Principles of Planning (Koontz and O'Donnel)
Related to Purpose and Nature
Principle of contribution to objectives
Every plan has to contribute positively toward the accomplishment of enterprise objectives.
Principle of efficiency of plans
Efficiency is measured by the contribution of the plan to objectives of the enterprise minus the costs and unsought for consequences in formulating and implementing the plan.
Principle of primacy of planning
Planning is the primary prerequisite for all other functions of management. Every action of the manager follows a planning step.
Principles Applicable to Structure of plans
Principle of planning premises
If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.
Principle of policy framework
If more policies, appropriate to the organization, are expressed in clear terms and form and if manages understand them, the plans of the enterprise will be more consistent.
Principle of timing
If plans are structured to provide a network of derivatives plans in sequence, there will be more effectiveness in attainment of enterprise objectives.
Principles in Applicable to Process of Planning
Principle of alternatives
Select the plan which is the most effective and the most efficient to the attainment of a desired goal.
Principle of limiting factor
Consider limiting factor in generating alternatives and selection from alternatives.
The commitment Principle
Planning can cover a period over which commitment of resources can be clearly visualized.
The Flexibility Principle
Building flexibility in planning is beneficial, but cost of building flexibility needs to be evaluated against the benefits.
The Principle of navigational change
Manager needs to periodically check events of the plan and redraw plans to maintain the move toward a desired goal.
Principle of competitive strategies
In a competitive arena, it is important to choose plans in the light of what competitor will or will not do and navigate based on what competitors are doing or not doing.
Detailed Discussion of Planning by Koontz and O'Donnell
Koontz and O'Donnell discussed the managerial function of planning in six chapters in the fourth edition of their text. The chapters are:
The nature and purpose of planning
Planning in action
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.
Types of Plans
Objectives are the ends toward which the activity of an organization is aimed.
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.
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.
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 executved. 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 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 are plans and they establish a method of handling activities. They specify a chronological sequence of required actions.
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.
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.
A budget is a plan. It is a statement of expected results expressed in numerical terms.
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.
It is interesting to note that the discussion of objectives is started with the section social objectives.The obectives 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.
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 ojective.
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.
Principles of Management – Koontz and O’Donnell
Originally posted on Knol (Knol no. 456)