UNIT 2

PLANNING
 Managerial Function: Planning
Planning is about managing resources and priorities in an
organized way.

Planning is future oriented concerned with clearly charting

out the desired direction of business activities in future.

The activity helps managers analyse the present condition

to identify the ways of attaining the desired position in
future. It is both, the need of the organisation and the
responsibility of managers.
Planning is the fundamental management function, which
involves deciding beforehand, what is to be done, when is
it to be done, how it is to be done and who is going to do it.

It is an intellectual process which lays

down an organisation’s objectives and develops various
courses of action, by which the organisation can achieve
those objectives. It chalks out exactly, how to attain a
specific goal.
1.Managerial function: Planning is a first and foremost managerial
function provides the base for other functions of the management,
i.e. organising, staffing, directing and controlling, as they are
performed within the periphery of the plans made.

2.Goal oriented: It focuses on defining the goals of the

organisation, identifying alternative courses of action and deciding
the appropriate action plan, which is to be undertaken for reaching
the goals.

3.Pervasive: It is pervasive in the sense that it is present in all the

segments and is required at all the levels of the organisation.
Although the scope of planning varies at different levels and
departments.
4.Continuous Process: Plans are made for a specific term,
say for a month, quarter, year and so on. Once that period is
over, new plans are drawn, considering the organisation’s
present and future requirements and conditions. Therefore, it
is an ongoing process, as the plans are framed, executed and
followed by another plan.

5.Intellectual Process: It is a mental exercise at it involves

the application of mind, to think, forecast, imagine
intelligently and innovate etc.
6.Futuristic: In the process of planning we take a sneak peek
of the future. It encompasses looking into the future, to
analyse and predict it so that the organisation can face future
challenges effectively.

7.Decision making: Decisions are made regarding the choice

of alternative courses of action that can be undertaken to
reach the goal. The alternative chosen should be best among
all, with the least number of the negative and highest number
of positive outcomes.
 Types of
Plans
Strategic
Planning
Tactical
Planning
Operational
Planning
Contingency
Planning
Strategic Planning
“Strategic plans are all about why things need to happen,” “It’s
big picture, long-term thinking.
It starts at the highest level with defining a mission and casting
a vision.”
Strategic planning includes a high-level overview of the entire
business. It’s the foundational basis of the organization and
will dictate long-term decisions. The scope of strategic
planning can be anywhere from the next two years to the next
10 years. Important components of a strategic plan are vision,
mission and values.
Tactical Planning
The tactical strategy describes how a company will implement its
strategic plan.
“Tactical plans are about what is going to happen.

“Basically at the tactical level, there are many focused, specific, and
short-term plans, where the actual work is being done, that support the
high-level strategic plans.”
Tactical planning supports strategic planning.

It includes tactics that the organization plans to use to achieve what’s

outlined in the strategic plan.
Often, the scope is less than one year and breaks down
the strategic plan into actionable chunks.

Tactical planning is different from operational planning

in that tactical plans ask specific questions about what
needs to happen to accomplish a strategic goal;
operational plans ask how the organization will
generally do something to accomplish the company’s
mission.
Operational Planning
Operational plans are about how things need to happen.
Guidelines of how to accomplish the mission are set.”
This type of planning typically describes the day-to-day running
of the company.
Operational plans encompass what needs to happen continually,
on a day-to-day basis, in order to execute tactical plans.
Operational plans could include work schedules, policies, rules, or
regulations that set standards for employees, as well as specific
task assignments that relate to goals within the tactical strategy,
such as a protocol for documenting and addressing work
Operational plans are often described as single use plans
or ongoing plans. Single use plans are created for events
and activities with a single occurrence (such as a single
marketing campaign).
Ongoing plans include policies for approaching problems,
rules for specific regulations and procedures for a step-
by-step process for accomplishing particular objectives.
Contingency Planning
Contingency plans are made when something unexpected happens
or when something needs to be changed.
Business experts sometimes refer to these plans as a special type
of planning.
Contingency planning can be helpful in circumstances that call for
a change.
Although managers should anticipate changes when engaged in
any of the primary types of planning.

As the business world becomes more complicated, contingency

planning becomes more important to engage in and understand.
Planning Process
As planning is an activity, there are certain reasonable measures
for every manager to follow:
(1) Setting Objectives
This is the primary step in the process of planning which specifies
the objective of an organisation, i.e. what an organisation wants to
achieve.
The planning process begins with the setting of objectives.
Objectives are end results which the management wants to
achieve by its operations.
Objectives are specific and are measurable in terms of units.
Objectives are set for the organisation as a whole for all
departments, and then departments set their own objectives
within the framework of organisational objectives.
(2) Developing Planning Premises
Planning is essentially focused on the future, and
there are certain events which are expected to
affect the policy formation.
Such events are external in nature and affect the
planning adversely if ignored.
Their understanding and fair assessment are
necessary for effective planning.
Such events are the assumptions on the basis of
which plans are drawn and are known as planning
premises.
(3) Identifying Alternative Courses of Action
Once objectives are set, assumptions are made.
Then the next step is to act upon them.
There may be many ways to act and achieve objectives.
All the alternative courses of action should be identified.

4) Evaluating Alternative Course of Action

In this step, the positive and negative aspects of each
alternative need to be evaluated in the light of objectives to
be achieved.
Every alternative is evaluated in terms of lower cost, lower
risks, and higher returns, within the planning premises and
within the availability of capital.
(5) Selecting One Best Alternative
The best plan, which is the most profitable plan and with
minimum negative effects, is adopted and implemented.
In such cases, the manager’s experience and judgement play
an important role in selecting the best alternative.

(6) Implementing the Plan

This is the step where other managerial functions come into
the picture.
This step is concerned with “DOING WHAT IS REQUIRED”.
In this step, managers communicate the plan to the
employees clearly to help convert the plans into action.
This step involves allocating the resources, organising for
labour and purchase of machinery.
(7) Follow Up Action
Monitoring the plan constantly and taking feedback
at regular intervals is called follow-up.
Monitoring of plans is very important to ensure that
the plans are being implemented according to the
schedule.
Regular checks and comparisons of the results with
set standards are done to ensure that objectives
are achieved.
 CONTRIBUTIONS OF PETER F. DRUCKER-
MBO (1909-2005)

 Management By Objectives is to determine joint objectives

and to provide feedback on the results
 His contribution is termed as “Empirical school of
Management”
 By increasing commitment, managers are given the
opportunity to focus on new ideas and innovation that
contribute to the development and objectives of organizations.
 Management By Objectives (MBO) is also known
as Management By Results (MBR).
Peter Drucker sets a number of conditions that must be met:

•Objectives are determined with the employees;

•Objectives are formulated at both quantitative and qualitative
levels;
•Objectives must be challenging and motivating;
•Daily feedback on the state of affairs at the level of coaching
and development instead of static management reports;
•Rewards (recognition, appreciation and/or performance-related
pay) for achieving the intended objectives is a requirement;
•The basic principle is growth and development not
punishments.
Benefits/Managerial Implications of
Management by Objectives-
•Management by objectives helps employees
appreciate their on-the-job roles and
responsibilities.

•The Key Result Areas (KRAs) planned are specific

to each employee, depending on their interest,
educational qualification, and specialization.

•The MBO approach usually results in better

•It provides the employees with a clear understanding of
what is expected of them. The supervisors set goals for
every member of the team, and every employee is
provided with a list of unique tasks.

•Every employee is assigned unique goals. Hence, each

employee feels indispensable to the organization and
eventually develops a sense of loyalty to the organization.

Managers help ensure that subordinates’ goals are related

to the objectives of the organization
Objective setting
Objective setting is when an organization plans
goals and how to meet them on a realistic
timescale. Objectives help define what each
department's and employee's responsibilities are
within the organization. Setting objectives is part
of establishing expectations for employees and
managing them, which is also called the
performance management process.
Objectives describe something that has to be
accomplished. Objectives or goals define what
organizations, functions, departments and
individuals are expected to achieve over a period of
time. Objective setting those results in an
agreement on what the role holder has to achieve
is an important part of the performance
management processes of defining and managing
expectations and forms the point of reference for
performance reviews.

Objective setting is a process related to management by

objectives. Its main assumption is to set specific, measurable,
achievable, realistic and time-bound objectives for people employed
Need to establish Objectives/ Need for Objective Setting-

It provides a yardstick to measure performance.

• It serves as a motivating force - People work to achieve

Objectives.

• It helps to pursue organization's vision and mission.

• it defines the relationship between the firm's internal and

external.
environment.

• It provides basis for decision making-All decisions are aimed

towards accomplishment of objectives.

• It provides standards for performance appraisal

Characteristics of Objectives-
• It must be understandable.

• It should be concrete and specific.

• It should be related to a time frame.

• It should be measurable and controllable.

• Different objectives must correlate with each other.

• It must be set within constraints

Advantages of Objective setting

Objective setting has several advantages that make it an effective tool for businesses and
organizations. These advantages include:

Improved productivity: Setting specific objectives helps individuals focus and prioritize
tasks, leading to improved productivity and efficiency.

More effective decision-making: Objectives provide a framework for making decisions,

allowing employees to determine what actions and choices support the overall goals and
objectives.

Improved communication: Objectives provide a common language and understanding,

enabling better communication and collaboration between team members.

Increased motivation: Working toward objectives gives employees a sense of purpose and
accomplishment, increasing motivation and engagement.

Enhanced accountability: Objectives provide a measure of accountability, since progress

can be tracked and evaluated.

Improved results: By setting objectives, organizations can ensure that the right resources
Step 1: Categorize the Objectives :

The first and foremost task in setting the objectives

is to categorize the objectives in various categories
such as long term, medium-term, short-term, etc.,
as per the time period of the objectives. These
categorized objectives should be divided into the
departmental, sectional, and individual objectives,
based on the type of objectives. These objectives
should be divided into a hierarchy to clarify the roles
and responsibilities of people at different levels of
the organisation.
After dividing the objectives, the strategic
leaders need to see whether or not these
objectives qualify in the criteria of good
objectives. If the objectives qualify then
the strategic leaders can proceed to the
next step. However, if the objectives do
not qualify in the criteria, then necessary
modifications are done so that they can
become achievable
Step 2: Review the Areas to Cover :

Once the objectives have been divided, the next thing is

to enlist the areas which need to be addressed.
According to Peter Drucker, "there are eight areas
in which objectives of performance and results
have to be set - market standing, innovation,
productivity, physical and financial resources,
profitability, manager performance and
development, workers performance and attitudes,
and public responsibility"
The strategic leaders should review the
objectives and should check whether these
areas are being covered or not. It should be
noted, that the objectives are feasible and
realistic, else the entire effort behind setting
objectives will get wasted.
Step 3: Balance the Objectives:

As soon as the objectives are divided

and areas are reviewed, the strategic
leaders should focus on balancing the
objectives. It is very essential to
balance the objectives for enabling
smooth operations within the
organisation.
It should always be kept in mind that
short-term objectives should be treated
as distinctive steps that lead to
fulfillment of long term objectives. The
objectives should be prioritized as per
their urgency and significance. Hence,
special attention should be paid to the
short-term objectives instead of long-
term objectives.
Step 4: Review the Formulated Objectives :

In the final step, the strategic leaders should review

the objectives that have been formulated. The
external environment is quite dynamic and changes
frequently which impose certain challenges on the
organisation. It is the responsibility of the strategic
leaders to analyse whether the objectives meet the
challenges. existing in environment. If necessary,
required adjustments should be made.
 Types of Objectives
1) Primary Objectives :
These are called primary objectives because they are concerned with fulfilling the
needs of primary stakeholders and consumers. They are the long-term goals of the
organisation. The primary objectives of an organisation can be surviving in the
competition, maximizing profit, increasing market share, etc. These objectives are
also called as "strategic objectives".

2) Secondary Objectives :
These objectives are also called as "tactical objectives". Secondary objectives are set
to perform the daily operations smoothly. These objectives address the issues of
wages, compensation, incentives, recognition, etc. These are routine objectives and
make a direct contribution in achievement of the primary objectives.

3) Short-Term Objectives :
These objectives are set to achieve short-term targets. The short-term goals are set
for up to one year or one financial year. For an organisation, the short-term objectives
can be used for increasing the sales, reducing the labour turnover, etc.
4) Medium-Term Objectives :
These objectives have longer time-period than the short-term objectives, and hence are
broader in perspective. The medium-term objectives are set for the period of 18 months to
five years. These objectives can be modified and reviewed whenever needed. The medium-
term objectives convert into short-term objectives with the passage of time. For example,
introducing variants of existing product, modification in existing organisational structure, etc.

5) Long-Term Objectives :
Long-term objectives are broad and inspiring in nature. The duration of long-term objectives is
more than five years. For example, diversifying the business, acquiring or merging a new
business, global expansion of business, etc.

6) Financial Objectives :
These objectives are associated with monetary benefits. These objectives are some of the
core and predominant objectives of organisation. The financial objectives of an organisation
can be to maximize sales, increase revenue by 20%, reducing product cost, etc. These
objectives may be short-term as well as medium-term.
7) Non-Financial Objectives :

These objectives are not associated with monetary

benefits. These objectives help the organisation to
evaluate the intangible aspects of a business such as
stability. health, long-term success, culture, value, etc.
Although many of such objectives are not aligned with
revenue generation, they finally have a positive impact
on the financial aspects of the organisation.