PRINCIPLES OF BUSINESS ADMINISTRATION

BFT - I SEMESTER
 UNIT-II
PLANNING

Definition and Concepts

Principles of Planning

Types of Plans

The Planning Process

Decision Making Process

Forecasting
DEFINITION

 According to Koontz O'Donnel - "Planning is an

intellectual process, the conscious determination of
courses of action, the basing of decisions on
purpose, acts and considered estimates".
NATURE OF PLANNING
 1. Planning is goal-oriented:
 2. Primacy of Planning
 3. Pervasiveness of Planning
 4. Efficiency, Economy and Accuracy
 5. Co-ordination
 6. Limiting Factors
 7. Flexibility
 8. Planning is an intellectual process:
PURPOSE OF PLANNING
 1. To manage by objectives
 2. To offset uncertainty and change
 3. To secure economy in operation
 4. To help in co-ordination
 5. To make control effective
 6. To increase organizational effectiveness
PLANNING PROCESS

 The various steps involved in planning are given

below
TYPES OF PLANS
TYPES OF PLANS..CONTD
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. It is further classified as
 i) Mission: The mission is a statement that reflects
the basic purpose and focus of the organization
which normally remain unchanged. The mission of
the company is the answer of the question : why
does the organization exists?
STRATEGIC PLANS..CONTD
 ii) Objectives or goals: Both goal and objective can be defined as
statements that reflect the end towards which the organization is
aiming to achieve. However, there are significant differences
between the two. A goal is an abstract and general umbrella
statement, under which specific objectives can be clustered.
Objectives describe—in precise, measurable, and obtainable terms
which reflect the desired organization’s outcomes.
 iii) Strategies: Strategy is the determination of the basic long term
objectives of an organization and the adoption of action and
collection of action and allocation of resources necessary to achieve
these goals. 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.
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.
 Tactical plans are concerned with shorter time
frames and narrower scopes than are strategic
plans.
OPERATIONAL PLANS
 The specific results expected from departments,
work groups, and individuals are the operational
goals. These goals are precise and measurable.
“Process 150 sales applications each week” or
“Publish 20 books this quarter” are examples of
operational goals.
 An operational plan is one that a manager uses to
accomplish his or her job responsibilities.
Single-use plans
 i) Single-use plans apply to activities that do not
recur or repeat. A one-time occurrence, such as a
special sales program, is a single-use plan because
it deals with the who, what, where, how, and how
much of an activity.
 Programme: Programme consists of an ordered list
of events to be followed to execute a project.
 Budget: A budget predicts sources and amounts of
income and how much they are used for a specific
project.
Standing plans
 ii) Standing plans are usually made once and retain their value over
a period of years while undergoing periodic revisions and updates.
The following are examples of ongoing plans:
 Policy: A policy provides a broad guideline for managers to follow
when dealing with important areas of decision making. Policies are
general statements that explain how a manager should attempt to
handle routine management responsibilities. for example, as
employee hiring, terminations, performance appraisals,
 Procedure: A procedure is a set of step-by-step directions that
explains how activities or tasks are to be carried out. Most
organizations have procedures for purchasing supplies and
equipment, for example.
 Rule: A rule is an explicit statement that tells an employee what he
or she can and cannot do. Rules are “do” and “don't” statements put
into place to promote the safety of employees and the uniform
treatment and behavior of employees.
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.
MANAGEMENT BY OBJECTIVES (MBO)

 MBO was first popularized by Peter Drucker in 1954 in

his book 'The practice of Management’.
 It is a process of agreeing within an organization so
that management and employees buy into the
objectives and understand what they are.
 “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.”
Features of MBO
 1. MBO is concerned with goal setting and planning for
individual managers and their units.
 2. The essence of MBO is a process of joint goal setting
between a supervisor and a
 subordinate.
 3. Managers work with their subordinates to establish the
performance goals that are
 consistent with their higher organizational objectives.
 4. MBO focuses attention on appropriate goals and plans.
 5. MBO facilitates control through the periodic development
and subsequent evaluation of
 individual goals and plans.
Decision Making
 The word decision has been derived from the Latin word "decidere" which means
 "cutting off". Thus, decision involves cutting off of alternatives between those that
are desirable and those that are not desirable.
 In the words of George R. Terry, "Decision-making is the selection based on some
criteria from two or more possible alternatives".
 Characteristics of Decision Making
 • Decision making implies that there are various alternatives and the most desirable
 alternative is chosen to solve the problem or to arrive at expected results.
 • The decision-maker has freedom to choose an alternative.
 • Decision-making may not be completely rational but may be judgemental and
emotional.
 • Decision-making is goal-oriented.
 • Decision-making is a mental or intellectual process because the final decision is
made by
 the decision-maker.
 • A decision may be expressed in words or may be implied from behaviour.
DECISION MAKING PROCESS
FORECASTING
 Forecasting is a process of predicting or estimating
the future based on past and present data.
Forecasting provides information about the
potential future events and their consequences for
the organization.
 It may not reduce the complications and uncertainty
of the future. However, it increases the confidence
of the management to make important decisions.
Features of Forecasting

 Forecasting in concerned with future events.

 It shows the probability of happening of future
events.
 It analysis past and present data.
 It uses statistical tools and techniques.
 It uses personal observations.
Steps in Forecasting

 Analyzing and understanding the problem

 Developing sound foundation
 Collecting and analyzing data
 Estimating future events
 Comparing results
 Follow up action
Importance of Forecasting

 Forecasting provides relevant and reliable

information about the past and present events and
the likely future events. This is necessary for sound
planning.
 It gives confidence to the managers for making
important decisions.
 It is the basis for making planning premises.
 It keeps managers active and alert to face the
challenges of future events and the changes in the
environment.