for activities performed repeatedly.
Standing plans include policies, rules, and procedures.
 Policies

General statements of understanding or intent; guide decision-making, permitting

the exercise of some discretion; guide behavior.
 Rules
guides to action that do not permit discretion in interpretation; specify what is
permissible and what is not permissible
 Procedures
These are specify a series of steps that must be taken in the performance of a
particular task.
3. SINGLE-USE PLANS

 Programs
a complex set of policies, rules, and procedures necessary
to carry out a course of action.
 Projects
specific action plans often created to complete various aspects
of a program
 Budgets
plans expressed in numerical terms
4. TIME-FRAME PLANS

 Short-range
Several hours to a year
 Medium-range
One to three or five years. It is any time period in between
 Long-range
More than three or five years depending on the purpose of
the organization
5. ORGANIZATIONAL SCOPE PLANS
 Business/divisional-level plans
Focus on one of the organization’s businesses (or divisions) and its
competitive position.
 Unit/functional-level plans
Focus on the day-to-day operations of lower-level organization units;
marketing, human resources, accounting, and operations plans
(production).
 Tactical plans
Division-level or unit-level plans designed to help an organization
accomplish its strategic plans.
 OTHER TYPES OF PLANS
 Specific plans are clearly defined and
leave no room for interpretation. They have
specifically stated objectives. There's no
ambiguity and no problem with
misunderstandings.
 Directional plans are flexible plans that
set out general guidelines. They provide
focus but do not lock managers into specific
goals or courses of action.
 Contingency plans are created to deal
with what might happen if these
assumptions turn out to be wrong.
Contingency planning is thus the
development of alternative courses of
action to be implemented if events disrupt a
planned course of action.
THE PLANNING PROCESS

 It involves an
extensive search
for alternatives
and analyzes
relevant
information, is
systematic in
nature, and is
commonly
participative.
THE PLANNING PROCESS

 Step 1: Developing an Awareness of the Present State

The first step in the planning process is awareness. It is at this step
that managers build the foundation on which they will develop their
plans. This foundation specifies an organization’s current status,
pinpoints its commitments, recognizes its strengths and weaknesses,
and sets forth a vision of the future.
 Step 2: Establishing Outcome Statements
The second step in the planning process consists of deciding “where
the organization is headed, or is going to end up.” Ideally, this
involves establishing goals.
THE PLANNING PROCESS

 Step 3: Premising
In this step of the planning process, managers establish the premises,
or assumptions, on which they will build their action statements. The
quality and success of any plan depends on the quality of its
underlying assumptions.
 Step 4: Determining a Course of Action (Action Statements)
In this stage of the planning process, managers decide how to move
from their current position toward their goal (or toward their domain).
They develop an action statement that details what needs to be done,
when, how, and by whom.
THE PLANNING PROCESS
Step 5: Formulating Supportive Plans
The planning process seldom stops with the
adoption of a general plan. Managers often need to
develop one or more supportive or derivative plans
to bolster and explain their basic plan. Suppose an
organization decides to switch from a 5-day, 40-hour
workweek (5/40) to a 4-day, 40-hour workweek
(4/40) in an attempt to reduce employee turnover.
This major plan requires the creation of a number of
supportive plans.
THE DEMING CYCLE
This helps managers assess the effects of planned action by
integrating organizational learning into the planning process. The
cycle consists of four key stages:
 Plan—create the plan using the model discussed earlier.
 Do—implement the plan.
 Check—monitor the results of the planned course of action;
organizational learning about the effectiveness of the plan occurs at
this stage.
 Act—act on what was learned, modify the plan, and return to the
first stage in the cycle, and the cycle begins again as the
organization strives for continuous learning and improvement.
IMPORTANCE OF GOALS OR OUTCOME STATEMENTS

The importance of goals is apparent from the purposes they serve.

Successful goals
 (1) Guide and direct the efforts of individuals and groups;
 (2) motivate individuals and groups, thereby affecting their efficiency and
effectiveness;
 (3) Influence the nature and content of the planning process; and
 (4) Provide a standard by which to judge and control organizational activity.
In short, goals define organizational purpose, motivate accomplishment,
and provide a yardstick against which progress can be measured
CRITICISMS OF FORMAL PLANNING

These primary arguments directed at formal

planning are as follows:
Planning may create rigidity:
Plans can't be developed for a dynamic
environment
Formal plans can't replace intuition and creativity.