CHAPTER THREE

PLANNING AND PLANS

 PLANNING AND PLANS 

The Meaning of Planning

 

Planning – is the dynamic process of making decisions today about

future actions; and it is a selection or choice among future alternatives.
 Planning is determining the objectives and formulating the
methods to achieve them. A job well planned is half done.
 Planning - is preparing today for tomorrow; it is the activity that
allows managers to determine what they want and how to get it:
They set goals and decide how to reach them. Planning focuses on
the future
 

2
 Planning
Plans have two basic components: goals and action statements. 
 Goals represent an end state the targets and results that managers
hope to achieve.
 Action statements represent how an organization goes ahead to attain
its goals. 
Planning is a deliberate and conscious work using which
managers determine a future course of action for attaining a
specific goal.
planning is deciding in advance what to do, how to do it, when
to do it and who is to do it.
Planning bridges the gap from where we are to where we want to
go.
 Cont’d…
 Planning answers six basic questions in regard to any intended
activity:
 What (the goal or goals).
 When (the time frame in which it will be accomplished)
 Where (the place or places where the plans or planning will
reach its conclusion).
 Who (which people will perform the tasks).
 How (the specific steps or methods to reach the goals).
 What resources (resources necessary to reach the goals).

4
 Reasons for Planning
To coordinate human resource
To reduce uncertainty in operation
To reduce overlapping and wasteful
activities

3
 Nature /Features of planning

Planning seeks to achieve certain objectives-

the purpose of any plan and its derivatives or supporting plans
is to facilitate the accomplishment of organizational objectives
The primacy of planning-
 planning precedes the execution of all other managerial functions.
The pervasiveness /Universality of planning-
 Planning is a function of all managers, although the character and
breadth of planning varies with each manager’s authority
Planning is a continuous process-
 Planning deals with the future and the future is full of
uncertainties. Hence, planning is subject to revision.
 Cont’d…

Planning is a means to an end-

 Planning is not an end by itself. It is a means to an end (meeting
objectives).
Plans are arranged in a hierarchy-
 Plans are first set for the entire organization. The corporate plan
then provides the framework for the formulation of divisional,
departmental, and sectional goals.
Planning and information-
 Basically no plan exists without information. To plan managers
have to gather relevant information from around the environment.
Information is one of the valuable resources for planning to exist.

7
 Importance of /Advantages of planning
If you are planning for one year, grow rice. If you are planning
for 20 years, grow trees. If you are planning for centuries, grow
men!
Chinese Proverb
It focuses attention on desired objectives
It helps to minimize risk-Anticipating and preparing for
possible future changes. planning answers “what-if”
questions.
It improve efficiency-Planning provides the opportunity for a
greater utilization of the available organizational resources
It avoid confusions
It enables co operation and group work
It serves as the basis of control - Standards /controlling
mechanisms/ are developed during planning.
 Limitations of planning

Lack of accurate information

Time consuming
Expensive
Planning is risky b/c of uncertainties in the future and
absence of accurate and adequate data.
Rigidity due to strict compliance with plans
External limitations (political )- government intervention,
natural disasters, import-export policies, taxation and
labor laws that can limit the success of planning
 The Planning Process
 These steps are interrelated and there is no rigid boundary between or
among.
1. Establishing objectives
 objectives provide the direction for all other managerial functions,
especially planning. objective setting is an important first step in the
planning process.
 Objective setting is a three steps process:
 Assessing the present situation
 Anticipating future conditions
 Setting the objectives
 The hierarchy of objectives starts at the top of the organization and
proceeds downwards with narrower and more specific objectives for
each level managers, derived from the objectives at the level
 

10
 Cont…
2. Developing premises
 Planning premises are assumptions about the
environment within which the plan is to be carried out.
 Next to objective investigate the company's EXT(for
Threats and Opportunities) & INT (for Strengths and
Weaknesses) environment to know factors that facilitate
or block the attainment of these objectives.
3. Determining alternative courses of actions
 Alternatives are courses of actions that are available to a
manager to reach a goal. In developing alternatives, a manager
should try to create as many roads to the objective as possible.

11
 Cont’d…
4. Evaluating alternative courses of action
 Evaluate the benefits, costs and effects of alternative courses
in light of their weight to goals
5. Selecting a course of action
 This is the point at which the plan to be adopted is chosen or
selected.
 It is the real point of decision-making.
6. Formulating derivative plans
 At step 5 planning is ended. Formulating derivative plans
means formulating other plans based on one major plan.

12
 Cont’d…
7. Numbering plans by budgeting
 Numbering plans is converting them into budgets. Plans will
have meaning when they are changed into numbers.
8. Implementing the plan
 After the optimum alternative has been selected, the manager
needs to develop an action plan to implement it.
 This is a step where by the entire organization will be in motion
or real operation.
9. Controlling and evaluating the results
 Once the plan is implemented, the manager must monitor the
progress that is being made, evaluate the reported results, and
make any modifications necessary.

13
 Types of Plans
Plans can be classified on different bases or dimensions:
Scope dimension, Time dimension, and Use/repetitiveness
i. Scope/Breadth Dimension
Scope refers to the comprehensiveness of the plan. This
dimension creates hierarchy of plans. Based on
scope/breadth:
1. Strategic Plan: is organization wide plan by top-level in
consultation with the board of directors and middle level
management. It applies to the entire organization.
Looks ahead over the next five or more years
Develops the direction for the entire organization.

14
 Cont’d…
2. Tactical Plan: is an intermediate plan reduce long
range planning into intermediate one.
 Tactical plans are specific and more goal oriented than
strategic plans. Middle level management in
consultation with lower level management develops
them.
 TP is narrower in scope than SP and wider than
OP
3. Operational Plan:
 Is concerned with the day to day activities and is made
at the lower level management in consultation with
middle level management.
 OP spell out specifically what must be accomplished.
15
 ii. Time Dimension

 Time dimension refers to the time periods for which the

planning is intended. Based on this, we do have three types
of plans: Long-range (five years or more), medium-
range (between one and five years) and short-range
plans (one year or less).
All strategic plans are long-range plans.
All tactical plans are medium-range plans.
All operational plans are short-range plans.
iii. Use Dimension
Use dimension refers to the extent to which plans will be used
on a recurring basis. Based on this dimension two types of
plans: standing plans and single use plans.
16
1. Standing Plans: are plans that provide an ongoing guidance for
performing recurring activities.
 formulated to be used again and again for the day-to-day
operation of repetitive situations or actions.
 Standing plans become valuable under relatively stable
situations.
E.g. A bank can more easily approve or reject loan requests if
criteria are established in advance to evaluate credit ratings,
collateral assets, and related applicant information.
 The major types of standing plans are policies, rules and
procedures.
a. Policies: is a general guide that specifies the broad
parameters within which organization members are expected to
operate.
 Policies are general statements or understandings which
guide thinking and actions in decision-making. 17
 Cont’d…
b.Rules: spell out specific required action or non-actions, i.e.,
actions that must be or must not be taken in a given situation.
E.g. No smoking, cheating is prohibited.
 A rule is an ongoing, specific plan for controlling human
behavior and conduct at work.
c. Procedures: are statements that detail the exact
manner in which certain activities must be
accomplished.
 Procedures are chronological sequences of required
actions.
 They provide detailed step-by-step instructions as to
what should be done.
18
Cont’d…

19
 Cont’d…
2.Single use plans: are plans aimed at achieving a specific goal that,
once reached, will most likely not recur in the future and dissolved when
these have been accomplished.
 Designed to accomplish a specific objective with in a relatively
shorter period of time and it is non repetitive.
The major types of single use plans are programs, projects, and
budgets.
a. Programs: is a comprehensive plan that coordinates a
complex set of activities related to a major non-recurring
goal.
- Are a complex of goals, policies, procedures, rules, task
assignments, resources to be employed and other
elements necessary to carryout a given course of action
- Single use plans may use standing plans and other single use
  
plans to be effective.
Single use plan = Standing plans + Single use plans 20
 Cont’d…
b. Projects: is a plan that coordinates a set of limited
scope of activities that do not need to be divided into
several major projects in order to reach a major non-
recurring goal.
 Projects are the smaller and separate portions of
programs.
c. Budgets: are statements of expected results expressed
in numerical terms.
 Are statements of financial resources set aside for specific
activities in a given period of time.
 Budget is a single use plan that commits resources to an
activity over a given period.
 It may be expressed in Birr, labor hours, units of product,
machine hrs, or any other numerically measurable term. 21
Thanks!