Department of Management
College of Business and Economics
Addis Ababa University
Introduction to Management
Yohannes Neda
yohannesneda@gmail.com
Strategic Management
1
Yohannes Neda
Chapter Three
Planning
Chapter Objectives
At the end of this course you will be able to:
✓ Define planning and its basic concepts
✓ Explain the nature and importance of planning
✓ Describe organizational vision, mission and
objectives
✓ Describe the various types of plans
✓ Apply the basic planning process
Contents
✓ Meaning of planning
✓ Nature of planning
✓ Importance of planning
✓ Vision, mission and objectives
✓ Types of plans
✓ The planning process
Meaning of Planning
• It is the process of determining a course of action, so as to achieve the
desired results.
• It is the dynamic process of making decisions today about future
actions; and it is a selection or choice among alternatives as to:
• What missions or objectives be achieved
• What actions should be taken
• What organizational positions be assigned
• How the end can be achieved
• When to achieve it
• Who is to do it
• Where to do it
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Meaning of Planning
• Planning requires that managers
be aware of environmental
conditions
facing
their
organization and forecast future
conditions.
• Planning is the core function of
management because it is the
foundation for all the other
functions of management.
4
Nature of Planning
•
•
•
•
•
•
•
The contribution of planning to purpose and objectives
The primacy of planning
The pervasiveness /Universality of planning
Planning and information
Planning is a continuous process
Planning is a means to an end
Plans are arranged in a hierarchy
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Your Reflection
What are the possible
importance of planning for
an organization?
The Importance of Planning
Some of the importance of planning include:
• It provides direction and sense of purpose
• It reduces uncertainties and anticipates the future/ preparing for change
• It provides basis for controlling
• It forces managers to see the organization as a system
• It promotes efficiency
• It improves time management
• It provides the base for cooperative and coordinated efforts
• It provides guideline for decision making
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Limitations of Planning
• Planning is risky
• It is a difficult and complicated task
• It is expensive and time consuming
• It is affected by external factors
• May reduce creativity
8
The Vision
• A vision or strategic intent is a view of a future
reality that the organization seeks.
• Vision is a mental journey from known to the
unknown, creating the future from a montage of
current facts, hopes, dreams, threats and
opportunities.
• A vision is often expressed in a vision statement.
• A vision statement should answer the basic
question, “What do we want to become?”
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The Mission
• Mission is defined as “the
fundamental purpose of
the
organization & its scope of
operation.”
• Organization mission is written in
terms of the general set of products
& services the organization provides
& the markets & clients it serves.
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Organizational Objectives
• Every plan has the primary purpose of
helping the organization succeed
through effective management.
• Success is defined as achieving
organizational objectives.
• These are performance targets, the end
results that managers seek to achieve.
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Objective Setting
Points to consider Include:
• Quantification (if possible)
• Indicate how the mission can be achieved
• Represent specific planned levels of achievement
• Provide precise points or states to be achieved
• Allow review and appraisal of achievement
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Objective Setting
• Make clear:
•
•
•
•
What is to be accomplished
How much is to be
accomplished
By when it is to be
accomplished
By whom it is to be
accomplished
In short an objective should SMART
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Objective Setting
• Specificity indicates clearly what needs to be achieved. Example: reduce delay.
• Measurability indicates the possibility to determine if the desired condition is
fulfilled. Example: Reduce delays by 40% by the end of 2012.
• Achievability indicates a consensus and commitment to the objectives among
the major stakeholders
• Relevance indicates objectives need to be achievable. It answers feasibility, the
availability of authority of the managers and the means of realization.
• Time bound indicates a clear understanding of the time scales associated with
each objective as defined. It is difficult to have commitment without time frame
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Types of Plans
• Organizations can establish different types of plans.
• These plans could be seen from at least three possible dimensions:
1. the scope of the plan
2. the time frame to be covered by the plan
3. standing vs. single-use plans.
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1. The Scope of the Plan
• Plans
in
an
organization
may
differ in their scope;
accordingly,
organizations
can
have:
• Strategic
• Tactical
• operational plans
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Strategic Plans
• Strategic plans are the plans developed to
achieve strategic goals.
• More precisely, a strategic plan is a general
plan outlining decisions of resource allocation, priorities, and action steps
necessary to reach strategic goals.
• These plans are set by the board of
directors and top management, generally
have an extended time horizon, and
address questions of scope, resource
deployment, competitive advantage, and
synergy.
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Tactical Plans
• A tactical plan, aimed at achieving tactical
goals, is developed to implement specific
parts of a strategic plan.
• Tactical plans typically involve upper and
middle management and, compared with
strategic plans, have a somewhat shorter
time horizon and a more specific and
concrete focus.
• Thus tactical plans are concerned more
with actually getting things done than
with deciding what to do.
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Operational Plans
• An operational plan focuses on
carrying out tactical plans to
achieve operational goals.
• Developed by middle and lowerlevel managers, operational plans
have a short-term focus and are
relatively narrow in scope.
• Each one deals with a fairly small
set of activities.
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2. Time Frames for Planning
• Time dimension refers to the time periods for
which the planning is intended. Based on the
length of time a plan covers, we do have three
types of plans:
• Long-range (five years or more),
• medium-range (between one and five years)
• short-range plans (one year or less)
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Long-Range Plans
• A long-range plan covers many
years, perhaps even decades.
• The time span for long-range
planning
varies
from
one
organization to another. For our
purposes, we regard any plan that
extends beyond five years as long
range.
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Intermediate Plans
• An intermediate plan is somewhat less
tentative and subject to change than
is a long-range plan.
• Intermediate plans usually cover
periods from one to five years and
are especially important for middle
and first-line managers.
• Thus they generally parallel tactical
plans.
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Short-Range Plans
• Managers also develop short-range plans,
which have a time frame of one year or
less.
• Short-range plans greatly affect the
manager's day-to-day activities.
• There are two basic kinds of short-range
plans. An action plan operationalizes any
other kind of plan.
• A reaction plan, in turn, is a plan designed
to allow the company to react to an
unforeseen circumstance.
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3. Standing Vs. Single-use Plans
• According to the repetitive
dimension of plans, plans
may be either single-use,
which are made to be used
only once (non-repetitive)
or standing plans, which
are made to be used over
and over again (repeated).
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Single –Use Plans
• A single-use plan is developed to carry out a
course of action that is not likely to be
repeated in the same form in the future.
• Single-use plans, unlike standing plans, are
developed for a specific purpose and
probably will not be used again in the same
form.
• However, a single-use plan may be used as
a model for future program, project or
budgets.
• The three most common forms of singleuse plans are programs, projects and
budgets.
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Single –Use Plans
• A program is a complex set of objectives and plans to achieve an important,
one-time organizational goal
• A project is similar to a program, but generally smaller in scope and
complexity.
• A project may be a part of a broader program, or it may be a self-contained
single-use plan.
• Budgets are single-use plans that commit resources to activities, projects, or
programs.
• They are powerful tools that allocate scarce resources among multiple and
often competing uses.
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Standing Plans
• Whereas single-use plans are developed for nonrecurring
situations, a standing plan is used for activities that recur regularly
over a period of time.
• Standing plans can greatly enhance efficiency by making decision
making routine.
• Policies, standard operating procedures, and rules and regulations
are three kinds of standing plans.
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Standing Plans
• A policy is the most general form of standing plan.
• A policy specifics the organization's general response to a designated problem or
situation.
• Procedures define a precise series of steps to be used in achieving a specific job.
• The narrowest of the standing plans, rules and regulations, describe exactly how
specific activities are to be carried out.
• Rather than guiding decision making, rules and regulations actually take the
place of decision making in various situations.
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Contingency Planning
• But the more uncertain the planning environment, the more likely that one's
original assumptions, predictions, and intentions may prove to be in error.
• Unexpected problems and events frequently occur.
• When they do, plans may have to be changed.
• It is best to anticipate during the planning process that things might not go as
expected.
• Alternatives to the existing plan can then be developed and readied for use when
and if circumstances make them appropriate.
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The Planning Process
• Formal planning is a systematic process.
• The elements of a formal planning process provide a general pattern of rational
planning.
• They do not form a step-by-step procedure, yet the sequence approximates
behavior in a formal planning environment.
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The Planning Process
Developing
premises
1
3
2
Establishing
objectives
Evaluating
alternative
courses of
action
Determining
alternative
courses of
actions
5
Formulating
derivative
plans
4
Implementing
the plan
6
Selecting a
course of
action
9
7
8
Numberizing
plans by
budgeting
Controlling
and evaluating
the results
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The Planning Process
Establishing objectives
01 • Objectives must be established to define long-range
operations.
• Initially, objectives are communicated to tactical managers,
who then specify objectives for their subordinates.
• The process of establishing objectives is a coordinated and
comprehensive effort.
1
3
2
5
4
9
7
6
8
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The Planning Process
Developing premises
02 • Planning premises are assumptions about the environment
within which the plan is to be carried out.
• These originate in both the internal environment of the firm
and the external environment.
1
3
2
5
4
9
7
6
8
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The Planning Process
03
Determining alternative courses of actions
• A successful planning process will generate several options for
managers to consider.
• These options are alternative courses of action that can achieve the
same result. Management's task is to decide among them.
1
3
2
5
4
9
7
6
8
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The Planning Process
04
Evaluating alternative courses of action
• Merits, demerits as well as the consequences of each
alternative must be examined before the choice is being
made.
• Because there are so many alternative courses in most
situations and there are numerous variables and
limitations to be considered, evaluation can be
exceedingly difficult.
1
3
2
5
4
9
7
6
8
35
The Planning Process
Selecting a course of action
05
• This is the point at which the plan to be adopted is chosen or selected.
• It is the real point of decision-making.
• The analysis of each alternative’s disadvantages, benefits, costs and
effects should result in determining one course of action that appears
better than the others.
• Whatever the course chosen, it should be one that gives you the most
advantages and the fewest serious disadvantages.
1
3
2
5
4
9
7
6
8
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The Planning Process
06
Formulating derivative plans
• In most of the times other plans are derived from one major plan
• Formulating derivative plans means formulating other plans based
on one major plan.
1
3
2
5
4
9
7
6
8
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The Planning Process
Numberizing plans by budgeting
07
• Numberizing plans is converting them into budgets.
• Plans will have meaning when they are changed into
numbers.
1
3
2
5
4
9
7
6
8
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The Planning Process
Implementing the plan
08
• This is a step where by the entire organization will
be in motion or real operation.
• All the planning in the world will not help an
organization realize objectives if plans cannot be
implemented.
1
3
2
5
4
9
7
6
8
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The Planning Process
Controlling and evaluating the results
09
1
• Once the plan is implemented, the manager must
monitor the progress that is being made, evaluate the
reported results, and make any modifications necessary.
3
2
5
4
9
7
6
8
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Characteristics of a Good Plan
• Objectivity
• Futurity
• Flexibility
• Stability
• Comprehensive
• Simplicity and clarity
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