MBA - Management Concepts - Module 2 - Planning

Module 2: Planning

2.1 Steps in the Planning Process

2.1.1 Meaning of Planning:
- Planning involves deciding in advance what to do and how to do it.
- It's a primary managerial responsibility.
- Planning is closely linked to innovation and creativity.
- Managers at all levels engage in planning.
- Planning involves decision-making, selecting from various performance options.
- It outlines the strategy for moving forward and requires creativity, insight, and judgment.
- Planning addresses forecasting, goal setting, and evaluating alternative courses of action.
- Decision-making is integral, involving choosing the best course of action to achieve goals.
- Planning includes setting goals for a specific period and devising strategies to achieve them.
- Plans are always created for a specific time frame.
2.1.2 Steps in Planning Process (Fig 2.1):
1. Setting Objectives:
  - Planning aims to achieve specific goals.
  - The first step is to precisely define and outline organizational goals.
  - Main goals should be identified and then divided into individual, sectional, and departmental goals.
  - Resource allocation is guided by the objectives.
  - Considerations like the nature of work are taken into account.
  - Future challenges and opportunities must be foreseen as accurately as possible.
  - Example: ABC Ltd. aims to sell 3,000 laptop units this year, doubling the previous year's sales. This goal is shared among manufacturing, marketing, sales, and finance departments.
2. Developing Planning Premises:
  - Establishing premises is the next stage.
  - Planning premises are the anticipated settings in which plans will function.
  - This includes estimates and assumptions about the future and understanding circumstances affecting the plan.
  - Premises set the conditions and limitations for carrying out plans.
  - Categories of planning premises: internal/external, controllable/semi-controllable/uncontrolled, tangible/intangible, foreseeable/unenforceable.
  - Example: ABC Ltd. estimates laptop demand based on the work-from-home policy to reach its sales goal. Accurate prediction is crucial for an effective plan.
3. Identifying Alternative Courses of Action:
  - After establishing goals and anticipating future events, the next step is to find alternative courses of action for achieving goals.
  - Collecting data from primary and secondary sources is required.
  - Data must be accurate and credible, directly and strategically connected to the targeted goal.
  - There are various alternatives for every plan, and all possible alternatives should be considered.
  - Example: ABC Ltd. incorporates ideas from employees and customers. Options include lowering prices, boosting advertising, promotion, and after-sale service. Discussions among organizational participants can generate more options for significant initiatives.
4. Evaluating Alternative Courses:
  - This involves examining each alternative after recognizing several options.
  - Evaluation includes considering the estimated cost and benefit to the organization.
  - Compare options in terms of risk, planning environment, and desired outcomes.
  - Each alternative's benefits and drawbacks must be carefully considered.
  - Example: ABC Ltd. assesses the advantages and disadvantages of each potential alternative.
5. Selecting an Alternative:
  - Choose the course of action that will be most effective after weighing the numerous options.
  - Develop fundamental, specific, and derived plans, including budgets, policies, regulations, and programs.
  - Derivative plans support the implementation of fundamental plans.
  - Mathematical analysis may not always be applicable; selection often depends on management experience, discretion, and intuition.
  - Combinations of plans are frequently chosen rather than a single optimal option.
  - Example: ABC Ltd. will use TV commercials, online marketing, and direct contact with MNCs to raise sales.
6. Implementing the Plan:
  - This step turns the plan into reality.
  - The staff must receive a thorough explanation of the plan to gain their cooperation.
  - Employee input must be taken into account, and they should be encouraged to carry out the plan to the best of their abilities.
  - This involves coordinating labor and acquiring equipment.
  - Example: ABC Ltd. hires more salespeople to reach out to MNCs, produces engaging internet advertisements, and establishes more service workshops.
7. Follow-up Action:
  - After implementation, periodically assess the current plan to ensure its effectiveness.
  - Continuously assess the plan and correct any deficiencies.
  - Example: ABC Ltd. creates a feedback mechanism to incorporate customer concerns and reviews to offer better service.
  - Real consumer feedback, revenue collection, and employee feedback are crucial.

2.2 Scope and Limitations

2.2.1 Scope of Planning:
- Planning focuses on achieving objectives.
- Organizations are created with a shared objective in mind.
- Planning is a primary function of management, laying the groundwork for other management functions.
- Planning is continuous.
- Planning is futuristic, involving forward-thinking and creating a plan for the future. It entails peering into the future, researching it, and predicting it.
2.2.2 Limitations of Planning (Fig 2.2):
1. Planning Leads to Rigidity:
  - Plans can be inflexible, making it difficult to adjust to changing circumstances.
  - Plans may need revision or abandonment when conditions change unexpectedly.
  - Plans are strict and must be followed by everyone.
  - Rigidity can be internal (plans, policies, procedures) or external (political, industrial, technological, legal, economic spheres).
  - Example: Hospital branch must abide by top administration's choices, even if they have better ideas.
2. Planning May Not Work in a Dynamic Environment:
  - The business environment is constantly shifting.
  - It's challenging to access future trends, consumer preferences, natural disasters, and competition practices with complete accuracy.
  - Organizations must constantly adapt, and the changing environment can cause plans to fail.
  - Example: Nestle's Maggi noodles were unavailable due to political and legal issues (high lead concentration).
3. Planning Reduces Creativity:
  - Top management is primarily responsible for planning; other members must adhere to these plans.
  - Employees become orders-following machines and don't engage in creative thinking.
  - Rigidity in following plans can stifle creativity.
  - Example: A shoe manufacturer doesn't pursue bespoke footwear despite seeing potential due to senior management's focus on standardized shoes.
4. Planning Involves Huge Cost:
  - Developing and implementing plans can be costly, especially with detailed research or specialized expertise.
  - Expenses include board meetings, consultations, and initial research.
  - Verifying data accuracy can be time-consuming.
  - Costs may not always be worth the benefits.
  - Example: IBM invests heavily in research and expert guidance, which is vital for its survival.
5. Planning is a Time-Consuming Process:
  - Planning requires extensive data collection, analysis, and interpretation.
  - Prolonged processes can delay decisions, miss chances, and leave little time for execution.
  - Example: Health is Wealth Ltd. lost an opportunity to hold more health check-up camps because management approval was delayed.
6. Planning Does Not Guarantee Success:
  - Success requires properly created and executed plans.
  - Plans lose their purpose if not carried out.
  - Managers often rely on tried-and-true strategies.
  - The changing and unpredictable environment means past success doesn't ensure future success.
  - Plans must adapt to the environment.
  - Example: A paint manufacturing firm's plan failed when a rival with higher paint quality entered the market.
2.2.3 Features of Planning:
1. Primary Function:
  - Planning comes first, establishing the framework for all management responsibilities.
  - Organizing, staffing, directing, and controlling are carried out within the parameters of written plans.
  - Other managerial functions cannot be performed without planning.
  - Example: After setting a goal to produce 2400 refrigerators, the corporation organizes work, hires personnel, motivates them, and evaluates performance.
2. Achieving Objectives:
  - Plans focus on actions necessary to achieve specific goals.
  - These actions become quantitative targets.
  - Planning is not possible without objectives.
  - Without planning, people would work in separate directions, preventing the achievement of targeted goals.
  - Example: A company decides to sell 2400 refrigerators in six months.
3. Futuristic/ Forward-Looking:
  - Planning involves anticipating and preparing for future events.
  - It is based on forecasts.
  - Example: Production and marketing plans are created based on sales forecasts.
4. All Pervasive:
  - Planning is necessary at all levels of management and organizations.
  - Top-level management plans affect the entire organization.
  - Middle-level management participates in departmental planning.
  - Lower-level management makes plans for daily operations.
  - Examples: Workers planning production schedules, CEOs planning new product launches, students planning for tests.
5. Continuous Process:
  - Plans are set up for various periods (day, week, month, year).
  - Fresh plans are created and periodically changed in light of input, specifications, and developments.
  - Examples: Adjusting plans during an economic boom or after events like flooding.
6. Decision Making:
  - The decision entails selecting the best option from a range of accessible options.
  - Planning is not possible without options.
  - Planning involves thoroughly evaluating options to select the optimal one.
  - Example: Choosing an import agency based on pricing if multiple agencies are available.
7. Planning is Mental Exercise:
  - Planning is the result of a logical process rather than speculation.
  - It is founded on reasoned argument, verifiable data, vision, foresight, and good judgement.
  - Example: CEOs like Mark Zuckerberg and Tim Cook exemplify imagination and sound judgement.
2.2.4 Nature or Characteristics of Planning:
- Planning is a crucial component of management.
- Managers foresee potential issues and their effects.
- Planning is continuously carried out at every level.
1. Planning, an Intellectual Process:
  - Requires mental effort and ties facts to expertise.
  - Planners envision future scenarios and create action plans.
  - Decisions shouldn't be based on guesswork but on weighing advantages and disadvantages.
  - Managers need imagination.
  - Planners consider what, how, when, and who.
  - Effective use of planning combines knowledge and power to achieve goals.
2. Primacy of Planning:
  - Planning precedes organizing, staffing, directing, and controlling.
  - It's a prerequisite for all other tasks.
  - Overlap between organizing, staffing, directing, and controlling exists.
  - Re-planning or adjusting can be necessary.
  - Planning and controlling go hand in hand.
3. All Managers Plan:
  - Every manager is tasked with planning.
  - Planning's extensiveness is often overlooked.
  - Managers at the top spend more time planning.
  - Extent, significance, and size of planning depend on the level at which it's executed.
  - Top-level planning is fundamental, extensive, and far-reaching.
  - Planning becomes smaller in scope at lower levels.
  - Various people have distinct ideas on whether planning and execution should be done by the same people or by different people.
  - Specialisation will result if planning and execution are seperated.
  - Coordination between planning and execution will benefit if planning and execution are done by the same people.
4. Planning: A Rational Approach:
  - A rational approach to achieving organizational goals.
  - Management aims to reach goals with appropriate resources.
  - Planning suggests several alternatives.
  - The future is uncertain, but planning provides alternative approaches.
  - Balancing ends and means lies within planning's purview.
  - Rational decisions are made to achieve enterprise goals.
5. Focus on Objectives:
  - Focus on establishing objectives and strategies.
  - Planning directs attention toward setting appropriate objectives.
6. Leads to Efficiency and Economy:
  - Effective use of resources: capital, labor, machinery, materials.
  - Every production factor is used effectively and economically.
  - Planning prevents duplication of work.
7. Limiting Factors:
  - Planners should consider limiting factors: money, people, materials, the market.
  - Availability should be considered before planning.
  - Example: Determining the availability of raw resources before planning manufacturing and marketing.
8. Coordination:
  - The who, what, how, why, and where of planning are coordinated through planning.
  - Various organizational parts may pursue different goals in the absence of planning.
9. Flexibility:
  - Flexible enough to react to the evolving commercial environment.
  - Planning adapts to the demands and specifications of the circumstances.
10. Realistic:
  - Based on projections for the future.

**Planning is Continuous

A manager's planning is a never-ending task. Planning is never final and is constantly open to change as more information becomes available. Even when planning is being carried out, circumstances and situations could change, prompting periodic modifications. Managers typically follow the practice of periodically reviewing plans and, if necessary, revising them in light of the changing circumstances. This will make it easier to adapt to changing circumstances and solve issues. Planning is essential both when things are going smoothly and when difficulties arise. Planning is necessary at all times for all kinds of scenarios.

2.3 Short-Range and Long-Range Planning

2.3.1 What is Short-Term Planning?
- Focuses on the immediate future (less than a year).
- Helps meet short-term expectations like developing new products and enhancing cash flow.
- Satisfies investors to find more funding for longer-term objectives.
- Should support long-term success while addressing immediate issues (machine problems, product complaints, employee skill levels).
2.3.2 What is Long-Term Planning?
- Aims to achieve goals established for the anticipated future.
- Seeks to achieve overall goals and permanently resolve issues.
- The company's strategic strategy is viewed by some as long-term planning.
- Involves assessing risks in terms of social, economic, and political circumstances.
- Takes into account factors affecting competitors.
- Researches capital investments, policies, and strengthening the company's profile.
2.3.3 What is the Relationship between Short Term Planning and Long-Term Planning?
- Short-term planning forces a business to look for long-term answers.
- Adopting long-term remedies from short-term issues helps the company reach its long-term objectives.
- Short-term objectives serve as building blocks for long-term objectives.
2.3.4 What is the Difference between Short Term Planning and Long-Term Planning?
- Short-term planning's outcome is anticipated in less than a year, done for urgent concerns.
- Long-term planning propels the business on a strategic path.
- Short-term: focuses on the current state of the business, internal problems (lack of training, client complaints).
- Long-term: focuses on both internal and external issues (political climate, global economy).
- Short-term objectives are simple; long-term objectives are complex and tactical.

2.4 Flexibility in Planning

Flexible planning enables managers to plan workload and resources.
Important due to unpredictable variables (software development, agencies).
Can impact project budget, schedule, and deadline.
Flexible resource and project management help respond to unforeseen developments.
2.4.1 Flexible planning tips:
1. Take external events into account
  - Assess external dependencies (time, money, national holidays, sick leaves).
  - Check events like national holidays upfront (Project Management Institute suggestion).
  - Find events, define unavailable groups, calculate the event's impact, and include overtime in plans.
2. Uncover risks and challenges
  - Examples: identifying necessary talents, coordinating team capacity and availability.
  - List employees, choose best, prepare for illnesses and resignations.
  - Create several scenarios and find answers in advance.
  - Create a RACI chart, list employees who can take over, have overview of personnel.
  - Calculate the impact of various outcomes.
  - Record tasks in a work breakdown structure (WBS) and attribute potential hazards.
  - Review previous efforts for potential risks.
3. Frequently verify client priorities
  - Outline objectives and dependencies.
  - Regularly update on client's priorities to confirm no alterations.
  - Ensure alignment and strategy meets expectations.
4. Draft alternative scenarios
  - Confidently handle project by going over potential outcomes.
  - Look at critical path (tasks and dependencies).
  - Identify floating tasks (won't compromise deadline).
  - Rearrange sequence of tasks or juggle resources.
5. Include meetings with your team and client in your plan
  - Hold regular meetings to stay informed.
  - Include meetings in plan before the project begins.
  - Inform team and client of when and where they will be held.
2.4.2 What meetings should you include?
- Scrum meetings (daily, sprint planning, sprint retrospective, sprint review).
- Daily stand-ups and planning sessions.
- Assist you in learning about any challenges your team may have had so you can address them
2.4.3 How to approach flexible planning:
1. Have clear goals.
  - Quantifiable in numbers or development stages.
  - Needs to be inspiring and easy to understand.
2. Make short-term plans.
  - Practical and realistic.
  - Everyone on the team must be able to prioritize their jobs and assess them realistically to see if they can be completed.
    *Discuss and decide on tasks and objectives.
3. Let your people fly.
  *Give them room to operate and relinquish power
4. Have weekly team-meetings to see what has been done and what will be done during the next week.
  *Adjust plan if needed.
5. Think at the moment.
  - When you are not constrained by long-term plans, dealing with issues, novel ideas, and customer requests is easier.
2.4.4 Why is flexible planning important?
- Project planning is significant for project management.
- Certain factors are always important (clear allocation of tasks, general objective and deadline, detailed schedule).
- Enforcing deadlines and schedules too strictly can lead to issues.
- Absence of one team member can delay project.
- Carefully planned out enterprises will eventually veer off course.
- Crucial to be adaptable to your ideas.
- Ensure plans in place to handle unforeseen problems.

2.5 Characteristics of a Sound Plan

Simplicity
Foresight
Flexibility
Best utilization of resources
Liquidity
Contingency planning
Economics

1. Simplicity
- A healthy financial system should offer a straightforward financial framework that is manageable and understandable even by laypeople.
2. Foresight
- To predict the capital requirements as accurately as possible, foresight must be applied when planning the scope of the operation
(3) Flexibility
- They must find it simple to modify the financial plan
(4) Optimum use of funds
- Capital needs to be both sufficient and productively used
(5) Liquidity
- This requirement states that a sufficient portion of the current assets must be maintained as liquid cash.
(6) Anticipation of contingencies
- When creating their financial plan, planners should include unforeseen circumstances or emergencies
(7)Economy
- Last but not least, financial arrangements should be devised to ensure that the cost of capital acquisition is kept to a minimum.

2.6 Summary

Change is constant in the corporate world.
Planning helps managers deal with challenges brought on by change.
Planning leads to success and expansion.
It anticipates possibilities and designs strategies to seize them.
Planning aids in selecting the path to take to accomplish specific organizational goals.
It involves thinking before acting.
New opportunities are brought about by change but so are increased threats.
Planning reduces risk and maximizes opportunity.

2.7 Keywords

Steps in Planning Process: There are seven steps involved the planning process.
Planning is a primary function of management: Planning lays the groundwork for other management functions.
Planning is futuristic: planning entails forward-thinking and creating a plan for the future.
Rigidity: One of the limitations of planning.

2.8 Self-assessment Questions

Explain the meaning of planning.
What are the steps in the planning process?
What is the scope of planning?
What are the limitations of planning?
What are the features of planning?
Explain the nature or characteristics of planning.
What is Short-Term Planning?
What is Long Term Planning?
What is the Relationship between Short Term Planning and Long Term Planning?
10 What is the Difference between Short Term Planning and Long Term Planning?

2.9 Case Study

Why Setting Traditional Goals Doesn't Work?

2.10 References

List of reference books.