Planning

Definition: Planning is the fundamental management function, which involves deciding

beforehand/in advance, what is to be done, when is it to be done, how it is to be done and who
is going to do it. It is an intellectual process which lays down an organization’s objectives and
develops various courses of action, by which the organization can achieve those objectives. It
chalks out exactly, how to attain a specific goal.

Planning is nothing but thinking before the action takes place. It helps us to take a peep into
the future and decide in advance the way to deal with the situations, which we are going to
encounter in future. It involves logical thinking and rational decision making.

Characteristics of Planning
1. Managerial function: Planning is a first and foremost managerial function provides the
base for other functions of the management, i.e. organising, staffing, directing and controlling, as
they are performed within the periphery of the plans made.
2. Goal oriented: It focuses on defining the goals of the organization, identifying
alternative courses of action and deciding the appropriate action plan, which is to be undertaken
for reaching the goals.
3. Pervasive: It is pervasive in the sense that it is present in all the segments and is required
at all the levels of the organization. Although the scope of planning varies at different levels and
departments.
4. Continuous Process: Plans are made for a specific term, say for a month, quarter, year
and so on. Once that period is over, new plans are drawn, considering the organization’s present
and future requirements and conditions. Therefore, it is an ongoing process, as the plans are
framed, executed and followed by another plan.
5. Intellectual Process: It is a mental exercise at it involves the application of mind, to
think, forecast, imagine intelligently and innovate etc.
6. Futuristic: In the process of planning we take a sneak peek of the future. It encompasses
looking into the future, to analyse and predict it so that the organization can face future
challenges effectively.
7. Decision making: Decisions are made regarding the choice of alternative courses of
action that can be undertaken to reach the goal. The alternative chosen should be best among all,
with the least number of the negative and highest number of positive outcomes.

Planning is concerned with setting objectives, targets, and formulating plan to accomplish them.
The activity helps managers analyse the present condition to identify the ways of attaining
the desired position in future. It is both, the need of the organization and the responsibility of
managers.
Importance of Planning

 It helps managers to improve future performance, by establishing objectives and

selecting a course of action, for the benefit of the organization.

 It minimises risk and uncertainty, by looking ahead into the future.

 It facilitates the coordination of activities. Thus, reduces overlapping among

activities and eliminates unproductive work.

 It states in advance, what should be done in future, so it provides direction for action.

 It uncovers and identifies future opportunities and threats.

 It sets out standards for controlling. It compares actual performance with the standard
performance and efforts are made to correct the same.

Planning is present in all types of organizations, households, sectors, economies, etc. We need to
plan because the future is highly uncertain and no one can predict the future with 100%
accuracy, as the conditions can change anytime. Hence, planning is the basic requirement of any
organization for the survival, growth and success.
 Steps involved in Planning

By planning process, an organization not only gets the insights of the future, but it also helps the
organization to shape its future. Effective planning involves simplicity of the plan, i.e. the plan
should be clearly stated and easy to understand because if the plan is too much complicated it
will create confusion among the members of the organization. Further, the plan should fulfil all
the requirements of the organization.

Management by Objectives (MBO)

Definition: Management by Objectives (MBO) or otherwise called as Management by Results
(MBR) is management philosophy which was first propounded by Peter F. Drucker in the
year 1954, in his book “Practice of Management”.
Management by objectives is a planning and controlling system, in which the superior and
subordinates work together in order to define business objectives and establish targets that are to
be achieved by the subordinates, and also determine each individual’s key area of responsibility
as regards the results expected. Further, these measures are considered as yardstick to run the
unit and also assess the contribution of each individual.

Assumption of Management by Objectives

MBO relies on the premise that people tend to perform better when they are known about what is
expected from them and when they can associate their personal goals with that of the objectives
of the organization. In addition to this, it also proposes that people have interest in establishing
goals and comparing the performance against the set target.

Process of Management by Objectives

  Goal Setting: First and foremost, the long term goals of the organization are defined,
such as its startegic intent, vision, mission and goals. Once these are formulated, the
management then decides specific objectives to be attained within the given time frame.

 Action Plan: Action plan refers to the way through which the objectives are achieved. It
provides direction regarding how the objectives can be achieved, as in what is to be done,
what steps are to be followed, etc.

 Performance Appraisal: Last but not the least, at this stage, a comparison is made
between actual and predermined standards. These objectives acts as a basis for reviewing the
progress.

MBO, is directed towards raising the performance level of the organization by conspiciosly

identifying the measurable goals and end results, which are agreed to the management as well as
employees of the organization. Thereafter, the employees participate in formulating the action
plan and strategy for the attainment of the goals.

Benefits of Management by Objectives

1. It facilitates the employees to understand their tasks and duties in a better way.
2. It is helpful in designing Key Result Area (KRA) for each employee, according to their
interest, specialization, experience and competency.
3. It eliminates overalpping and confusions in the tasks and duties.
4. Every employee contributes towards the achievement of the objectives by successfully
completing the tasks and duties assigned to them by the superior.
5. It creates an open communication enviornment in the organization.

In a nutshell, Management by objectives is nothing but a process wherein the goals, plans and
control system of the organization are defined by the management and employees jointly.
 Objectives ant Its Nature

There are two interchangeable and related term as Goal and Objective, used in management

having different meaning as Goal is concerned with the result or achievement toward which

effort is directed or aimed.

An Objective has a similar definition but is supposed to be a clear and measurable target.
Business objectives are the goals, aims or purpose of the business. The business tries to achieve

these goals. Profit is the main objective of business. However, the business cannot have only one

objective. This is because it has to satisfy different groups such as shareholders, employees,

customers, creditors, etc. So, it has to fix objectives for each group.

Nature Characteristics of Business Objectives

The features or characteristics of business objectives are depicted below.

1. Multiplicity of Objective

Business objectives are multiple in character. That is, a business does not have only one

objective. It has many or multiple objectives. This is because a business has to satisfy different

groups, i.e. shareholders, employees, customers, creditors, vendors, society, etc. The business

has to fix different objectives for each group.

2. Hierarchy of Objectives

Hierarchy means to write down the objectives according to their importance. The most important

objective is written first, and the least important objective is written last. All objectives are

important. However, some objectives are more important than others. Some objectives need

immediate action while others can be kept aside for some time.

3. Periodicity of Objectives
Based on period, business objectives can be classified into two types, viz.,

Short-term objectives, and

Long-term objectives.

The short-term objectives are made for a short-period, i.e. maximum one year. Short-term

objectives are more specific.

The long-term objectives are made for a long-period, i.e. for five years or more. Long-term

objectives are more general. They are like a Master Plan.

4. Flexibility of Objectives

The business is flexible. Therefore, the business objectives must also be flexible. If the

objectives are rigid, the business will not survive. This is because the business environment

keeps on changing. There are continuous changes in the technical, social, economic and political

environment. The business has to change its objectives according to the changes in the business

environment. The hierarchy of objectives must also be changed from time to time.

5. Qualitative and Quantitative Objectives

There are two types of objectives, viz., Quantitative and Qualitative objectives.

Quantitative objectives are easy to measure. It is expressed in numbers. For e.g. in Dollars,

Rupees, Percentage, etc. Quantitative objectives are visible, tangible and countable.

Qualitative objectives are not easy to measure. It is not expressed in numbers. For e.g. Employee

performance, employee satisfaction, etc. These objectives cannot be measured. Qualitative

objectives are invisible, intangible and uncountable.

Today modern methods are used to measure qualitative objectives. A business must have both

quantitative and qualitative objectives.

6. Measurability of Objectives

The objectives must be clear and specific. It must be easy to measure. For e.g. Each salesman

must sell 100 units of water purifier per month. This is a clear and specific objective. It is easy to

measure the performance of the salesman. If a salesman sells 200 units of water purifier in a

month then his performance is good. He can be given bonus and promotion. However, if a

salesman sells only 10 units of water purifier in a month then his performance is bad. He needs

more training. Measurable objectives motivate the employees to work hard. This is because they

know their target clearly. Their performance can also be measured easily.

7. Network of Objectives

Network means an interconnection between different objectives. A business has many different

objectives, viz., corporate objectives, departmental objectives, sectional objectives and individual

objectives. It also has objectives for shareholders, customers, employees, etc. All these

objectives must be interconnected. They must support each other. They must not clash with each

other. They must move in the same direction. If not, the business will not survive. Similarly, the

objectives of all the departments, must support each other. They must not clash or conflict will

each other.