COMPONENTS OF PLANNING
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Posted By: Babu Neelakandan Member Level: Gold Points/Cash: 7
COMPONENTS OF PLANNING
CLASSIFICATION OF PLANS
In the process of planning several specific plans are prepared which may broadly be classified into two categories: Standing and Single-Use Plans.
Examples of ‘Standing Plans’ are Mission, Objectives, Policies, Procedures, Rules, Strategies etc. The Standing or Repeated-Use Plans are formulated by the Managers at different levels and are meant for repeated use as and when the occasion demands. Programmes, Projects, Schedules, Budgets and Standards are examples of ‘Single-Use Plans’. The basic difference between Standing and Single-Use plans lies in the fact that Standing Plans are used over a long period of time whereas the Single-Use Plans are used only for specific periods. The components of both these types of plans are explained in the following paragraphs.
STANDING OR REPEATED-USE PLANS
These include the following
Every organisation must have a mission ; then only it becomes meaningful or purposive. The ‘mission’ of a business organisation may be two-fold : (i) production and distribution of goods and services in order to satisfy the basic needs of the consumers, and (ii) provision of employment and a source of income to the people whereby they might be in a position to purchase their desired goods and services; The mission is the central guiding concept describing the fundamental reason for the existence of an organisation, It indicates the line of business and reflects upon philosophy of management. lii short, the mission gives a clear-cut idea about basic long-run commitment of an organization.
Definition. Objectives may be defined as the goals which an organisation tries to achieve. Objectives are also described as the end-points of planning. In the words of Koontz and O’ Donnell ‘Objective is a term commonly used to indicate thee- t (i) ii point of a management programme.” According to Dalton E, McFarland, “Objectives are the goals, aims or purposes that organisations wish to achieve over varying periods of times” ‘Objectives’ is a wider term and ‘Mission’ is part a and the parcel of it Objectives decide where we want to go, what we want to achieve and next what is our destination. Objectives constitute the purpose of the enterprise and ends re without them no intelligent planning can take place.
Characteristics. Important characteristics or features of objectives are as below : (i) The objectives must be pre-determined. (ii) The objectives must be reduced to black and white A clearly defined objective provides the clear direction for managerial efforts (iii) Objectives must be realistic, i e they must be within the reach of the organisation. (iv) Objectives must be measurable. (v) Objectives must : have social sanction. Restrictions on organisational objectives are put through social rules, norms or customs. (vi) Objectives are usually plural. As Drucker puts it, “The search for one objective is essentially a search for a magic formula that will make judgment unnecessary. Objectives are needed in every area where performance and results directly and vitally affect the survival and prosperity of the business.” Peter Drucker has recommended eight key areas in which business firms have to set their objectives Market standing, innovation, physical and financial resources, manager performance and development, worker performance and attitude, productivity, profitability and public accountability. (vii) All objectives are interconnected and mutually supportive. (viii) Objectives may be short-range, medium-range and long- range. (ix) Objectives may be constructed into a heirarchy, e.g., overall, major, divisional, departmental, etc.
Advantages. Good management is management by objectives. According to L.Gulick, “In administration God helps those administrators who have a clearly defined objective.” An organisation can grow and prosper in an orderly and progressive manner only if well-defined goals have been established to guide its progress Certain specific benefits of sound and carefully chosen objectives are as follows : (1) Clear definition of objectives encourages unified planning. The unifying effect arises when the plans prepared by different departmental heads are adjusted to a common objective. (2) Objectives provide motivation to people in the organisation. Objectives help in providing the sense of unity, harmony and accomplishment to cooperative efforts. (3) When the work is gdal-oriented, unproductive tasks can be avoided. (4) Objectives provide standards which aid in the control of human efforts the in an organisation. (5) Objectives serve to identify the organisation and to link it to hem the groups upon which its existence depends. (6) Objectives act as a sound basis for the developing administrative controls. (7) Objectives contribute to the management and process ; they influence the purpose of the organisation, policies, personnel, and leadership as well as managerial control. (8) Objectives indicate, the contribution to be made by each unit and thus it is the basis for decentralisation. (9) MB (Management by Objectives) programme cent per cent depends upon clear cut objectives.
Types of Objectives. Mere maximisation of profit cannot be the sole objective of an enterprise. Objectives may be external as well as intenwi. ‘Service of the customer’ is the primary external objective of an enterprise. Consumerism may develop when business forgets its primary responsibility towards the consumers. As a social institution business must maintain and develop the quality of life ; it should prevent all type of pollution. Moreover, in addition to its social obligation towards the consumers, business must fulfil the expected responsibilities towards the society, community and the government. The internal objectives of an organi relate to (i) maximum profitability, (ii) maximum service and satisfaction to employees, and (iii) fair return on the shareholder’s investments.
Hierarchy of Objectives. Objectives set up by top management act as the ends and the middle managements plan to achieve those objectives (or ends). Thus at the next lower level the objectives act as the means. Each level of objectives stands as ends relative to the level below it and as means relative to the level above it ; this is known as what we call ‘Means-ends Chain of Objectives The following diagram beautifully illuminates this point•
HIERARCHY OF OBJECTIVES
Setting of objectives. The following considerations play an important role n the setting of ob : (1) Organisational objectives are of multiple character; hence pressing and dominant objectives should be given priority over others through the constant adjustment of short-run emphasis on such objectives. (2) Co-ordination and balance should be maintained between the overall objectives of the organisation and the departmental goals; (3) Translation of major objectives into operating objectives should be in tangible and meaningful terms. (4) Objectives should be realist rather than idealistic. (5) Objectives may be (a)major or minor, (b) short-term or long-term, and (c) economic or social. Major objectives relate to the chief purpose of the Organisation and minor objectives are subordinate to but consistent with the major objectives. In the short term an enterprise may concentrate more on satisfying customers with good products at cheap price, keeping in view the long-term objective of maximum profit. Short-term objectives should be treated as steps towards long- term objectives. Economic objectives are goals with respect to the market place. Social objectives refer to the company’s intentions towards its employees, shareholdei1 and the public at large. (6) Objectives have to be set up for each person and for each responsibility centre. For example, the foreman on the shop floor as well as the departmental manager should know what exactly they live to achieve and how? Setting up detailed quantitative objectives is an essential task of planning.
Meaning and Definition. Policy-making is another most important component of business planning. Policies are guides to action. They provide abroad guideline as to how the objectives of an organisation are to be achieved. In the words of Joseph L. Massie, “Policies include that body of understanding (generally known by members of the group), which makes the action of each member of the group in a given set of circumstances more pr to other members.” According to Koontz and Q’ Donnell, “Policies are general statements or understandings which guide or channel thinking in decision-making of subordinates.”
Features of sound policy. The following features of a policy emerge from the above definitions: (i) The policy tries to contribute to the organisational objectives. (ii) Policy is formulated through the various steps in the decision-making process. (iii) Policy can be interpreted from the behaviour of the top management. (iv) Policy provides guidelines to the members of the organisation for choosing a particular course of action. (v) Policy-making is the task of all managers ; however, the higher manager is in the organisation, the more important is his role in policy-making. (vi) A sound policy must be flexible in its implementation. (vii ) A policy should be uniform in its application ; it must be fair to all, offering equity and justice to those who are affected by it.
Relationship and distinction between Policies and Objectives. Objectives are end-points of planning, while policies prescribe the broad ways in which the objectives can be realised. Objectives and policies may be distinguished along the following lines : (i) Objectives are basic to the existence and functioning of air organisation but policies are not. While we cannot visualise an organisation without a mission or objective, it is possible for an organisation to function without policies (ii) Objectives are ends ; policies are means to ends ; they throw light on the question of how objectives are to be achieved. Objectives and policies are related to each other in an ends-means chain or hierarchy. (iii) Objectives are stated in broad ideological terms and tend to take the shape of vague, abstract aspirations expectations and intents of an organisation. Policies, on the other hand, give meaning and content to objectives, clarify the intents of top management and express its aims in more specific terms. (iv) Objectives are often branded as official or stated goals which in many cases remain on paper. In contrast, policies indicate the real intents of the organisation and reflect its true character. (v) Objectives are meant to be achieved but policies are meant to be observed by managers. Policies clarify the perspectives of managers for handling the managerial problems in a disciplined manner.
Importance. The importance of policies can be judged from the following points—(i) Policies lead to a uniform pattern of action in respect of various matters relating to an organisation. (ii) Policies speed up decision-making since they provide a framework within which the decisions can be taken. (iii) Policies help both men and boss to work for a better performance. (iv) Policies help in securing effective Co ordination of efforts and activities in the organisation.
Classification of Policies. Alford and Beatty have classified the industrial policies as follows:
1. Top management policies are those derived from top management planning. They include policies concerned with long-range product selection, sales forecasting, sizing the enterprise, process selection, machine selection, determining plant needed, and budget.
2. Upper middle management policies are those which are special to a function, such as sales, production, research, finance accounting and are made by the vice-president or other executive responsible for these functions. They should he in harmony with the major policies of the enterprise.
3. Middle management policies are those which grow out of the planning of junior executives, superintendents of departments or divisions and others in like positions. These men are functional, product or area specialists within the sales, production, research, finance, or accounting sub-division of the enterprise.
4. Foremen policies are those directly related to the accomplishment of the set for his small sub-division or the whole enterprise. They include the policies concerned with the assignment of the jobs to the best suited men, the provision for adequate tools by which to do the job, and so forth.
5. Operating force policies are those found in little notebooks in the possession of each worker. These state his rule or code for doing each job that he is called upon to do. From it, the worker knows how long each job should take, what, tricks of the trade are required, and what quality features are emphasized. He does not trust to his memory to complete a respective job satisfactorily, for he has an established policy to follow for this recurring situation.
6. Sales policies may be concerned with determining location of markets, selecting channels of distribution, dividing the total market Into branch or dealer areas, pricing the product, determining sales incentives, establishing advertising policies, setting up sales control policies, and establishing sales volume and expense budgets.
7. Production Policies may be concerned with the making of a production budget, selection of junior executives, the organization and co-ordination of their activities, factory layout, inventory control, collective bargaining and labour relations, selection of system for quality, cost and production control, and the like.
8. Research policies may be concerned with the selection of projects for investigation, the choice of personnel and mechanisms for carrying out these activities, the determination of research budgets, the measurement of results and similar matters.
9. Financial Policies. In the area of finance a number of policies would be required, such as: (i) The method of raising funds and the ratio between the various types of sources of funds. How much risk the company can undertake ? What return does it expect on the funds procured and how much of the control aspect management is willing to give? (ii) Policy for the use of the funds and the ratio between different types of assets. (iii) The credit policy and the distribution policy towards customers. (iv) The dividend policy, i.e., how much dividends are to be declared out of the profit earned. (v) Provision for working capital requirements and other matters of this type.
10. Costing Policy. It may include the policy for selecting the method of costing, the method of allocating, apportioning, re-apportioning and absorbing overheads, etc. .
11. Accounting Policy. This may include the following: (i) The basis of valuation of stock of finished goods. It is a matter of policy whether the finished goods are valued at total cost or at direct cost or at works cost; (ii) The issue price of raw materials, whether to follow FILO or LIFO or average cost or any other method of pricing (iii) Depreciation policy. i.e., which method of depreciation be followed:
12. The treatment of deferred revenue expenditure, intangible assets, fictitious assets and preliminary expenses ; (v) Capitalisation of expenditure during construction period ; (vi) Policy for provision of doubtful debts, investment losses, etc.
13. Marketing Policy. Here a number of policies in market analysis, business law, display and salesmanship may be followed.
14. Promotion Policies. The objectives of the promotion policy may be: (i) to utilise fully the managerial resources of the organisation ; (ii) to provide a fair opportunity to all for advancement and promotion ; and (iii) to base the promotion on an objective assessment of merit and not merely seniority.
In order to achieve the above objectives, the following policy guidelines may be laid down : (a) Promotions will be based on merit. A vacancy can be filled by promotion where the individual concerned fulfils the requirements of the job for its most effective performance, in terms of education, professional qualifications, experience, knowledge of the job, background, personality and personal qualities, etc. Factors like age, health and effect on morale or other aspirants will be considered. (b) All appointments in senior management cadres will be made by the Board of Directors as a whole, through recruitment, promotion or rotation. (c) In case of promotions to vacancies below the senior management level, these will be recommended to the Board by the line director in consultation with the personnel director. (d) High-fliers will be identified through annual appraisal system at as early a stage as possible. A list of such persons be maintained by the personnel director.
15. Product Policies. These may include the following : (1) The company will deal in the whole range of engineering products for construction projects. (ii) The products of the company will be meant mainly for government and industrial customers. (iii) The company will purchase as many of the components as possible from small-scale industrial units and will concentrate largely on assembling. (iv) The company will try to differentiate its products from those of the rival manufacturing units in terms of shape, design and other specifications. (v) The company will book bulk orders and make its products available according to the specifications provided by the clients.
Policies are also classified according to their origin as originated, appealed, implied and imposed policy. An Originated Policy is that which is formulated by the managers in the organisation for their subordinates’ action as well as their own action. The broad policy laid down by the top management becomes a guide for the managers at the lower levels of the organisation who formulate policies for the benefit of their subordinates. Appealed Policy arises from the appeal made by a subordinate to his superior for deciding an important case. Appealed policy decisions are mostly to solve current problems or issue. An Implied Policy is one that is inducted from the action and behaviour of the top management. An Imposed Policy is a policy that is imposed by some external force like the government, trade union or a trade association. Labour policies formulated to comply with labour laws or meet the terms of a collective agreement belong to this category.
Essentials of the Policy Formation. According to Alford and Beatty, the essentials of policy formation may be listed as below
1. A policy should be definite, positive and clear. It should be understood by everyone in the organisation.
2. A policy should be translatable into the practices and peculiarities of every department and division of the organisation.
3. A policy should be flexible and at the same time have a high degree of permanency.
4. A policy should be formulated to cover all reasonably anticipatable conditions.
5. A policy should be founded upon facts and sound judgment.
6. A policy should conform to economic principles, statutes and regulations and should be compatible with the public interest.
7. A policy should be a general statement of the established rule to follow in recurring situations ; rather than one prescribing detailed procedure.
Policy Manual. When the policies are reduced to black and white and compiled into a book or manual, that may be designated as a ‘Policy Manual’. The organization is considerably strengthened by having a Policy Manual, because the statement of policy, then becomes readily available for reference and guidance. Some of the advantages of a policy manual may be enumerated as follows (1) Lessen misinterpretation, misunderstanding, and resulting friction because the policies are stated in writing. (2) Provide a check list of current policies which can be used to determine whether or not they are being adhered to. (3) Constitute useful instructional device for acquainting the personnel with the principles and procedures required to make the policies effective in the operation of the enterprise.
Meaning. A ‘Procedure’ is a standing plan describing a customary method of handling a future activity. The term ‘Procedure’ refers to a specific administrative directive prescribing the sequential manner in which a repetitive activity is to be initiated, carried forward and completed in a goal-oriented manner. Procedures are meant to standardize and routinise the pattern and, pace, of work flow at the operational level. They provide the framework for doing routine things in a rational and expeditious fashion so that there is little duplication of effort, waste motion and confusion. They help the process of streamlining and simplifying administrative activity. In the words of George R. Terry, “A Procedure is a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished.” For example, the procedure of scientific selection of employees may have the following steps : (i) Preliminary interview, (ii) Application blank, (iii) Reference check, (iv) Employment tests, (v) Final interview, (vi) Supervisor’s approval, (vii) Medical checkup, (viii) Appointment, and (ix) Induction or Orientation.
Importance and Benefits. Procedures help to standardize and streamline the day-to-day activity in organisations. Whether for procuring funds, for manpower recruitment, for receiving and inspecting materials and stores, for sanctioning expenditures or for granting leave, certain standard operating procedures are laid down as a basis for the operators to know how to process the matter in a systematic manner without leaving loose ends, in the best interest of the organisation as reflected from the management’s approval of the procedures. A procedure has the following ad vantages : (i) It ensures uniformity of action ; (ii) It decreases the need for further decision-making laying down a standard path to follow; (iii) It increases co-ordin tion among the personnel in the organisation and its departments : and (iv) It provides a good standard for the manager to appraise his employees. Procedures serve as tools of managerial direction, co-ordination and control of specific activities within the organisation. Managers formulate procedures for observance by people in work situations so that ‘Management by System’ takes hold ; well-laid down procedures tend to become working habits of people to the extent that they structure, smoothen and simplify the patterns of their work performance. Any intentional deviation from well-established procedures without adequate reason is bound to be frowned upon by those who have laid them and/or who are affected by them.
Policies and Procedures distinguished. (i) Procedures are guides to action while policies are guides to decision-making. (ii) Policies are determined by top management in general, after considering a wide range of important variables ; procedures are formulated at relatively lower managerial levels. (iii) In the ends-means chain policies occupy a higher position than procedures ; in fact the latter are derived from the former; policies form the basis for determination of procedures. (iv) Policies form part of the organisations strategic postures in combination with objectives and long range plans, to enhance the capability of the organisation to cope with complex external environment. Procedures are more tactical; they are operational devices for the efficient guidance of routine or ‘steady state’ organisational activity. Their scope is limited. (v) Policies are relatively flexible and they allow managers a measure of discretion and latitude in deciding upon relevant issues. Procedures are more deterministic and are meant to be observed as faithfully as possible. (vi) Policies serve as bridges between organisational purpose and performance while procedures serve as bridges between activities and outcomes. (vii) A policy-centred thinking on the part of managers is considered a healthy sign and is encouraged in organisations, but in the case of procedures, a single minded focus on them is regarded as inimical to organisational goals.
Setting a Procedure. The following points should be kept in view while setting a procedure: (i) The basic principle of procedures is that they should be kept to the minimum possible. (ii) Procedures should be based on adequate facts of the particular situation, not guesses or wishes. (iii) Procedures to be effective must be recognised as a system of interrelated activities in a network. (iv) While designing a procedure proper balance should be kept between stability and flexibility. (v) Procedures should be reviewed at intervals and necessary changes should be made as per research and development programmes.
5. Rules and Methods
Rules and Methods are Standing Plans in a formal organisatlon, in association with policies and procedures. They are meant for repeated reference, ready guidance and strict adherence by people in work situations.
Meaning of Rule. The term ‘RULE’ is defined as a prescriptive directive to people on their conduct and action. Rules are almost in the nature of ‘commandments’ seeking to discipline, structure and restrain behaviour and task performance of people in formal organisational settings. A rule is in the nature of a decision made by the management regarding what is to be done and what is not to be done in a given situation. A rule is definite and rigid ; it allows no deviation or discretion to subordinates. Generally the breach of rules carries a penalty. Illuminating examples of rules are : (i) Employees are to retire once they attain the age of 58 years ; (ii) Smoking is prohibited inside the factory; (iii) Officers are not entitled for over-ti allowance ; (iv) All purchases are to be made only through calling tenders.
Rule and Procedure Differentiated. More often than not, a rule is confused with policy because both provide guidelines for action, However, there is a difference between these two. A ‘Policy ‘provides guidelines for managerial action by defined areas of discretion, whereas in a ‘Rule’ there is no such discretion. Rules are impersonal and are meant for observance irrespective of the personalities involved. Rule is a rule allowing no liberty or leniency. For example, a rule like ‘No Smoking’ is applicable to each and every person working in the concern or passing through the prohibited area. Even the chief executive is bound by such a rule.
Rule and Procedure Differentiated. A rule is also different from a procedure. As a matter of fact, a procedure may be looked upon as a sequence of rules; however, a rule may or may not be a part of a procedure. For example, ‘Smoking is prohibited’ is unrelated to any procedure, but if somebody violate it, he may be penalised according to a certain set of procedures. Rule does not prescribe a time sequence for an action whereas procedure does so.
Meaning of Method. A Method’ is a prescribed process in which a particular operation of a task is to be performed. It specifies the ‘one best way’ of performing each step in a task. It defines the technology of individual operations in a work situation. As compared to procedure, ‘Method’ describes how one particular step of a procedure is to be performed. Method involved only one department and one person, while a procedure may involve many departments and many persons in an organisation. A method is meant to be a complete guidance to individuals in their performance of tasks. The most important advantage of Taylor’s scientific management movement was the determination of standardized, simplified and efficient methods of performing physical task by operatives. In the modern 0 & M (Organisation and Methods) area of activity, much attention is devoted to develop and refine methods of carrying out clerical, administrative and managerial tasks. In modern computer systems also, standard methods are generated to instruct the computer what operations it has to perform in processing data.
Methods and Rules Distinguished. It is clear from the above discussion that there are important differences between methods and rules. The main points of difference may be outlined as below:
(1) Methods are meant for efficient and Consistent performance of tasks ; they link inputs and outputs in operational situations. Rules, on the other hand, are in the nature of cautions, taboos and norms. They state in clear terms what must and must not be done. They have very little to do with efficiency of performance.
(2) Standardization of methods also calls for standardization of the related working conditions within which tasks are performed ; otherwise observance and application of methods become difficult on the part of individuals. In case of rules. no such standardization of conditions is needed.
(3) Much research and analysis goes into formulation of methods. It is not a simple or routine task. But rules are formulated by management, on the basis of its conmon-sense, applicable legal requirements and judgment n the light of personal values and corporate objectives.
(4) In general, violation of or deviation from methods, though rare, by individual employees does not attract penalty whereas the violation or by-passing of rules is viewed seriously by management and some penalty is attached to such lapses.
(5) Rules are often regarded as official, formal, authoritative and bureaucratic. They are also associated with control, order, coercion and conformism. Methods are generally free from such associations. They are more viewed as scientific, objective, rational, logical means of ensuring standardization, simplification and systematisation of work. Rules are ‘enforced’ by management whereas there is little appearance of enforcement in case of methods.
(6) Methods relate to physical and other tasks and define the way how thcy . to be performed. Rules relate to individuals and groups and define the way how they have to behave in particular situations.
Literally speaking, the term Strategy’ stands for the war-art of the military general, compelling the enemy to fight as per our chosen terms and conditions. A strategy is a special kind of plan formulated in order to meet the challenge of the policies of the competitors. In another way Edmund P. Learned has defined ‘strategy’ as “the pattern of objectives, purposes or goals and major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be and the kind of company it is or is to be.” Koontz and 0’ Donnell have called the former as ‘Competitive Strategy’ and the latter as ‘Grand Strategy’. The purpose of grand strategy is to determine and communicate through a system of major objectives and policies, the probable shape which the organization is likely to take in future. David I. Cleland and William R. King, in their popular work, ‘A System Approach’ have beautifully pointed out that “Strategy is the complex plans for bringing the organisation from a given post* to a desired position in a further period of time.” The principal purpose of ‘Competitive Strategy’ is to encounter the forces of competitors so that competition is faced boldly and scientifically. Keeping this purpose in view, Haynes and Massier have defined strategy as “the planning for unpredictable contingencies about which fragmentary information is available.” According to C. T. Hardwick and B.F. Landuyt, “The word strategy is used to signify the general concept and salient aspect of gamesmanship as an administrative course designed to bring success.” Strategy may also be designed by the general forces operating in an industry and the economy. For example, if the management anticipates an economic recession, it may decide upon a strategy of reduced stocks, fewer staff, reduced expenses, etc. According to force Haimann, “Strategy is an interpretative policy. It is a policy that has been formulated by the top management for the purpose of interpreting and shaping the meaning of other policies.
Characteristics of Strategy. The following characteristics emerge from the above definitions of ‘Strategy’ : (1) It is the right combination of different factors. (2) It relates the business organisation to its environment. (3) It is an action to meet a particular challenge, to solve particular problems or to attain a desired objective. (4) Strategy may need contradictory action. For example, today a manager may adopt a particular course of action but tomorrow he may revise the same due to changes in situations. (5) Strategy is forward looking. (6) It is a means to an end and not an end in itself. (7) It is a means of coping with or managing the events and changes in the external environment. (8) It is formulated at the top management level. (9) It is generally long-range in nature but short-range moves are also specified in it. (10) It is and flexible and dynamic. (11) It involves assumption of certain calculated risks. (12) It is action-oriented and more specific than objective. (13) It is generally meant to cope with a competitive setting, in which the behaviour of competitors and other adversaries of the enterprise affects its own functioning and performance.
Strategy and Policy Distinguished. Policy is a guide to the thinking and action of those who make decisions, while Strategy relates to the direction in which human and physical resources are to be used in order to maximise the change of achieving a selected mission in the face of competition and other hurdles. Secondly, policy is a contingent decision, whereas strategy is a rule for making decision. Thirdly, the implementation of policy can be delegated downward in the organisation whereas the strategy cannot, since it requires a last-minute executive decision.
Strategy Formulation. A perfect strategy can be built only on perfect knowledge of the plans of others in the industry, This may be done by the management putting itself in the position of a rival and then trying to estimate their plans. There are three phases in strategy formation, viz. Determination of objectives, (‘2) Ascertaining the specific areas of strengths and weaknesses in the total environment, and (3) Preparing the Action Plan to achieve the objectives in the light of environmental forces. The following factors will determine the right strategic decisions (i) It must be appropriate in the light of available resources ; (ii) It must be workable ; (iii) It must involve acceptable risks ; (iv) The timing of the action plan must be appropriate ; (v) The action plan must be based on reliable anticipations of (vi) future trends and conditions ; (vi) There should be a perfect co-ordination between and the objectives and strategies ; and (vii) Strategy must fulfil ethical and social responsibilities.
Appropriateness of a business strategy and its evaluation. Since a business strategy is a pragmatic plan of action to achieve desired goals, there is an ever- present need to measure its appropriateness. Seymour Tiles offers six criteria for evaluating the appropriateness of a business strategy
1. Internal Consistency. The strategy of an organisation must be consistent with its other strategies and also its goals, policies and plans. Serious internal inconsistency in business strategy is bound to give birth to problems in the course of its implementation.
2. Consistency with the environment. The strategy must be consistent with the external environment. It has both static and dynamic aspects. In a static sense, it implies judging the strategy with its suitability to the existing environment. in a dynamic sense, it implies judging the efficacy of strategy with the changing environment. The strategy selected should enhance the confidence and capability of the enterprise to manage and adapt with or gain command over the environmental forces.
3. Appropriation in the light of available resources. Strategy needs a realistic assessment of the resources of the enterprise—men, money and materials— both existing resources as also the resources, the enterpirse can command. The resources of an enterprise also include the skills of management and other manpower, command over sources of scarce raw materials, production facilities, technology, marketing capabilities, and image, and so on. It is advisable that the individual enterprise formulates its strategy within the limitations imposed by its resources. The objective is to ensure that the enterprise’s resources are not over stretched or over-strained on the one hand and to utilise the existing/commandable resources in the best possible manner, on the other
4. Acceptable degree of risk. Any major strategy carries with it certain elements of risk and uncertainty because it covers a relatively longer future horizon and because it seeks to cope with a complex environment. The amount of risk inherent in a strategy should be within the bearable capability of the enterprise. Resources should not be committed irrevocably, nor should they be concentrated on a single or narrow range of ventures. Also, there should be much between risk and returns, financial and otherwise.
5. Appropriate time horizon. Time is the essence of any strategy. A good strategy not only provides what objectives would be achieved, it also indicates when those objectives would be achieved, in selecting an appropriate time horizon, the organisation must pay careful attention to the goals being pursued. An optimal time span cannot be mathematically determined ; it is a matter of environmental conditions, the objectives to be sought and the judgment of management.
6. Workability. Last, but not the least, the strategy must have enough degree of workability. It must be feasible and should produce the desired results within the constraints and parameters known to management. It must be realistic and relatively simple and intelligible at the level of interpretation and implementation.
ADVANTAGES OF STANDING PLANS
The advantages of standing plans may briefly be summarised as below: (i) Managerial effort and time can be minimised. (ii) It facilitates the delegation of authority. (iii) Effective control can be enforced. (iv) Standard operating procedures and methods evolve considerable use of the ‘one best way’ under scientific management. (v) it helps in co-ordinating the different activities of an organisation. (vi) Standing plans enable the performance of work by persons with less experience and ability. (vii) it is easy to train people under recognised policies and procedures. Job rotation is also feasible.
The only disadvantage is that the manager’s discretion is reduced. It is apparent from the following diagram:
SINGLE – USE PLANS
Single-use plans are devised to meet the demands of a particular situation and are not meant to serve as standing guides to thinking and action. These include the following.
Meaning. A ‘Programme’ may be defined as single-use comprehensive plan designed to implement the policies and accomplish the objectives. It gives a step by- step approach to guide the action necessary to reach a pre-determined goal. It is really a combination of policies, procedures, rules, budgets, task assignments etc. for the specific purpose of carrying out a particular course of action. It is designated as ‘single-use plan’ because a programme cannot be used in the same form again, once its objective is achieved. The expansion programme of a cotton mill is a case in point. A programme may be a major or a minor one ; along-term, medium-term or a short- term one. Generally, a programme is supported by the required capital and operating budgets.
Essential features of a programme. (1) It is a single-use but comprehensive plan. (2) It lays down the principal steps for accomplishing a mission. (3) It gives a • step-by-step approach to guide the action plan. (4) It is guided by the objectives and strategies and covers many other types of plans. (5) It is a time-table of the future action. (6)It ensures smooth, efficient and integrated functioning of an organisation. (7) Programmes involve an integrated and coordinated planning approach.
Basic steps in programming. (i) The various activities needed to achieve the objective are first to be divided into clear-cut steps. (ii) The steps are then to be arranged in a proper sequence. (iii) Then the programme team should be decided, i.e., who will do what, where, when and how? (iv) Determine the various resources required for each step. (v) The time required for each step should also be ascertained. (vi) Assign definite dates for each part of a programme. (vii) Overall or Master Schedule for the Programme should also be prepared.
Meaning. A single step in a programme is known as a ‘Project’. A project is a single-use plan which is part of a general programme. It may be defined as any scheme or a part of a scheme for investing resources, which can be analysed and evaluated as an independent unit. It is actually a proposal of investment which can be separately appraised through cost-benefit analysis.
Essential features’. (i) It is a non-recurring plan. (ii) The activity is definable in terms of specific objective. (iii) It involves time-bound activities. (iv) Project approach is needed when (a) the work to be done is special requiring expertise from different departments; (b) the work is very complex; (c) high cost is involved; (d) errors and omissions are to be minimised; and (e) ‘one-shot’ and time-bound activities are needed. It is a one-time crash programme. A project has a distinct mission and a clear termination point. Advantages. When the programme is set up in projects, the task of management becomes easier. There is a precise allocation of duties with a clear sense of responsibility and, due to easy control, the implementation of the plan too becomes easier.
Scheduling is a process of establishing a time sequence for the work to be done. It is an essential part of an action plan. It prescribes the exact time when each step would begin and when it would terminate. When the tasks to be done and the persons who must do them are ascertained, the only important thing attracting the attention of the management is ‘scheduling’.
Meaning. A budget is a single-use plan expressed in quantitative terms. It is always expressed in numerical terms ; hence it is also known as what we call ‘Numerised Plan’. According to Koontz and O’Donnell, “A budget as a plan is a statement of expected results expressed in numerical terms.” Budgets may be prepared in terms of time, money, materials or other units required to perform work and accomplish specified results. Since most values are ultimately convertible to monetary units, money budgets are commonly used. The preparation of budget is planning. It calls for the compilation of all relevant facts and figures like any other plan.
Essential features of a Budget. (1) Budget plays a dual role ; it is a planning instrument on the one hand and a control device on the other. Budgeting actually provides a means for controlling operations. (2) Usually there is a separate budget for each unit and a master budget for the entire organisation. (3) Usually budgets are prepared for the financial year, but there may be monthly or quarterly budgets also. (4) Budgets can set standards of performance so very necessary for the control process.
The budgets may be prepared for various groups of activities. Examples of certain important budgets are : (i) Materials budget, (ii) Production budget, (iii) Personnel budget, (iv) Sales budget, (v) Cash flow budget, and (v) Profit budget. Budgets are most widely used instruments for planning and control. As a type of plan, budget has the advantage that the departmental and organisational goals are expressed in exact numerical terms. This makes the co-ordination or departmental plans easier.
Generally speaking, all plans are considered as standards. from a specific point of view, a ‘Standard’ is a norm or criteria against which performance is compared and evaluated. In short, a ‘Standard’ is a guide for performance evaluation.
A company may set up a variety of standards expressing the anticipated results of the plans. Qualitative and quantitative standards are established in each area of business, e.g., physical standards, quality standards, personnel standards, performance standards, standards of service and conduct, etc. Financial ratios (such as liquidity ratios, current ratio etc.) are very popular in financial management as standards of ‘ economic performance.
KINDS OF ENTERPRISE PLANS
An enterprise may have the following types of plans:
• Business or Divisional Plans. If an enteprise has separate divisions for different products like radios, television sets, electric computers and spare parts; divisional plans can be prepared for each one of these divisions separately.
• Functional Plans. These relate to the various functions of the enterprise. For example, a marketing plan may be prepared for the enterprise as a whole as also for each of the divisions of the enterprise.
• Geographic or Regional Plans. If an organisation has got regional divisions, it may have plans for each division or zone. They are also Known as territorial plans.
• Corporate Plan. It relates to the complete plan for the entire organisation.
• Long, medium and short-range plans. Long-range plans extend to 10 or 20 years ; medium-range plans extend to 5 years and short-range plans generally extend to one year
|Author: Abdul Vasim S||Member Level: Bronze||Revenue Score: |
The article which you have provided is very very informative about plans, Basically i worked as Planner in Pharmacetical company ofcourse now i shifted to Software domain but the information you have provided is detailed and every individual who wants to know about types of plans then they can refer this article. Good article.
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