UNIT TWO

2. MANAGERIAL PLANING
Learning Objectives:
At the end of this chapter you will be able to:-
⧫ To introduce the meaning and definitions of planning.
⧫ Analyze the nature and importance of planning.
⧫ Discuss various types of planning.
⧫ Understand types of plan.
⧫ Present steps in planning.

2.1 CONCEPTS AND NEED FOR PLANING

2.1.1 DEFINITION OF PLANING
Planning is the process of determining how the organization can get where it wants to go, and
what it will do to accomplish its objectives. In more formal terms, planning is “the systematic
development of action programs aimed at reaching agreed-upon business objectives by the
process of analyzing, evaluating, and selecting among the opportunities which are foreseen.”
Planning- is a critical management activity regardless of the type of organization being
managed. Modern managers face the challenge of sound planning in small and relatively simple
organizations as well as in large, more complex ones, and in nonprofit organizations
Heying and Massie define “Planning is that function of the manager in which he decides in
advance what he will do. It is a decision making process of a special kind. It is an intellectual
process in which creative mind and imagination are essential”. Planning is an attempt to
anticipate the future in order to achieve better performance.

In the business world, organizations should achieve their objectives. In order to achieve
objectives, the organizations should plan. Planning process produces the plan.
Plan is a blueprint for action & prescribes activities necessary for an organization to realize its
goals. Understanding of planning process requires knowing the relationship between goals, plans
& controls as shown below.

Goals Plans Controls

Goals represent the designed position of an organization that is sought to be achieved; Plans
establish the means for achieving the organization goals; and through planning managers outline
the activities necessary to insure that the goals of the organization are achieved; and Controls
monitor the extent to which goals have been achieved and ensure that the organization is moving
in the direction suggested by its plans.
Goals are the outcomes of planning and benchmarks for controls. They are taken from the plan.
Goals, plans & controls are inextricably intertwined & must be well integrated so as to make the
planning process successful.
Planning answers six basic questions in regard to any intended activity(objective).
⧫ The ‘what’ or what to do: is the goal that we want to achieve. It may be long term or
short term.
⧫ The ‘when’ or when to do: is the question of timing. Each long term goal may have a
series of short term goals that must be achieved before the long term can be achieved.
⧫ The ‘where’ or where to do: is the place at which the plan is put into practice.
⧫ The ‘who’ or who does it: is the individual/ unit supposed to undertake specific tasks. It
asks which specific people will perform specific tasks.
⧫ The ‘how’ or how it is done or by whom it is done: is the strategy/ method for
achieving the goal. It describes what specific steps are to be taken and in what kind of
sequence.
⧫ The ‘how much’ or how much is required to do: concerns with the expenditure of
resources that are determined to be essential to reach goals.
Planning - is the process of setting objectives and determining the steps needed to attain them.
✓ Is today systematic preparation for tomorrow course of action.
✓ Deals with ends (what is to be done).
➢ in planning managers:
✓ Assess the future
✓ Determine objectives of the organization and develop the overall strategies.
✓ Determine resources needed to achieve the objectives
2.1.2 NEED FOR PLANNING
Planning is important for every organization irrespective of its size, objectives, and location.
Because decisions without planning would become random this may lead to failure of entire
organization.
Planning is important for several reasons:
1. It reduces risk and uncertain of the future: by providing a more rational, fact based
procedure for making decision, planning allows managers and organizations to minimize
risk and uncertainty.
2. Leads to success: planning does not guarantee success, but studies have shown, often
things being equal, companies which plan not only outperform the non-planners but also
outperform their own past result.
3. Focus attention on the organization’s goals: planning helps the manager to focus
attention on the organization’s goals and activities. This makes it easier to apply and
coordinate the resources of the organization more efficiently. The whole organization is
 forced to embrace identical goals and elaborate in achieving them. It also enables the
manager to outline in advance an orderly sequence of steps for the realization of an
organization’s goals and to avoid a needless overlapping of activities.
4. Facilitates control: in planning, the manager gets goals and develops plans to
accomplish these goals. These goals and plans then become standards or benchmarks
against which performance can be measured. The function of control is to ensure that the
activities conform to the plans. Thus, controls can be exercised only if there are plans.

WHERE DOES PLANNING START?

Planning is carried out at the various levels of the organization. There are two basic approaches
to planning, namely the top - down approach and the bottom - up approach.
1. The top - down approach: It is the planning efforts that begin at the top level managers.
Top level managers determine the direction of the organization and establish a master plan to
achieve over all goals. The master plan provides direction within which departments & work
groups develop their plans.
2. The bottom - up approach: It is the planning that is initiated at the lowest level of the
organizational hierarchy. In this approach, the managers and employees at the operational
level began the planning process, finally the top levels bring together all the plans of the
organizations work groups to develop a cohesive & well integrated master plan, then this
establishes the overall direction of the organization.
These planning modes/ approaches are not mutually exclusive. By being flexible, mangers can
capitalize on the benefits of both approaches. The current trend is towards integrating the aspects
of both top down & bottom up planning approaches.
REQUIREMENTS OF PLANNING
All organizations want smooth transition from present to the future. Planning represents the way
in which decision makers attempt to build bridge into the future. For several reasons, planning is
not given the attention that it requires. But Planning requires time; commitment; forecasts;
thought and paper-work.
CHARACTERISTICS OF PLANNING
The following are the basic characteristics of planning.
1) Planning is the primary function of management: Planning is the starting point of
management. It is only planning which gives meaning to all other managerial functions,
namely, organizing, staffing, co-coordinating and controlling. Without planning the other
functions cannot be effectively performed.
2) It is goal-oriented: The goal of every business is to make profits. Planning helps to attain
the goal in the most effective and efficient manner.
3) It is all-pervasive: By this we mean that planning is done by everyone at every level of
management, namely top, middle and lower levels. Planning is pervasive and it extends
 throughout the organization. Planning is the fundamental management function and every
manager irrespective of level, has a planning function to perform within his particular area of
activities. Top management is responsible for overall objectives and action of the
organization. Therefore it must plan what these objectives should be and how to achieve
them. Similarly a departmental head has to devise the objectives of his department within the
organizational objectives and also the methods to achieve them. Thus planning activity goes
in hierarchy as shown in the following figure.

4) It is an intellectual activity: Planning is a mental activity. It involves application of mind

and intelligence to attain, in a systematic manner, the organizational objective.
5) It is future –oriented: Planning is required to attain the future goals of an organization.
However, past happenings provide the basis for plans. As future is uncertain, a plan must
make suitable provisions to meet any crisis.
6) It requires an integrated approach: There must be a link between the plans of different
departments. The production plan of a business must be in tune with its financial plan. The
marketing plan likewise must be in tune with the production plan and vice versa.
7) It is a continuous process: It means that a stage will never come when the need for planning
will not be felt at all. Planning is required as long as we live in this world. As far as business
is concerned, planning is needed as long as there are business activities.
8) It involves decision making: Planning involves making choice out of certain alternative
courses i.e., decision-making. When there is only one way of doing something, there is no
need for planning at all.
9) Planning is antithesis of status quo: Planning is undertaken with the conscious purpose of
attaining a position that would not be accomplished by the company. Hence it implies change
in organizational objectives, policies, products, marketing strategies, etc. Planning itself is
affected by unforeseen organizational change. Therefore, it needs examination, re-
examination, and continual reconsideration of the future, continuous searching for more
effective methods & improvement of results. Planning is a process and the exact opposite of
status quo.
 2.2. TYPES/ CLASSIFICATION OF PLANS
Plan can be classified in to different types based on various criteria (basis): repetitiveness, time
dimension and scope or breadth dimension.
CLASSIFICATION OF PLANS BASED ON REPETITIVENESS
1. STANDING PLANS
Standing plans are plans that are used again & again; followed each time; and designed to deal
with organizational issues or problems that recur frequently. They can limit employees'
flexibility & make it difficult to respond to the needs of the customers. By using standing plans
management handles repetitive problems. Standing plans include mission or purpose; goals/
objectives, strategy; policy; procedure; method and rule.
A. Purpose or Mission
Setting organizational objectives is the starting point of managerial actions. Every
organization is purposive creation, it has some objectives; the end results for which the
organization strive. These end results are referred to as mission, ‘purpose’, ‘goal’, ‘target’ etc.
which are often used inter-changeably. However there are differences in the contest in which
these terms are used.
In every social system, enterprises have a basic function or task, which is assigned to them by
society. The mission or purpose identifies this basic function or task of the organization, for
example the purpose of university is teaching & research.
Mission and purpose are often used interchangeably though there is difference between the two
at least at theoretical level. Mission has external orientation and relates the organization to the
society in which it operates. A mission statement links the organization activities to the needs of
the society and legitimates its existence. Purpose is also externally focused but is relates the
organization to that segment of the society to which it serves; it defines the business which the
company will undertake. The mission of the company says what it can be for the country i.e.,
society in general and purpose suggest how this contribution can be made. However in general
practice mission and purpose are either used interchangeably or jointly.
B. Goals or Objectives
Every organization is established for the purpose of achieving some objectives. An
individual who starts a business has the objective of earning profits. A chartable institution
which starts schools and colleges has the objectives of rendering service to the public in the field
of education. Though objectives may differ from one organization to another, yet each
organization has its own objective. Objectives are the end towards which the activities of an
organization are directed. Objectives are known by different names, such as goals, aims,
purposes, targets etc. Setting up of objectives is the first step in planning.
Policies
A policy is a general guide to thinking and action rather than a specific course of action. It
defines the area or limits within which decisions can be made to achieve organizational
objectives. It sets up boundaries around decisions. According to Koontz and O’ Donnell
policies are general statements of understanding which guide or channel thinking in decision
making of subordinates. Policies channelize the thinking of the organization members so that it
is consistent with the organizational objectives. According to George R Terry “ Policy is a
verbal, written or implied overall guide, setting up boundaries that supply the general limits and
directions in which managerial action will take place”. Although policies deal with “how to do”
the work, but do not dictate terms to subordinates. They only provide framework within which
decisions are to be made by the management in various areas. Hence an organization may have
recruitment policy, price policy, advertisement policy etc.
Types of policies: Policies may be classified on the basis of sources, functions or organizational
levels as shown

Originated policies are policies which are established formally. These policies are established by
top managers for guiding the decisions of their subordinates and also their own and are made
available in the form of manuals. Appealed policies are those which arise from the appeal made
by a subordinate to his superior regarding the manner of handling a given situation. When
decisions are made by the supervisor on appeals made by the subordinates, they become
precedents for further action. For example a books dealer offers a discount of 10% on all text
books. Suppose if an institution requests for a discount of 15% and prepared to pay full amount
in advance, the sales manager not knowing what to do may approach his superior for his advice.
If the superior accepts the proposal for 15% discount, the decision of the superior become a
guideline for the sales manager in future. This policy is an appealed policy because it comes into
existence from the appeal made by the subordinate to the superior. The policies which are stated
neither in writing nor verbally are known as implied policies. The presence of implied policies
can be ascertained by watching the actual behavior of various superiors in specific situations. For
example if company’s residential quarters are repeatedly allotted to individuals on the basis of
seniority, this may become implied policy.
On the basis of business function policies may be classified into production, sales, finance,
personnel policies etc. Every one of these function may have a number of policies. For example
 the personnel function may have recruitment policy, promotion policy and finance function may
have policies related to capital structure, dividend payment etc.,
On the basis of organizational level policies may range from major company policies through
major departmental policy to minor or derivative policies applicable to smallest segment of the
organization.
Advantages of Policies
The advantages of policies are as follows:
✓ Policies ensure uniformity of action at various organization points which make actions
more predictable.
✓ Since the subordinates need not consult superiors, it speeds up decision.
✓ Policies make easier for the superior to delegate more and more authority to his
subordinates because, he knows that whatever decision the subordinates make will be
within the boundaries of the policies.
✓ Policies give a practical shape to the objectives by directing the way in which
predetermined objectives are to be attained.
C. Procedures
A procedure is a chronological sequence of steps to be undertaken to enforce a policy and to
attain an objective. It lays down the specific manner in which a particular activity is to be
performed. It is a planned sequence of operations for performing repetitive activities uniformly
and consistently.
Policies are carried out by means of more detailed guidelines called procedures. A
procedure provides a detailed set of instructions for performing a sequence of actions involved in
doing a certain piece of work. A procedure is a list of systematic steps for handling activities that
occur regularly. The same steps are followed each time that activity is performed. A streamlined,
simplified and sound procedure helps to accelerate clerical work without duplication and waste
of efforts and other resources. Difference between policies and procedures can be explained by
means of an example. A company may adopt a policy of centralized recruitment and selection
through labor department.
The labor department may chalk out the procedure of recruitment and selection. The
procedure may consist of several steps like inviting application, preliminary interview aptitude
and other tests, final interview, medical examination and issue of appointment orders. The
following are advantages of procedures.
✓ They indicate a standard way of performing a task.
✓ They result in simplification and elimination of waste.
✓ Procedure improves the efficiency of employees.
✓ Procedure serves as a tool of control by enabling managers to evaluate the performance
of their subordinates.
D. Methods
A method is a prescribed way in which one step of procedure is to be performed. A method is
thus a component part of procedure. It means an established manner of doing an operation.
Medical examination is a part of recruitment and selection procedure, method indicate the
manner of conducting medical examination. Methods help in increasing the effectiveness and
usefulness of procedures. By improving methods, reduced fatigue, better productivity and lower
costs can be achieved. Methods can be improved by eliminating wastes by conducting “motion
study”.
Methods are more detailed than procedures. Procedure shows a series of steps to be taken where
as a method is only concerned with a single operation, with one particular step, and tells exactly
how this particular step is to be performed.

E. Rules:
Rules are the simplest and strictest type of standing plan found in organizations. They provide
detail & specific regulations for action, and reflect managerial decisions that certain actions must
or must not be done. Rules are different from policies & procedures. Rules also serve as
guidelines, but allow no discretion in their application; allow no deviation from the stated course
of action. A procedure might be looked upon as of rules but a rule may or may not be a part of
procedure. e.g. “No smoking” is a rule unrelated to any procedure. Rules are already decided
measures that are applied in response to a certain action. And they are pre-decided actions by top
level managers. Employees don't have right to modify or change rules by themselves.
Rules, procedures & methods, by their nature, are designed to repress thinking; we should use
them only when we don’t want people in an organization to use their discretion.
2. SINGLE – USE PLANS
They are developed to address a specific organizational situation. They are used up only once but
not over & over again as the standing plans. They are not used up again once the objective is
accomplished. Single – use plans are commonly three types, namely programs; projects and
budgets.
A. Programs
They are a relatively broad set of activities designed to accomplish a particular set of goals. They
are complex and encompass goals, policies, procedures, rules, task assignments, steps to be
taken, resources to be employed, and other elements necessary to carry out a given course of
action; they are supported by budgets. Programs may be of various size & duration. A program is
a sequence of activities directed towards the achievement of certain objectives. A programme is
action based and result oriented. A program lays down the definite steps which will be taken to
accomplish a given task. It also lays down the time to be taken for completion of each step. The
essential ingredients of every program are time phasing and budgeting. This means that specific
dates should be laid down for the completion of each successive stage of programme. In addition
a provision should be made in the budget for financing the programme. A program might include
such general activity as purchasing new machines or introducing new product in the market.
Thus a program is a complex of objective, policies, procedures, task assignments, steps to be
taken, resources to be employed and other elements to carry out a given course of action.
B. Projects
Projects are parts of a general program and direct the efforts of individuals or work groups
towards the achievement of well defined goals. They are typically less comprehensive &
narrower in focus than programs; and usually have predetermined target dates for completion.
Project is a subset of a specific program. It is a smaller portion of a program. Projects are
connected with a major program but a project can be handled by itself.

C. Budgets
Budget is the resources required in numerical terms. It is referred as a numerated/ numberized
program. it is a fundamental planning instrument in companies that deals with the future
allocation and utilization of various resources to different organizational activities over a given
time period. Budget can be expressed in financial terms; labor units; products/ unit of product;
machine hours or in any other numerically measured term. It is necessary for control; and serves
as a benchmark for controlling. Budgets are 3 types.
Variable or flexible budget: budgets that vary according to the organization’s level of
output.
Program budget: when an organization & its departments identify goals, develop
detailed programs to meet the goals estimate the cost of each program. To prepare
effective program budget, a manager must do some fairly detailed & through
planning.
Zero – base budget: the programs started from the scratch or “base zero”.

N.B. Programs are the most comprehensive, projects have the narrower scope and often
undertaken as a part of a program. Budgets are developed to support programs & projects.
CLASSIFICATION OF PLANS BASED ON TIME
All planning deals with the future; and the future are measured in time. All the kinds of plans are
interrelated and one is the derivative of the other. Plans in terms of time periods are classified
into three as long term/ range; intermediate range and short range.
1. Long – range planning: has longer time horizon; and usually concerned with the future
direction of the organization but not concerned with the immediate future but with distant
future. The time usually ranges from 5-10 years, but the time length is a relative term that
depends on the size & the nature of the organization.
2. Intermediate – range planning: ranges between long & sort range planning; and they are
usually developed for 1-5 years, but the time dimension can also vary depending on the size
& nature of the organization.
3. Short – range planning: are not developed separately. They are also taken as operational
plans derived from the long ranging or intermediate plans. The time length is commonly
taken as less than 1 year. What is long or short range in most cases depends on the size of the
organization & the type of business of the organizations.
 CLASSIFICATION BASED ON SCOPE/ BREADTH
Planning that is strategic in nature; focuses on changing the competitive position and the overall
performance of the organization is the long term. Based on scope, plans are classified into 3
categories as Strategic plan; Tactical plan & Operational plan.
1. Strategic planning
Strategic plan is a general plan outlining decisions of resources allocation, priorities, and action/
steps necessary to reach strategic goals. It is a process of analyzing & deciding the organs
mission; objective; strategy (major courses of action) and the major resource allocations. It is
also developed by top level managers; mostly long –range in its time horizon; expressed in
relatively general, non-specific terms & a type of planning that provides a general direction to
the organization. Strategic planning is the process by which the organization's strategies are
determined. In the process, three basic questions are answered:
➢ Where are we now?
➢ Where do we want to be?
➢ How do we get there?
The "where are we now?" question is answered through the first three steps of the strategy
formulation process:
✓ Perform internal and external environmental analyses,
✓ Review vision, mission and objectives, and
✓ Determine SWOT: Strengths, Weaknesses, Opportunities and Threats.
SWOT analysis is very crucial. Going on to strategy choices without a comprehensive SWOT
analysis is risky. Strengths and weaknesses come from the internal environment of the firm.
Strengths can be exploited, built upon and made key to accomplishment of mission and
objectives. Strengths reflect past accomplishments in production, financial, marketing and
human resource management. Weaknesses are internal characteristics that have the potential to
limit accomplishment of mission and objectives. Weaknesses may be so important that they need
to be addressed before any further strategic planning steps are taken. Opportunities and threats
are uncontrollable by management because they are external to the firm. Opportunities provide
the firm the possibility of a major improvement. Threats may stand in the way of a firm reaching
its mission and objectives.
2. Tactical planning:
Tactical plan is a plan aimed at achieving tactical goals and developed to implement specific
parts of strategic plan. It refers to the process of developing action plans through which strategies
are executed. It is concerned with shorter time frame & narrower scopes than strategic planning.
Departmental managers in organizations are often involved in tactical planning. The strategic
planning & tactical plan are highly interrelated.
3. Operational planning:
Operational plans focuses on carrying out technical plans to achieve operational goals.
Operational planning is mainly short range; more specific & detailed. It is made at operational
level & concerned with day- today; week – to - week activities of the organizations.
4. Contingency planning:
Contingency planning is an approach that has become very popular in today's rapidly changing
business envelopment. It is the determination of alternative courses of action to be taken if the
original plans are disrupted or become inappropriate due to the changing circumstances. It is
proactive in nature & the management tries to anticipate changes in the environment and
prepares to cope with the future events. It is necessary at each level of management and for
strategic, tactical, and operational plantings. It is the development of two or more plans based on
different conditions. The plan to be implemented is determined by the specific prevailing
situation.

2.3 THE PLANNING PROCESS

The planning process indicates the major steps taken in planning. And generally there are 10
steps in planning process
Step 1: Understanding the existing situation
Awareness to the external environment to the organization is great important in planning to
identify opportunities (O) & Threats (T) and identify Strength (S) & Weaknesses (W) of an
organization. To understand external environment organizations should analyze economic
situations (competition, prices, demand, supply, etc.); Political situations (government policies,
taxation, peace & stability, etc.); Socio – cultural situations: (culture of the society, direction in
change of the culture, attitude of the society towards different products, etc.); Environmental
situations and Technological situations. In addition to external environment, understanding the
internal environment is also essential, i.e. different types of resources an organization possesses.
Therefore managers must look at O and T as well as S &Ws, and understand what problems
they wish to solved & why, and know what they expect to gain. Setting realistic objectives
depends on this awareness. Planning requires a realistic diagnosis of the opportunity situation.
Step 2: Forecasting
Forecasting is assumption what the future looks like. To decide where one wants to go, it is
necessary to have information about what the future looks like. Planning is deciding what is to be
done in the future. The future is full of uncertainties; the manager must make certain assumptions
about it in order to plan properly. These assumptions are based on forecasts of the future.
Step 3: Establishing objectives
Objectives established for the entire enterprise and then for each subordinate work unit. They
specify the expected results and indicate the end points what is to be done, where the primary
emphasis to be located, & what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets, & programs. Organizational objectives give direction to the major
plans, by reflecting these objectives departmental objectives defined, departmental objectives
intern control objectives of subordinate departments, etc. down the line. The objectives of lesser
departments will be more accurate if the subdivisions managers understand the overall
organizational objectives and the derivative goals.
Step 4: Determining the alternative courses of action
Determining the alternative courses of action is searching for & examining alternative course of
action (strategies), especially for those not immediately apparent. The more common problem is
not finding alternatives but reducing the number of alternatives
Step 5: Evaluating alternative courses of action
Evaluating alternative courses of action is assessing the alternatives by weighing them in light of
premises and goals. It is seeking out alternative courses and examining their strong & weak
points.
Step 6: Selecting a course of action
Selecting a course of action is the point at which the plan is adopted. It is the real point of
decision making.
Step 7: Formulating derivative plans
Derivative plans are those which support the basic or main plan.
Step 8: Numberizing plans by budgeting
After decisions are made & plans are set, the final step is giving them meaning. Budgeting is to
numberized plans by converting them into budgets. The organization’s budget represents the sum
total of income & expenses. If done well, budgets become a means of adding together various
plans & also set important standards against which planning progress can be measures.
Step 9: Implementing the plan
After selecting optimum alternative, the manager has to develop an action plan to implement it.
The manager must decide these issues
o Who will do what
o By what date will the tasks be initiated & completed
o What resources will be available for the process (human & material)
o How will the plan be evaluated
o What reporting procedures are to be used
o What type & degree of authority will be granted to achieve these ends
Step 10: Controlling & evaluating the results
Once the plan is implemented, the manager must monitor the progress, i.e. evaluate the
reported results, and make any modifications necessary. Plans have to be modified because the
environment is constantly changing. Modification is needed because plans are not quite perfect
when they are implemented.
PRINCIPLE OF PLANING
Planning depends on the production, technology, human, financial & physical resources,
working conditions/ environment of the organizations, and its environmental forces. Certain
principles underlie sound planning. These principles are
1. Principle of contribution to objectives.
The soundness of plans depends on the extent to which they contribute to the efficient &
effective achievement of corporate objectives. Objectives are the basic criteria underlying the
formulation of plans & also for evaluating results of operating plans.
2. Principles of sound & consistent premising
Premises are assumptions regarding the environment that would prevail during the period of the
implementation of plans. These environmental forces include general;
o Economic conditions
o Social/ cultural forces
o Political/ legal
o Technological conditions
o Market conditions/ actions of competitors, etc.
Plans are made on the basis of premises about the future state of these environments and the
soundness depends on the accuracy of these premises. Premising about such a myriad of
environmental forces is as difficult as it is critical. Hence, large corporations employ a large
number of economists, engineers, sociologists, and other experts whose sole responsibility is
planning & forecasting.
3. Principles of limiting factors
The limiting factors are elements in a company’s internal or external situation which should be
revoked or modified if plans are to be formulated for the achievements of its objectives.
4. Principles of commitment
Logical planning should cover a period of time in the future necessary to foresee as well as
possible, through a series of actions, the fulfillment of commitments involved in a decision made
today.
5. Principles of coordinate effort
This principle advocates that all the plans of the company should be coordinated with one
another so as to produce an integrated plan. Thus short & long range plans should be coordinated
with one another. It is achieved if short range plans are derived from long range plans, and the
implementation of the former regarded as the contribution to the implementation of the latter.
Instruments of planning including strategies, policies, rules, procedures, programs, projects, &
budgets should be mutually content and lead to coordinate effort towards effective
implementation of plans.
6. Principles of timing
Corporate plans consist of a number of major and derivative plans. All these plans should be
synchronized as to the timing of the implementation. Some of these plans be implemented
sequentially, while others simultaneously. Hence all these plans should be arranged in the time of
hierarchy.
7. Principle of efficiency
Plans require the expenditure of resources for their formulation and implementation. All these
resources constitute the cost of planning. Plans should aim at minimizing the cost & thereby
achieve the most efficient utilization of scarce resources
8. Principle of flexibility
Plans should have an inbuilt flexibility when actual environment turns out to be different from
predications. This principle can be taken for granted that the future will be different in actuality
that the forecasts on which the plans are based. Companies prepare contingency plan which may
be put into operation in response to the prevailing situations.
9. Principle of navigational change
Plans should be reviewed periodically as to their premises in relation to actually operating
environment and the future expectation and as to their results in relation to the planned goals.
The review may require changes in objectives, strategies, policies and programs.
10. principle of acceptance
Successful implementation of plans requires the willing and cooperative effort of all employees.
It is essential that plans should be understood and accepted by them

2.4 STRATEGIC OBJECTIVES

Mission, Vision, Goals, Objectives, and Targets
These words are often the most confusing words in management field. They are some what
similar but not exactly the same in their meanings.

Vision- Erich Fromm pointed out; "The best way to predict your future is to create it." A vision
might be a picture, image, or description of the preferred future. A visionary has the ability to
foresee something and sees the need for change first. Managers require more vision than ever
because change is coming faster than ever. Leaders have the ability to make their vision real by
engaging the minds, as well as the hearts of others.
Mission _ refers to the main reason why the organization is established. or it indicates purpose
for existence of an organization
✓ Relates organization to external environment.
Values- are traits or qualities having intrinsic worth, such as courage, respect, responsibility,
caring, truthfulness, self-discipline, and fairness. Values serve as a baseline for actions and
decision-making and guide employees in the organization's intentions and interests. The values
driving behavior define the organizational culture.
Goal _ is expected (desired) performance to be accomplished but it is not set specifically- is
desired future outcome that an organization strives to achieve generally. Goal is an end that the
organization strives to attain. However, the supervisor cannot "do" a goal. Supervisors break
down processes, analyze them, set objectives and then drive hard to achieve them. Doing the
same thing and expecting different results doesn't work. E.g.to increase profit.
Objective An objective is simply a statement of what is to done and should be stated in terms of
results. A mnemonic aid to write objectives is SMART (Specific, Measurable, Attainable,
Result-oriented, Time-limited).
Characteristics of good (effective) objective (SMART)
There are some characteristics of effective objectives, so effective objectives are mostly:
Specific; Objectives should state the exact level of performance expected specifically. An
objective must be specific with a single key result. If more than one result is to be
accomplished, more than one objective should be written. Just knowing what is to be
accomplished is a big step toward achieving it. What is important to you? Once you clarify
what you want to achieve, your attention will be focused on the objective that you deliberately
set. You will be doing something important to you.

Measurable- as much as possible objectives should be expressed quantitatively, therefore, it is

possible to easily determine whether or not goals have been achieved. An objective must be
measurable. Only an objective that affects behavior in a measurable way can be optimally
effective. If possible, state the objective as a quantity. Some objectives are more difficult to
measure than others are. However, difficulty does not mean that they cannot be measured.
Treatment of salespeople might be measured by looking at the absenteeism and turnover rates
among the sales force. Also, salespeople could be asked to fill out a behavioral questionnaire
anonymously giving their observations of the supervision they receive. Customer service could
be measured by such indices as the number of complaints received, by the number of customers
lost, and by customer interviews or responses to questionnaires. Development of subordinates
could be measured by determining the number of tasks the subordinate has mastered.
Cooperation with other functions could be measured by length of delay in providing requested
information, or by peer ratings of degree of cooperation.

Avoid statements of objectives in generalities. Infinitives to avoid include to know, to

understand, to enjoy, and to believe. Action verbs are observable and better communicate the
intent of what is to be attempted. They include to write, to apply, to recite, to revise, to contrast,
to install, to select, to assemble, to compare, to investigate, and to develop. How will you know
you've progressed?
Appropriate- objectives should be prepared in suitable, acceptable. And achievable manner.

Realistic and challenging- objectives should be attainable or real rather than fantasy. An
objective must be attainable with the resources that are available. It must be realistic. Many
objectives are realistic. Yet, the time it takes to achieve them may be unrealistic. For example, it
is realistic to want to lose ten pounds. However, it is unrealistic to want to lose ten pounds in one
week. What barriers stand between you and your objective? How will each barrier be overcome
and within what time frame? It also better to have challenging objectives as far as they could
motivate workers if attained.
Time bound _ objectives should be set with in specific time limits or target dates for their
attainment. The objective should be traceable. Specific objectives enable time priorities to be set
and time to be used on objectives that really matter. Are the time lines you have established
realistic? Will other competing demands cause delay? Will you be able to overcome those
demands to accomplish the objective you've set in the time frame you've established?
Write Meaningful Objectives
Although the rules are difficult to establish, the following may be useful when writing an
objective.
1. Start with an action or accomplishment verb. (Use the infinitive form of the verb. This means
to start with "to.")
2. Identify a single key result for each objective.
3. Give the date of the estimated completion.
4. be sure the objective is one you can control.
5. To test for validity of SMART objectives, ask yourself the following questions.
» S = Exactly what is my objective?
» M = What would a good job look like?
» A = Is my objective feasible?
» R = Is my objective meaningful?
» T = Is my objective traceable?

Objectives have the following characteristics.

 Objectives are multiple in numbers: Every business enterprise has a package of
objectives set in various key areas. Peter Drucker has emphasized setting objectives in
eight key areas namely market standing, innovation, productivity, physical and financial
resources, profitability, manager performance and development, worker performance and
attitude, and public responsibility.
  Objectives are tangible or intangible: Some of the objectives such as productivity,
physical and financial resources are tangible; whereas objectives in the areas of manager’s
performance, workers morale is completely intangible.
 Objectives have a priority: At a given point of time one objective may be important than
another. For example maintaining minimum cash balance is important than due date of
payment.
 Objectives are generally arranged in hierarchy: It implies that organization has
corporate objectives at the top and divisional, departmental and sectional objectives at the
lower level of organization.
 Objectives some time clash with each other: An objective of one department may clash
with the objectives of other department. For example the objectives of production of low
unit cost achievement through mass production of low quality products may conflict with
goal of sales department selling high quality products.
Requirements of Sound Objectives
 Objectives must be clear: There should not be ambiguity in objectives. The framed
objectives should be achievable and are to be set considering various factors affecting
their achievements.
 Objectives must support one another.
 Objectives must be consistent with organizations mission.
 Objectives should be consistent over period of time.
 Objectives should be rational, realistic and not idealistic.
 Objectives should start with word ‘to’ and be followed by an action verb.
 Objectives should be periodically reviewed.
Advantages of Objectives
The following are some of the advantages of objectives.
✓ Unified planning: Various plans are prepared at various level in the organization. These
plans are consistent with the objectives and hence objectives encourage unified planning.
✓ Individual motivation: Objectives act as motivators for individual and departments
imbuing their activity with a sense of purpose.
✓ Coordination: Objectives facilitate coordinated behavior of various groups which
otherwise may pull in different directions.
✓ Control: Objectives provide yardstick for performance. The actual performance is
compared with standard performance and hence objectives facilitate control.
✓ Basis for decentralization: Department-wise or section wise objectives are set in order to
achieve common objectives of the organization. These objectives provide basis for
decentralization.
F. Strategies
A strategy may be defined as relationship or an administrative course of action designed to
achieve success in the face of difficulties. Strategy is the basic plan chosen to achieve objectives.
‘Every organization has to develop plans logically from goals considering the environmental
opportunities and threats and the organizational strengths and weakness. A strategy is a plan
which takes into these factors and provides an optimal match between the firm and external
environment. Two activities are involved in strategy formulation namely environmental appraisal
and corporate appraisal. Environmental appraisal involves identifying and analysis of the
following factors:
 Political and legal factors: Stability of government, taxation and licensing laws, fiscal
 policies, restrictions on capital etc.
 Economic factors: Economic development, distribution of personal income, trend in
prices, exchange rates etc.
 Competitive factors: Identifying principal competitors and analysis of their performance,
anti-monopoly laws, protection of patents, brand names etc. Corporate analysis involves
identifying and analyzing company’s strength and weakness. For example a company’s
strength may be low cost manufacturing skill, excellent product design, efficient
distribution etc. Its weakness may be lack of physical and financial resources. A company
must plan to exploit these strengths to maximum and circumvent its weakness.
The formulation of strategy is like preparing for beauty contest in which a lady tries to
highlight her strong points and hide her weak points. The process of matching company’s
strength and weakness with environmental opportunities and threats is known as SWOT
analysis.

2.5 PLANNING TECHNIQUE

Managers Can Improve the Quality of their planning by applying variety of Planning tools and
techniques .The important fanciful of planning is management by objectives (MBO).
Management By Objective (MBO)
MBO is a system in which specific performance objectives are jointly determined by
subordinates and their superiors, progress toward objectives is periodically reviewed, and
rewards are allocated on the basis of this progress. An effective planning tool to help the
supervisor set objectives is Management by Objectives (MBO). MBO gained recognition in
1954 with the publication of Peter Drucker's book The Practice of Management. MBO is a
collaborative process whereby the manager and each subordinate jointly determine objectives for
that subordinate. To be successful MBO programs should include commitment and participation
in the MBO process at all levels, from top management to the lowest position in the organization.

MBO begins when the supervisor explains the goals for the department in a meeting. The
subordinate takes the goals and proposes objectives for his or her particular job. The supervisor
meets with the subordinate to approve and, if necessary, modify the individual objectives.
Modification of the individual's objectives is accomplished through negotiation since the
supervisor has resources to help the subordinate commit to the achievement of the objective.
Thus, a set of verifiable objectives for each individual are jointly determined, prioritized, and
formalized.
The supervisor and the subordinate meet periodically to review the latter's progress.
Communication is the key factor in determining MBO's success or failure. The supervisor gives
feedback and may authorize modifications to the objectives or their timetables as circumstances
dictate. Finally, the employee's performance is measured against his or her objectives, and he or
she is rewarded accordingly.
Elements of MBO
1. Top level goal setting effective MBO begins with the objective being set by top managers
which is open for discussion by managers and subordinates to reach up on the common
objectives.
2. Individual targets- in an effective MBO each manager and subordinate has clearly defined
responsibilities or expected results
3. Participation- both managers and subordinates are participating in objective setting.
4. Autonomous of individuals- Once the objective is set, subordinates have a right to
select methods of attaining the objectives.
5. Performance review- managers and subordinates periodically meet to review progress
toward the objectives
6. Reward- those individuals who meet the objectives in performance review are rewarded.
The rewords may be recognition, praise, pay increase etc-------

Shortly MBO Principles

Cascading of organizational goals and objectives
Specific objectives for each member
Participative decision making
Explicit time period
Performance evaluation and feedback.
Steps in MBO
Effective MBO passes through different steps:
1. Setting individual objectives and plans
with each subordinate the manager jointly set objectives the participation of
subordinates in the objective setting process is away of strengthen their
commitment to achieve their goals.
 2. Giving feedback and evaluating performance
Employees must know how much they are progressing toward their objectives.
Thus, managers and subordinates should meet frequently to review progress and
evaluate performance communication is key factor in determining success of
failure of MBO
3. Rewarding according to performance
employees' performance should be measured against their objectives. Employees
who meet their objectives should be rewarded through recognitions, praises. Pay
rises and so on.
Fig 3.1 Management By Objective

Research has demonstrated that when top management is committed and personally involved in
implementing MBO programs, they significantly improve performance. This finding is not
surprising when one considers that during the MBO process employees determine what they will
accomplish. After all, who knows what a person is capable of doing better than the person does
him or herself?
Benefits
1. MBO uplifts workers motivation
2. MBO allows managers and subordinates share experience
Limitation
1. It consumes much time