Planning

Definition Characteristics /Features of Planning. Essentials of an ideal plan. Importance of Planning. Process of Planning. Kinds of Planning. Strategy and policy. Types of Planning - Standard/Repeated use plans - Single use plans Planning Premises Guidelines for objective Settings. MBO

Planning
Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen. -Koontz & ODonnel
PLANNING INVOLVES SELECTING MISSIONS & OBJECTIVES & THE ACTIONS TO ACHIEVE THEM. IT REQUIRES DECISION MAKING, THAT IS CHOOSING OF ACTION FROM AMONG ALTERNATIVES. PLANNING IS THE CONSCIOUS DETERMINATION OF FUTURE COURSE OF ACTION. THIS INVOLVES WHY AN ACTION, WHAT ACTION, HOW TO TAKE ACTION & WHEN TO TAKE ACTION.

Characteristics /Features of Planning

Intellectual process Goal oriented Pervasive Pervades(helps) all managerial activity Directed towards efficiency Integrated process

Essentials of an ideal plan

Clarity Simple Flexible

Balanced
Optimum use of resources etc.

Importance of Planning
Planning focuses on the future directions values and sense of

purpose. Planning helps MBO. Planning provides unifying decision making framework. Planning offsets future uncertainty and change. Planning helps in economy in operation. Planning helps in coordination. Planning helps in controlling To increase organisational effectiveness. Planning improves motivation. Planning provides performace Standards.

Process of Planning
Awareness of Opportunities Establishing Objectives
Planning Premises

Identification of Alternatives

Establishing sequence of activities

Formulation of Plan

Choice of Alternative Plan

Evaluation of Alternatives

EIGHT STEPS IN PLANNING : Being aware of opportunity-----in light of the market, competition, what

customers want, our strengths & our weaknesses. Setting objectives or goals-----where we want to be & what we want to accomplish & when. Considering planning premises---in what environment; both internal & external; will our plans operate. Identifying alternatives-----what are the most promising alternatives to accomplishing our objectives ? Comparing alternatives in light of goals sought---which alternative will give us the best chance of meeting our goals at the lowest cost & highest profit ? Choosing an alternative---selecting the course of action we will pursue. formulating supporting plan---such as plans to buy eqpt, buy materials, hire & train workers, develop a new product. Establishing sequence of activities----after formulating basic & supporting plans, sequence of activities is determined so that plan of action are put into action. budgets for various periods can be prepared to give plans more concrete meaning for implementation.

Kinds of Planning
Corporate planning and Functional planning.
Strategic Planning and operational Planning/Tactical Planning. Proactive and Reactive Planning. Formal Planning and Informal Planning. Long-term Planning and short term Planning.

Strategy and policy

Strategy-it is companies long term plan for how it will balance its internal strenghts & weaknesses with its external opportunities & threats to maintain a competitive advantage. Definition of strategy : strategy defines where the org wants to go to fulfil its purpose & achieve its mission. it provides the frame work for guiding choices which determine the orgs nature & direction. these choices relate to the orgs products or services, markets, key capabilities, growth, return on capital & allocation of resources. Example The new strategy for Sandvik Asia is focused on increasing profitability, strengthened position in attractive markets and segments and a more active portfolio management Policies are general statements or understandings which guide managers thinking in decision making. policies ensure that decisions fall within certain boundaries. policies do not require action but are intended to guide managers in their commitment to the decision they ultimately make. Definition of Policies :Policies define area within which a decision is to be made & ensure that the decision will be consistent with & contribute to an objective. Example Sandvik Mining and Construction Region Africas environmental policy is to be a responsible corporate citizen in protecting the environment. We are committed to complying with accepted environmental practices, including the commitment to meet or exceed applicable legal and other requirements, to strive for continual improvement in our environmental management system, and to minimise the creation of wastes and pollution.

Types of Planning Standard/Repeated use plans 1.Objectives 2.Policies 3.Procedures 4.Rules 5.Strategies Single use plans 1.Programmes 2.Budgets 3.Projects

Goals Strategic Plan Operational Plans Standing Plans/Repeated use plans Objectives Budgets Policies Procedures Rules

Single Use Plans Programs

Projects

Standard/Repeated use plans

Objectives(MBO) Specific goals or targets to be accomplished Specific Realistic Backed by suitable subgoals Flexible
Policies

-Guiding principles established by the company to govern actions usually under repetitive conditions -Broad outline, consistent, sound, flexible -Functional Policies -Originated, appealed, imposed policies -Written/Unwritten

 Rules
a decision made by the management regarding what is to be

done and what is not to be done in a given situation. Strategy a policy formulated by top management for the purpose of interpreting and shading the meaning of other policies. a special kind of plan formulated in order to meet the challenge of the polices of competitors

Single use plans

Programmes

A specific plan devised to meet a particular situation Action based, result-oriented.

Budget

a plan a statement of expected result expressed in numerical terms Planning, Co-ordinating, controlling, Motivation Plans translated into accomplishments.
Project

Part of general programme a complex of policies, procedures, rules, to carry out a course of action

Planning Premises
1. External 2. Internal 1.Controllable 2.Uncontrollable 3.Semi Controllable 3 Tangible and intangible premises 4 Foreseeable and unforeseeable premises Forecasting A picture of future based on inference from known facts. General business forecast, sales forecast, capital forecast I keep six honest serving men, They taught me all I knew, Their names are What and Where and When and How and Why and Who-Rudyard Kipling.

Planning premises may be classified as follows: 1. Internal and external premises: Internal premises are the resources and abilities which pertain to the firm's own climate. These include sales forecasts, capital investment in plant and equipment, skill of labor force, competence of management policies and programmers of the organization, values and beliefs of organization members, management philosophy, etc. Such premises are amenable to management control. On the other hand, external premises are related to the external environment of business. They consist of economic, technological, social and political factors such as population trends, Government policies and regulations, employment figures, national income, price levels, technological changes, sociological factors, etc. External premises may be classified in three groups, namely general business environment, product market and the factor market characteristics. 2. Controllable, semi-controllable and uncontrollable premises: Controllable premises are those factors over which management has full control. Plant location, expansion programme, advertising policy, capital investment, etc are examples of controllable premises. Uncontrollable, or non-controllable premises refer to war, population trends, new inventions, natural calamities, business cycles, government policy, legislation, etc which are beyond the control of management. They upset the plans and require periodical revision of plan in accordance with current developments. Semicontrollable premises are those over which management has partial control. Union management relations, firm's share in the market, etc. are examples of such premises. 3. Tangible and intangible premises: Tangible or quantitative premises are those which can be expressed or measured in quantitative terms, e.g., labor hours, units of production, number of machines, capital investment, industry demand, population growth, etc. On the other hand, intangible premises are those which can not be measured quantitatively, e.g., company reputation, public relations, employee motivation and morale, attitudes and philosophy of the owners, political stability, etc. In spite of their qualitative nature, intangible premises play an important role in managerial planning. 4. Foreseeable and unforeseeable premises: Foreseeable premises tend to be definite and well-known and they can be foreseen with certainty. Requirements for men, money and machines are examples of foresee able premises. Unforeseeable premises "such as war, strike, natural calamities are unpredictable

SETTING OBJECTIVES
OBJECTIVES ARE PRECISE & USED TO SPECIFY THE END

RESULTS WHICH AN ORG WANTS TO ACHIEVE. OBJECTIVES OR GOALS ( TERMS ARE USED INTERCHANGEABLY ) ARE THE ENDS TOWARDS WHICH ACTIVITY IS AIMED. THEY REPRESENT NOT ONLY THE END POINT OF PLANNING BUT ALSO THE END TOWARDS WHICH ORGANIZING, STAFFING, LEADING & CONTROLLING ARE AIMED.
Definition

OBJECTIVES ARE GOALS, AIMS, OR PURPOSES THAT ORGS WISH OVER VARYING PERIODS OF TIME. McFARLAND

OBJECTIVES SHOULD BE SMART i.e.

S---SPECIFIC
M----MEASURABLE A----ACHIEVABLE R---RELEVENT T---TIME FRAMED

GUIDELINES FOR OBJECTIVE SETTING

OBJECTIVES MUST BE CLEARLY SPECIFIED & TIME BOUND. OBJECTIVES MUST BE SET TAKING INTO ACCOUNT THE VARIOUS FACTORS AFFECTING THEIR ACHIEVEMENT. OBJECTIVES MUST BE CONSISTENT WITH ORG MISSION. OBJECTIVES MUST BE RATIONAL & REALISTIC RATHER THAN IDEALISTIC. ( RATIONAL MEANS BASED ON OR IN ACCORRDANCE WITH REASON OR LOGIC; ABLE TO THINK SENSIBLY OR LOGICALLY ). OBJECTIVES SHOULD BE ACHIEVABLE BUT MUST PROVIDE CHALLENGE TO THOSE RESPONSIBLE FOR ACHIEVEMENT. OBJECTIVES MUST YIELD SPECIFIC RESULTS WHEN ACHIEVED.. OBJECTIVES SHOULD BE DESIRABLE FOR THOSE WHO ARE RESPONSIBLE FOR THE ACHIEVEMENT. OBJECTIVES SHOULD START WITH THE WORD TO & BE FOLLOWED BY AN ACTION VERB. OBJECTIVES SHOULD BE CONSISTENT OVER THE PERIOD OF TIME. OBJECTIVES SHOULD BE PERIODICALLY REVIEWED

MANAGEMENT BY OBJECTIVES

Steps In MBO
SET THE ORGS GOALS
SET DEPT GOALS DISCUSS DEPT GOALS DEFINE EXPECTED RESULTS ( SET INDIVIDUAL GOALS )

PERFORMANCE REVIEWS. AND

PROVIDE FEEDBACK.

Goals for sustainability programs Sandviks Group Executive Management set new or modified sustainability objectives and targets in November 2008. Environment The Groups objectives are: More efficient use of energy and input materials. Reduced emissions to air and water. Increased recovery of materials and by-products. Reduced environmental impact from the use of hazardous chemicals. Increased number of products that support sustainability principles. The Groups targets are: Reduce the use of energy in relation to sales volume by 10% before year-end 2012 (base year: 2008). Reduce consumption of fresh water in relation to sales volume by 10% before year-end 2012 (base year: 2008). Commence reporting of wastewater discharged from sites before year-end 2009. Replace all chlorinated solvents, such as dichloromethane, tetrachloroethene, tetrachloromethane, trichloroethane and trichloroethene, with other solvents or techniques before year-end 2010. Reduce carbon dioxide emission from internal use of fossil fuels and electricity by 10% in relation to sales volume before year-end 2012 (base year: 2008). Commence reporting of carbon dioxide emission arising from transportation before year-end 2009. All major production, service and distribution units shall be certified in accordance with ISO14001 within two years of acquisition or establishment.

Employee conditions and development The Groups objectives are: Increase equality of opportunity at workplaces.

The Groups targets are: All sites will introduce a program to improve the gender balance before year-end 2010. All employees shall have formal annual performance review

Management by objectives Sandvik has a number of customer-oriented, financial, social and environmental objectives. Management by objectives is pursued in a decentralized manner and contains both short and longterm goals. The objectives are broken down into a number of targets that are adapted to the various levels in the organization. Read more about the objectives of the Groups sustainability work or at www.sandvik.com. Overall financial goals The overall financial goal is based on the Groups world-leading positions in various business areas. The long-term goal for Sandviks organic growth is 8%, compared with the estimated underlying average market growth over the same period of 46% in Sandviks areas of activities. The goal is based on: Increased market shares in current and new markets. New products. New application areas with high growth potential. The goal for return on capital employed in existing operations is 25% for the Group as a whole. The various business areas encounter differing commercial conditions and they have thus been assigned specific intermediate goals. Specialized and decentralized organization Sandvik is a global engineering Group with a decentralized organization. Decisions regarding operational activities are carried out within the Groups three business areas, all of which have specialist expertise in various technological areas, as well as deep insight into customer requirements and processes. Long-term approach and shareholder value The Groups long-term objective is to create value for its shareholders. Sandvik has achieved in average of about 7% annual growth over the past 20 years half of which through organic growth and half through acquisitions. In the past five years, the total return on an investment in Sandvik shares has averaged 15% annually. Research and development Comprehensive and goal-oriented research and development is a prerequisite for growth. Each year, Sandvik invests approximately SEK 3 billion in R&D. More than 2,400 employees work in the area and activities are often pursued in close cooperation with customers. The Group has some 5,000 active patents and other intellectual property rights that are owned and managed by a separate company to maximize value creation.

Advanced logistics Efficient inventory management and advanced logistics enhance the reliability of supplies and ensure excellent customer service. Sandviks distribution system is based on a small number of large and strategically sited warehouses in the largest market areas. This means that the Group can ensure rapid deliveries and maintain a broad product offering. World-class manufacturing Sandviks production organization is integrated with R&D activities and maintains world-class efficiency. This creates favorable potential for the continuous and rapid launch of products, which is a major competitive advantage for the Group. Transparent corporate governance Effective and transparent corporate governance builds trust among Sandviks various stakeholders and creates a distinct focus on customer and shareholder value. Corporate governance clearly defines the roles and responsibilities of shareholders, the Board of Directors and Group Executive Management. It also covers the Groups control and management systems. Sustainable development Issues relating to sustainable development are assigned priority at Sandvik. The Groups focus on enhancing efficiency in customer operations contributes to sustainable development, since it means that a growing number of companies endeavor or are given the opportunity to effectively utilize their resources. Sandvik shall also maintain a high level of ethics and be a good global corporate citizen.

The Groups Code of Conduct includes guidelines for the environment, health, safety and social responsibility. Management by objectives and preventive programs are important foundation pillars in efforts to achieve continuous improvements. The Code of Conduct applies to all units and employees. It includes rules and guidelines for record keeping and accounting, business ethics, working conditions, and environmental and social commitments. The Code of Conduct forms the basis for Sandviks management system and helps to continuously improve the Groups financial, environmental and social performance. Each manager in the Group is responsible for ensuring compliance with the Code. At the same time as Sandviks sustainability work generates positive leverage for customers and the external environment, it is also important that Sandviks suppliers share its values. Sandvik has thus prepared a Code of Conduct for its suppliers and similar stakeholders. Read more about the Groups sustainability work or at http://www.sandvik.com/. Long-term acquisition strategy Company acquisitions are part of Sandviks long-term growth strategy to strengthen and advance positions in the Groups priority areas. Acquired operations add new products and new know-how, strengthen the existing offering, provide entry into new markets and create the potential for an even stronger presence in markets with high growth and favorable profitability. The Group has completed some 40 company acquisitions over the past ten years. Sandvik continuously analyzes possible acquisition candidates in its various areas of operations. At the same time, assessments are made regarding the possible divestment of operations that do not comprise part of the Groups areas of core strategic directions.