Taxmann's Management Principles & Applications | UGCF

LEADERSHIP

MANAGERIAL CHALLENGES IN 21ST CENTURY

Planning & Objective Setting 5

CHAPTER

CHAPTER OUTLINE

Introduction:

Nature, importance and limitations of planning

The process of planning

Approaches to planning

Principles of planning

Effective planning

Tactical, strategic and operational planning

Components of planning

Organisational objectives and goals

Objectives: Characteristics & Importance

Areas needing objectives

Top down or bottom up approach

Objective setting: Influencing factors

Setting of

Objectives : Approaches

All about MBO

Chapter Summary

Test questions

Introduction

A plan is a predetermined course of action. It is a blue print for goal achievement. Simply stated, it is setting goals and deciding how to achieve them. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are to where we want to go Planning has a number of characteristics:

Planning is goal-oriented : All plans arise from objectives. Objectives provide the basic guidelines for planning activities. Planning has no meaning unless it contributes in some positive manner to the achievement of predetermined goals.

Planning is a primary function: Planning is the foundation of management. It is a parent exercise in management process. It is a preface to business activities.

Planning is all-pervasive: Planning is a function of all managers. It is needed and practiced at all managerial levels. Planning is inherent in everything a manager does.

Planning is a mental exercise : Planning is a mental process involving imagination, foresight and sound judgment. Planning compels managers to abandon guesswork and wishful thinking. It makes them think in a logical and systematic manner.

Planning is a continuous process: Planning is continuous. It is a never-ending activity. It is an ongoing process of adjustment to change. There is always need for a new plan to be drawn on the basis of new demands and changes in the circumstances.

Learning exercise: A time management plan

Skill builder: How do you plan to achieve the goals?

Role play exercise

Case study: New management challenges for the new age

Planning involves choice: Planning essentially involves choice among various alternative courses of action. If there is one way of doing something, there is no need for planning. The need for planning arises only when alternatives are available.

Planning is forward looking: Planning means looking ahead and preparing for the future. It means peeping into the future, analyzing it and preparing for it. Managers plan today with a view to flourish tomorrow. Without planning, business becomes random in nature and decisions would become meaningless, ad hoc choices.

Planning is flexible: Planning is based on a forecast of future events. Since future is uncertain, plans should be reasonably flexible. When market conditions change, planners have to make necessary changes in the existing plans.

Planning is an integrated process: Plans are structured in a logical way wherein every lower-level plan serves as a means to accomplish higher level plans. They are highly interdependent and mutually supportive.

Planning includes efficiency and effectiveness dimensions: Plans aim at deploying resources economically and efficiently. They also try to accomplish what has been actually targeted. The effectiveness of plans is usually dependent on how much it can contribute to the predetermined objectives.

Importance of Planning

Planning helps an organisation in the following ways:

(i) Planning provides direction: Planning provides direction and a sense of purpose for the organisation. Without plans and goals, organisations merely react to daily occurrences without considering what will happen in the long-run. Plans avoid this drift situation and ensure that short-range efforts will support and harmonize with future goals. It helps an organisation decide what to do and when to do it. It reduces aimless activity and makes action more meaningful.

(ii) Planning provides a unifying framework: A plan helps people to set priorities and put effort accordingly. A plan tells everyone what the organisation hopes to achieve and what the contribution of each department must be, and who is to utilize resources to achieve the goals. Plans help in coordinating effort at various levels. In the absence of a plan, the organisation would be pulled in different directions, creating confusion and misunderstanding at various levels.

(iii) Planning is economical: Effective plans coordinate organisational work and eliminate unproductive effort. Guess work is banished. Facilities are employed to the best advantage. Waste motions and idle facilities are removed By focusing attention on what is to be done, how and when it is to be done, plans help an organisation to economically utilize the physical and financial resources. This, ultimately, improves efficiency of operations.

(iv) Planning reduces the risks of uncertainty: Planning helps an organisation to cope with an uncertain future. It helps management to anticipate the future and prepare for the risks by making necessary provisions to meet the unexpected turn of events. Planning minimizes the chances of mistakes and unpleasant surprises because objectives, policies and strategies are formulated after a careful scrutiny of internal as well as external environment. Planning, thus, seeks to minimize risk while taking advantage of opportunities.

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v) Planning facilitates decision making: Decision-making involves searching of various alternative courses of action, evaluating them and selecting the best one. Planned targets serve as the criteria for the evaluation of different alternatives so that the best one may be chosen. If there are no plans for the future, there are few guidelines for making current decisions. For example, decisions have to be made in present for a product to be introduced three years in the future. When future plans exist, decisions consistent with the future plans are made. Further, without plans, people will make decisions according to their own preference rather than those of the organisation.

(vi) Planning encourages innovation and creativity: Planning involves looking ahead and preparing for the future. The process of looking ahead, forces an organisation to be alert of opportunities and threats in the environment. It forces managers to find out new and improved ways of doing things in order to remain competitive and avoid the threats in the environment. It compels the managers to be creative and innovative all the time. Planning helps managers to visualize problems early and take suitable remedial steps. It helps them exploit opportunities and come out as ‘winners’ in a competitive world.

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vii) Planning improves morale: Once members know what is expected of them, they can contribute better. When goals are properly defined, work assignments can be fixed and everyone can begin to contribute to the achievement of these goals. This produces improvements in morale. Further, planning permits employees to participate in the thinking process. This helps them develop a broad mentality. Also, when the plan is actually translated into action, they feel that it is their own plan. Positive attributes are, thus, developed.

(viii) Planning facilities control: Planning and controlling functions are said to be ‘Siamese twins’ (inseparable twins). There is nothing to control without planning and without proper control, planning proves to be a wasteful and an unproductive exercise. Plans serve as yardsticks for measuring performance. They help in channelizing behaviour in the right direction. They help in preventing mistakes, oversights and deviations.

Limitations/Criticisms of Planning

The limitations of planning can be examined under the following headings:

1. Rigidity: Plans put the activities of an enterprise in a rigid framework. Everything is spelt out in detail and deviations are not permitted. New opportunities are often ignored or rejected because of the commitment to existing plans. Events may change, but plans may remain fixed. Managers, too, would be

reluctant to reorient their plans suitably, because it involves serious mental work to put everything in black and white change the same all over again.

2. Costly and time consuming: Planning is costly. It is expensive in terms of time spent to formulate the plans, the manpower required to do the planning and resources needed to execute the plan. The collection of information, evaluation of alternatives, selection of a suitable course of action, etc., may consume lot of executive time and organisational resources.

3. Employee resistance: For any plan to succeed, you need operating people to understand it, embrace it, and make it happen. One of the frequent complaints made against the planning process is that it is done by specialists who are not in touch with operations. As a result, operating people who are not involved in planning tend to resist the planning process. Planning ‘imposed from above’ often leads to resentment and resistance from those forced to execute.

4. False sense of security: Elaborate planning may create a false sense of security in the organisation. Managers may begin to feel that everything is well taken care of. They begin to assume that as long as plans are adhered to, there will not be any problems. As a result, they fail to take note of environmental changes and the need to review, restructure and reorient the old plans in an appropriate way.

BOX 5.1 : WHY PLANS FAIL?

Complex plan and no one really understood the same

Support from every one at every level missing

Complicated procedures and methods coming in the way

Knotty internal issues not put to rest completely.

Not a balanced and harmonious effort taking care of every aspect

Very rigid, inflexible approach to every issue

Effort not coordinated properly at various levels

People who are charged with implementation not fully involved

Impact of external forces not properly assessed

Over estimating strengths and underestimating rivals capacity to hit back (Source: Kinicki 2009 Hitt et al 2010; Robbins; Daft—Management 2010)

5. Managerial deficiencies: Planning is an intellectually demanding function. Since managers are assessed on the basis of results, they begin to discount long-range plans, and adopt short-range plans which would put them in a comfortable position. This may harm organisational interests in the long-run. Planning involves lot of paper work and hard mental labour. Most managers may not like to undergo such a painful process which, ultimately may not produce results.

6. Planning prevents innovation: Planning demands commitment to written policies, procedures and rules etc. It restricts a manager unnecessarily to defined areas. The executive is prevented from experimenting with novel

ideas, venturing into risky but profitable areas and exploring the untested yet lucrative grounds.

7. External Limitations: It is quite often remarked that ‘planning is a ritual in a fast changing environment’. This statement subscribes to the fact that planning is an empty academic exercise in the face of a highly competitive and turbulent environment.

Difficult to predict: It is difficult for planners to forecast economic conditions, government policies, competitive manoeuvers or human behaviour with any degree of accuracy. Planning, basically depends on a whole set of assumed conditions. Only when these assumptions are substantially correct, planning produces fruitful results.

Projected too far into the future: Moreover, the reliability of planning efforts is open to doubt since they are projected farther into the future, where the manager has no control over environmental forces.

Environmental turbulence: Future is a moving target. It may not be possible to anticipate future changes accurately and provide for them in plans. Uncertainty and unpredictability, the hallmarks of business environment–reduce the usefulness of planning and forecasting. Competition turns the best laid human plans into waste paper. Economic, political and technological revolutions force corporate planners to revise the plans day in and day out. Sometimes, there is a revision in plans even before their implementation. In the face of a highly volatile and turbulent environment, plans become obsolete documents and fail to guide the destinies of the organisation. And, it is extremely difficult for the organisations to buffer themselves against environmental instability, no matter how carefully and effectively the planning exercises are done.

Emergency situations: The utility of planning is further discounted, in the face of emergencies like strikes, lockouts, industrial disasters like the one that took place in Chemical Plant in Bhopal, Madhya Pradesh (India). In such instances, plans are completely upset, decisions made hand-to-mouth.

The Process of Planning

The process of planning consists of the following steps:

Establishing objectives: The first step in the planning process is to identify the goals of the organisation. The internal as well as external conditions affecting the organisation must be thoroughly examined before setting objectives. The objectives so derived must clearly indicate what is to be achieved, where action should take place, who is to perform it, how it is to be undertaken and when is it to be accomplished. In other words, managers must provide clear guidelines for organisational efforts, so that activities can be kept on the right track.

Developing premises: After setting objectives, it is necessary to outline planning premises. Premises are assumptions about the environment in which plans are made and implemented. Thus, assumptions about the likely impact of

important environmental factors such as market demand for goods, cost of raw materials, technology to be used, population growth, government policy, etc. on the future plans are made. Plans should be formulated by the management, keeping the constraints imposed by internal as well as external conditions in mind.

Evaluating alternatives and selection: After establishing the objectives and planning premises, the alternative courses of action have to be considered. The pros and cons as well as the consequences of each alternative course of action must be examined thoroughly before a choice is made.

Formulating derivative plans: After selecting the best course of action, the management has to formulate the secondary plans to support the basic plan. The plans derived for various departments, units, activities, etc., in a detailed manner are known as ‘derivative plans’. For example, the basic production plan requires a number of things such as availability of plant and machinery, training of employees, provision of adequate finance, etc. To ensure the success of a basic plan, the derivative plans must indicate the time schedule and sequence of performing various tasks.

Securing cooperation and participation: The successful implementation of a plan depends, to a large extent, on the whole-hearted cooperation of the employees. In view of this, management should involve operations people in the planning activities.

Providing for follow-up: Plans have to be reviewed continually to ensure their relevance and effectiveness. In the course of implementing plans, certain facts may come to light that were not even thought of earlier. In the light of these changed conditions, plans have to be revised. Without such a regular follow-up, plans may become out-of-date and useless. Moreover, such a step ensures the implementation plans along right lines.

Principles of Planning

To be useful, planning should try to incorporate some of the time-tested and interrelated principles, beautifully summed up by Koontz thus:

1. Principle of contribution to objectives: Every plan should help in the achievement of organisational objectives.

2. Principle of primacy of planning: Planning precedes all other managerial functions. It is the first and the foremost function to be followed in the process of management.

3. Principle of pervasiveness of planning: Planning is an all-pervasive function. It is important to all managers regardless of their level in the organisation.

4. Principle of flexibility: By flexibility of a plan is meant its ability to switch gears, change direction to adapt to changing situations without unnecessary cost (ability to vary product mix, shift marketing effort geographically, raise additional funds on favourable terms, reshuffle and relocate personnel quickly, change organisation structure etc.).

5. Principle of periodicity: Plans should be integrated and interconnected in such a way as to achieve the stated objectives economically and efficiently. A manager should review events and expectations regularly; refine and redraw the plan and keep it on track.

6. Principle of planning premises: Every plan is based on carefully considered assumptions, known as planning premises. “The more the individuals charged with planning, understand and agree to utilise consistent planning premises, the more coordinated enterprise planning will be”.

7. Principle of limiting factor: While choosing an appropriate course of action among different alternatives, the limiting or critical factor (such as money, manpower, machinery, materials, management) should be recognised and given due weightage. When ignored, the critical factor would seriously impact the process of planning and make it impossible to achieve goals.

Effective Planning

How can managers effectively plan when the external environment is continually changing? The following steps have to be taken—according to experts-- in order to make planning effective:

1. Climate: Planning must not be left to chance. Additionally, conducive climate must be provided so that activities proceed smoothly and systematically. Top managers should remove obstacles to planning, by establishing clear cut goals, realistic planning premises and offering required information and appropriate staff assistance at various levels.

2. Top management support: Planning must start at the top. It must receive attention of the top management continually. They must be willing to extend a helping hand, whenever required.

3. Participation: Plans are implemented by people. So, it is necessary to secure acceptance and commitment from them. One way to increase commitment is to solicit subordinates’ participation in the planning process. Planning comes alive when employees are involved in setting goals and determining the means to reach them.

BOX 5.2 : TEN COMMANDMENTS OF A GOOD PLAN

1. Should have a clear objective

2. Should be simple and easy to understand

3. Should provide for proper analysis and clarification of actions

4. Should be flexible enough to move in sync with changing trends

5. Should have a balanced focus

6. Should be practicable and capable of delivering results

7. Should allow people---especially those who look after its implementation-to participate actively and enthusiastically

8. Should provide for optimum use of resources

9. Should be sold to everyone and communicated well before it’s being implemented

10. Should allow integration of effort at every level smoothly : (L.F. Urwick, Koontz, Stoner)

4. Communication: Goals, premises and policies must be properly communicated to people. People must know what they are supposed to do, when, how and where. The time limits must also be communicated in advance.

5. Integration: Different plans must be properly balanced and integrated. They must support each other and should not work at cross purposes. Every attempt should be made to ensure that the pay-offs of planning are more than the costs involved.

6. Monitoring: Plans must be subjected to regular appraisal and review, so as to take note of internal as well as external changes. Better to keep the plan flexible to the extent possible. It may sound curious but in an uncertain environment, managers should be armed with plans that are speci c but exible. To be useful, plans need to be formulated in black and white but they should not be set in stone. Using the road map provided by a plan, managers should clear the hurdles on the way. They should be willing to change direction if environmental conditions warrant such a step. Even in the face of continual changes in environmental conditions, managers should adhere to a set of actions to see where things are going off the track and their likely impact on organisational performance. When things are manageable, as planned, then targets are achieved. Where things are thrown off the track, managers need to pick the loose threads rmly and weave them into a ne garment---as desired by customers and market forces.

Types of Planning

Strategic Planning

Strategic planning involves decisions about the organisation’s long term goals such as survival, growth etc. It involves setting long term objectives (by top management) and deciding about the judicious deployment of resources to achieve those objectives. Strategic planning, thus, is long-term in nature. It tends to be a top management responsibility. It requires looking outside the organisation for threats and opportunities. It also requires looking inside the organisation for nding out weaknesses and strengths. It affects many parts of the organisation, as its decisions have enduring effects that are dif cult to reverse. It tries to equip the organisation with capabilities needed to confront future uncertainties, by taking a holistic view of the entire organisation. Its focus is clearly on the ‘jungle, not the trees’. The main objective is to position the rm in an advantageous position in relation to the environment, keeping the rm’s own capabilities in mind. Example: In business, it means how much money is going to be dedicated to a project, and by when you

expect the project complete. In personal life, suppose you plan a wedding, it means deciding on the budget and the date.

Tactical Planning

Tactical planning translates broad strategic goals and plans into speci c goals and plans that are relevant to a de nite portion of the organisation, such as a functional area like marketing or human resources. Tactical plans focus on a major actions a unit must take to ful l a part of the strategic planning. They are often focused on 1-2 years in the future. This is the implementation of the strategic plan stage combining your available resources, look at obstacles, and review alternatives. Example: In business, it means an analysis of resource combination, planning for obstacles, and general timetable. In personal life, for the wedding, it means, nding the place, developing a guest list, deciding on a menu and music.

Operational Planning

Operational planning identi es the speci c procedures and processes required at lower levels of the organisation. Frontline managers usually focus on routine tasks such as production runs, delivery schedules, and human resource needs etc. They typically focus on the short term, usually 12 months or less. These plans are the least complex of the three and rarely have a direct effect or other plans outside of the department or unit for which the plan was developed. Example: In business, it means engaging the team, develop and answer the who, what, when, where, how management questions. In personal life, for the wedding, it means, choosing the band, nding the caterer, decide on owers, etc. To be fully effective, the organisation’s strategic, tactical and operational plans must be aligned – that is, they must be consistent, mutually supportive and focused on meeting the common purpose and direction.

TABLE 5.1: STRATEGIC, TACTICAL AND OPERATIONAL PLANS: KEY DIFFERENCES Point

ence

Time horizon

Typically 3-5 years 1-2 years

Scope Broadest

Complexity

Highly complex, covers a large territory

Impact Have the potential to have a dramatic impact –including survival and success of the organization

Management

A strategic business Unit

Complex, but more specific with a more limited domain of Application

Affect specific business units but the effect on the entire organization is measured

Next 12 months or less

Most narrow, centered on departments or smaller units of an organization

The least complex because they usually focus on small, homogeneous units

Impact is usually restricted to a specific department or organisation unit

Point of Differ-

Interdependence

High interdependence, must take into account the resources and capabilities of the entire organization and its external Environments

Components of Planning

Moderate interdependence; must take into account the resources and capabilities of several units within a business

Low interdependence; the plan may be limited to higher level, tactical and strategic plans but are less independent on these plans

Plans may be classi ed into two categories, i.e. standing plans and single use plans. Standing plans are put to use, again and again, over a long period of time. Once established, they continue to apply until they are modified or abandoned. Standing plans help managers in dealing with routine matters in a predetermined and consistent manner. Examples: 1. Objectives, 2. Strategies, 3. Policies, 4. Procedures, 5. Methods and 6. Rules.

Single use plans are non-recurring in nature and deal with problems that probably will not be repeated in the same form in future. Examples: 7. Programmes, 8. Schedules, 9. Projects, 10. Budgets. These are discussed below.

Objectives

Objectives are established to guide the efforts of a company and each of its components. They indicate the ‘end point of a management programme’. They typically indicate the result that an organisation expects to achieve in the long run. The nature of objectives may be captured thus:

Objectives generally are prioritized and arranged in an order of importance, i.e., overall objectives, divisional objectives, departmental objectives and individual objectives, etc.

Objectives are interrelated and interdependent. To achieve the end result, everyone must work in close coordination with others. There are multiple goals that are being talked about and taken up for action at any point of time.

Objectives have a definite time horizon. As a result, an organisation can have short term, medium term and long term objectives.

Objectives describe the purpose of an organisation. They show the way and direct effort. They put activities on the right track. Once objectives are set, it becomes easy to find out who is doing what, where things have gone wrong, why actions are not moving along desired lines and what needs to be done to rectify things etc.

Management Principles & Applications | UGCF

AUTHOR : V.S.P. Rao

PUBLISHER : TAXMANN

DATE OF PUBLICATION : JUNE 2024

EDITION : 3rd Edition

ISBN NO : 9789356223769

NO. OF PAGES : 596

BINDING TYPE : PAPERBACK

DESCRIPTION

This book is designed in a compact, easy-to-understand language, incorporating new topics to reflect the latest thinking in the field. It balances time-tested management principles with their successful application in a dynamic world. The third edition features significant enhancements, making it more accessible with examples, charts, tables, and study aids to maintain readability. Each chapter includes case studies and skill-building exercises to encourage creative thinking and problem-solving. Role-play exercises provide valuable learning opportunities, allowing students to act out situations individually or in groups.

This book is tailored for students in B.Com. (Hons.) Core Paper under UGCF for the University of Delhi, NCWEB, SOL, and various universities across India.

The Present Publication is the 3rd Edition, authored by V.S.P. Rao, with the following noteworthy features:

• [Chapter Outline] Clear statement of topics covered at the beginning of each chapter

• [Textual Matter] Divided into 19 chapters covering Introduction, Planning, Organising, Directing & Controlling, and Salient Developments & Contemporary Issues

• [Contemporary Examples] Complex topics explained through current examples

• [Charts | Boxes | Tables] Content presented concisely

• [Chapter Summary & Review Questions] Summaries and test questions at the end of each chapter to check understanding

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