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Planning - Lecture notes 5

Organization & Management (STI College)

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Planning
I. Definition and Nature of Planning

Planning is very important. As by nature, it inquires about organizational goals and targets
and involves decision-making about desired ways and means to achieve them. It is the most
basic of all managerial functions. It is the process by which managers establish goals and
define the methods by which these goals are to be attained. It involves selecting missions and
objectives and the actions to achieve them; it requires decision-making, which is choosing
from among alternative future courses of action. It is, therefore, a rational approach to
achieving pre-selected objectives.

Planning is taken as the foundation for future activities. It is about deciding in advance what
is to be done; that is, a plan is a projected course of action. So, planning can be thought of as
deciding a future course of action. It may also be treated as a process of thinking before
doing.

Management has to plan for long-range and short-range future direction by looking ahead
into the future, by estimating and evaluating the future behavior of the relevant environment
and by determining the enterprise's own desired role. It involves determining various types
and volumes of physical and other resources to be acquired from outside, to allocate these
resources in an efficient manner among competing claims and to make arrangement for
systematic conversion of these resources into useful outputs.

As it is clear, plans have two (2) basic components: goals and action statements. Goals
represent an end state – the targets and results that managers hope to achieve. Action
statements represent the means by which an organization goes ahead to attain its goals.
Planning is a deliberate and conscious act by means of which managers determine a course of
action for pursuing a specific goal.

Planning to a manager means thinking about what is to be done, who is going to do it, and
how and when s/he will do it. It also involves thinking about past events (retrospectively) and
about future opportunities and impending threats (prospectively). Planning enquirers about
organizational strengths and weaknesses and involves decision making about desired ways
and means to achieve them. There are, however, differences between decision-making and
planning. Decisions can be made without planning but planning cannot be done without
making decisions. The nature of planning can be understood by examining its four (4) major
aspects:

Contribution of Planning to the Attainment of Objectives

Since plans are made to attain goals, every plan and all its support should contribute to the
achievement of the organization’s purpose and objectives. An organized enterprise exists to
accomplish group objectives through willing and purposeful co-operation.

Primacy of Planning
That planning is the prime managerial function is proved by the fact that all other functions
such as organizing, staffing, leading and controlling are designed to support the

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accomplishment of the enterprise's objectives. Planning quite logically, therefore, comes first
before execution of all other managerial functions as it involves establishing the objectives
necessary for all group efforts. Also, all the other managerial functions must be planned if
they are to be effective. Likewise, planning and controlling are inextricably bound up.
Control without a plan is meaningless because the plan provides the basis or standard of
control.

Pervasiveness of Planning
Planning is a unique and universal function of all managers. The character and scope of
planning may vary with each manager's authority and with the nature of the policies and
plans outlined by superiors, but all managers must have some function of planning. Because
of one's authority or position in the managerial hierarchy, one may do more or less planning,
but some kind or amount of planning a manager must do.

The Efficiency of Plans

Plans should not only be effective, but also efficient. The effectiveness of a plan relates to the
extent to which it accomplishes the objectives. However, a plan is efficient if its contribution
to the purpose and objectives offsets the costs and other factors required to formulate and
operate it. Plans are efficient if they achieve their objective at a reasonable cost when such a
cost is measured not only in terms of time, money, or production but also in terms of
satisfaction of the individual or group. Both conceptual and practical reasons are put forward
in support of planning. Two (2) conceptual reasons supporting systematic planning by
managers are limited resources and an uncertain environment.

II. Types of Plans

Hierarchical Plans – These plans are drawn at three major hierarchical levels, namely, the
institutional, the managerial, and the technical core. The plans in these three (3) levels are a
strategic plan, administrative or intermediate plan, and operational plan.

Frequency-of-use Plans – Plans can also be categorized according to frequency or

repetitiveness of use. They are broadly classified as:

• Standing Plans - which are drawn to cover issues that managers face repeatedly. Such
a standing plan may be called standard operating procedure (SOP). Generally, five (5)
types of standing plans are used: mission or purpose, strategy, policies, rules, and
procedures.

• Single-use Plans - which are prepared for single or unique situations or problems and
are normally discarded or replaced after one use. Generally, four (4) types of single-
use plans are used. These are objectives or goals, programs, projects, and budgets.

Contingency Plans – These are made to deal with situations that might crop up if these
assumptions turn out to be wrong. Thus, contingency planning is the development of
alternative courses of action to be taken if events disrupt a planned course of action.

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III. Planning at Different Levels in the Firm

Planning is the part of management concerned with creating procedures, rules, and
guidelines for achieving a stated objective. Planning is carried out at both the macro and
micro level. Managers need to create broad objectives and mission statements as well as
look after the day-to-day running of the company.

Strategic Plan – This is a high-level overview of the entire business, its vision, objectives,
and value. This plan is the foundational basis of the organization and will dictate decisions in
the long-term. The scope of the plan can be two (2), three (3), five (5), or even 10 years.

Managers at every level will turn to the strategic plan to guide their decisions. It will also
influence the culture within an organization and how it interacts with customers and the
media. Thus, the strategic plan must be forward-looking, robust but flexible, with a keen
focus on accommodating future growth.

The crucial components of a strategic plan are:

• Vision – Where does the organization want to be five years from now? How does it want
to influence the world?
• Mission – The mission statement is a more realistic overview of the company’s aim and
ambitions. Why does the company exist? What does it aim to achieve through its
existence? For instance, a clothing company might want to “bring high street fashion to
the masses”, while a non-profit might want to “eradicate polio”.
• Values – “I inspire. Go above & beyond. Innovate. Exude passion. Stay humble. Make it
fun.” These aren’t fragments from a motivational speech. These values will guide
managers and influence the kind of employees you hire. There is no template to follow
when jotting down the values. You can write a 1,000-page essay, or something as simple
as Google’s “Don’t be Evil” – it’s all up to you. There are really no rules to writing the
perfect strategic plan. This is an open-ended, living document that grows with the
organization. You can write whatever you want in it, as long as it dictates the future of
your organization.

Tactical Plan – This plan describes the tactics the organization plans to use to achieve the
ambitions outlined in the strategic plan. It is a short range (i.e. with a scope of less than one
year), a low-level document that breaks down the broader mission statements into smaller,
actionable chunks. If the strategic plan is a response to “What?” the tactical plan responds to
“How?” Creating tactical plans is usually handled by mid-level managers. The tactical plan is
a very flexible document; it can hold anything and everything required to achieve the
organization’s goals. That said, there are some components shared by most tactical plans:

• Specific Goals with Fixed Deadlines

Suppose your organization’s aim is to become the largest shoe retailer in the city. The
tactical plan will break down this broad ambition into smaller, actionable goals. The
goal(s) should be highly specific and have fixed deadlines to spur action – expand to two
(2) stores within three months, grow at 25% per quarter, or increase revenues to Php1M
within six (6) months, and so on.

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• Budgets
The tactical plan should list budgetary requirements to achieve the aims specified in the
strategic plan. This should include the budget for hiring personnel, marketing, sourcing,
manufacturing, and running the day-to-day operations of the company. Listing the
revenue outflow/inflow is also a recommended practice.
• Resources
The tactical plan should list all the resources you can muster to achieve the organization’s
aims. This should include human resources, IP, cash resources, etc. Again, being highly
specific is encouraged.
• Marketing, Funding, etc.
Finally, the tactical plan should list the organization’s immediate marketing, sourcing,
funding, manufacturing, retailing, and PR strategy. Their scope should be aligned with
the goals outlined above.

Operational Plan – This plan describes the day-to-day running of the company. The
operational plan charts out a roadmap to achieve the tactical goals within a realistic
timeframe. This plan is highly specific with an emphasis on short-term objectives. “Increase
sales to 150 units/day”, or “hire 50 new employees” are both examples of operational plan
objectives. Creating the operational plan is the responsibility of low-level managers and
supervisors. Operational plans can be either single use, or ongoing, as described below:

Single Use Plans – These plans are created for events/activities with a single occurrence.
This can be a one-time sales program, a marketing campaign, a recruitment drive, etc. Single
use plans tend to be highly specific.

Ongoing Plans – These plans can be used in multiple settings on an ongoing basis. Ongoing
plans can be of different types, such as:

• Policy – A policy is a general document that dictates how managers should approach a
problem. It influences decision making at the micro level. Specific plans on hiring
employees, terminating contractors, etc. are examples of policies.
• Rules – Rules are specific regulations according to which an organization functions. The
rules are meant to be hardcoded and should be enforced stringently. “No smoking within
premises”, or “Employees must report by 9 a.m.”, are two (2) examples of rules.
• Procedure – A procedure describes a step-by-step process to accomplish a particular
objective. For example, most organizations have detailed guidelines on hiring and
training employees, or sourcing raw materials. These guidelines can be called procedures.
Ongoing plans are created on an ad-hoc basis but can be repeated and changed as
required.

Operational plans align the company’s strategic plan with the actual day to day running of
the company. This is where the macro meets the micro. Running a successful company
requires paying an equal attention to now just the broad objectives, but also how the
objectives are being met on an everyday basis, hence the need for such intricate planning.

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IV. The Planning Process

1. Define our goals or objectives by identifying desired outcomes or results in very specific
ways.
2. Determine where you stand in relation to set goals or objectives; know your strengths and
weaknesses.
3. Develop premises regarding future conditions; anticipate future events, generate
alternative scenarios for what may happen; identify for each scenario things that may
help or hinder progress toward your goals or objectives.
4. Analyze and choose among action alternatives; list and carefully evaluate possible
actions and choose the alternative most likely to accomplish goals or objectives.
5. Implement the plan and evaluate results; take corrective action and revised plans needed.

V. Planning Techniques and Tools

• Forecasting is the process of predicting what will happen in the future.

• Contingency planning involves identifying alternative courses of action that can be
implemented when an original plan proves inadequate because of changing
circumstances.
• Scenario planning is a long-term version of contingency planning that involves
identifying several alternative future scenarios or states of affairs that may occur, and
then making plans to deal with each scenario should it actually occur.
• Benchmarking is a technique that makes use of internal and external comparisons to
better evaluate current performance and identify possible actions to improve the future.
• Participatory planning includes the people who will be affected by the plans and those
who will be asked to implement them in all planning steps.

VI. Decision-making

A decision is a choice among possible alternative actions. Like planning, decision-making is

a challenge and requires careful consideration for both types of decisions, namely:

Structured or Programmed decisions are routine and repetitive, and the organization
typically develops specific ways to handle them. A programmed decision might involve
determining how products will be arranged on the shelves of a supermarket. For this kind of
routine, repetitive problem, standard arrangement decisions are typically made according to
established management guidelines.

Unstructured or non-programmed decisions are typically one-shot decisions that are usually
less structured than a programmed decision.

Everyday a manager must make hundreds of decisions in the organization. Managers do not
function in a theoretical world but they function within the reality that many things are not
known. There are three (3) conditions that managers may face as they make decisions. They
are the following:

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• Certainty – This exists only when the managers knows the available alternatives as well
as the conditions and consequences of those actions. There are little ambiguity and
relatively low possibility of making a bad decision. It assumes that manager has all the
necessary information about the situation. Hence, decisions under certainty mean a
perfectly accurate decision will be made time after time. Of course, decision making
under certainty is rare.

• Risk – A state of risk exists when the manager is aware of all the alternatives but is
unaware of their consequences. The decision under risk usually involves clear
and precise goals and good information, but future outcomes of the alternatives are just
not known to a degree of certainty. A risk situation requires the use of probability
estimates. The ability to estimate may be due to experience, incomplete but reliable
information, or intelligence. Statistical analysis can be applied to
the calculation or probabilities for success or failure.

• Uncertainty – In today's complex environment, most significant decisions are made under
a state of uncertainty where there is no awareness of all the alternatives and the outcomes,
even for the known alternatives. To make effective decisions, managers must require as
much relevant information as possible. Such decisions require creativity and the
willingness to take a chance in the face of such uncertainties. In such situations, managers
do not even have enough information to calculate probabilities and degrees of risk.
So, statistical analysis is of no use. Hence, managers need to make certain assumptions
about the situation to provide a reasonable framework for decision making. Intuition,
judgment, and experience always play major roles in the decision-making process under
conditions of uncertainty.

Hence, we can say that greater the amount of reliable information, the more likely the
manager will make a good decision. Hence, the manager should make sure that the right
information is available at the right time.

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