Chapter TWO

PLANNING Prepared by Emnet N.

Chapter TWO Planning function

2.1 Concepts and need for planning 2.1.1 concepts of planning
Planning - is the process of setting objectives and determining the steps needed to attain them. is systematic preparation for tomorrow, today is an orderly process that allows managers to determine what they want and how they get it deals with ends (what is to be done)

Cont
Planning answers six basic questions in regard to any

intended activity (objective). what ,when, where, who, how and how much in planning managers:
assess the future Determine objectives of the organization and develop the

overall strategies. determine resources needed to achieve the objectives

2.1.2 Need for planning

Planning is important for every organization irrespective

of its size, objectives, and location. Because decisions without planning would become random this may lead to failure of entire organization. Planning is important for several reasons:

1. It provides direction for an organization by 2. 3.

4. 5.

specifying objectives It reduces risk and uncertain of the future It allows organizational members to concentrate on common organization's objective It provides criteria for decision making It provides basis for control or it facilitates control

2.2 Types of Plans

Plan can be classified in to different types based on

various criteria (basis):

repetitiveness, time dimension and scope or breadth dimension

Classification of plans based on repetitiveness
On the basis of repetitiveness plans can be

classified in to two:

single use plans standing plans

I, Single use plans

Single use plans are those plans which have no

more use after objective is accomplished. Relatively for short period of time. Are non- recurring in nature. They include: programs , projects, and Budgets. Program :- is set of goals, policies, procedures, rules, job assignments, resources to be employed, and other elements necessary to carry out a given course of action. is set of activities used to accomplish objectives or used to solve some problem

 project :-is specific action plan formulated to

Single use plans

complete various aspects of a program which can be distinctly identified as a clear-cut grouping of activities with definite objectives and completion time. Budget :- is a statement of expected results expressed in numerical terms. Even if budget is often thought as control technique, it is also a plan since it sets forth objective to attain. Some times called as 'numerical plan' as they are quantitative in nature.

II,standing plans.
Standing plans are type of plans which can be used

again and again once they made. They remain useful for long period in dealing with repetitive situations . They include: policies, procedure, Method and rules

II,standing plans.
Policies:- are guidelines to decision making. Policies establish abroad framework with in which

managers at different levels make decisions. are general guide to thinking and action Policies are important for an organization as they:
provide guidance to decision making
Channels all decisions toward the attainment of objectives. Ensure consistency and uniformity in decision making

II,standing plans.
Procedures :- are sequences of steps or activities

involved in making decisions or performing other tasks. Procedures aim at laying down a mechanism for orderly performance and coordination of various organizational activities. avoid random actions and operations. Like policies, procedures also contribute in consistency of organizational activities by providing steps.

II,standing plans.
Methods:- are sub-units of procedure They show clearly as to how a step of procedure should be performed They indicate the techniques to be employed make the procedure effective Rules :- are on-going specific plans influencing human behavior or conducts at work place. are fixed plans and define what should and what should not be done. (Guide to action). Unlike polices, rules don't allow for interpretation or decisions. Decisions are needed only in making the rules.

Classification of plans
Classification of plans based on time dimension

Basically planning deals with future and the future is measured in time. Hence it is convenient and acceptable to think of different kinds of planning in terms of the time periods for which the planning is intended. Taking time in consideration a plan can be categorized in to three
Long range plans Intermediate plans short range plans

Long range plans Long range plans are those plans which have longer time

horizon. they are concerned with distant future than immediate

Intermediate plans
Intermediate range plans are those plans with a time

horizon between one and five years. They range between long and short-term plans.

short range plans

Short range plans are those plans with time dimension it is not possible to have aright time horizon guide line. For a plan to be short range or long range, it depends on the size of an organization and nature of business of an organization. So short range plan for one organization may be an intermediate or long range plan for the other organization.

Classification of plans based on scope (Breadth)

Based on their scope or breadth plans can be classified in to three types:

plans tactical plans, and operational plans. Strategic plans: Performed by top-level management Mostly long range in its time frame Expressed in relatively general terms Type of planning that provides general future based direction to organization
strategic

Tactical plans
Tactical planning is the process of developing action

plans through which strategies are executed. Tactical plan- is a plan used to develop means needed to activate and implement strategy. Tactical plans:
performed by middle level managers
Have shorter time frame, more detail and narrower

scope than strategic plans Guide submits of an organization

Operational plans
Operational planning is the process of setting shortrange objectives and determining in advance how they will be accomplished. Operational plans:

are first line managers' tools for exciting daily, weekly, and monthly activities. performed by operational level managers. are Specific and more detail than others.

2.3 Planning process

Planning is not something which is made all once at

a time. A person involved in planning pass through number of steps to make effective plans The steps generally involved in planning are:
environmental Analysis and forecasting
Establishing objectives determining alternative course of Action evaluating the alternatives

Select the best alternatives

Implementing the plan Controlling and evaluating the results

Step 1. environmental Analysis and forecasting

awareness of environment, both internally and

externally. It involves continual assessment of the environment to determine

strengths

internally

weaknesses

to be aware of
opportunities threats

externally

Based on this analysis of internal and external

environment forecasting (predicting) of different environmental factors such as economics, technological, social, political etc can be made to assist real planning.

Step-2. Establishing objectives

establish objectives for the enterprise and then for

each subordinate work unit. Objectives are established at all levels of the structure, beginning at the top level and running down to first line

Step 3. determining alternative course of Action

Identifying alternative ways for reaching objectives. When developing alternatives a manager should try to

create as many roads to each objective as possible. In fact, in most cases the challenging is not to find alternative ways but to decide which ones are best. To decide on best ones it requires evaluation.

Step 4. evaluating the alternatives

Evaluating each alternative to select the best one to

achieves objectives. In evaluating, managers should assess cost (disadvantages) and benefits (advantages) of all alternatives. The assessment may include both financial and non financial considerations.

Step 5. Select the best alternatives

After evaluating all possible alternatives, managers

will select alternative that remains better than others. It may be an alternative with least disadvantages and most advantages.

Step 6. Implementing the plan

After the alternative course of action selected, it is

important to develop an action plan to execute the plan. In this step method for implementation will be suggested.

Step 7. Controlling and evaluating the results

Once the plan is implemented it needs monitoring. monitor the progress being made, evaluate the reports made based on results, and make any necessary modifications, because factors in

environment are constantly changing, plans must be modified to cope up with changes.

mission goals, objectives, and targets

These words are often the most confusing words

in management filed. They are some what similar but not exactly the same in their meanings. Mission :-refers to the main reason why the organization is established. it indicates purpose for existence of an organization relates organization to external environment. Goal :- is expected (desired) performance to be accomplished but it is not set specifically It is desired future outcome that an organization strives to achieve generally.

mission goals, objectives, and targets

Objective : is expected (desired) performance

expressed in specific and measurable terms (manner). Target : is expected performance set for specific individual in an organization. is more specific in nature than objectives.

The difference between goals ,objectives and targets.

Goals are milestone to reach.

Example Ethiopia wants to be the world's

best producer of coffee.

Objectives are usually the written steps to achieve

goals.

Example to increase coffee production by

20% per annum.

Targets are usually numerical objectives.

December sales of $200,000 per sales

person is a target.

2.4 Characteristics of good (effective) objective

effective objectives should be SMART

Specific:- Objectives should state the exact level

of performance expected specifically. Measurable:-as much as possible objectives should be expressed quantitatively. therefore, it is possible to easily determine whether or not goals have been achieved.

2.4 Characteristics of good (effective) objective

Appropriate:-objectives should be prepared in

suitable, acceptable. and achievable manner. Realistic and challenging:- objectives should be attainable or real rather than fantasy. It also better to have challenging objectives as far as they could motivate workers if attained. Time bound :-objectives should be set with in specific time limits or target dates for their attainment.

2.5 Planning techniques

Managers can improve the quality of their planning

by applying variety of Planning tools and techniques .The important fanciful of planning is management by objectives (MBO). Management by objective (MBO) MBO is the technique in which managers and their subordinates together set objectives for subordinates ,periodically evaluate the performance and reward effective workers etc.

Elements of MBO
1. Top level goal setting: effective MBO

begins with the objective being set by top managers which is open for discussion by managers and subordinates to reach up on the common objectives. 2. individual targets:-in an effective MBO each manager and subordinate has clearly defined responsibilities or expected results 3. Participation:- both managers and subordinates are participating in objective setting. 4. Autonomous of individuals:-Once the objective is set, subordinates have a right to

Elements of MBO
5.performance review:- managers and subordinates periodically meet to review progress toward the objectives 6. Reward:-those individuals who meet the objectives in performance review are rewarded. The rewords may be recognition, praise, pay increase etc

Steps in MBO
Effective MBO passes through different steps: Setting individual objectives and plans with each subordinate the manager jointly set objectives. the participation of subordinates in the objective setting process is away of strengthen their commitment to achieve their goals. Giving feedback and evaluating performance Employees must know how much they are progressing toward their objectives. Thus, managers and subordinates should meet frequently to review progress and evaluate performance communication is key factor in determining success of failure of MBO

Steps in MBO
Rewarding according to performance
employees' performance should be measured

against their objectives. Employees who meet their objectives should be rewarded through recognitions, praises, Pay rises and so on .

Benefits and limitations of MBO

Benefits

MBO uplifts workers motivation MBO allows managers and subordinates share experience
Limitation

It consumes much time

The END