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Principle of Management
Week 5
Foundation of Planning

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• Table of contents;
– Reflecting last week.
– Group presentation on question 4. What can you
learn about decision making from this situation?
– Role of a Manager - Discussion.
– Planning and why managers plan – Discussion.
– How do Managers plan - Discussion.
– Issues in Planning – group discussion.
– Summary.
– Motivating your self.
– Case study (Group Discussion with individual
submission).

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Why should managers formally plan?
Managers should engage in planning for at least 4 reasons:
1.Provides direction- establishes coordinated effort. It gives direction
to managers and nonmanagers alike. When all organisation menbers
understand where the organisation is going and what must they
contribute to reach the objectives, they can begin to coordinate their
activities, thereby fostering cooperation and teamwork.
2.Reduces the impact of change- by forcing the managers to look
ahead, anticipate change, consider the impact of change and develop
appropriate responses, planning reduces uncertainty. It also clarifies
the consequences of the action managers might take in response to
change. Planning then, is precisely what managers need in a chaotic
environment.
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4. Malaysian Institute of Aviation TechnologyWhy should managers formally plan?
3. Minimizes waste and redundancy: also reduces overlapping and
wasteful activirties.
4. Sets the standards to facilitate control: planning establishes
objectives or standards that facilitate control. If organisational
members are unsure of what they are attempting to achieve, how
can they determine whether they have achieved it? In planning,
objectives are developed. In the controlling function of
management, performance is compared against the establishes
objectives. If anything, corrective action can be taken.
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What is Planning?
• A process ... involves defining the organisation’s goals, establishing
an Overall strategy for achieving those goals.
And developing a comprehensive set of plans to integrate and
coordinate organisational work.
• It is with Concerned both the END (what is to be done) and
the MEANS (how it is to be done).
• Planning can be further defined as Formal and informal.
Normally, informal planning, very little is written down. What is to be
accomplished is rarely verbalised. This generally describes planning in many
smaller businesses.
E.g: the owner manager has a private vision where he or she wants to go and
how he or she expects to get there.
- We imply formal planning in this chapter. This means that management
clearly defines the path it wants to take to get from where it is to where it wants
to be.

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How Do Managers Plan:
• Planning is Primary Management Function because it establishes the basis
for all other functions, organise, lead and control.
• Involve 2 important elements: GOALS and PLANS.
• Goals: Desired outcomes for individuals, groups or entire organisations.
• Plans: Documents that outline how goals are to be met, including resources
allocations, schedules and other necessary actions to accomplish the goals.
• Stated Goals: Official statements of what an organisation says, and what it
wants its various stakeholders to believe, its goals are.
• Real Goals: Goals that an organisation actually pursues, as defined by
the actions of its members.

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Stated Goals / Objectives from Large US Companies.
Strategic Objectives.
• A bigger market share.
• A higher, more secure industry rank.
• Higher product quality.
• Low cost relative to key competitors.
• Broader or more attractive product line.
• A stronger reputation with customers.
• Superior customer service.
• Recognition as a leader in technology
and/ or product innovation.
• Increased ability to compete in
international markets.
• Expanded growth opportunities.
Financial Objectives.
• Faster revenue growth.
• Faster earning growth.
• Higher dividends.
• Wider profit margins.
• Higher returns on invested capital.
• Stronger bond and credit ratings.
• Bigger cash flows.
• A rising share price.
• Recognition as a “blue chip” company.
• A more diversified revenue base.
• Stable earnings during recessionary
periods.

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Type of Plans
• Strategic Plan: Plans that apply to the entire organisation, establish the
organisation’s overall goals and seek to position the organisation in term of
its environment.
• Operational Plans: Plans that specify the details of how the overall goals
are to be achieved.
• Long-term Plans: Plans with a time frame beyond three years.
• Short-term Plans: Plans covering one year or less.
Breadth Time frame Specificity Frequency of
Use
Strategic Long-term Directional Single use.
Operational Short-term Specific Standing.

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• Specific Plans: Plans that are clearly defined and that leave no room
for interpretation. (for example, a manager who seeks to increase her firm’s
sales by 10% over a given 12 months period might establish specific
procedure, budget allocations and schedules of activities to reach that
objectives)
• Directional Plans: Plans that are flexible and that set out general
guidelines (for example, a specific plan might aim to cut costs by 10% and
increase revenue by 8% in the next six months; a directional plan might aim at
improving corporate profits between 6 and 12 % during the next 6 months).
• Single use Plan: A one time plan specifically designed to meet the
needs of unique situation.
• Standing Plans: Ongoing plans that provide guidelines for activities
performed repeatedly (for example, when you register for classes for the
coming semester, you are using a standing registration plan at your college or
university. The dates change, but the process works in the same way semester
after semester.

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Establishing Goals
• Traditional Goal Setting: An approach to setting goals in which goals are set at the
top level of the organisation and then broken down into sub-goals for each level of
the organisation.
• Means – Ends Chain (how to be done-what to be done): An integrated networks of
goals in which the accomplishment of goals at one level serves as the means for
achieving the goals or ends at the next level.
• Management By Objectives (MBO): A management system in which specific
performance goals are jointly determined by employees and their managers,
progress toward accomplishing those goals is periodically reviewed, and rewards
are allocated on the basis of this progress. This concept goes back almost 50 years
ago.
• The 4 elements of MBO are:
• Goal specificity.
• Participative decision making.
• An explicit time period.
• Performance feedback.

11. Malaysian Institute of Aviation TechnologyMBO
• The objective of MBO should be concise statements of
expected accomplishments. It is not adequate, for
example: to state a desire to cut costs, improve service
or increase quality. Such desires need to be converted
into tangible objectives that can be measured and
evaluated.
• E.g: To cut deparmental cost by 8%, to improve service
by ensuring that all insurance claims are processed
within 72 hours of receipt, or to increase quality by
keeping returns to less than o.5% of sales.
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Steps in a typical MBO Program:
• The organisation’s overall objectives and strategies are formulated.
• Major objectives are allocated among divisional and departmental units.
• Unit managers collaboratively set specific objectives for their units and with
their managers.
• Specific objectives are collaboratively set with all department members.
• Action plans, defining how objectives are to be achieved, are specified and
agreed upon by managers and employees.
• The action plans are implemented.
• Progress toward objectives is periodically reviewed, and feedback is provided.
• Successful achievement of objectives is reinforced by performance based
rewards.

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Characteristics of Well Designed Goals
• Written in terms of outcomes rather than actions.
• Measurable and quantifiable.
• Clear as to a time frame.
• Challenging yet attainable.
• Written Down.
• Communicated to all necessary organisational members.

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Steps in Goal Setting
1. Review Mission- sense of purpose and what it hopes to accomplish.
2. Evaluate available resources.
3. Determine the goals individually or with input from others.
4. Write down the goals and communicate to all who need to know.
5. Review results whether goals are being met.

15. Malaysian Institute of Aviation TechnologyHow do you set employee objectives?
 Employees should have a clear understanding of what they are
attempting to accomplish. As a manager, you have the responsibility
for seeing that this task is achieved by helping your employees set
work goals.
 Setting objectives is a skill that every manager needs to perfect. To
better facilitate, follow these guidelines:
 Identify and employee’s key job tasks.
 Establish specific and challenging goal for each key task
 Allow the employee to actively participate
 Prioritise goals
 Build in feedback mechanism to assess goal progress
 Link rewards to goal attainment
(refer handout- p.97) 15

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Developing Plan
• The three Contingency Factors in planning:
• Level in the organisation.
• Degree of environmental uncertainty.
• Length of future commitments.
• Commitment Concept:
• Plans should extend far enough to meet those commitments
made when the plans were developed.
• Formal Planning Department.
• A group of planning specialists whose sole responsibility is helping to
write various organisational plans.
• Participative Planning – when organisational members actively involved in
planning, they see the plans are more than just something written down on paper.

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Issues on Planning
Criticism:
• Should managers forget about planning?
Effective planning in dynamic environments:
• Specific but flexible.

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Assignment Chapter 4
Group Discussion
(Individual submission)
How do you think planning in today organisations
compare to planning 25 years ago?
Do you think planning become more important or
less important in a world where everything is
changing fast and crises are a regular part of
organisational life. WHY? 18

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CHAPTERS’ PRESENTATION
(in group)
 Group 1 – Chapter Organisational Structure and
Design (19th
February 2013)
 Group 2 – Chapter Understanding Groups and
Teams (19th
February 2013)
 Group 3 – Chapter Motivating Employees (26th
February 2013)
Group 4 – Leadership
(26th
February 2013) 19