Principle and Practice of

Management
MBA 1st Semester
 Planning and Concept of objectives:
• Nature and Purpose of planning
• The planning process
• Principles for planning Unit : 1
Syllabus
• Types of planning
• Advantages and limitations of planning
• Objectives(nature and types)
• MBO (process, benefits and limitations)

“Plan your work. Work your plan.”

 Planning
Skills:
• Ability to think ahead
• Ability to define company objectives
• Ability to forecast future environmental trends
• Ability to frame correct strategies
• Ability to monitor the implementation of strategies
 Nature and Purpose of
planning
• Planning involves selecting missions and objectives and deciding on the
actions to achieve them; it requires decision-making, i.e., choosing a course
of action from among alternatives. Plans thus provide a rational approach
to achieving preselected objectives.
• Planning bridges the gap from where we are to where we want to go. It is
also important to point out that planning and controlling are inseparable.
Any attempt to control without plans is meaningless, since there is no way
for people to tell whether they are going where they want to go (the result
of the task of control) unless they first know where they want to go (part of
the task of planning).
Planning is required to make
decisions on …..
• What should be done?
• How it should be done?
• Who will be responsible?
• Where the action is to be taken?
• Why is it done?
DEFINITIONS:
• “Planning is the selecting and relating of facts and the making and
using of assumptions regarding the future in the visualization to
achieve desire results.” - George Terry.
• “Planning is deciding advance what to do, how to do it, when to do it,
who is to do it. It bridges the gap between where we are, where we
want to go. It makes it possible for things to occur which would not
otherwise happen.” - Koontz and O'Donnell.
NATURE OF PLANNING:
• Planning is goal-oriented
• Primacy of Planning
• Pervasiveness of Planning
• Efficiency, Economy and Accuracy
• Planning is an intellectual process
• Limiting Factors
• Flexibility
• Co-ordination
PURPOSES OF PLANNING:
• i. To provide direction
• ii. To reduce / offset uncertainty and change
• iii. To minimize waste and redundancy
• iv. To set the standards to make control effective
• v. To manage by objectives
• vi. To help in co-ordination
• vii. To secure economy in operation
• viii. To increase organizational effectiveness
 The Planning Process
(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 digitization 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, organizing 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.
Types of planning:
• Planning is a complex and comprehensive process involving a series of
overlapping and interrelated elements or stages, including strategic, tactical,
and operational planning.
• I. On the basis of nature, Plans can be classified as:
A. Strategic Planning
B. Tactical Planning
C. Operational planning
• II. On the basis of time period
A. Long term planning
B. Intermediate term/ Midterm planning
C. Short term planning
A. Strategic planning establishes master plans that shape the destiny of the firm.
• An example of strategic planning is when the executive team at Lotus Pvt. Lmt. planned how to deal with the
demographic shift of their customer base becoming much older.
• Strategic plans set broad, comprehensive, and longer-term action directions for the entire organization.
B. Tactical planning translates strategic plans into specific goals and plans that are most relevant to a
particular organizational unit. The tactical plans also provide details of how the company or business unit will
compete within its chosen business area. Middle level managers have the primary responsibility for formulating and
executing tactical plans.
• It is the blue print for current action and it supports the strategic plans.
• It is more detailed because it involves with time to time operations of the organization. It is done at middle level of
management.
C. Operational planning identifies the specific procedures and actions required at lower levels in the
organization.
• It is short term
• It is more detailed because it is involves with day to day operations of the organization.
• Done at lower level of management
• Define what needs to be done in specific areas to implement strategic plans. – Production plans – Financial plans –
Facilities plans – Marketing plans – Human resource plans
• II. On the basis of time period
A. Long term planning: Time frame beyond five years. Long term Plans:
>5yrs, It specifies what the organization wants to become in long run.
It involves great deal of uncertainty. Higher management levels focus on
longer time horizons. Cover a longer time. May include a variety of different
types of training Some examples Long term Plans: • An annual plan,
including Fast Start and basic training • Personal coaching • Self-study.
We should not overlook the importance of long-range plans in providing a
total leadership growth and development program for leaders.
B. Intermediate term/ Midterm planning : Time frame between two and five
years. Medium Term Plans: >1 yr but <5yrs It is designed to implement long
term plans.
C. Short Time Planning:
• Time frame of one year or less. Short term Plans: Upto one year
• It provide basis for day to day operations.
• Meet a particular objective in the near future
• Cover a limited area of training
• Answer the question: Are we doing things right?
• Should fit well within and contribute to long-range plans
For examples: • Plans for basic training sessions for new leaders who have
just been recruited
 Advantages of Planning:
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 organizing 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.
Limitations of Planning:

(5) Planning is
(1) Planning Leads (3) Planning
a Time-consuming
to Rigidity Reduces Creativity
Process

(2) Planning May

(6) Planning Does
Not Work in (4) Planning
Not Guarantee
Dynamic Involves Huge Cost
Success
Environment
 Objectives(nature and types):
• Objectives are very precise, time-based, measurable actions that support
the completion of a goal.
• Objectives typically must
• (1) be related directly to the goal;
• (2) be clear, concise, and understandable;
• (3) be stated in terms of results;
• (4) specify a date for accomplishment; and
• (5) be measurable.
 Objective
s:
• Objectives are specific actionable targets that
needs to be achieved within smaller time frame,
such as a year or a month, to reach a certain
goals.
• Objectives describes the actions or activities
involved in achieving a goal.
• For Example: To achieve the goal of increasing
revenues, a company can have an objective like “
Add three new products by the end of October
this year.”
MBO (process, benefits and
limitations):
 Benefits of MBO:
• To the organization
• Better Planning
• Efficient Management
• Facilitates Control
• Increases Level of Commitment
• Transparency of organizational goals
• Help in Goal setting
 Benefits of MBO:
• To the Superiors
• Coordinating Individual Efforts to Group efforts
• Better Guidance and Direction
• Performance Evaluation
• Accelerates motivation of Subordinates
• Locating Weak and Problem Areas
 Benefits of MBO:
• To the Subordinates
• Increases Job Satisfaction
• Simplifies Goal Achievement
• Motivates to perform better
• Encourages Innovative Thinking and Ideas
• Initiates Self-Direction and Self Control
 BENEFITS OF MBO:
• i) Benefits to subordinates:
• include greater role clarity, measurement of performance and increased job
satisfaction. W hen specific objectives have been agreed upon, the subordinate
knows exactly what he has to achieve and can plan his various activities towards
this end. Role and goal clarity ensure that there is no wastage of scarce
organisational resources, on the one hand and single minded dedication to
achievement of objectives on the other.
• MBO implies regular feedback and measurement of performance against
objectives. This serves as a great motivating factor for people to put in their best
effort to achieve the objectives. It also helps to weed out the non-performer and
identify the real contributors. Clear, specific objectives and unbiased feedback
about performance contribute to increased job satisfaction as compared to a
situation where a person does not know what is expected of him and how, if at all,
his performance will be judged.
• ii)Benefits to Superiors:
• The benefits accruing to the subordinate will, of course, also accrue to the
superiors. But besides these, the other specific benefits for superiors are
that MBO motivates subordinates, strengthens superior-subordinate
relationship, and provides an objective appraisal method. MBO is based
on the concept of participation and this leads to greater motivation.
Setting objectives implies that both the superior and the subordinate have
to sit across the table and openly discuss their respective roles, work,
obstacles and competencies. Such candid discussion always leads to
increased mutual trust and confidence in each other and provides an
enduring bond to the relationship.
• Benefits to the organisation:
• MBO focuses on managerial effectiveness as a central value in the entire
organisation. And this emphasis flows down to the lowest level,
influencing each manager and worker. This shows up in all the decisions
which each manager makes and the overall performance of the
organisation is improved. Secondly, MBO with its focus on objectives
improves concentration and coordination of managerial effort. There is
maximum utilization of resources and conflicting pulls in opposite
directions are avoided. Thirdly, the periodic review in MBO helps identify
advancement potential of workers and managers.
 Limitation of MBO:
• It imposes a burden of extra duty on the Managers, as MBO requires regular attention by them.
• It involves huge paper works. Hence, it is said to create more pile of papers in the organisation
and adds to the existing large amount of paper works.
• The goals set out by MBO process are rigid. Emphases are put on short-term goal and the long-
term goals are neglected.
• MBO stresses on quantitative goal while the other Aspect of quality are neglected.
• MBO process is more time consuming in nature It fails if the Managers couldn't spare adequate
time required by the process.
• MBO required to be integrated with other system of the organisation such as budgeting,
communication; control etc. changing of the current working system may disrupt the work process
and may cause other difficulties.
• The process of MBO though simple but its application is difficult in dynamic environment.
• The process of MBO to be successful requires a pretty long time more than a year or two. This
proves to a testing of patients for the Managers and on the process creates hurdle for the current
running process of the organisation.