Planning Process, Types of Planning, MBO

What is planning process?

Planning or planning process is the process of thinking about the activities which are required to achieve a desired goal. This is the first and very important activity which helps in achieving the desired goal. Planning process involves the creation and maintenance of a plan, such as a psychological aspect that requires conceptual skills.

  • Deciding in advance what to do, how to do, when to do and who has to do it.
  • A forecast for accomplishment.
  • Predetermined course of action.
  • To produce a scheme for future action and to bring about specified results at a specified cost in a specified period of time.

Planning focuses on future and it involves all the activities that determine objectives for the future and the appropriate means for achieving that determine objectives. Outcome of planning process is a plan, which is a document that specifies the course of action the organization will take.

What is the nature of planning process?

  1. Provides knowledge: – It provides basic knowledge from which all future management rise.
  2. Goal oriented: – Planning is concerned with or focused on achieving a particular objective or result.
  3. All pervasive: – Planning is a pervasive activity that covers the entire organization with all its segments and levels. Planning is required at all levels of the organization (top, middle and bottom) and all departments (procurement, production, personnel, finance, etc.).
  4. Intellectual exercise: – Planning is a mental exercise because it involves thinking and deciding what to do, when to do it and how to do it. In planning, managers decide the goals of the organization and the actions through which the goals are to be achieved.
  5. Continuous process: – Planning is a continuous process since new plans need to be prepared and executed one by one. This is because just one plan is not enough for any organization to survive in a dynamic business environment.
  6. Futuristic: – Planning determines the planning of work as what to do, how to do it, when to do it, who will do it, all these questions are related to the future.
  7. Integrated process: – Process planning refers to how the business produces for a particular period of time. This involves deciding which product lines to build, how many units to produce, and what to use. The integration attempts to plan the process and schedule as much as possible.

What is the importance of planning process?

  1. Provides direction: – Planning tells in advance what is to be done. It defines achieving goals and objectives. These goals and objectives set out in the plan provide direction to managers as to what action to take to achieve them.
  2. Leads to economical utilization of resources: – Efficient use of resources means getting things done, with minimal cost in the shortest time and  without wasting any resources. Effectiveness refers to achieving the goal and setting the goal in the right direction.
  3. Reduces the risk of uncertainty: – By directing an organization in the right direction, it recognizes its managers for analyzing and anticipating future changes. This reduces the uncertainty of preceding events.
  4. Facilitates decision making: – Planning helps managers to make various decisions. As planning goals are set in advance and predictions are made for the future. These forecasts and goals help the manager to take faster decisions.
  5. Encourages innovation and creativity: – Planning promotes innovative ideas and it requires high thinking and is an intellectual process. So it makes managers innovative and creative.
  6. Improves morale: – Morale is also boosted by employees feeling that they are valued, being thanked and proving to be important given by superiors.
  7. Facilitate controls: – Planning facilitates control in the business in that it defines the parameters or limits within which a business should be and must operate.

What are the types of planning?

1. Long range planning vs. Short range planning

Point of DistinctionLong range planningShort range planning
MeaningCovers many years and affect many departments of the organization.Covers less than one year and is more specific and detailed.
TimeFive years or moreUp to one year
Primary focusOrganization linkage with external affairs.Linkage with various parts of an organization.
Deals withMission, long term goals and strategies.Current operations of organization.
Prepared byTop managementLower level executives

2. Strategic planning vs. Operational planning

Point of distinctionStrategic planningOperational planning
Time horizonFive year or moreUnder one year
PurposeAdapt to external environment based on internal strength.Implement Internal goals
Activity controlledTotal institutional performanceInternal tasks and operations
 InvolvedTop managementMiddle and lower level management
Basis for planningPrimarily judgementalExact data and standards used.

3. Corporate planning vs. Functional planning planningFunctional planning
1.The term corporate planning refers to the planning activities for the entire enterprise.The planning that is done to ensure the smooth running of the organization keeping in mind the needs of each department.
2.The objective of corporate planning is to determine the long-term objectives of the organization as a whole.The objective of functional planning is to promote standardized management practices for corporate functions.
3.  Corporate planning is usually done at the top level of management.Functional plans are made at every level of the organization.
4.Focus on organizational processFocus on departmental performance.

4. Proactive planning vs. Reactive planning planningReactive planning
1.Goal-oriented; Objectives are assigned, and progress is reviewed in a timely manner.The organization does not plan for the future nor serve the purpose.
2.Make short term and long term plans and have a separate emergency plan.In emergency, they plan that how to handle the situation.
3.Takes feedback and comments from the entire team before making a decisionAll problems are handled with gut feelings rather than proper analysis.
4.It focuses more on customer satisfaction and also evaluate customer feedback in a timely mannerDo not analyze competitive behavior, products or markets

5. Standing used planning vs. Single used planning Standing used planningSingle used planning
1.Standing used plans are defined as long term plans which are approachable and are prepared by top level managers of the organization.Single-use plans can be defined as a short-term approval that is prepared by lower-level managers of the organization.
2.Standing use plans are stable in nature. It cannot be changed at any cost.Single use plans are flexible in nature and can be changed according to the organization’s conditions.
3.Standing use plans are to achieve the primary goals of the organization.Single-use plans are to achieve specific goals or address specific problems of the organization.
4.Standing use plans are made over a long period of time.Single use plans are made over a long period of time.

Hierarchy of planning process

Hierarchy of planning

What are the steps to be taken in planning process?

  1. Set of goals to be achieved: – A goal is a specific goal, end result, or something to be desired. This is a major step to achieve the vision of the organization.
  2. Establishing planning premises: – Planning requires making some assumptions about the future. We know that as plans are implemented, circumstances will change and managers need to forecast what changes will happen.
  3. To decide the planning period: – After determining the long-term objectives and planning premises, the planning period is another stage to choose. Some plans are made for short period of time and other plans are made for longer period.
  4. Finding alternative course of action: – This step is to analyze and evaluate each course of action in view of available resources and objectives. It invites you to predict what will happen if you take a particular action.
  5. Evaluating and selecting the course of action: – There may be more than one way to achieve the goal. Managers need to identify potential alternatives and evaluate that which one is easy in achieving the end goal.
  6. Measuring and controlling the planning process: – Control is one of the most important functions of management. Its main objective is to ensure that the activities of an organization are proceeding according to plan.

What are the limitations of planning process?

  1. Planning leads to rigidity: – The plans are to be rigid in nature and have to be complied with throughout the organization. Such rigidity of schemes can be internal as well as external.
  2. Rapidity of change: – Each organization operates under certain internal and external environments. The environment cannot always be stable. The excess of changes in the internal and external environment, therefore, creates a situation of instability, making planning work extremely difficult.
  3. Time and cost constraints: – Every organization must plan within a certain time and cost constraints. Such hurdles are against the efficiency of the scheme. In the event of a crisis, the organization may also have to make decisions at the war-level, which is virtually without planning.
  4. Planning is a time-consuming  process: – Planning is a very long process as it takes a lot of time for collection, analysis and interpretation of data.
  5. Planning does not guarantee success: – The success of an enterprise is possible only when the plans are properly prepared and implemented. If it does not implemented into action, the schemes become meaningless.

What is MBO?

Management by Objectives (MBO) is a strategic approach to enhance the performance of an organization. ‘MBO’ is known as Management by Objectives. It is a process where the goals of the organization are defined and conveyed by the management to the members of the organization. Organizational structures with the intention to achieve each objective.

MBO is a strategic management model aimed at clearly defining the performance of an organization by defining the objectives that are agreed upon by both management and employees.

What are the steps in MBO?

  • Top’s management support and commitment.
  • Establishing long range objectives and plans.
  • Establishing specific shorter term organizational objectives.
  • Appraisal of results of organization (Implementation and maintaining self-control, reviewing progress periodically, appraising performance).
  • Taking corrective actions.

What are the advantages of MBO?

  • Establishing managers to think about planning for results than merely planning for work.
  • Motivates managers to accept and achieve the set goals.
  • Directs work activity towards organizational goals/objectives.
  • Encourages personal commitment from employees to achieve their goals/objectives.
  • Provides clear standards for control.
  • Reduces role conflict and role ambiguity.
  • Provides more objective appraisal criteria.
  • Identifies problem better by frequent performance review.
  • MBO aids in development of personnel.

What are the disadvantages of MBO?

  • It is time-consuming.
  • It involves enormous paper work and documentation.
  • Failure to implement MBO.
  • Contradictory objectives

Leave a Reply