The planning function requires to make decisions about four fundamental elements of plans: * Objectives. Objectives are statements of future conditions, that a manager hopes to achieve. All sets of objectives have three characteristics: priority, timing, and measurement. The prase priority of objectives implies that at a given time, accomplishing one objective is more important than accomplishing others. Time dimensions imply that an organization's activities are guide by different objectives, depending on the duration of the action being planned. Effective planning requires measurement of objectives. A variety of measurements exists to quantify objectives in the eight areas that management expert Peter Drucker suggests: market standing, innovations, productivity, physical and financial resources, profitability, manager performance and responsibility, worker performance and attitude, social responsibility. * Actions. Actions are the means, or specific activities, planned to achieve the objectives. The terms strategies and tactics refer to planned courses of action. * Resources. Resources are constraints on the course of action. It also involves budgeting - identifying the sources and levels of resources that can be committed to the courses of action. Management can select the type of budget that best suits the planning needs of the organization. * Implementation. Implementation involves the assignment and direction of personnel to carry out the plan. The three approaches to implementation are authority, persuasion, and policy. Much of this task consists of asking the appropriate questions. Table 3-1 suggests the fundamental questions that are appropriate regardless of the type and size of the organization.
Why a general approach to adaptation planning? We developed this approach with recognition that there is a great deal of variation among Australian NRM groups; as such, it supports the integration of climate change adaptation into planning regardless of the current style or stage of planning. By focusing on five general components of planning, this guide will be relevant regardless of the specific planning approach. The five components of adaptation planning The components reflect an iterative planning process that is also appropriate for planning for climate change. This is because the most effective responses to climate change risks may not be known and outcomes may only be achieved after trying a range of options, assessing the responses, and adjusting those responses. It is designed to support self-assessment; NRM users can consider how well their current processes meet many of the challenges that will arise due to climate change, what adaptation might be required, and how some processes might need to be adjusted to incorporate adaptation into planning. The table below summarises how each stage of planning might be different under an adaptation lens. For a more detailed look into the components of planning, including examples of how they have been applied in natural resource management, download The NRM Adaptation Checklist.
TYPES OF PLANS / COMPONENTS OF PLANNING In the process of planning, several plans are prepared which are known as components of planning. Plans can be broadly classified as Strategic plans Tactical plans Operational plans Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment of strategic plans. In addition to these three types of plans, managers should also develop a contingency plan in case their original plans fail. a) Strategic plans: A strategic plan is an outline of steps designed with the goals of the entire organization as a whole in mind, rather than with the goals of specific divisions or departments. It is further classified as i) Mission: . The mission is a statement that reflects the basic purpose and focus of the organization which normally remain unchanged. The mission of the company is the answer of the question : why does the organization exists? Properly crafted mission statements serve as filters to separate what is important from what is not, clearly state which markets will be served and how, and communicate a sense of intended direction to the entire organization. Mission of Ford: “we are a global, diverse family with a proud inheritance, providing exceptional products and services”. ii) Objectives or goals: Both goal and objective can be defined as statements that reflect the end towards which the organization is aiming to achieve. However, there are significant differences between the two. A goal is an abstract and general umbrella statement, under which specific objectives can be clustered. Objectives are statements that describe—in precise, measurable, and obtainable terms which reflect the desired organization’s outcomes. iii) Strategies: Strategy is the determination of the basic long term objectives of an organization and the adoption of action and collection of action and allocation of resources necessary to achieve these goals. Strategic planning begins with an organization's mission. Strategic plans look ahead over the next two, three, five, or even more years to move the organization from where it currently is to where it wants to be. Requiring multilevel involvement, these plans demand harmony among all levels of management within the organization. Top-level management develops the directional objectives for the entire organization, while lower levels of management develop compatible objectives and plans to achieve them. Top management's strategic plan for the entire organization becomes the framework and sets dimensions for the lower level planning. b) Tactical plans: A tactical plan is concerned with what the lower level units within each division must do, how they must do it, and who is in charge at each level. Tactics are the means needed to activate a strategy and make it work. Tactical plans are concerned with shorter time frames and narrower scopes than are strategic plans. These plans usually span one year or less because they are considered short-term goals. Long-term goals, on the other hand, can take several years or more to accomplish. Normally, it is the middle manager's responsibility to take the broad strategic plan and identify specific tactical actions. c) Operational plans The specific results expected from departments, work groups, and individuals are the operational goals. These goals are precise and measurable. “Process 150 sales applications each week” or “Publish 20 books this quarter” are examples of operational goals. An operational plan is one that a manager uses to accomplish his or her job responsibilities. Supervisors, team leaders, and facilitators develop operational plans to support tactical plans (see the next section). Operational plans can be a single-use plan or a standing plan. i) Single-use plans apply to activities that do not recur or repeat. A one-time occurrence, such as a special sales program, is a single-use plan because it deals with the who, what, where, how, and how much of an activity. Programme: Programme consists of an ordered list of events to be followed to execute a project. Budget: A budget predicts sources and amounts of income and how much they are used for a specific project. ii) Standing plans are usually made once and retain their value over a period of years while undergoing periodic revisions and updates. The following are examples of ongoing plans: Policy: A policy provides a broad guideline for managers to follow when dealing with important areas of decision making. Policies are general statements that explain how a manager should attempt to handle routine management responsibilities. Typical human resources policies, for example, address such matters as employee hiring, terminations, performance appraisals, pay increases, and discipline. Procedure: A procedure is a set of step-by-step directions that explains how activities or tasks are to be carried out. Most organizations have procedures for purchasing supplies and equipment, for example. This procedure usually begins with a supervisor completing a purchasing requisition. The requisition is then sent to the next level of management for approval. The approved requisition is forwarded to the purchasing department. Depending on the amount of the request, the purchasing department may place an order, or they may need to secure quotations and/or bids for several vendors before placing the order. By defining the steps to be taken and the order in which they are to be done, procedures provide a standardized way of responding to a repetitive problem. Rule: A rule is an explicit statement that tells an employee what he or she can and cannot do. Rules are “do” and “don't” statements put into place to promote the safety of employees and the uniform treatment and behavior of employees. For example, rules about tardiness and absenteeism permit supervisors to make discipline decisions rapidly and with a high degree of fairness. Contingency plans Intelligent and successful management depends upon a constant pursuit of adaptation, flexibility, and mastery of changing conditions. Strong management requires a “keeping all options open” approach at all times — that's where contingency planning comes in. Contingency planning involves identifying alternative courses of action that can be implemented if and when the original plan proves inadequate because of changing circumstances. Keep in mind that events beyond a manager's control may cause even the most carefully prepared alternative future scenarios to go awry. Unexpected problems and events frequently occur. When they do, managers may need to change their plans. Anticipating change during the planning process is best in case things don't go as expected. Management can then develop alternatives to the existing plan and ready them for use when and if circumstances make these alternatives appropriate. OBJECTIVES Objectives may be defined as the goals which an organisation tries to achieve. Objectives are described as the end- points of planning. According to Koontz and O'Donnell, "an objective is a term commonly used to indicate the end point of a management programme." Objectives constitute the purpose of the enterprise and without them no intelligent planning can take place. Objectives are, therefore, the ends towards which the activities of the enterprise are aimed. They are present not only the end-point of planning but also the end towards which organizing, directing and controlling are aimed. Objectives provide direction to various activities. They also serve as the benchmark of measuring the efficiency and effectiveness of the enterprise. Objectives make every human activity purposeful. Planning has no meaning if it is not related to certain objectives. Features of Objectives The objectives must be predetermined. A clearly defined objective provides the clear direction for managerial effort. Objectives must be realistic. Objectives must be measurable. Objectives must have social sanction. All objectives are interconnected and mutually supportive. Objectives may be short-range, medium-range and long-range. Objectives may be constructed into a hierarchy. Advantages of Objectives Clear definition of objectives encourages unified planning. Objectives provide motivation to people in the organization. When the work is goal-oriented, unproductive tasks can be avoided. Objectives provide standards which aid in the control of human efforts in an organization. Objectives serve to identify the organization and to link it to the groups upon which its existence depends. Objectives act as a sound basis for developing administrative controls. Objectives contribute to the management process: they influence the purpose of the organization, policies, personnel, leadership as well as managerial control. Process of Setting Objectives Objectives are the keystone of management planning. It is the most important task of management. Objectives are required to be set in every area which directly and vitally effects the survival and prosperity of the business. In the setting of objectives, the following points should be borne in mind. Objectives are required to be set by management in every area which directly and vitally affects the survival and prosperity of the business. The objectives to be set in various areas have to be identified. While setting the objectives, the past performance must be reviewed, since past performance indicates what the organization will be able to accomplish in future. The objectives should be set in realistic terms i.e., the objectives to be set should be reasonable and capable of attainment. Objectives must be consistent with one and other. Objectives must be set in clear-cut terms. For the successful accomplishment of the objectives, there should be effective communication. Page 2MANAGEMENT BY OBJECTIVES (MBO) MBO was first popularized by Peter Drucker in 1954 in his book 'The practice of Management’. It is a process of agreeing within an organization so that management and employees buy into the objectives and understand what they are. It has a precise and written description objectives ahead, timelines for their motoring and achievement. The employees and manager agree to what the employee will attempt to achieve in a period ahead and the employee will accept and buy into the objectives. Definition “MBO is a process whereby the superior and the mangers of an organization jointly identify its common goals, define each individual’s major area of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.” Features of MBO MBO is concerned with goal setting and planning for individual managers and their units. The essence of MBO is a process of joint goal setting between a supervisor and a subordinate. Managers work with their subordinates to establish the performance goals that are consistent with their higher organizational objectives. MBO focuses attention on appropriate goals and plans. MBO facilitates control through the periodic development and subsequent evaluation of individual goals and plans. Steps in MBO: The typical MBO process consists of: Establishing a clear and precisely defined statement of objectives for the employee Developing an action plan indicating how these objectives are to be achieved Reviewing the performance of the employees Appraising performance based on objective achievement 1) Setting objectives: For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors. The managers of the various units or sub-units, or sections of an organization should know not only the objectives of their unit but should also actively participate in setting these objectives and make responsibility for them. Management by Objective (MBO) systems, objectives are written down for each level of the organization, and individuals are given specific aims and targets. Managers need to identify and set objectives both for themselves, their units, and their organizations. 2) Developing action plans Actions plans specify the actions needed to address each of the top organizational issues and to reach each of the associated goals, who will complete each action and according to what timeline. An overall, top-level action plan that depicts how each strategic goal will be reached is developed by the top level management. The format of the action plan depends on the objective of the organization. 3) Reviewing Progress: Performance is measured in terms of results. Job performance is the net effect of an employee's effort as modified by abilities, role perceptions and results produced. Effort refers to the amount of energy an employee uses in performing a job. Abilities are personal characteristics used in performing a job and usually do not fluctuate widely over short periods of time. Role perception refers to the direction in which employees believe they should channel their efforts on their jobs, and they are defined by the activities and behaviors they believe are necessary. 4) Performance appraisal: Performance appraisals communicate to employees how they are performing their jobs, and they establish a plan for improvement. Performance appraisals are extremely important to both employee and employer, as they are often used to provide predictive information related to possible promotion. Appraisals can also provide input for determining both individual and organizational training and development needs. Performance appraisals encourage performance improvement. Feedback on behavior, attitude, skill or knowledge clarifies for employees the job expectations their managers hold for them. In order to be effective, performance appraisals must be supported by documentation and management commitment. Advantages Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems. Clarity of goals Subordinates have a higher commitment to objectives they set themselves than those imposed on them by another person. Managers can ensure that objectives of the subordinates are linked to the organization's objectives. Limitations There are several limitations to the assumptive base underlying the impact of managing by objectives, including: It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. It underemphasizes the importance of the environment or context in which the goals are set. That context includes everything from the availability and quality of resources, to relative buy-in by leadership and stake-holders. Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal only looks at what employees should be, not at what they should do. When this approach is not properly set, agreed and managed by organizations, self-centered employees might be prone to distort results, falsely representing achievement of targets that were set in a short-term, narrow fashion. In this case, managing by objectives would be counterproductive. STRATEGIES The term 'Strategy' has been adapted from war and is being increasingly used in business to reflect broad overall objectives and policies of an enterprise. Literally speaking, the term 'Strategy' stands for the war-art of the military general, compelling the enemy to fight as per out chosen terms and conditions. According to Koontz and O' Donnell, "Strategies must often denote a general programme of action and deployment of emphasis and resources to attain comprehensive objectives". Strategies are plans made in the light of the plans of the competitors because a modern business institution operates in a competitive environment. They are a useful framework for guiding enterprise thinking and action. 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 of a firm putting itself in the place of a rival firm and trying to estimate their plans. Characteristics of Strategy It is the right combination of different factors. It relates the business organization to the environment. It is an action to meet a particular challenge, to solve particular problems or to attain desired objectives. Strategy is a means to an end and not an end in itself. It is formulated at the top management level. It involves assumption of certain calculated risks. Strategic Planning Process / Strategic Formulation Process Input to the Organization: Various Inputs (People, Capital, Management and Technical skills, others) including goals input of claimants (Employees, Consumers, Suppliers, Stockholders, Government, Community and others)need to be elaborated. Industry Analysis: Formulation of strategy requires the evaluation of the attractiveness of an industry by analyzing the external environment. The focus should be on the kind of compaction within an industry, the possibility of new firms entering the market, the availability of substitute products or services, the bargaining positions of the suppliers, and buyers or customers. Enterprise Profile: Enterprise profile is usually the starting point for determining where the company is and where it should go. Top managers determine the basic purpose of the enterprise and clarify the firm’s geographic orientation. Orientation, Values, and Vision of Executives: The enterprise profile is shaped by people, especially executives, and their orientation and values are important for formulation the strategy. They set the organizational climate, and they determine the direction of the firm though their vision. Consequently, their values, their preferences, and their attitudes toward risk have to be carefully examined because they have an impact on the strategy. Mission (Purpose), Major Objectives, and Strategic Intent: Mission or Purpose is the answer to the question: What is our business? The major Objectives are the end points towards which the activates of the enterprise are directed. Strategic intent is the commitment (obsession) to win in the competitive environment, not only at the top-level but also throughout the organization. Present and Future External Environment: The present and future external environment must be assessed in terms of threats and opportunities. Internal Environment: Internal Environment should be audited and evaluated with respect to its resources and its weaknesses, and strengths in research and development, production, operation, procurement, marketing and products and services. Other internal factors include, human resources and financial resources as well as the company image, the organization structure and climate, the planning and control system, and relations with customers. Development of Alternative Strategies: Strategic alternatives are developed on the basis of an analysis of the external and internal environment. Strategies may be specialize or concentrate. Alternatively, a firm may diversify, extending the operation into new and profitable markets. Other examples of possible strategies are joint ventures, and strategic alliances which may be an appropriate strategy for some firms. Evaluation and Choice of Strategies: Strategic choices must be considered in the light of the risk involved in a particular decision. Some profitable opportunities may not be pursued because a failure in a risky venture could result in bankruptcy of the firm. Another critical element in choosing a strategy is timing. Even the best product may fail if it is introduced to the market at an inappropriate time. Medium/Short Range Planning, Implementation through Reengineering the Organization Structure, Leadership and Control: Implementation of the Strategy often requires reengineering the organization, staffing the organization structure and providing leadership. Controls must also be installed monitoring performance against plans. Consistency Testing and Contingency Planning: The last key aspect of the strategic planning process is the testing for consistency and preparing for contingency plans. Page 3TYPES OF STRATEGIES According to Michel Porter, the strategies can be classified into three types. They are Cost leadership strategy Differentiation strategy Focus strategy The following table illustrates Porter's generic strategies: a) Cost Leadership Strategy This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market. Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. Firms that succeed in cost leadership often have the following internal strengths: Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome. Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Efficient distribution channels. Each generic strategy has its risks, including the low-cost strategy. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. b) Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily. Firms that succeed in a differentiation strategy often have the following internal strengths: Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product. Corporate reputation for quality and innovation. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. c) Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. Some risks of focus strategies include imitation and changes in the target segments. Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may be able to carve out sub-segments that they can serve even better. A Combination of Generic Strategies These generic strategies are not necessarily compatible with one another. If a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For example, if a firm differentiates itself by supplying very high quality products, it risks undermining that quality if it seeks to become a cost leader. Even if the quality did not suffer, the firm would risk projecting a confusing image. For this reason, Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be "stuck in the middle" and will not achieve a competitive advantage. Porter argued that firms that are able to succeed at multiple strategies often do so by creating separate business units for each strategy. By separating the strategies into different units having different policies and even different cultures, a corporation is less likely to become "stuck in the middle." However, there exists a viewpoint that a single generic strategy is not always best because within the same product customers often seek multi-dimensional satisfactions such as a combination of quality, style, convenience, and price. There have been cases in which high quality producers faithfully followed a single strategy and then suffered greatly when another firm entered the market with a lower-quality product that better met the overall needs of the customers. |
What are the two components of planning
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