Summary about planning

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

 Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be
done & when it is to be done.

 Planning involves determination of objectives, formation of programmes & course of action for
their attainment & dev’t of schedule & timing of actions

 What will be done? (what are the objectives in the short & long run?)

 When it will be done?-Determination of the timing & sequence

 How it will be done?

 Determination of tasks, activities, programmes, projects, etc required for achievement of

objectives

 Formulation of strategies, policies, procedures, methods & standards for the above purpose

 What resources will be required?

 Estimate resources required for the achievement of objectives

 Who will do it? Who is in charge?

 Where? Place

Nature of planning

1. The contribution of planning to purpose & objectives

2. The primacy of planning-planning precedes the execution of all other managerial functions

3. Planning is a continuous process-Revisions in response to changes

4. Universality of planning-Planning is the function of all managers

5. character and breadth of planning varies with

each manager’s authority and with the nature of policies and plans outlined by superiors

6. Planning & information-Basically no plan exists without information

7. Planning is a means to an end

8. Plans are arranged in hierarchy like;

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  Corporate plans
 Divisional/ departmental plan
 Sectional plans
 Unit plans

9. Each of this division sets its plans, programs, projects, budgets, resource requirements,

10. Planning is a continuous process :- changes in the internal and external environments of the
organization

Importance of planning

1. It provides direction & sense of purpose

 It is through planning that we can establish our objectives.
2. It reduces uncertainties & anticipates the future
 Planning answers ‘what if questions’

3. It provides basis for controlling-Standards are developed during planning

4. It forces managers to see the organization as a system

5. It promotes efficiency

6. Developing managers-Planning implies that managers should be proactive & make things
happen rather than reactive & let things happen

7. deal with abstract and uncertain ideas and information

8. systematic thinking about the present and the future

requires being proactive than reactive

9. It provides guide line for decision making recurring nature based on strategies
and policies of the organization.

Planning process
1. Establishing objectives it involves : assessing the present situation, anticipating the future
condition, setting objectives

2. Developing premises(goobaha meel dhismo)-assumptions about the environment within which

the plan is to be carried out, SWOT analysis

 Strengths are internal competencies possessed by the organization in

comparison with the competitors. These include structure and policies of the
organization, location, financial soundness, knowledge of personnel, and so on.
 Weaknesses are attributes of the organization, which tend to decrease its
competence in comparison to its competitors.

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  Opportunity is a combination of circumstances, which are likely to produce
significant benefits.
 Threat is reasonably probable events, if occur, would produce significant
damage to the organization.

3. Determining alternative course of action

 create as many roads to the objective as possible

4. Evaluating alternative courses of action-valuate the benefits, costs & effects of alternative courses

5. Selecting a course of action- the real point of decision-making

6. Formulating derivative plans-formulating other plans based on one major plan.

7. Numberizing plans by budgeting-converting in to budgets & set important standards against which
planning process can be measured.

8. Implementing the plan-develop an action plan & implement it.

9. Controlling & evaluating the result-make certain that the plan is going according to expectations &
making necessary adjustments.

Types of plans
Plans based on scope/based on levels of management

1. Strategic plans-

2. organization wide plan that is formulated or developed by top-level mgt

 It applies to the entire organization.

 Develops the direction for the entire organization.

 Is primarily concerned with solving long-term problems.

Characteristics of strategic plan:

 It requires looking outside the organization for threats & opportunities.

 It requires looking inside the organization for strengths & weaknesses
 It takes a longer view, i.e. it covers a relatively long time horizon(jidtoosan)
 It tends to be top management responsibility, but it reflects a mentality of usefulness at
all levels.
 It is expressed in relatively general non-specific terms.

Strategic plans address such questions as:

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 1. What business are we in?
2. What business should we be in?
3. Where will we be in ten years if we continue doing what we are doing now?

2. Tactical plans

1. intermediate plan

2. specific & more goals oriented than strategic plans

3. Middle level management in consultation with lower level management

4. the means charted to support the implementation of the strategic plans

5. implementation of activities & the allocation of resources

6. Tactical plans make premises for operational plans

Eg. What is the best pricing policy?

Which city/town is suitable for marketing our products?

3. Operational plans

1. Operational plans have relatively short time frame

2. It is the most detailed (more specific) & narrowest plan compared to the above two

E.g. –What production technique is best?

What materials are needed for operation?

Plans based on use/based on how repeatedly/frequently a given plan is used

1) Standing plans-provide an ongoing guidance for performing recurring activities.

E.g. A bank can more easily approve or reject loan requests if criteria are established in advance to
evaluate credit ratings, collateral(harmaad) assets & related applicant(codsade) information.

Plans based on use/based on how repeatedly/frequently a given plan is used

1) Standing plans-provide an ongoing guidance for performing recurring activities.

E.g. A bank can more easily approve or reject loan requests if criteria are established in advance to
evaluate credit ratings, collateral (harmaad) assets & related applicant (codsade) information.

Types of Standing Plans:

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 1. Policies-general statements or understandings which guide thinking & actions

Examples of policy:

 No employee shall accept any gift from any supplier at any time.
 Hiring university trained engineers
 To promote from within
 We accept returned merchandise
1. Rules- spell out specific required action or non-action
 the most explicit of standing plans & are not guides

E.g. No smoking, cheating is prohibited.

 Procedure- is statements that detail the exact manner in which certain

activities must be accomplished.
 are chronological sequences of required actions

E.g. Material procurement, university admission, bidding, etc.

2) Single use plan- plans aimed at achieving a specific goal that, once reached, will most likely not recur
in the future

 The major types of single use plans are programs, projects, & budgets.
a. Program- 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, ...
 May be as large in scope as placing a person on the moon or as small as improving the reading
level of 9th grade students in a school district.
 A program may be repeated with modification but not as it is.
b. Project- plan that coordinates a set of limited scope activities that do not need to be divided
into several major projects

 Projects are the smaller & separate portions of programs

E.g. Building a warehouse can be taken as a program. The typical projects in this program might include:

 the preparation of layout drawings,

 a report on labor availability,

c. Budget-statements of expected results expressed in numerical terms.

 statements of financial resources set aside for specific activities

 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.

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  It may be referred to as a “numberized” program

 Budgets are also control devices. However, making a budget is clearly planning.

Characteristics of a Good Plan

1. Objectivity- It should be factual, logical & realistic.

2. Futurity- it must foresee with reasonable accuracy the nature of future events affecting the
industry & the firm.

3. Flexibility- adjust smoothly & quickly to changing conditions without seriously losing their
effectiveness.

4. Stability- it should not be changed materially from day to day.

5. Comprehensive- provide adequate guidance

6. Simplicity & clarity

Limitations of Planning

1. Planning is risky-uncertainties in the future & absence of accurate & adequate data
2. It is a difficult & complicated task-requires patience & commitment
3. It is expensive & time consuming-requires financial, physical, human & time resources

4. It is affected by external factors-external impositions, government intervention(ka hortag),

natural calamities, import-export policies, taxation & labor laws that can limit the success of
planning.

Objectives

1. are direction (what does the organization wants to achieve)

2. are desired outcomes

3. are end results to be achieved

4. are destination of the organization/future destination which the organization wants to reach

Nature of objectives:

1. Are predetermined or stated in advance

2. Describe future desired results toward which present efforts are directed

Should be SMART:

S-specific: to avoid differing interpretation

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 M-measurable- expressed in quantitative terms to allow monitoring & evaluation

A- Appropriate

R-realistic- achievable & meaningful

T-time bound- with specific time frame for completion

Objectives have hierarchy

 Strategic

E.g. Boost overall corporate profit by 10%

 Tactical

E.g. complete market study on sales potential for new products

 Operational

E.g. Increase daily sales by 3%

5. Multiplicity of objectives- Organizations have many objectives. E.g. broad objectives: profit
maximization

Sub objectives: satisfaction of customers

Research & development

Employee development

6. Network of objectives- interrelated & interdependent

7. Should be challenging but realistic-not too difficult & not too easy, should be set within the
existing resource base

8. Multiplicity of objectives- Organizations has many objectives. E.g. broad objectives: profit
maximization

Sub objectives: satisfaction of customers

Research & development

Employee development

6. Network of objectives- interrelated & interdependent

7. Should be challenging but realistic-not too difficult & not too easy, should be set within the
existing resource base.

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