January 20, 2017

Planning - A Management Process

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 managers 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.

Steps in Planning

1. Being Aware of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative Courses
5. Evaluating Alternative Courses
6. Selecting a Course
7. Formulating Derivative Plans
8. Numberizing Plans by Budgeting

1. Being Aware of Opportunities

Awareness of opportunities in the external environment and within the existing organization (sometimes it can be the single entrepreneur to start with) is the real starting point for  planning. All managers have to see opportunities clearly and completely and understand the feasibility of profiting from them in the light of their strengths and weaknesses. They have to answer why and how they expect to profit from the opportunity. Setting realistic objectives depends on this step of understanding opportunities. 

2. Establishing Objectives

Objectives of the enterprise specify the expected results. Strategies, programs,  policies, procedures, rules, and budgets follow from the objectives. Enterprise objectives provide the basis for determining department level objectives.

3. Developing Premises

Plans of an organization must be based premises about the environment as well as the organization. It is important that all managers in the organization agree on the premises. The following principle is relevant here.

Principle of planning premises
          If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.

Forecasting is important exercise for premising.  Some people may argue that future is likely to change and hence planning is not going to be useful. What is important is the ability to plan for a given scenario. If the organization has that ability, whenever it is recognized that situation has changed a new plan can be quickly developed by the organization. The formal function of controlling is basically that. If expected results are not forthcoming, reasons have to investigated (both in the external environment and internal organization) and new plans have to be created. 

4. Determining Alternative Courses

Alternative courses of action to achieve the objectives in the light of premises have to be developed. Creative thinking is required here. Innovative thinking, which is developing profitable business models is also involved in this stage.

5. Evaluating Alternative Courses

The alternative courses developed in the above stage are subjected to detailed evaluation from technical, marketing and financial angles. Even people behavior issues have to be considered in this stage.

6. Selecting a Course

This is the point at which the plan is adopted by the decision makers.

7. Formulating Derivative Plans

Number of derivative plans based on major plan have to be prepared to make sure that the major plan does not get stuck due to neglect of some minor issues.

8. Numberizing Plans by Budgeting

Budgeting is a plan for period that clearly shows the inputs that go into the enterprise and the output that are expected from the enterprise giving in normal circumstances  profit in a business enterprise for the period.

 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:


Principles of Management – Koontz and O’Donnell

Joint Revision Article - 23 January

Process and Functions of Management

Related Knols

Updated 23 January 2017,   22 July 2014, 16 Feb 2012

Originally posted on Knol (Knol no. 456)

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