Planning

Objectives
After

studying this unit you should be able to :

Define planning and why it is termed the primary

function of management.
Explain the different classifications and types of
plans.
Explain the importance and the steps involved in
planning.
Explain why people fail in planning and the limits to
planning.
Discuss the tools used in planning.

Introduction

A Plan:

Planning:

is a specific documented intention consisting of an objective (end)

and an action statement (means)

Is an intellectual process;
it requires the conscious determination of courses of action, and
the basing of decisions on purpose, knowledge and considered
estimates. (Koontz, ODonnell & Weihrich, 1980)
is a task of:
setting objectives,
specifying how to achieve them,
implementing the plan. and
evaluating the results. (Boddy, 2005).

Planning
Allows for coping with uncertainty

by formulating courses of action to achieve specified

results

Three Types of Uncertainty

1.
2.
3.

State uncertainty: Occurs when the environment, or

a portion of the environment, is considered unstable
Effect uncertainty: Occurs when impacts of
environmental change are unpredictable
Response uncertainty: Arises when the
consequences of decisions are unpredictable

Planning contd.

It is deciding in advance:

In this sense planning is essentially decision making,

and

It is the responsibility of management

Because it affects all downstream mgmt functions,

what to do,
how to do it,
when to do it, and
who is to do it.

it has been called the primary management function.

Planning: The Primary Management

Function

Classification of Plans
Standing

Those that are repeatedly used ie. policies,

procedures and rules

Single

plans

use plans

Those designed for the attainment of specific

objectives within a relatively short time span, ie a
programme and budgets

Types of Plans
Strategic

plans

Set out the overall direction for the business, are

broad in scope and cover all major activities.
Chandler (1962) defined them as:
determining

the the basic long-term goals and

objectives of an enterprise and
the adoption of courses of action and the allocation of
resources necessary for carrying out these goals.
Tactical/Divisional

plans

for each major unit of the business

focus on how to compete

Types of Plans contd

Operational

First line managers tool for planning daily, weekly,

and monthly activities

Business

plans

plans

set out the markets the business intends to serve,

how it will do so and what finance they require
(Blackwell,2004)

Types of Plans

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Types of Plans contd

(Koontz, et. al.)
Purpose/mission
Objectives
Strategies
Policies
Procedures
Rules
Programmes,

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Budgets.

and

Purpose or mission
A broad

definition of an organizations
operations and scope, aiming to distinguish it
from similar organizations (Boddy,2005).

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Objectives
Represent

the desired ends and can be used

as yardsticks for measurement of performance,

to indicate to what extent an organizations mission

is being carried out.

Eg.

An airlines mission is the provision of cheap air

freight facilities,
its objectives could include:
Cutting

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costs so that its able to offer profitable low

freight charges.

Objectives contd
Objectives

are fundamental to the control of

organizational activity, and
are vital for the formulation of policies,
programmes and rules.
Objectives should be SMART expressed in
quantitative, measurable, and concrete terms.
Ie.
o
o
o

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What specific result is to be achieved?

When is the result to be achieved?
How is the result to be measured?
Who will be responsible for achieving the result?

The Importance of Objectives

(Kreitner 2007, p. 161)
Target:

Sets specific goals to achieve

Measuring

stick:

Gauges how much was achieved

Commitment:

Encourages pursuit of the objective

Motivation:

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Provides a challenge for achievement

A Typical Means-Ends Chain of

Objectives

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Strategies

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Are courses of action to be taken in light of the adverse

environmental forces so as to achieve company
objectives.

Policies

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These are statements that reflect the basic

objectives and provide guidelines for selecting
actions to achieve objectives.

Procedures
Series

of related sequential steps to deal with a

structured problem.
Narrower and more specific than policies
Often utilized when high degrees of accuracy in
performance are required if policies are to be
executed effectively.

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Eg. if an airline has a policy of servicing incoming

aircraft within a reasonable time of landing, that
calls for the drawing up of appropriate procedures

Rules
Simplest

type of operational plans

They state specific action for particular situations
no discretion.
Differ :

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from procedures in that they are not related to time

sequences, and
from policy which is essentially guides decision-making

Programmes
Single

use plans comprising relatively wide

related activities and requiring complex
coordination
Involve, objectives, policies, procedures and
budgets and fixed period.

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Budgets
Statements

future expenditures and revenue

reflecting resources allocated to specified activities
within a stated period of time (usually 1 yr).

They

mirror basic organizational plans &

are used as guides to and controls of, standards of

performance.

They

taken
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in quantified terms of:

act as signals for corrective action to be

Importance of Planning
1.
2.
3.
4.

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To offset uncertainty and change

To focus attention on objectives
To gain economical cooperation
To facilitate control

The Planning Process Involves :

Assessing

The Planning Period

The Environment of Plans

Environmental

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Forecasting

Economic Forecasting
Technological Forecasting
Social Forecasting, and
Political Forecasting

The Planning Period

Planning

can be short, medium, or long range

is costly , therefore a company should probably not
plan for a longer period than is economically
justifiable,
yet it is risky to plan for a shorter period.

It

is important to integrate short & long term

plans.
Planning involves an Open-System Approach

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therefore a plan requires an analysis of every

environmental element.

The Environment of Plans

Non

controllable elements include:

Population growth, future price levels,political

environment, tax rates, policies & business cycles.

Semi

controllable include:

Marketshare, character of labor turnover, labor

efficiency, company price policy and industry
legislative policy

Controllable

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elements

Those decided largely by the company mgmt and

involving policies, programs & strategies.

Environmental Forecasting

Allows mgrs to gain information on what is pertaining and

what changes are likely to occur in the environment
Involves conducting a PEST, SWOT, Competitor &
ANALYSIS
Forecasts & their review:

Forecasting:

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compel mgrs to think ahead, look into the future & provide for it.
may disclose areas where necessary control is lacking.

especially where participated in throughout the organization may

help unify and coordinate plans.
it assists in brining in singleness of purpose to planning

Steps in Planning
1.
2.
3.
4.
5.
6.
7.

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8.

Be aware of opportunity
Establishing objectives
Premising
Determining alternative courses of actions
Evaluating alternative course of action
Selecting a course of action
Formulating derivative plans
Numbering plans by budgeting

Steps in Planning contd

Being aware of opportunity

1.

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Includes a preliminary look at possible future

opportunities, a
knowledge of where we stand in the light of our
strengths and weaknesses, an
understanding of why we wish to solve uncertainties,
and
a vision of what we expect to gain

Steps in Planning contd

2.

Establishing objectives

Objectives specifying the:

results expected,
the end points of what is to be done, where
the primary emphasis is to be placed, and
what is to be accomplished by the network of:

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strategies, policies, procedures, rules, budgets, and

programs.

Steps in Planning contd

3.

Premising

4.

Determining alternative courses

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assumptions about the environment (internal &

external) in which organizational plans are to be
implemented. and
should be limited aspects that are critical or strategic
to the plan those with the most influence.
the number of alternatives should be reduced so that
the most promising possibilities may be analysed

Steps in Planning contd

Evaluating alternative courses

5.

Selecting a course of action

6.

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examine their strong and weak points,

weigh the various factors in light of premises and
goals
examine ROI, risk & cost.
this is a stage at which a plan is adopted,
the real point of decision making

Steps in Planning contd

Formulating derivative plans

7.

plans required to support the basic plan.

Eg when a airline decides to acquire new planes,
derivatives plans will include:

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hiring and training various types of personnel;

acquisition and positioning of spare parts;
development of maintenance facilities;
scheduling, advertising, financing and insurance.

Steps in Planning contd

8.

Numbering plans by budgeting

Convert plans to budgets.

The overall budgets of an organization represent
the sum total of income and expenses.
o

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Each department or program of a business can

have its own budgets.

If done well, budgets become important standards

against which planning progress can be measured

Planning; an example (Plunkett et al)

Basic
1.

planning process by a first level manager

Being aware of an opportunity

2.

Set Objective

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Increasing marketshare

To ensure that the office is staffed from 8hrs to

21hrs, Mon Thurs. Target date January 1 2016.

3.Premising
Present

staffing situation

Office is staffed by two f/time hourly employees.

08hrs to 16.30 and 08hrs to 17hrs

Financial

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resources

Operating budget has sufficient funds to support

additional staff at a range of K6 K8 p/hr, but
benefits are restricted.

Premising contd
Labour

supply

The potential number of p/time applicants is

uncertain based on the rate of pay available.

Company

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policy

Severe limits are placed on the use of overtime &

compensatory time.
a p/time employee becomes eligible for a limited
benefits package when they work 19hrs per week

4. Determining alternative courses

1.

2.
3.
4.

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Use present office staff by developing by

developing a combination package involving
o/time and compensatory time.
Use the present office staff by altering the work
hours of one or both.
Hire p/time staff to work 17 21hrs Mon Thurs
Hire two p/time workers to work two nights each
from 17 21hrs.

5. Evaluating alternative courses

1.

Present staff/combination package

1.

2.

Present staff/altered work hours.

1.

3.

Would provide coverage but would affect daytime

productivity. Staff reaction no!

One p/time staff

1.

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Problems with company pay policy & potential

reaction of present staff.

Would provide office coverage but stretch financial

resource, because new employee would be eligible
for limited benefits

Evaluating alternative courses

4.

Two p/timers/two nights each.

1.

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Would provide coverage and not exceed financial

resources or benefits restriction. Only question is:
can labour supply produce two qualified applicants?

6. Selecting a course of action

The

alternative with the fewest questions and

most promise is alternative 1. the only problem
lies in attracting candidates.

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7. Implementation
1.

2.
3.
4.
5.
6.

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To overcome the potential limitation (supply of

qualified candidates), pay the proposed
employees top rate of K8 p/hr.
Develop advertising by October 1.
Advertise both internally to externally
Establish Nov 1 as cutoff date for applications
Complete screening and interviews by Nov.21
Make hiring offers by Dec. 1.

8. Control & evaluation

1.
2.
3.

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Check daily to determine number of applicants

Extend the advertising deadline until a sufficient
number (20 30), applications are received.
If two candidates cannot be found, obtain
additional funds and implement alternative 3.

Why People Fail in Planning

1.

Lack of commitment to planning

2.

Psychological difficulties

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There is a natural tendency to let today's problems

push aside planning for tomorrows opportunities.
Therefore there is need for a climate that forces
people to plan
Lack of confidence & risk taking
Fear of adding to ones responsibility

Why People Fail in Planning

3.

Lack of meaningful objectives

4.

Tendency to underestimate the importance of

planning premises

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Goals must be clear, attainable, actionable and

verifiable (smart)
Goals must be defined in light of our strengths &
weaknesses and the relevant environmental factor.

Plans must be made in the light of uniform and

generally understood planning premises.

Why People Fail in Planning contd

5.

Failure to see scope of plans

6.

Failure to see planning as a rational process

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Some mgrs concentrate solely on either major or

minor plans neglecting other types of plans:
Eg. Missions/purposes, objectives/goals, strategies,
policies, rules, procedures and programs.
Planning requires clear goals, knowledge of
alternatives and a desire to come up with best
possible solution

Why People Fail in Planning contd

7.

Excessive reliance on experience

8.

Failure to use the principle of the limiting

factor

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What happened in the past is not likely to suit a

future situation

it requires that mgrs search out those factors in a

problem situation which make the most difference
in the solution and then deal primarily with them.

Why People Fail in Planning contd

9.

Lack of top management support

10.

Lack of clear delegation

11.

It is very difficult for people to plan if they do not know

what their job is, and
if they do not have clear authority to make decisions.

Lack of adequate control techniques & info.

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Planning is not likely to be very effective if there is no

support from top mgmt.

It can hardly be very effective if those responsible do

not know how well they are working.

Why People Fail in Planning contd

12.

Lack of an appropriate planning climate within

the organization as a whole

13.

Technical problems

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procedural inflexibilities inhibit effective planning, &

too much pressure on line mgrs leaves them with no
time to prepare effective plans
a mgr lacking technical skills will be deficient in
solving some of the technical problems which
accompany planning

Why People Fail in Planning contd

14.

Resistance to changes

50

without proper levels of participation, & careful

planning for implementation,
plans & objectives will be resisted by some
employees.
limiting resistance to change requires patient
selling of ideas, careful dissemination of
information and aggressive leadership

Limits to Planning
1.
2.
3.
4.
5.
6.
7.
8.

51 9.

Cost
Complexity of the planning process
Problem of rapid change
Political climate
Labour organization
Technological change
Current crises
Policy and procedural inflexibility
Capital investment

1. Cost
Cost effective planning requires a lot of time
and energy.
The more:

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committed to planning an organization is, the

more time and energy it devotes to it, and the
more
detailed the planning, the more expensive it will
be.

The longer the planning period the more

costly the plans will be.

2. Complexity of the planning

process
Shifting patterns of market demand make
prediction highly uncertain
Forecasting & planning techniques require a
fair degree of mathematical knowledge by
mgrs, so

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lack of training in quantitative approaches to

planning, creates difficulties.

3. Problem of rapid change

In

a complex & rapidly changing industry,

planning is very difficult, because new
problems become more complicated.

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4. Political climate

Government regulation must be taken into

account

5 Labor organization

Technological change

6.

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existence of strong unions especially those

organized on a national basis tend to restrict
freedom in planning.
The rate & nature of change presents external
limitations on planning

7. Current crises

8.

Policy & procedural inflexibility

9.

Progressive planning requires an environment of

change.

Capital investment

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Focusing on and constantly dealing with current

crises resulting from uncontrollable environment.

The ability to switch courses of future action

becomes limited and
the investment itself becomes a planning
premises.

Project Planning and Management

Project

The Project Life Cycle

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A temporary endeavor to achieve a particular aim

Conceptualization: Setting project goals and objectives
Planning: Organizing facilities and equipment, personnel and
task assignments, and scheduling
Execution: Beginning actual work on the project
Termination: Turning the project over to the end user and
phasing out project resources

The Project Life Cycle and Project

Planning Activities

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Graphic Planning, Scheduling and

Control Tools
Flow

Charts

Arrange events in the order of their actual or desired

occurrence (flow)
Eliminate wasted steps and activities (work
simplification)
Are useful for identifying task components and in
TQM
Potential problems:
They

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do not indicate the time dimension of tasks.

They are not practical for complex operations where
several activities occur at once.

A Sample Flow Chart

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Graphic Planning, Scheduling and

Control Tools (contd)
Gantt

Charts

A graphic scheduling technique historically

used in production operations
Useful

for scheduling large projects where time

for each activity can be specified and progress
assessed
Potential problem: Overly complex endeavors
are too cumbersome for Gantt charts.

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Figure 6.8: A Sample Gantt Chart

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Break-Even Analysis
Break-Even

The level of sales at which there is no loss or profit

The point at which the total of fixed and variable costs
equal total sales revenues

Fixed

Versus Variable Costs

Fixed costs:
Costs

that must be paid regardless of output or sales

Variable costs
Costs

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Point

that vary directly with production and sales

Graphic Break-Even Analysis

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Break-Even Analysis
Strengths

Planners are forced to interrelate cost, volume, and

profit in a realistic way.
Planners are able to ask what-if questions concerning
the impact of price, costs, and profit objective changes.

Limitations

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A neat separation of fixed and variable costs is difficult

to achieve.
Complex factors in supply and demand interfere with
the linear projections (point estimates) of the analysis.

The End

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