Solutions to Assignments
MBA and MBA (Banking & Finance)
MMPC 001 - Management Functions and Organisational Processes
MMPC-004/TMA/JULY/2022
Question No. 2. Discuss the necessity of having Planning and how it helps organisations. Describe various types of planning and their merits.
The fast-changing business environment creates the need for development
and planning. An organization that adopts a lackadaisical approach in the
identification of environmental change would surely struggle to survive and
grow. The following point shows how planning is an important management
function:
1. Ensures selection of optimum goals: planning is the cognitive and
intellectual process of selecting the best course of action from various
available alternatives. It is also about selecting one course of action that
has sound chances of being profitable, feasible, achievable and
economical and reject the other courses of actions that are not so feasible
and profitable. The selected course of action ensures the overall growth
of an organization keeping in mind the organizational limitations in
terms of resources, time limit, objectives and strategies. In overall
development of the organization, it is necessary to optimize the overall
operation of the organization and sub-optimization of other departments.
2. Manages complexities: a single organization is a function of the
heterogeneous group of human resource who possess different KSA,
values, belief, culture and motivation level. In such heterogeneous
working environment, it is obvious to have a disharmony in terms of
organizational and individual interest. An effective plan of organization
is a way to create a common interest among individual of an organization
who works together towards the accomplishment of organizational goals
in which they have shared common goals too. Thus planning is a way
towards goal directing activity.
3. Survive environmental change: the business environment witness
tremendous change now and then. From a conservative business model
to democratic, global business scenario has left the business houses to
keep itself updated to meet changing demands with changing
environment. Change in demand, change in technologies, fashion,
preferences, social values significantly affect the organizational normal
course of operation. Management must strive to grab the opportunity to
take advantage of the changed situation by adapting and adjusting its
inputs to meet new demand and preferences of customers. Proper,
scientific and systematic planning helps to survive in the turbulent
situation created out of environmental change.
4. Protection from failure: unpredictable change in consumer’s taste and
preferences, cut-throat competition, rapid technological change,
economic slowdown, political disturbances significantly affect the nation
and so business houses. Sometimes these changes are so adverse that
leads to complete business failure. However, many organizations could
not survive these radical changes due to ineffective planning and faulty
decision making. It cannot be denied that planning cannot eliminate all
business failures, but it can surely help in identification and evaluation of
business opportunities and threats and examining the various course of
action thereafter.
5. Unity of action: since the organization works with joint efforts of an
individual with different KSAs, thus their harmonious working is
necessary towards accomplishment of organizational goals. This is
possible with efficient planning that provides stake to employees to work
jointly for organizational success.
6. Supports control and coordination: Planning function supports other
management function such as control and coordination. What, when,how and by whom a function is to be performed, all these are planned
and worked out well in advance. This helps in easy and timely
performance appraisal and finding the deviation thereof. In the absence
of planning neither the performance would be of quality nor can the
standard of performance be established effectively. This will lead to poor
performance, delay in completion of tasks, wastages, chaos and
ultimately control and coordination would suffer. Proper planning can
ensure establishment performance standards scientifically and
systematically, timely and effective performance measurement, timely
identification and elimination of deviations and thus harmonious
function at the workplace.
7. Planning Promotes Innovative Ideas:It is clear that planning selects the
best alternative out of the many available. All these alternatives do not
come to the manager on their own, but they have to be discovered. While
making such an effort of discovery, many new ideas emerge and they are
studied intensively in order to determine the best out of them. In this
way, planning imparts a real power of thinking in the managers. It leads
to the birth of innovative and creative ideas. For example, a company
wants to expand its business. This idea leads to the beginning of the
planning activity in the mind of the manager.
8. Planning Facilitates Decision Making: Decision making means the
process of taking decisions. Under it, a variety of alternatives are
discovered and the best alternative is chosen. The planning sets the target
for decision making. It also lays down the criteria for evaluating courses
of action. In this way, planning facilitates decision making.
• Gives an organization a sense of direction Without plans and
goals, organizations merely react to daily occurrences without
considering what will happen in the long run. For example, the
solution that makes sense in the short term doesn't always make
sense in the long term. Plans avoid this drift situation and ensure
that short range efforts will support and harmonize with future
goals.
• Focuses attention on objectives and results Plans keep the people
who carry them out focused on the anticipated results. In addition,
keeping sight of the goal also motivates employees.
• Establishes a basis for teamwork Diverse groups cannot
effectively cooperate in joint projects without an integrated plan.
Examples are numerous: Plumbers, carpenters, and electricians
cannot build a house without blueprints. In addition, military
activities require the coordination of Army, Navy, and Air Force
units.
• Helps anticipate problems and cope with change When
management plans, it can help forecast future problems and make
any necessary changes up front to avoid them. Of course, surprises
— such as the 1973 quadrupling of oil prices — can always catch
an organization short, but many changes are easier to forecast.
Planning for these potential problems helps to minimize mistakes
and reduce the “surprises” that inevitably occur.
• Provides guidelines for decision making Decisions are future
oriented. If management doesn't have any plans for the future, they
will have few guidelines for making current decisions. If a
company knows that it wants to introduce a new product three years
in the future, its management must be mindful of the decisions they
make now. Plans help both managers and employees keep their
eyes on the big picture.
• Serves as a prerequisite to employing all other management
functions Planning is primary, because without knowing what an
organization wants to accomplish, management can't intelligently
undertake any of the other basic managerial activities: organizing,
staffing, leading, and/or controlling.
TYPES OF PLANNING
Based on the organizational objectives and goals the planning can broadly be
classified into three main categories. These are Strategic Planning, Tactical
Planning and Operational planning. The organization works in an uncertain
business environment. Thus it is susceptible to various threats as well as
opportunities from the environment. When an organization analyzes possible threats and competitive opportunities within the environment and evaluates
its strength and weaknesses to position itself to take the advantage of the
environment or survive the adverse the organization plans strategically.
Strategic planning involves long term commitment often five or more years.
This planning is complex as it includes the entire organization and
formulation of objectives. Generally, strategically planning is done in the
view of organizational vision and mission. Since it is long term and highly
technical therefore top management is involved in it. On the other hand,
tactical planning of less long term in nature usually for one to three years
and it is about developing means and mechanism to be adopted for the
implementation of strategic plans. In simple words, tactical planning is “how
to implement” strategic plans. This planning is about implementation
therefore middle-level managers are involved in such planning process. The
third type of planning i.e. operational planning seems to functional planning
where organization-wide or goals and objective for each unit or sub-unit is
established ways to achieve them is looked for. Operational planning is shortterm planning for less than one year as it aims to eliminate current
operational problems. Planning at this level supports at the higher-level
planning of tactical and strategic.
The above discussion classified the planning into three broad categories,
however, planning can also be classified based on the time frame involved in
it. Broadly plans under planning are divided into three parts i.e. Long-term
plans, medium-term plans and short-term plans. Plans those are highly
technical and deals with the competitive aspect of the organization are termed
as long term plans as they involve allocation of resources for a long period
usually between five and fifteen years. However they may vary concerning
their nature, scope, complexity, and size and are usually somewhat vague.
These plans are more susceptible to uncertain events that may leave a
significant impact on the organization. Such as technological changes, change
in consumer behaviour, government policies can significantly affect the
organization and involves serious attention of top management to make a
long-term plan. Plans that are relatively detailed and specific and usually
range between two and five years are medium-term plans. These plans are
operational as decisions like raw material purchase; overhead expenses,
labour wages, production etc are taken. Though these decisions are also
crucial to an organization, yet any flaw in planning would not result in
serious failure, as it can be altered in two-three years. Similarly in shortterm plans for about a year or so are more specific and deals with day to day
operation such as inventory management, employees training etc.
Plans can be classified based on the nature and scope of plans. Based on their
nature and scope of plans, plans can be standing and of repeated nature that is
used repeatedly. In such plans, objectives, policies, procedures, rules and
strategies are developed. These plans serve as guidelines to carry out business
activities. When an organization has a single-use plan, it usually establishes
programmes and budgets.
Types of Plans:
As the plans are all pervasive, they are made at every level of organization with different purposes and perspectives. Accordingly they may take various
shapes and stand differently in the hierarchy of importance.
The most popular ways to describe organizational plans are by their:
1. Coverage – Strategic, tactical, and operational,
2. Time frame – Short and long term,
3. Specificity – Specific versus directional,
4. Frequency of use – Single use and standing.
Note that these planning classifications aren’t independent. For instance,
short-and long- term plans are closely related to strategic and operational
ones. And single-use plans typically are strategic, long term, and directional.
1. Strategic, Tactical and Operational Plans:
a. Strategic Plans:
Strategic plans are designed to meet the broad objectives of the
organization – to implement the mission that provides the unique
reason for organization’s existence. They are set at the top
managerial level, and are meant to guide the whole organization.
An organization’s strategic plan is the starting point for planning.
The aim of strategic planning is to help a company select and
organize its businesses in a way that would keep the company
healthy in spite of unexpected upsets occurring in any of its specific
businesses or product lines.
For example- in order to deal with uncertainties of raw material
availability, a company’s strategic plan may purport to acquire its
own facilities for generating raw material. Strategic plan serves as a
guide to the development of sound sub plans to accomplish the
organizational objectives.
b. Tactical Plans:
Top level managers set the strategies that an organization should
focus to achieve organizational goals. Examples of strategies include
set-up a plant to generate raw material for the organization’s
manufacturing activities, explore North-East market, and likewise.
Middle managers interpret these strategies and develop tactical plans
for their departments that follow strategies in order to contribute to
the organizational goals.
In order to develop tactical plans, middle management needs detail
reports (financial, operational, market, external environment).
Tactical plans have shorter time frames and narrower scopes than
strategic plans. Tactical planning provides the specific ideas for
implementing the strategic plan. It is the process of making detailed
decisions about what to do, who will do it, and how to do it.
c. Operational Plans:
The supervisor interprets the strategic and tactical management
plans as they apply to his unit. This way, he makes operational plans
to support tactical plans. These plans provide the details of how the
strategic plans will be accomplished. Examples of planning by
supervisors include scheduling the work of employees and
identifying needs for staff and resources to meet future changes.
Operating plans tend to be repetitive and inflexible over the short
run. Change comes only when it is obvious that plans and specific
action steps are not working.
There are two main type of operational plans – Single use plans
which are developed to achieve specific purposes and dissolved
when these have been accomplished; standing plans are standardized
approaches for handling recurring and predictable situations.
Note that Tactical plans are based on the organization’s strategic
plan. In turn, operational plans are based on the organization’s
tactical plans. These are specific plans that are needed for each task
or supportive Activity comprising the whole. Strategic, tactical, and
operational planning must be accompanied by controls.
Monitoring progress or providing for follow-up is intended to ensure
that plans are carried out properly and on time. Adjustments may
need to be made to accommodate changes in the external and/ or
internal environment of the organization.
2. Short-Range and Long-Range Plans:
Time is an important factor in planning. George Terry says, “The time
period covered by planning should preferably include sufficient time to
fulfil the managerial commitments involved.”
Generally a short range planning (SRP) means a plan for one or two
years and long range planning (LRP) means a plan for three to five years
or more. Though this division may be considered as arbitrary, but it may
have a general acceptability. This period of course, may vary according
to the nature and size of business.
When a concern requires long gestation period, it is natural that the long
range planning may cover a longer period than five years. For exampleorganizations, such as oil or mining companies, or airlines must make
long range planning because of their particular purposes and objectives.
A home video-rental store or a book store might concentrate on seasonal or annual goals.
However, whatever the period of planning, it should not be too rigid. It
should rather be flexible to meet the unknown factors of the future. If a
concern adopts both short-term and long-term planning, the short-term
planning should fit in with long-term planning. It is important, for
managers, to understand the roles of both long range and short range
planning in overall planning scheme.
3. Specific and Directional Plans:
Specific plans are established to achieve a specific purpose and dissolves
when the purpose is accomplished. For example- a manager who seeks to
increase his firm’s sales by 20 per cent over a given twelve-month period
might establish specific procedures, budget allocations, and schedules of
activities to reach that objective. These represent specific plans.
Directional plans identify general guidelines. They provide focus but do
not lock managers into specific objectives or courses of action. Instead of
following a specific plan to cut costs by 4 per cent and increase revenues
by 6 per cent in the next six months, a directional plan might shoot for
improving corporate profits by 5 to 10 per cent every year.
Intuitively it seems right that specific plans would be preferable to
directional or loosely guided plans, because they have clearly defined
objectives. There is no ambiguity, no problem with misunderstandings.
However, in certain circumstances, like in case of fast changing
environment, directional plans provide the flexibility required to cope
with the changing situations.
4. Single Use and Standing Plans:
A single-use plan is a one-time plan specifically designed to meet the
needs of a unique situation and created in response to non-programmed
decisions that managers make.
In contrast, standing plans are ongoing plans that provide guidance for
activities repeatedly performed in the organization. Standing plans are
created in response to programmed decisions that managers make and
include the policies, rules, and procedures.
i. Single-Use Plans:
Single-use plans are detailed courses of action that probably will not
be repeated in the same form in the future. For example- a firm
planning to set up a new warehouse because it is expanding rapidly
will need a specific single-use plan for that project, even though it
has established a number of other warehouses in the past.
It will not be able to use an existing warehouse plan, because the
projected warehouse presents unique requirements of location,
construction costs, labour availability, zoning restrictions, and so
forth. The major types of single-use plans are programs, projects,
and budgets.
a. Programs:
A program covers a relatively large set of activities.
The
program shows-
(1) the major steps required to reach an
objective,
(2) the organization unit or member responsible for
each step, and
(3) the order and timing of each step.
The
program may be accompanied by a budget or a set of budgets
for the activities required.
A program may be as large in scope as placing a person on the
moon or as comparatively small as improving the reading level
of fourth-grade students in a school district. Whatever its scope,
it will specify many activities and allocations of resources
within an overall scheme that may include other single-use
plans as projects and budgets.
b. Projects:
Projects are the smaller and separate portions of programs. Each
project has limited scope and distinct directives concerning
assignments and time. In the warehouse example, typical
projects might include the preparation of layouts, a report on
labour availability, and recommendations for transferring stock
from existing facilities to the new installation. Each project will
become the responsibility of designated personnel who will be
given specific resources and deadlines.
c. Budgets:
Budgets are statements of financial resources set aside for
specific activities in a given period of time. They are primarily
devices to control an organization’s activities and so are
important components of programs and projects. Budgets
itemize income as well as expenditures and thus provide targets
for such activities as sales, departmental expenses, or new
investments.
Managers often use budget development as the process by
which decisions are made to commit resources to various
alternative courses of action. In this sense, budgets can be
considered single-use plans in their own right.
ii. Standing Plans:
a. Policies:
A policy is a general statement designed to guide employees’
actions in recurring situations. It establishes broad limits,
provides direction, but permits some initiative and discretion on
the part of the supervisor. Thus, policies are guidelines. Some
policies deal with very important matters, like those requiring
strict sanitary conditions where food or drugs are produced or
packaged. Others may be concerned with relatively minor
issues, such as the way employees dress.
Policies are usually established formally and deliberately by top managers of the organization. Policies may also emerge
informally and at lower levels in the organization from a
seemingly consistent set of decisions on the same subject made
over a period of time.
For example- if office space is repeatedly assigned on the basis
of seniority, that may become organization policy. In recent
years policy has also been set by factors in the external
environment—such as government agencies that issue
guidelines for the organization’s activities (such as requiring
certain safety standards).
b. Procedures:
A procedure is a sequence of steps or operations describing how
to carry out an activity. It is more specific than a policy and
establishes a customary way of handling a recurring activity.
Thus, less discretion on the part of the supervisor is permissible
in its application. For example- the refund department of a large
discount store may have a policy of “refunds made, with a
smile, on all merchandise returned within seven days of
purchase.”
The procedure for all clerks who handle merchandise returned
under that policy might then be a series of steps like these- (1)
Smile at customer. (2) Check receipt for purchase date. (3)
Check condition of merchandise … and so on. Such detailed
instructions guide the employees who perform these tasks and
help insure a consistent approach to a specific situation.
OBJECTIVES: the future goals and desired state that an organization strives
to achieve in future. Objectives are road map or direction path that keeps an
organization attentive and focused towards its goals and helps in dodging
obstacles. Peter Drucker say that an organization mostly has objectives
related to market share, innovation, productivity, profitability, physical and
financial resources, performance and development etc. Charles Perrow
classified objectives into five categories namely; Societal objectives (cultural
values, production of goods and services), output objectives, system
objectives, product objectives and Derived objectives (community
development).
Though organizational objectives are vital to an organization, yet it suffers
from the problem of quantification.
Where objectives stated in quantitative
terms are easily understandable, qualitative objectives are vague and
confusing. For example, the objective of cost reduction, ROI on investment,
market share, reduction in cost by one-third, fifteen increase in profit, ten
percent return on capital etc are explicitly stated and are not subject to
vagueness and confusion. Qualitative objective such as maximizing customer
satisfaction through quality performance, maintaining an ethical relationship
with stakeholders etc are necessary but vague in terms of a clear definition of
satisfaction, quality performance and ethics. Objectives that are clear and
unambiguous are sure to be achieved.
Management by Objectives (MBO)
Management by objective is the scientific and strategic approach to enhance
the organizational objective wherein goals and objectives of organizations are
clearly stated, define and conveyed by the managers to the entire
organization. The crucial step of defining the objective under this approach
is to monitor and evaluate employees’ performance against the stated
objectives. Ideally, under this approach, employees themselves set their goals
and course of action that effectively fulfil their obligation. In other words,
MBO is a scientific strategy to establish objectives jointly by managers and
subordinates and desire to achieve them with achieving organizational
objectives simultaneously. MBO approach follows the following six steps:
1. Defining organizational objectives/goals with the help of different
managers and supervisors. Based on organization status and
performance, objectives to be achieved in specific time are established.
A broad range of objectives that are critical to the organization is
established and most top-level managers are involved in this step.
2. Defining objectives for employees: after establishing the general broad
organizational objectives, plans and procedures, managers are superiors
discuss and work with their subordinates to establish their objectives.
This step is crucial enough as the personal objectives of employees
motivate them to work towards organizational objectives. Managers and
superiors discuss the need, goals, time and resources required by the
employees to achieve their objective and organizational objective
ultimately. Employees present their thought and ideas about what
departmental objectives are necessary to be framed and achieved.
3. Regular monitoring performance and progress: since an organization is
managed by managing the objectives of an organization. Thus, apart
from increasing managerial efficiency, regular monitoring and progress
of employees are necessary. Close monitoring of performance ensures
eliminating performance deviation and flaws.
4. At this step performance of each employee concerning performance
standard and objectives are evaluated by the concerned managers of
supervisors.
5. Providing Feedback: feedback step is very crucial under management by
objective approach. Continuous feedback on performance helps the
employees to manage their performance quality and correcting their
actions. Feedback at a particular point of time should be replaced with
continuous feedback through regular formal and informal meetings of
superiors and subordinates. In this way, probable performance deviation
can be eliminated and progress can be ensured.
6. Performance Appraisal: the routine of performance of an employee by
the managers is the final step under the MBO approach.
Management by objectives offers several benefits to the organization such as
it ensures better communication between managers and subordinates while
objectives for organization and employees are set, makes job clarity amongst
subordinates, it leads to increase in motivation level of employees as they feel more connected with the organization being part of the planning process, and
it also ensures the close monitoring too of performance of employees.
Ultimately, MBO improves the planning process. Despite several benefits to
the organization and employees, MBO is engulfed in various demerits and
limitations. Since it involves setting clear and unambiguous objectives for
organization as well as employees, a lot of paperwork is involved in it.
Regular meetings and sessions are conducting with managers and
subordinates to set objectives and detailed records are maintained. Secondly,
many a time, lower levels of management are kept outside the objectivesetting process and thus the process becomes less democratic. Thirdly, where
poor performance is closely monitored and managed, exceptionally good
performances do not get any incentive. Moreover, MBO faces the problem of
defining the objectives with clarity, devising suitable means to achieve them,
difficulty in avoiding conflicts.
Policies: Policies refers to guides to think about the actions to be taken to
make decisions with regards to organizational objectives. It is ready reference
and answer to all the questions that may arise in due course of time in
running the organization. These are broad, comprehensive and flexible to
define the course of actions to be followed to attain objectives. In other
words, it eliminates the possible confusion of objectives and makes the
objectives more concrete and static. Though they are not about any decision
yet it sets the boundary and limits within which decision should be made.
For instance, an organization aiming at reducing the poverty level within a
particular area may hire employees from that local area only.
A good policy is the one that is broad, consistent, adequate in numbers,
practical and flexible. The policy formulated must be outlined broadly
leaving more scope for managers to decide within the limit. It need not cover
every detail as it would become more particular and less scope would be
there to make a decision. Since many policies resort to many questions, there
are chances that one policy may contradict others. Such a situation must be
avoided and hence policies formulated must be consistent and not mutually
contradictory. The policy of an organization binds itself in a single thread
with which is it known. Hence it is an image builder. A policy must be
logical and practical so that every member of an organization can rely on that
and managers can make a decision effectively. Lastly, it must be flexible
enough to incorporate any probable change and uncertainty.
Procedures: A good objective and good policy may not lead to the desired
result until a clear way and mean to achieve them are not established. An
organization that does not ponder upon the procedure to be followed for
accomplishing its objectives and policies to be implemented is certain to
flounder. Questions like what, when and by whom a task would be
performed. An effective procedure ensures easy to control, standardisation,
consistency, coordination and communication.
Rules: in a general term, rules are norms set by the organization that governs
what and what not to be done under a certain situation. It is the self-imposed
principle of action and varies with the situation. Rules set the parameters to
be followed and standards to be achieved. Hence it does not leave any scope for decision making. Deviations or violations of rules usually lead to
punishment.
Strategies: derived from the Greek word “strategi” which means the office of
the general. Strategy refers to the organizational overall plan to attain the
objectives working under the ambit of uncontrollable environmental forces.
In an uncertain external environment, the organization is exposed to various
threats as well as opportunities. In such situations, an enterprise makes
various strategies such as; a strategy to stabilize the business in a turbulent
situation, strategy to develop a product, strategy to expand the market,
vertical integration, mergers, disinvestment, etc.
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