Chapter 8- Planning

Forms of Plans

Types of Plans:

Plan is a document that outlines what is to be done to achieve the desired goals. It is a specific action proposed that helps the organisation achieve its objectives. Managers prepare and use various types of plans which can broadly be divided into two categories:

A.      Single Use Plans:  Single use plans are one time use plans. These are made to achiever a particular goal or for a specific period of time. After the lapse of the time or the performance of the activity, these plans are prepared again for the next activity or time. Example of single use plans are Budgets, programmes etc.

B.       Standing Plans: These plans are used repeatedly in similarly use and provide guidelines to managers. Such plans are used over a long period of time. Examples – objectives, Policies, Procedures, Rules, Methods etc.

Objectives Strategies Policies Procedures Rules Programmes  Methods Budgets

   Based on the above, various plans can be arranged in a hierarchy as follows:

These sub-plans can be elaborated as follows:

1.      Objectives :

“Objective is the end which an organisation seeks to achieve by its operations”

The process of planning begins with the setting of objectives. These may be defined as the purpose or the aims which and organisation wants to achieve over different period of time. These serve as a guide for overall business planning. A business enterprise may have multiple objectives such as Survival, Profits expansion, Growth, Improvement is service to customers etc. The multiplicity of objectives creates the problem of fixing priority between objectives. However, the priority may change over time. For example, for a new enterprise, Survival is more important than growth.

   Objectives can be for short term as well for long term.

Objectives are also planned both for the organisation as whole as for each department/branch of the enterprise.

Objectives are also set for each level of the organisation.  Lower level objectives are derived from the immediate next higher level objectives. And achievement of objectives at the lower level helps in achieving objectives of set at the higher level.

Essentials of Good objectives:

    i.            Objectives must be Clear and specific .

  ii.            Objectives should be measureable i.e. stated in quantity terms.

iii.            They should be time bound.

 iv.            Objectives should be challenging but achievable.

   v.            Objectives in different areas must be supportive to one another.

 vi.            Objectives should be acceptable to people.

2.     Strategy :  A strategy is a comprehensive plan to achieve the organisational objectives. It is a blueprint of an organisational desired destination, direction and path to follow. It is a comprehensive plan for achieving organisational objectives. This comprehensive plan will include three dimensions:

a.     Determining long term objectives.

b.    Adopting particular course of action, and

c.     Allocating resources necessary to achieve the objectives.

Whenever a strategy is formulated, the business environment needs to be taken into consideration. The changes in the economic, political, social, legal and technological environment will affect an organisation strategy. Strategic decisions will include decisions like whether to introduce a new product or not. If to introduce new product, who are the target customers, whether to make changes in the existing products, what is likely demand for the product.

Therefore a strategy guides the management to find answer to questions like “where is the organisation now and where does it want to be in future? What is a must to do things to reach the desired position?”

Main features of strategy are :

·        These are generally formulated by top levels of management.

·        Strategy is generally long term in nature.

·        It is action oriented and more specific.

·        It is formulated through SWOT analysis.

·        It is to ensure optimum use of key resources of the organisation in the best possible manner.

3.     Policies

“ A policy is a general statement that guides decision making”

Policies define the boundaries within which decisions can be made. Policies guide the thinking of the executives so that they are not affected by their personal values, bias or preferences. For example, McDonald’s policy is not grant franchise to an individual who already has food restaurant. Policies provide direction and help in decision and help in implementation of strategies.. For example, the company may have a recruitment policy, pricing policy etc. within which decisions can be made. And details of recruitment policy may include – policy of hiring only trained engineers, preference to local people in employment, practice of promoting people from within, preference to the relatives of employees while recruiting new staff etc. Pricing policy may state- setting competitive prices, no credit sales, etc.

   Therefore, policies are general statements of understanding which guide or channelize thinking in decision making of subordinates

On the basis of above description, the following are the features of Policies:-

a)       A policy is a Standing Plan.

b)      Policies provide broad guidelines and set parameters within which a manager may function and thus guide decision making.

c)       Policies exist at all levels of organisation—major company policies, department policies, and minor polices.

d)      Policy is formulated in the context of organisational objectives and strategies. Therefore policies contribute to achievement of objectives.

      Essentials of a good policy:

a.     A sound policy  must state clearly the objectives from which it is derived.

b.    It should be easy to understand. The language used must be simple , clear and precise.

c.     As far as possible, the policy should be in writing.

d.    It must be consistent and flexible enough to be adjusted to suit changing needs and environment of the organisation.

e.     Policies should be just, fair, and equitable ensuring equal treatment to all without discrimination on the basis of religion, race, sex , etc.

Procedure:

A procedure describes the exact manner in which a certain activity is to be performed. It is a chronological sequence of steps to be taken. Procedures are designed to execute policies and achieve objectives. Exmples of procedure are : Procedure for purchase of goods, Procedure for conducting interviews, Procedure for recovery of money form customers etc. Procedure can be used to judge whether the work is to be done in a particular manner and thus serves as  a basis of control. Main features of procedure are:

a)       It establishes sequential steps for performing activities.

b)      Different activities may require different types of procedures.

c)       Procedures are made for each department and may be for each activity. Procedure are also made for each level of management. Procedure guide management for routine jobs. For example, procedure for how meeting of Board of Directors should be conducted ( top level); procedure for recruitment of employees (middle level); procedure for purchase of store materials ( lower level).

d)      In many cases, procedures may cut across the functional line in an organisation. For example, execution of sales orders require involvement of Marketing, Production, and finance departments.

Methods:  “ Method is a standardised way or manner of performing a routine activity, considering its objectives”

For example, there are different methods of valuation of closing stock, or charging depreciation on fixed assets, methods of training etc.

Method is a plan because it provides guidelines to organisational members about which method is to be followed in a given situation. This will ensure uniformity in a action of employees. The comparison of results becomes easy.

Rules :   “ Rule is a specific statement that prescribes what is to be done or not be done”

Rules channelize the behaviour of the employees in the right and acceptable direction. Rules help in maintaining discipline. For example “No Smoking in is allowed in the factory; The office opens at 10.00 a.m. etc.

Main features of rules are:

a)       Rules set the conditions which must be observed in gives situations.

b)      Rules must be followed strictly. Non adherence to rules may result in punishment or fines.

c)       Rules are meant to govern behaviour of members and maintain discipline.

d)      Rules must treat all employees equally and be impersonal in nature.

Budgets:  “ Budget is a statement of expected results expressed in numerical terms”

Budget may be expressed in terms of money or physical units. It may project allocation of resources, costs and achievements/results expected in numerical terms.

Budgets may be prepared for different activities of the business like production budget, sales budget, materials budget, cash budget, capital expenditure budget, etc. Budget is related to both planning and controlling. When we prepare a budget, it is related to planning and when we use it as a tool to measure deviation, it is related to controlling. Therefore, it becomes a tool to measure success and failure of the activity budgeted.

Therefore main features of budget are :

a)       Budget is numeric expression of what is to be done or achieved in a specified period of time.

b)      There may be different types of budgets, each budget covering a particular type of activity.

c)       Budget is prepared for a period of time. When, this period is over, a new budget is prepared for the next period

Programme:  “ A programme is a detailed statement about a project which is a combination of objectives, policies, procedures, methods, rules and resources required to implement any course of action”

In fact, the basic plan is implemented through a programme or a set of many programmes. It is a kind of action plan which include various types of plans like policies, procedures, methods etc. It spells out clearly the steps to be taken, resources to be used, time period within which the task is to be completed, what and how the things to be done. In business, programmes are used in various areas like developing a new product, training programme, advertising programme, expansion programme etc.

Major programme is prepared by the top management and to support the primary programme supportive programmes of different levels are prepared for smooth functioning of the company. A programme serves as a useful guide for day-to-day functioning. It is action based and result oriented. A change in environment may require making change in programme.

Difference between different forms of plans _ learn from Book