PLANNING

Planning Defined
The Nature of Planning
Planning at Various Management Levels
The Planning Process
Types of Plans
Parts of the Various Functional Area Plans
Making Planning Effective
CHAPTER 6 | PLANNING
Objectives
At the end of this chapter, the students are expected to:

1. define the meaning of planning;

2. describe the nature of planning;
3. contrast planning functions at various management levels;
4. examine the steps in the planning process;
5. compare various types of plans;
6. assess the parts of the various functional area plans;
7. determine various parts of the strategic plan; and
8. analyze how to make planning effective.

INTRODUCTION
If managing an organization is to be pursued vigorously, planning will be an important and
necessary activity. Managers who plan are afforded with the opportunity to carefully analyze situations,
which directly contribute to effective decision making. Plans provide the manager with the opportunity
to concentrate on implementation.

The manager, regardless of his management level, will have to devote some of his time to
planning. The higher the management level, the more sophisticated his planning activity becomes. Why
and how this is so is the subject of this chapter.

PLANNING DEFINED
Planning may be defined as selecting the best course of action in anticipation of future trends so
that the desired result may be achieved. It must be stressed that the desired result takes first priority
and the course of action chosen is the means to realize the goal.

THE NATURE OF PLANNING

There are many instances when managers are overwhelmed by various activities, which at times
cloud his judgment: This must be expected since anybody who is confronted by several situations
happening simultaneously will lose sight of the more important concerns of managing. To minimize
mistakes in decision making, planning is undertaken.

A plan, which is the output of planning, provides a methodical 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 accomplishment of objectives. An
example of the difficulty of not having a plan is illustrated on the next page.
 The management of a firm was able to identify the need to hire three additional employees. The
manager proceeded to invite applicants, screen them, and finally hired three of them.. When the hiring
expense report was analyzed, it was found that the hiring expense was more than double the amount
spent by other firms in hiring the same number of people. When an inquiry was made, it was
determined that the manager committed some errors of judgment. For instance, he used an expensive
advertising layout in a newspaper when a simple message will do. It was also revealed that the absence
of a hiring plan contributed to the high cost of hiring.

PLANNING AT VARIOUS MANAGEMENT LEVELS

Since managers could be occupying positions in any of the various management levels, it will be
useful for them to know some aspects of planning undertaken at the different management levels. As
indicated in Figures 15 and 16, planning activities undertaken at various levels are as follows:

1. Strategic Planning for Top Management. Strategic planning 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. Strategic planning is the concern of top management

In strategic planning, the whole company is considered, specifically its objectives and
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 those goals.

2. Intermediate Planning for Middle Management. Intermediate planning refers to the process of
determining the contributions that subunits can make with allocated resources. This type of
planning is the concern of middle management. Under intermediate planning, the goals of a
subunit are determined and a plan is prepared to provide a guide for the realization of the goals.
The intermediate plan is designed to support the strategic plan.
3. Operational Planning for Lower Management. Operational planning is the process of
determining how specific tasks can best be accomplished on time with available resources. This
type of planning is the responsibility of lower management. It must be performed in support of
the strategic and intermediate plans.

Figure 15

Types of Planning
 Figure 16

The Organization and Types of Planning Undertaken

THE PLANNING PROCESS

The process of planning consists of various steps depending on the management level that
performs the planning task. Generally, however, planning involves the following:

1. Setting Organizational, Divisional, or Unit Goals. The first task of the 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 provides an answer to the said concern.
If everybody in the firm (or division or unit, as the case may be) is aware of the goals, there is a
big chance that everybody will contribute his share in the realization of such goals.

Goals are precise statements of results sought, quantified in time and magnitude, where
possible. According to Davis and Weckler (1997) goals are "concrete results that the
organization intends to achieve within a specified period." Examples of goals are provided in
Figure 17.
 Figure 17

Examples of Goals, By Organizational Level

2. Developing Strategies or Tactics to Reach Goals. After determining the goals, the next task is to
devise some means to realize them. The ways chosen to realize the goals are called strategies
and these will be the concern of top management. The middle and lower management will
adapt their own tactics to implement their plans.

Strategy may be defined as a course of action aimed at ensuring that the organization
will achieve its objectives. The decision of a construction firm's management to diversify its
business by also engaging in the trading of construction materials and supplies is an example of
strategy. When this is implemented, it may help the construction firm realize substantial savings
in the material and supply requirements of their construction activities. The firm will also have
greater control in the timing of deliveries of materials and supplies.

A tactic is a short-term action by management to adjust to negative 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. An
example of tactic is the hiring of contractual workers to augment the company's current
workforce.

3. Determining Resources Needed. When particular sets of strategies or tactics have been devised,
the 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.

The quality and quantity of resources needed must be correctly determined. Too many
resources in terms of either quality or quantity will be wasteful; too little will mean loss of
opportunities for maximizing income.
 To satisfy strategic requirements, a general statement of needed resources will suffice.
The different units of the company will determine the specific requirements.

To illustrate:

Suppose the management of a construction firm has decided, in addition to its current
undertakings, to engage in the trading of construction materials and supplies. A general
statement of required resources will be as follows:

"A new business unit will be organized to deal with the buying and selling of
construction materials and supplies. The amount of P55 million shall be set aside to finance the
activity. Qualified persons shall be recruited for the purpose.'" Setting Standards. The standards
for measuring performance may be set at the

4. 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 performance of people, capital,
goods, or processes.

An example of a standard is the minimum number of units that must be produced by a

worker per day in a given work situation.

TYPES OF PLANS
Plans are of different types. (Figure 18). They may be classified in terms of functional areas, time
horizon, and frequency of use.

Figure 18
 Types of Plans

1. 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: Marketing Plan - is the
written document or blueprint for implementing
a. and controlling an organization's marketing activities related to a particular marketing
strategy.
b. Production Plan - is a written document that states the quantity of output a company must
produce in broad terms and by product family.
c. Financial Plan- is a document that summarizes the current financial situation of the firm,
analyzes financial needs, and recommends a direction for financial activities.
d. Human Resources Plan 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.
2. Plans with Time Horizon. Plans with time horizon consist of the following:
a. Short-Range Plans - are plans intended to cover a period of less than one year. First line
supervisors are mostly concerned with these plans.
b. Long-Range Plans - are plans covering a time span of more than one year.Middle and top
management mostly undertake these.
3. Plans with Varied Frequency of Use. According to frequency of use, plans may be classified as:
a. 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:
i. Policies refer to broad guidelines used by managers to help make decisions and take
actions on specific circumstances.
ii. ii. Procedures - are plans that describe the exact series of actions to be taken in a given
situation.
iii. iii. Rules - - are statements that either require or forbid a certain action.
b. 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:
i. Budget Plan - sets forth the projected expenditures for a certain activity and explains
where the required funds will come from.
ii. ii. Program Plan - is designed to coordinate a large set of activities.

iii. Project Plan is usually more limited in scope than a program plan and is sometimes prepared
to support a program.

ARTS OF THE VARIOUS FUNCTIONAL AREA PLANS

The manager may be familiar with plans, knowing the details from beginning to end. however,
the ever present possibility of moving from one management level to the next and bottom one
functional area to another makes it important for the manager to be familiar with other functional area
plans.
1. Marketing Plan. The structure and content of marketing plans vary depending on the nature of
the organizations adapting them. The typical marketing plan includes the following:
a. executive summary - which presents an overall view of the marketing project and its
potential;
b. table of contents;
c. situational analysis and target market;
d. marketing objectives and goals;
e. marketing strategies;
f. marketing tactics;
g. schedule and budgets; and
h. financial data and control..

An example of marketing plan is shown in Figure 19.

 Figure 20

An Example of A Production Plan Schedule

3. Financial Plan. The components of the financial plan are as follows:

a. an evaluation of the firm's current financial condition as indicated by an analysis of the
most recent financial statements;
b. sales forecast;
c. the capital budget;
d. the cash budget;
e. a set of pro forma (or projected) financial statements; and
f. the external financing plan.
4. Human Resource Plan. The human resource plan must contain the following:
a. personnel requirements of the company;
b. plans for recruitment and selection;
c. training plan; and
d. retirement plan.
5. Strategic Plan. The strategic plan must contain the following:
a. company or corporate mission;
b. objectives or goal; and
c. strategies.

The company or corporate mission refers to the strategic statements that identify why.
an organization exists, its philosophy of management, and its purpose as distinguished from
other similar organizations in terms of products, services, and markets.

MAKING PLANNING EFFECTIVE

Planning is done so that some desired results may be achieved. At times, however, failure in
planning occurs. Planning may be made successful by recognizing the planning barriers, and by using the
aids to planning.
The planning barriers consist of the following:

1. manager's inability to plan;

2. improper planning process;
3. lack of commitment to the planning process;
4. improper information;
5. focusing on the present at the expense of the future;
6. too much reliance on the planning department; and
7. concentrating on only the controllable variables.

Among the aids to planning that may be used are:

1. gathering as much information as possible;

2. developing multiple sources of information; and
3. involving others in the planning process.

SUMMARY
Business activities, like other activities, require effective planning if objectives and goals are to
be realized.

A plan is methodical way of achieving results.

Planning is undertaken at various management levels. Various steps are required in the planning
process depending on the management level.

Plans may be classified in terms of functional areas, time horizon, and frequency of use.

Plans consist of various parts that the manager must be familiar with.

Plans can be made effective by recognizing the planning barriers and making use of planning
aids.

CHAPTER EXERCISES
3. Prove or disprove the statement: "Planning is everyone's job in the organization including those
in the non-management level."
4. Describe the types of plans appropriate to the following situations:
a. once in a lifetime event;
b. organization's competition-related activities; and
c. investment-related activities.
3. Discuss the value of preparing strategic plan.
4. Summarize ways to make planning effective.
SUGGESTED ITEM FOR RESEARCH
Interview the general manager of a manufacturing or service firm. Inquire about the planning
activities undertaken by the firm. Prepare a report about the result of the interview.
Chapter Test 6
Name: Section:

Score: Professor:

I. Fill in the blanks

1. ____________ is the output of planning.

2. ____________ is that management function where the best alternative, in anticipation of the future is
selected with the objective of achieving the desired result.

3. ____________ refers to the process of determining the major goals of the organization and the
policies and strategies for obtaining and using resources to achieve its goals.

4. ____________is designed to support the strategic plan.

5. ____________are precise statements of results sought, quantified in time and magnitude, where
possible.

6. ____________ is a course of action aimed at ensuring that the organization will achieve its objectives.

7. ____________ is a short-term action by management to adjust to negative or

8. ____________ is a written document that states the quantity of output a external influence. company
must produce in broad terms and by product family.

10. ____________are statements that either require or forbid a certain action. is a single-use plan
designed to coordinate a large set of 9. 10. activities.

II. Match column A with column B

A

_______1. the plan.

_______2. course of action

_______3. strategic planning

_______4. setting standards

_______5. strategies

_______6. standard

_______7. marketing plan

_______8. long-range plan

_______9. project
_______10. objectives or goals

A. a functional area plan

B. a time-horizon plan

C. a single-use plan

D. a part of the strategic plan

E. serves as a useful guide in the implementation of activities

F. the means to realize the goal

G. a concern of top management

H. a step in the planning process

I. the way chosen to realize the goals

J. a quantitative or qualitative measuring device designed to help monitor the performance of people,
capital goods, or a step in the planning process