January 27, 2016

The Nature and Purpose of Planning - Review Notes


The Nature and Purpose of Planning

Every manager has to select objectives for his enterprise, department, section, unit or group. Based on the objectives he has to set goals for a specific period and make plans that contain ways of reaching the set goals. Planning in general is explained as generating alternatives and selection of the most suitable alternatives from among them for solving a problem. The problem in this context has positive connotation also. How to achieve growth is a problem which has a positive implication only.

Therefore planning is deciding in advance what to do, how to do it, when to do it, and who is to it.

Essential nature of planning can be described by four major aspects:
1. Its contribution to objectives.
2. Its primacy among the manager's tasks.
3. Its pervasiveness
4. The efficiency of plans


1. Its contribution to objectives (Plans must have effectiveness).

Every major plan and its supporting plans should contribute to the accomplishment of the purpose and objectives of the enterprise. It means plans have to be effective.They have to deliver the required output. Organized enterprise exists for the accomplishment of group purpose through deliberate cooperation that is voluntary involvement of people in the enterprise for achieving the objectives and sharing the rewards.

2. Its primacy among the manager's tasks.

Managerial operations of organizing, staffing ( resourcing), leading (executing) and controlling are done to accomplish the objective through plans. Hence planning logically precedes the execution of all the other managerial functions.  Planning is primary task of managers.

3. Its pervasiveness

All managers from the first line supervisor to the chief executive officer of a company are to do planning. At lower levels we may term it as operational planning and at higher levels we may term it as strategic planning. The amount of time spent in planning may vary with the level. CEOs may spend more time planning and organizing and departmental heads may be there to take care of resource acquisition, leading people in their departments and controlling the department performance. But policy making and administering policies can be differentiated. Some managers at higher levels may be more involved in policy making and some other managers are more involved in taking decisions based on the policy.

4. The efficiency of plans

The effectiveness of a plan pertains to the degree to which it achieves the purpose or objectives. The efficiency of the plan refers to the contribution to the objectives, offset by the costs and other factors required to formulate and operate it. More simply stated if sales is taken as an objective, the total sales revenue is the contribution of the plan to the objective and the profit which is the difference between sales revenue and total cost is the efficiency. A plan may enhance the attainment of an objective, say in can get more sales but at an unnecessarily high cost. Hence as a part of planning, efficiency of the plan has to be analysed and improved. Industrial engineering discipline focuses  primarily on  the efficiency of engineering activities and plans and it was extended to other areas like business processes and managerial processes in industrial and commercial concerns. Industrial engineering was also embraced by hospitals in a big way.

Koontz and O'Donnell specially observed that efficiency aspect has to be applied not only in money terms to various resources used in production and service activities but also to the individual and group satisfaction of human resources.


Types of Plans



Objectives

Objectives are the ends toward which the activity of an organization is aimed.

Goals

Goals represent the rate at which objectives of an organization are achieved. Goals quantify the objective with a time frame. For example, if a country has the objective of switching to unconventional sources of energy, the goals could specified as so many gigawatts of energy by end of year 2012.


Values.

Values represent stable long lasting belief about what is important. They are evaluative standards that help us define what is right or wrong, good or bad, in the world. Some organizations declare their values and make them known to all. They are also subject to the planning process.

Grand strategies

According to R.N. Anthony strategies result from the processes  of deciding "on objectives of the organization", "on changes in these objectives", "on the resources used to attain these objectives", and "on policies that are to govern the acquisition, use, and disposition of these resources." The main meaning and usefulness of grand strategies are to describe a type of planning program of a broad nature which gives over-all direction to the other and more detailed programs of an enterprise.
The emphasis in grand strategies is on the pattern of basic objectives of the organization and goals and the major policies and plans for achieving them.

The purpose of grand strategy of an enterprise is to determine and communicate, through a system of major objectives and policies, a picture of what kind of enterprise is envisioned. A framework is given in the grand strategy which is a useful plan to guide company thinking.

Koontz and O'Donnell give the opinion that strategy is not a new type of plan actually. It is a program. But the concept of strategy is practically very useful and its importance in guiding detailed planning justify its separation as a different type of plan.

Competitive strategies

Competition exists where two or more persons strive for the same goals under conditions in which not all can gain from them. Competitive strategy is a plan made in the light of the plans of a competitor. The plans are made either with an estimate of plans or competitor or plan is a reaction to the strategic move of competitor either announced or executed.  To estimate the competitor's plans, a manager has to put himself in his competitor's place and develop a set of plans for his competitor, using the knowledge has regarding the objectives and the circumstances in which the competitor is operating. No doubt some industrial espionage will be tried to get an understanding of competitor's plans.

Policies

Policies are general statements which guide or channel thinking in decision making of subordinates. Policies delimit an area within which a decision is to be made and assure that the decision will be consistent with and contribute to objectives. Policies tend to predecide issues, and avoid repeated analysis. Polices are based on analysis and once pronounced avoid repeated analysis.

Procedures

Procedures are plans and they establish a method of handling activities. They specify a chronological sequence of required actions.

Rules

A rule is the simplest type of plan. A rule requires that a specific and definite action be taken or not taken with respect to a situation.

Programs

A program is a complex of policies, procedures, rules, task assignments assembled to carry out a given course of action. A program is supported by necessary capital and operating budgets.

Budgets

A budget is a plan. It is a statement of expected results expressed in numerical terms.

Objectives 

Objectives are referred to some authors with different terms. Purposes, missions, goals or targets are the terms used to refer to objectives. Mission is usually used in military enterprises and occasionally in churches and government. "Goals" and "targets' often carry the notation of specific quantitative end. Sometimes the end can be qualitative also. Koontz and O'Donnel used the chapter on objectives to discuss all the various types of terms used in relation to objectives.

Social objectives

It is interesting to note that the discussion of objectives is started with the section social objectives.The objectives of a private enterprise have to be in harmony with the ends for which a society is organized. Whenever the actions and objectives of a private enterprise are thought be against the objectives of the society, legal action is initiated to regulate it or suppress it.

United States has a statement of nation purpose set forth in the Declaration of Independence. The preamble of the Constitution of USA states:

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
All subordinate enterprises in USA, be it a school, church, hospital, government agency or business firm should have objectives which are harmonious with and supportive to national objectives.

Enterprise Objectives

The plural form is used to stress the fact that enterprises have mutliple objectives. Drucker asserted that there are eight areas in which objectives of performance and results have to set by all enterprises. They are: Market Standing, Innovation, Productivity, Physical and Financial Resources, Profitability, Manager Performance and Development, Worker Performance and Development, and Public Responsibility.

For each area or function that company identifies as necessary for survival there has to be objective.


Principles to be followed in setting objectives:

1. Objectives have to be practically achievable. The organization must be able to do some thing to achieve each objective that it has set.
2. The objectives have to support the enterprise purpose, its contribution to the customer.
3. If long range objectives and short range objectives are specified, there must be integral relationship between them.
4. At various points of time prioritization among objectives may be required.
5. Objectives have to be specific and actionable and verifiable
6. Objectives have to planned. There are the result of planning process or activity.
7. Objectives have to be communicated to those charged with building plans to meet them. 


These different types of plans once again described in details in later articles which are summaries chapters written on them.

It is important to remember that planning is rational approach to goal achievement.

Another interesting question is what should be the planning period.

Koontz and O'Donnell advise us to use commitment principle to answer that. The principle says logical planning encompasses a future period of time necessary to fulfill, through a series of actions, the commitments involved in decisions made today.

They clarify saying that long range planning is not really planning for future decisions, but visualising the future impact of today's decisions and satisfying ourselves that impact contribute to the achievement of our objectives. A plan is actually a decision. Certain commitments of resources can only be recovered over  a long period of time and such decisions require long range planning. Certain commitments are recovered quickly and can be reversed quickly also and short range planning is sufficient for them.

Whenever a long term plan exists, short range plans must be in alignment with them. Therefore, all managers must be informed of the long range plans adequately.


Related topics

The Nature and Purpose of Planning
The Nature of Organizing
Resourcing - A Function of Management
Leading - Introduction
Planning and Execution - Theory and Practice
The System and Process of Controlling




Updated

27 Jan 2016, 16 Jan 2014, 22 July 2014, 12 Dec 2011

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