Unit 2- Planning and Concept objective

Definition of planning
 Planning is the process of thinking regarding the activities required to achieve a desired
goal. Planning is based on foresight, the fundamental capacity for mental time travel.
Some researchers regard the evolution of forethought - the capacity to think ahead - as a
prime mover in human evolution.

 Planning is a primary function of management and is a continuous process that precedes

other management functions. It is an intellectual process that helps to bridge the gap
between the present and the desired future.

 Alford and Beatt - Planning is the process of thinking, organized foresight, and a vision
based on experience and facts that is required for intelligent action.

 Theo Haimann - Planning is the act of deciding in advance what needs to be done.

 Koontz and O'Donnell- Planning is the act of deciding in advance what to do, how to do
it, when to do it, and who is to do it.

 Mitchell- Planning is the process of developing a strategy to achieve desired objectives,

solve problems, and facilitate action.

 Richard Daft- Management planning is the act of determining goals and defining the
means.

Nature of planning
1. Planning is an intellectual activity- to decide the things to be done in future. It involves
use of mental skills for the achievement of group objective Planning involves selection
among alternative. Planning is a choice activity planning process involves mining of
alternatives in selection of the best alternative
2. Planning is forward-looking planning -means looking ahead it is carried out to achieve
some objectives in future. It may involve forecasting of future event such as customer
demand, competition, and government policies.
3. Planning related to objective- every plan that comprised the objective to be attained in the
future and these steps necessary to reach them managerial planning seeks to achieve a
consistent coordinator, structure of operation, focused on desire ends.
4. Planning is the most basic of all management functions-Managerial operation and
organizing, staffing, leading and controlling are design to support the accomplishment of
organisation objective planning location of all the other managerial function
 5. Planning is a necessary function of management- planning is a function of all managers
all the character and planning will play very with their nature of policy and plan outlined
by the superior.

Significance of planning
1. Focus is on attention on objective: - All planning is directed towards achieving the
Enterprises objective and focuses attention on these objectives.
2. Planning ensures economic cooperation -Planning needs lots of mental exercise, which is
directed towards achieving efficient operation in the Enterprise substitute joint directed
efforts for a co-ordinate piecemeal activity this helps in better utilization of resources and
then minimizing costs
3. Reduces uncertainty -planning helps in reducing uncertainty of future because it involves
anticipation of each element effective planning is a result of deliberate thinking based on
forecast and figures.
4. Facilitate control- Planning helps the manager and performing their function of control
planning and control are inseparable in the sense that unplanned action cannot be
completed the predetermined deviations from plan
5. Improve competitive strength effective- Planning gives competitive edge to the enterprise
over other income Luck now plan other ineffective Planning
6. Improve motivation- A good planning system ensure your participation of all managers
which improve their motivation it improves the motivation of work and because they
know clear what is to be expected of them.

Importance of Planning

Planning is definitely significant as it directs us where to go, it furnishes direction and decreases
the danger of risk by making predictions. The significant advantages of planning are provided
below:

 Planning provides directions: Planning assures that the objectives are certainly asserted
so that they serve as a model for determining what action should be taken and in which
direction. If objects are well established, employees are informed of what the company
has to do and what they need do to accomplish those purposes.
 Planning decreases the chances of risk: Planning is an activity which permits a manager
to look forward and predict changes. By determining in prior the tasks to be completed,
planning notes the way to deal with changes and unpredictable effects.
 Planning decreases overlapping and wasteful activities: Planning works as the foundation
of organising the activities and purposes of distinct branches, departments, and people. It
assists in avoiding chaos and confusion. Since planning guarantees precision in
understanding and action, work is conducted on easily without delays.
  Planning encourages innovative ideas: Since it is the primary function of management,
new approaches can take the form of actual plans. It is the most challenging project for
the management as it leads all planned actions pointing to growth and of the business.
 Planning aids decision making: It encourages the manager to look into the future and
make a decision from amongst several alternative plans of action. The manager has to
assess each option and pick the most viable plan.
Planning Process

As planning is an activity, there are certain reasonable measures for every manager to follow:

(1) Setting Objectives

 This is the primary step in the process of planning which specifies the objective of an
organisation, i.e. what an organisation wants to achieve.
 The planning process begins with the setting of objectives.
 Objectives are end results which the management wants to achieve by its operations.
 Objectives are specific and are measurable in terms of units.
 Objectives are set for the organisation as a whole for all departments, and then
departments set their own objectives within the framework of organisational objectives.
Example:

A mobile phone company sets the objective to sell 2,00,000 units next year, which is double the
current sales.

(2) Developing Planning Premises

 Planning is essentially focused on the future, and there are certain events which are
expected to affect the policy formation.
 Such events are external in nature and affect the planning adversely if ignored.
 Their understanding and fair assessment are necessary for effective planning.
 Such events are the assumptions on the basis of which plans are drawn and are known as
planning premises.
Example:

The mobile phone company has set the objective of 2,00,000 units sale on the basis of forecast
done on the premises of favourable Government policies towards digitisation of transactions.

(3) Identifying Alternative Courses of Action

 Once objectives are set, assumptions are made.

 Then the next step is to act upon them.
  There may be many ways to act and achieve objectives.
 All the alternative courses of action should be identified.
Example:

The mobile company has many alternatives like reducing price, increasing advertising and
promotion, after sale service etc.

(4) Evaluating Alternative Course of Action

 In this step, the positive and negative aspects of each alternative need to be evaluated in
the light of objectives to be achieved.
 Every alternative is evaluated in terms of lower cost, lower risks, and higher returns,
within the planning premises and within the availability of capital.
Example:

The mobile phone company will evaluate all the alternatives and check its pros and cons.

(5) Selecting One Best Alternative

 The best plan, which is the most profitable plan and with minimum negative effects, is
adopted and implemented.
 In such cases, the manager’s experience and judgement play an important role in
selecting the best alternative.
Example:

Mobile phone company selects more T.V advertisements and online marketing with great after
sales service.

(6) Implementing the Plan

 This is the step where other managerial functions come into the picture.
 This step is concerned with “DOING WHAT IS REQUIRED”.
 In this step, managers communicate the plan to the employees clearly to help convert the
plans into action.
 This step involves allocating the resources, organising for labour and purchase of
machinery.
Example:

Mobile phone company hires salesmen on a large scale, creates T.V advertisement, starts online
marketing activities and sets up service workshops.
(7) Follow Up Action

 Monitoring the plan constantly and taking feedback at regular intervals is called follow-
up.
 Monitoring of plans is very important to ensure that the plans are being implemented
according to the schedule.
 Regular checks and comparisons of the results with set standards are done to ensure that
objectives are achieved.
Example:

A proper feedback mechanism was developed by the mobile phone company throughout its
branches so that the actual customer response, revenue collection, employee response, etc. could
be known.

Principles of Planning
1. Principle of top management interest: The chief executive of the organisation must show
genuine interest in planning, submit himself to the discipline of planning and must inspire his
team to do the same.

2. Principle of long-range view: Every manager must plan decisions after a full analysis and
understanding of their long-term future effects, and after considering all the available facts
objectively.

3. Principle of contribution to objectives: Planning should be purposeful. It should directly

contribute to the achievement of organizational objectives or desired ends.

4. Principle of primacy of planning: As stated earlier, planning holds the prime position in the
process of management. It is logically regarded as the first function of managers from which all
other functions flow.

5. Principle of flexibility: The principle suggests that flexibility in planning helps the
organization to cope with rapid and unforeseen changes in the external events. This can be
achieved without abandoning the predetermined plans or without inviting adverse consequences
even if drastic.

6. Principle of navigational change: This principle is related to the principle of flexibility. It

indicates that a regular process of monitoring the course of external events is to be combined
with a review and revision of plans. This should be done in order to achieve desired goals just as
a navigator negotiates his ship’s way by making changes in his route in response to the behavior
of the water mass.

7. Principle of commitment: This principle helps in the determination of the planning period.
Planning should cover a period of time necessary to fulfill the commitments involved in a
decision. For example, if a student makes a decision to join a three years B.Com. Course, his
planning period is three years.

8. Principle of the limiting factor: A limiting factor is one which stands in the way of achieving
the desired objective. Managers should pay due to attention to tackle those limiting factors which
hinder the smooth progress in the achievement of objectives.

Types of Planning
1. Corporate planning – corporate planning is defined as a systematic and comprehensive
process of planning taking into account of resources and capabilities of the organisation
and the environment within which it has to be operate it will it usually covers a long
period of 5 years or even more than this.
2. Divisional planning (middle level) -divisional planning related a particular division or
department wise that the objectives policy and program of a particular division or
department in tune with the corporate plan of the Enterprise
3. Sectional planning( lower level) -sectional all over planning is Highly Effective as it is
done to achieve the Divisional objective it focus is to lay down retail plan for a particular
unit for the day to take guide of personal working there
4. Strategic planning- strategic planning is the process of deciding the objectives of the
organization and decide the manner in which the resources of the enterprises are to be
deployed to realize the objective in the uncertain environment. It covers a long period
depending on the nature of Business, top-level management does Environment .
5. Operational planning -operational planning confirm the efficient use of the sources
already located update the development of control mechanism for the efficient Operation
for that organizational objectives are achieved. It covers a short run period after one year
it is done by the middle level and lower level and focus is on specific departments and
functional area of this business.
6. Tactical planning -these plans are made for short-term moves and necessary for the
strategic plans in a given first forms objective and they are required to meet the challenge
of sudden change in the environment .For example tactical plans are made to handle
change in demand of your company product because of entry of a competitor.

According to time span of planning

1. Long run planning -long range planning is the process of establishing long-term NGOs
working out strategic policy and program to achieve the in other words long range
planning sets long-term goal for the business it covers a period of ranging from 5 years to
20 years.
2. Medium range planning- intermediate plans are made to support the now they may relate
to development of a new product or market and publicity increasing return on investment
 from the existing product for market. Medium term planning for the period of more than
one year but less than five years.
3. Short range planning- short range planning relate to period of less than one year. These
plans are made to short terms goals for instance training of workforce, product design

The 6 Ps of Planning

The 6 Ps of planning are Purpose, Philosophy, Promise, Policies, Plans, and Priorities. They
define an organization’s direction, beliefs, strengths, and strategies.
Policies guide decision-making, plans set goals and actions, while priorities allocate limited
resources. These elements work together to ensure effective goal achievement, aligning the
organization and driving success.
 1. Purpose- At the heart of every plan lies a clear purpose. Purpose defines the reason for an
organization’s existence. It’s the “why” behind its actions. For instance, a company’s
purpose might be to innovate and create cutting-edge products. Defining purpose brings
focus and direction, guiding every decision and initiative. It ensures that efforts are
aligned with a meaningful objective, making the organization’s journey purposeful and
impactful.
2. Philosophy- Philosophy reflects an organization’s core beliefs and values. It’s the guiding
principles that shape behavior and decisions. Philosophy can be about quality over
quantity or ethical conduct over short-term gains. A strong philosophy shapes the culture,
influencing how employees interact, how products are developed, and how customers are
treated. It acts as a compass, ensuring that actions are in harmony with the organization’s
values.
3. Promise- An organization’s promise is its commitment to stakeholders. It’s an evaluation
of strengths and weaknesses based on knowledge and assumptions about the
environment. By analyzing trends and forecasts, a promise is made about future actions
and outcomes. This promise is a pact with customers, employees, and partners – a
commitment to provide value, maintain quality, and adapt to changes. Keeping this
promise builds trust and credibility, fostering enduring relationships.
4. Policies- Policies are the guardrails that guide an organization’s actions. They provide a
structured framework for decision-making. Policies exist across various domains –
production, marketing, finance, and more. They ensure consistency and coherence in
operations. For example, a marketing policy might outline guidelines for customer
engagement. Policies streamline processes, minimize ambiguity, and ensure that actions
align with organizational goals.
5. Plans- Plans are the detailed roadmaps that lead to goal achievement. They outline
specific objectives and the actions needed to attain them. Plans break down complex
goals into manageable steps, offering a clear path forward. A plan can involve launching
a new product, expanding into a new market, or improving customer service. Plans
provide clarity, allocate resources effectively, and serve as a reference point for progress
assessment.
6. Priorities- In a world of limited resources, prioritization is key. Priorities determine where
an organization focuses its efforts and allocates its resources. It’s about identifying high-
impact goals and channeling resources toward them. By setting priorities, an organization
ensures that its most critical objectives receive the attention they deserve. Prioritization
aligns activities, optimizes resource allocation, and enhances overall efficiency.

Advantages of planning
1. Helps in achieving objectives:
• Planning concentrates attention on setting goals or objectives of an organization.

• It gives effective direction to the control of employees of the organization towards

achieving organizational goals

2. Better utilizations of resources:

• Planning gives clear cut direction on what to produce and how to produce. Therefore,
there is a possibility of utilizing the resources effectively.

3. Economy in Operation:

• Better utilization of resources leads to economy in operation.

4. Reduces uncertainty and Risk:

• Uncertainty and change are inevitable and planning cannot eliminate them. Planning
enables the enterprise to make adequate adjustment to adopt to future changes.

5. Improve competitive strength:

• Planning enables a firm to remain in competition.

• Planning helps management to adopt modern methods of operation and to improve the
quality of the product to attract the customers competitive strength is improved by adding
these changes.

6. Effective Control:

• Planning serves as a base for control.

• Planning determines the time for starting and completing the project, set standards of
performance. It enables the mangers to control the activities.

7. Coordination:

• Planning enables effective coordination of all managerial function By providing well-

defined objectives, unity of direction, well established policies, procedures and programs,
planning facilities to get effective coordination.

8. Encourages Motivation:

• A well prepared plan encourages the employee’s morals and confidence of the managers
and gives them a sense of effective coordination & participation.

9. Guides in Decision-Making:
• Planning targets serves as the criteria for the evaluation of different alternatives so that
the best course of action may be chosen. In absence of plans, there is no sound basis of
Decision-Making.

10. Provides Decentralization:

• A well- Prepared plan will always facilitate the delegation of authority to lower levels of
management.

11. Improve Efficiency:

• Planning facilitates optimum utilization of available resources. It helps to reduce costs

and hence, it increase efficiency.

12. Anticipation of Crisis:

• Careful Planning will avoid the crisis which is likely to occur.

• In this way, Management can reduce the internal organizational conflicts.

Disadvantages of Planning
1. Lack of accurate Information:

• Planning is doing for future. The accuracy and reliability of forecasting period increases,
because future is quite uncertain. Planning cannot insure against future perfectly.

2. Time and Cost:

• Planning is a time consuming process. The various steps in planning may consumes a lot
of time because there is no limit of precision in planning tools.

• Since, the planning is proceeded with many course of action such as collection of
necessary information, careful analysis and interpretation etc. It is a costly affair.

3. Inflexibility:

• Planning may result in integral rigidity in managerial work. Such rigidity leads to delay
in work performance. Many times, changes are not accepted even though they are
unavoidable.

4. Delay during Emergency Period:

• During emergencies, immediate and on the spot of action are necessary which are not
possible under planning. So planning leads to delay in action.

5. False sense of Security:

 • The management people may think that once the plans are formulated action will be
automatically efficient forever. It makes the management having a false sense of security
unless the plans are reviewed and revised periodically.

Objectives
Objectives in management are typically clear, concise, and measurable, and are related to the
goal of the organization. They should also be stated in terms of results, begin with an action verb,
and specify a date for completion.

Here are some other aspects of objectives in management:

 Management by Objectives (MBO)

A systematic approach to goal-setting that helps departments develop their purposes. MBO is
result-oriented, so outcomes are easily monitored.
 Dynamic organizations
Management creates dynamic organizations by including goals, objectives, and other activities
that change as the business environment changes.
 Social objectives
Management can create benefits for society through their work, such as using environmentally-
friendly production methods or offering fair wages and opportunities.
 Financial management
Involves planning, organizing, controlling, and monitoring financial resources to achieve
business objectives.
 Marketing management
Responsible for setting marketing objectives that are aligned with the company's overall profit
maximization objectives.
What Is Management by Objectives (MBO)?
Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both
management and employees. According to the theory, having a say in goal setting and action
plans encourages participation and commitment among employees, and aligns objectives
across the organization.

KEY TAKEAWAYS

 Management by objectives (MBO) is a process in which a manager and an employee

agree on specific performance goals and then develop a plan to reach them.
  It is designed to align objectives throughout an organization and boost employee
participation and commitment.
 There are five steps: define objectives, share them with employees, encourage
employees to participate, monitor progress, and finally, evaluate performance and
reward achievements.
 Critics of MBO argue that it incentivizes employees to achieve these goals by any means
necessary, often at the cost of the company.

Understanding Management by Objectives (MBO)

Management by objectives (also known as management by planning) is the establishment of

a management information system (MIS) to compare actual performance and achievements with
the defined objectives. Practitioners claim the major benefits of MBO are that it improves
employee motivation and commitment and allows for better communication between
management and employees.

However, a cited weakness of MBO is that it unduly emphasizes the setting of goals to attain
objectives, rather than working on a systematic plan to do so. Critics of MBO, such as W.
Edwards Deming, argue that setting particular goals like production targets leads workers to
meet those targets by any means necessary, including shortcuts that result in poor quality.

In his book that coined the term, Peter Drucker set forth several principles for MBO. Objectives
are laid out with the help of employees and are meant to be challenging but achievable.
Employees receive daily feedback, and the focus is on rewards rather than punishment.
Personal growth and development are emphasized, rather than negative feedback for failing to
reach objectives.

Steps of MBO

MBO outlines five steps that organizations should use to put the management technique into
practice.

1. Either determine or revise organizational objectives for the entire company. This broad
overview should be derived from the firm’s mission and vision.
2. Translate the organizational objectives to employees. In 1981, George T. Doran used the
acronym SMART (specific, measurable, acceptable, realistic, and time-bound) to
express the concept.
3. Stimulate the participation of employees in setting individual objectives. After the
organization’s objectives are shared with employees from the top to the bottom,
employees should be encouraged to help set their own objectives to achieve these larger
organizational objectives. This gives employees greater motivation since they have
greater empowerment.
4. Monitor the progress of employees. In this way, managers can measure and track the
goals set by employees. As step two states, a key component of the objectives is that
they are measurable for employees and managers to determine how well they are met
across a given timeframe.
 5. Evaluate and reward employee progress. This step includes honest feedback on what
was achieved and not achieved for each employee.

Advantages and Disadvantages MBO

MBO comes with many advantages and disadvantages.

Advantages

 Employees take pride in their work and are assigned goals they know they can achieve
that match their strengths, skills, and educational experiences.
 Assigning tailored goals brings a sense of importance to employees, boosting their
output and loyalty to the company.
 Communication between management and employees is increased.
 Management can create goals that lead to the success of the company.

Disadvantages

 As MBO is focused on goals and targets, it often ignores other parts of a company, such
as the culture of conduct, a healthy work ethos, and areas for involvement and
contribution.
 Strain is increased on employees to meet the goals in a specified time frame.
 Employees are encouraged to meet targets by any means necessary, meaning that
shortcuts could be taken and the quality of work compromised.
 If management solely relies on MBO for all management responsibilities, it can be
problematic for areas that don’t fit under MBO.

What Is the Goal of Management by Objectives (MBO)?

Management by objectives (MBO) uses a set of quantifiable or objective standards against

which to measure the performance of a company and its employees. By comparing actual
productivity to a given set of standards, managers can identify problem areas and improve
efficiency. Both management and workers know and agree to these standards and their
objectives.

What Is an Example of MBO?

A company can set various goals with its employees. In the case of a call center, an MBO could
increase customer satisfaction, say, by 10%, while reducing call times by one minute. The onus
is now on finding ways to achieve this goal. Once that’s decided on, it’s important to get
employees on board and then monitor their progress, provide feedback, and reward those who
do a good job.
What Are Some Drawbacks of Using MBO?

As MBO is entirely focused on goals and targets, it often ignores other parts of a company, such
as the corporate culture, worker conduct, a healthy work ethos, environmental issues, and areas
for involvement and contribution to the community and social good.

What Is the Difference Between MBO and Management by Exception

(MBE)?

In management by exception (MBE), management only addresses instances where objectives or

standards are transgressed. Thus, workers are left alone unless productivity is not met.

Conclusion

As a theory, MBO makes a lot of sense: if employees are involved in setting company goals,
they are more likely to share management’s objectives, work harder, and deliver.

However, there’s also a good reason why MBO is widely criticized. Like most things that look
good on paper, it doesn’t always work in practice. The key is to be aware of its drawbacks,
customize the plan according to your organization, ensure that everyone is fully on board, and
identify objectives that are clear and reasonable before putting them into action.