MODULE 4 MANAGERIAL FUNCTION: PLANNING

Topic Outline
1. Basic Features of a Good Management Plan
2. Steps in Planning Process
3. Four Types of Plans
a. Operational Planning
b. Strategic Planning
c. Tactical Planning
d. Contingency Planning
4. Elements of Planning
a. Organizational Vision, Mission,
Philosophy, Goals and Values b. Forecasting
c. Budgeting
i. Zero-based budgeting
ii. Fixed Budgeting
iii. Flexible Budgeting
iv. Capital Budgeting
v. Operating Budgeting
5. Barriers to Effective Planning
PLANNING
• Planning is the primary function of management. Its purpose is to ensure optimum utilization of
human and economic resources in the business processes. It precedes all other activities of the
business undertaking.
• It is the process of charting out the path for attaining the ultimate purpose of business
operations by outlining the sequence of events forecast with reasonable degree of certainty. It
involves not only anticipating the consequences of decisions but also predicting events that may
have effects on a business.
• Thus, planning is deciding in the present what to do in the future. It directs efforts and
resources of an enterprise toward the common objectives.
• “Planning function of management is the continuous process of making present
entrepreneurial (risk-taking) decisions systematically and with the best possible knowledge of
their futurity, organizing systematically the efforts needed to carry out these decisions, and
measuring the results of these decisions against the expectations through organized systematic
feedback.”- Drucker
• Planning requires both creativity and analysis in defining business opportunities and
constraints. Hence it is called the art of the possible. It is the
process of guiding the business enterprise toward clearly specified objectives with the clearest
possible view of the future. Deciding what is desired and determining the actions required are
both involved in planning.
• It is known as the process of matching the resources with opportunities.
• It is a future oriented activity.
• It specifies in detail what will be done, by whom,
with what and when to achieve the objective of
the undertaking.
• It should be noted that planning is not a
“blueprint” of future operations. It is basically a
problem of choosing.
• The essentials of planning lie in the provision of
integrated decision-structure for an undertaking as a whole. It demands thinking of shaping the
future of the undertaking instead of expecting the organizations to adapt to a future as shaped
by directionless forces. It is in this sense that planning is the determination of desired results
and the ways and means to achieve them.
1. It should define objectives. Objectives are the ultimate goals towards which all activities are
directed. A statement which lays down objectives should be clear and definite and everyone in
the organization should understand it in the same sense.
2. It should be simple. If a plan is expressed in a language which is not understandable by the
personnel of the concern or it is complicated, it may create problems for those who are to
actually put it into action.
3. It should be clear. A good plan must not contain anything that is ambiguous or indefinite.
4. It should be comprehensive. A good plan should contain all that is necessary for the
attainment of the objectives of the enterprise. If a master plan is prepared for the whole
organization, it will be more useful as it can be seen that nothing is left from it.
5. It should be flexible. A flexible plan adjusts the changes in the plans without any delay. Hence
a plan must not be rigid. A plan should be broad

NINE BASIC FEATURES OF A GOOD MANAGEMENT PLAN

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enough to meet the future challenges and
uncertainties.
6. It should be economical. A plan should be made
keeping in mind the resources available with the concern and making optimum utilization of the
available resources. In other words, a plan must recover its cost and should result in the least
operating cost.
7. It should establish standards. A plan must lay down the standards to be achieved. The actual
performance is compared with these standards and deviations if any are noted.
8. It should be balanced. It is necessary ensure that there is a proper co-ordination between
different types of plans such as short-term and long-term plans, “plans of different departments
etc. A business enterprise usually has a number of department’s viz., production, marketing,
finance etc. Each department frames its own plans. It is for the management to see that all
these plans are well balanced.
9. It should be practicable. A plan is worth only if it is practically workable and realistic. It should
be formulated keeping in view the limitations of planning. If a plan is good in theory but bad in
practice, it is of no use. Similarly, if the desired results are not achieved by a plan, it leads to
frustration at all levels in the organization.
STEPS IN PLANNING PROCESS
1. Analysis of the current state and forecasting the future environment. SWOT analysis and/or
other organizational analysis measures may be done to examination of your organization's
strengths, weaknesses, opportunities, and threats. Then develop an organizational vision and a
mission statement as how you describe the future of your organization - where it wants to be, its
essential values, and what it wants to do.
2. Determination of objectives and strategies. A comprehensive planning effort to be successful
requires that managers in each department be involved in the planning process. These
objectives and strategies will direct the future course of the organization must be clear, concise
and specific.
3. Identify alternatives. V arious alternatives can be identified based on the organizational
objectives and planning premises. The concept of various alternatives suggests that a particular
objective can be achieved through various actions.
4. Select best alternative. This is the real point of decision-making. An analysis and evaluation
of alternative courses will disclose that two or more are advisable and beneficial. The fit one is
selected.
5. Implementation and evaluation. The next step is to implement and evaluate the plan.
Implementation in large organizations, such as governmental agencies or large corporations,
will be done by a different set of organizational members than the members that created the
plan.
There is a need to constantly monitor and assess the implementation of the plan to determine if
the plan is achieving the objectives leading to the strategic goal. If not, then adjustments to the
long- term strategy will be necessary.
“Operational plans are about how things need to happen,” motivational leadership speaker
Mack Story said at LinkedIn. “Guidelines of how to accomplish the mission are set.”
This type of planning typically describes the day-to-day running of the company. Operational
plans are often described as single use plans or ongoing plans. Single use plans are created for
events and activities with a single occurrence (such as a single marketing campaign). Ongoing
plans include policies for approaching problems, rules for specific regulations and procedures
for a step-by- step process for accomplishing particular objectives.
STRATEGIC PLANNING
“Strategic plans are all about why things need to happen,” Story said. “It’s big picture, long-term
thinking. It starts at the highest level with defining a mission and casting a vision.”
Strategic planning includes a high-level overview of the entire business. It’s the foundational
basis of the organization and will dictate long-term decisions. The scope of strategic planning
can be anywhere from the next two years to the next 10 years. Important components of a
strategic plan are vision, mission and values.
TACTICAL PLANNING
Tactical plans are about what is going to happen,” Story said. “Basically at the tactical level,
there are many focused, specific, and short-term plans, where the actual work is being done,
that support the high-level strategic plans.”
THE FOUR TYPES OF PLANS
OPERATIONAL PLANNING
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Tactical planning supports strategic planning. It includes tactics that the organization plans to
use to achieve what’s outlined in the strategic plan. Often, the scope is less than one year and
breaks down the strategic plan into actionable chunks. Tactical planning is different from
operational planning in that tactical plans ask specific questions about what needs to happen to
accomplish a strategic goal; operational plans ask how the organization will generally do
something to accomplish the company’s mission.
CONTINGENCY PLANNING
Contingency plans are made when something unexpected happens or when something needs
to be changed. Business experts sometimes refer to these plans as a special type of planning.
Contingency planning can be helpful in circumstances that call for a change. Although
managers should anticipate changes when engaged in any of the primary types of planning,
contingency planning is essential in moments when changes can’t be foreseen. As the business
world becomes more complicated, contingency planning becomes more important to engage in
and understand.
• Vision- future-oriented, purposeful statements designed to identify the desired future of an
organization; Note for timeline
• Mission- tells the reason why an organization exists
o describes an organization what it will be and
what it should be
• Objectives- specific statements to be achieved in an
individual unit
o S. M. A. R. T. (Specific, Measurable,
Attainable, Realistic & Time Bound)
• Philosophy- statement of beliefs and values that
directs one’s values
o Contains value statement about
human beings, about work, clients,
education, service, competencies
• Values- an organization’s values can be defined as
the moral guide for its business practices.
EXAMPLE
FEU’s Vision-Mission
Guided by the core values of Fortitude, Excellence and Uprightness Far Eastern University aims
to be a university of choice in Asia.
Committed to the highest intellectual, moral and cultural standards, Far Eastern University
strives to produce principled and competent graduates.
It nurtures a service-oriented and environment- conscious community which seeks to contribute
to the advancement of the global society.
Core Values
• Fortitude. A Tamaraw is characterized by
fortitude. Moral courage and strength of character allow Tamaraws to persevere and achieve
more than is expected of them.
• Excellence. A Tamaraw is characterized by excellence. The FEU academic community is
committed to perform to its fullest potential thus creating a culture of excellence.
• Uprightness. A Tamaraw is characterized by uprightness. Full development of morality and
integrity is among the primary purposes of FEU as an educational institution.
FORECASTING
Forecasting is a decision-making tool used by many businesses to help in budgeting, planning,
and estimating future growth. In the simplest terms, forecasting is the attempt to predict future
outcomes based on past events and management insight.
There are two forecast types: judgment-based (e.g. “gut feel”) and quantitative (e.g. statistics).
The most trustworthy forecasts combine both methods to support their strengths and mitigate
their weaknesses.
Ex. Gantt Chart
BUDGETING
• Budgeting is the process of designing, implementing and operating budgets. It is the
managerial process of budget planning and preparation, budgetary control and the related
procedures.
• Budgeting is the highest level of accounting in terms of future which indicates a definite course
of action and not merely reporting.
TYPES OF BUDGET
1. Zero-based budgeting
• As one of the most commonly used budgeting
methods, zero-based budgeting starts with the assumption that all department budgets are zero
and must be rebuilt from scratch. Managers must be able to justify every single expense.
• No expenditures are automatically “okayed”. Zero-based budgeting is very tight, aiming to
avoid any and all expenditures that are not
ELEMENTS OF PLANNING
ORGANIZATIONAL VISION, MISSION, PHILOSOPHY, GOALS AND VALUES
17

considered absolutely essential to the

company’s successful (profitable) operation.
• This kind of bottom-up budgeting can be a
highly effective way to “shake things up”.
• The zero-based approach is good to use when there is an urgent need for cost containment,
for example, in a situation where a company is going through a financial restructuring or a major
economic or market downturn that
requires it to reduce the budget dramatically.
• Zero-based budgeting is best suited for addressing discretionary costs rather than
essential operating costs.
2. Fixed Budgeting is a budget that remains constant, irrespective of the levels of activity, i.e. the
budget is created for a standard volume of production.
3. Flexible Budgeting. Budget created for different production levels or capacity utilization, i.e. it
changes in accordance with the activity level.
4. Capital Budgeting. It is the planning process used to determine which of an organization’s
long-term investments are worth pursuing.
• It is the planning process used to determine whether an organization's long term investments
such as new machinery, replacement of machinery, new plants, new products, and research
development projects are worth the funding of cash through the firm's capitalization structure
(debt, equity or retained earnings).
• It is the process of allocating resources for major capital, or investment, expenditures.
• One of the primary goals of capital budgeting
investments is to increase the value of the firm to the shareholders
5. Operating budgeting. It is a forecast of the revenues and expenses expected for one or more
future periods.
• It is typically formulated by the management team just prior to the beginning of the year and
shows expected activity levels for the entire year.
• This budget may be supported by a number of subsidiary schedules that contain information at
a more detailed level.
• For example, there may be separate supporting budgets that address payroll, the cost of
goods sold, and inventory. Actual results are then compared to the operating budget to
determine the extent of any variances from expectations. Management may alter its actions
during the
year to bring actual results into line with the
operating budget.
• An operating budget tends to become less
accurate for periods further in the future. To offset this issue, some organizations routinely
update their budget based on the latest available information.
Being a leader is about more than a title following your name. It requires developing a strategy
and then expressing the vision in a clear way, so the entire team understands the goal. When a
vision is clearly laid out, business leaders must inspire team members to join the program for
the new vision and implement new strategies.
Even when leaders do all this well, they still need to be constant motivators, project managers
and evaluators of the strategy's implementation. Without motivation, new strategies fall behind
as workers return to their habitual ways of doing things.
Too many distractions present a significant barrier to effective planning. It could be that a leader
is trying to implement too many things at once, and the team is confused about the priorities.
Another way that a distraction prevents effective planning implementation occurs when a leader
attempts to roll out a new program during a peak business season. Your team can't focus on
new strategies and processes if they are working overtime taking care of clients. As the leader,
understand that timing the implementation of new strategy carefully is as important as the
strategy itself.
LACK OF SYSTEMS
Having the right systems in place to support a new strategy is important for success. Systems
could include hardware or software systems or could be something as simple as the fulfillment
process chain of events. Leaders need to look at the resources in place before implementing a
new strategy. For example, a new customer-retention management program might help the
team become more efficient from the sale through the delivery of goods. However, if the
computer systems haven't been upgraded, the new program could overload the computers and
cause crashes and freezes. Team members can't be productive while using a system that isn't
working correctly. LIMITED MANPOWER TO COMPLETE TASKS Some strategies require a
bigger labor force. Without it, seeing a new strategy implemented effectively has potential
problems. For example, a new lead-generation plan could do a great job of flooding your sales
team with
BARRIER TO EFFECTIVE PLANNING
LACK OF LEADERSHIP
EXCESSIVE DISTRACTIONS PREVENT EFFECTIVE PLANNING
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leads. However, if the sales team doesn't have the capacity to follow up with all the leads, the
strategy wastes money and burns prospects.
Additionally, the new influx of orders needs a fulfillment team capable of handling the new
orders. Make sure you have the right people in place to execute new strategies effectively.
INADEQUATE RESOURCES AND FUNDING
You may have a great plan but don't have the resources to execute it properly. A lack of
resources can impact marketing, talent acquisition and new distribution programs.
Bootstrapping new changes can strain the team as it implements something that isn't ready to
go. When you don't have the funding, segment the strategy and roll it out in phases that meet
budget limitations.
IMPRACTICAL BUSINESS PLANNING
Some ideas are just not practical. Don't be stubborn about the execution of a new strategy. A
strategy is a concept that is fleshed out during implementation. Business leaders must be
flexible to see what is working and what isn't working in the strategy and make adjustments
accordingly.