Chapter 1 intro to mgmt + planning 4 students

Chapter 1

Introduction to
Management

Syllabus
•Definitions & Characteristics
•Management Science or Art
•Development of Management Thought
•Scope of Management
•Functions of Management
•Contribution by Management Experts

What is Management?
 All managers work in organizations

 Organizations – collections of

people who work together and
coordinate their actions to achieve a
wide variety of goals

1.0 The Management Process

Resources

Human
Planning
Financial
Physical
Informational

Management Functions
Goal

Organizing Directing

Controlling

Achievements

Question?
Person responsible for supervising the use
of an organization’s resources to meet
its goals?
A. Team leader
B. Manager
C. President
D. Resource allocator

Managers
Managers –
 The people responsible for supervising the use of an

organization’s resources to meet its goals

What is Management?
The planning, organizing, leading, and
controlling of human and other
resources to achieve organizational
goals effectively and efficiently

What is Management?
 Resources include people, skills,

know-how and experience,
machinery, raw materials,
computers and IT, patents, financial
capital, and loyal customers and
employees

5 M’s of
Management
1. Money
2. Manpower
3. Materials
4. Machinery
5. Methods

DEFINITIONS:
• F.W. Taylor - “Art of knowing what you want to do

and then seeing that it is done the best and cheapest
way”.
• Henry Fayol – “To Manage is to forecast, to plan, to

organize, to command, to co-ordinate and to
control”.
• Peter F.Drucker –”Management is work and as such

it has its own skills, its own tools and its own
techniques”.
• “Management is the art of getting things done

through and with people”.

The Universalism of
Management
Across Organizations of Different Size and Types

Business

Governmental Educational
Agencies
Institutions

Across Organizational Levels

Social
Services

Health Care
Delivery

Across Functional Areas

Top
Management
Middle
Management
Lower
Management

Production arketing Finance Personnel
M

CHARACTERISTICS OF
MANAGEMENT
1.
2.
3.
4.
5.
6.
7.
8.
9.

Universal Process
Purposeful
Creative
Group Phenomenon
Social Process
Multidisciplinary
Continuous Process
Intangible
Both Science and Art

MANAGEMENT AS SCIENCE OR ART:
Management is the art of getting
things done through others
MANAGEMENT AS A SCIENCE
PROVIDES PRINCIPLES AND AS AN
ART HELPS IN TACKLING
SITUATIONS.

•
•
•
•
•
•

Art
Practical know how
Technical skills
Concrete results
Creativity
Personalized nature

•
•
•
•
•
•

Science
Empirically Derived
Critically tested
General principles
Cause and effect relationship
Universal applicability

MANAGEMENT AS A PROFESSION ??
• Existence of an organized and systematic body of
knowledge,
• Formalized methods of acquiring knowledge and skills,
• Existence of an apex level body with
Professionalization as its goal,
• Existence of an ethical code to regulate the behavior of
the members of the profession,
• Charging of fees based on service and

A close scrutiny of management as a
profession reveals that it has a long
way to go to have a universal
acceptance of management as a
profession. Unlike other profession
such as medicine, law etc., the practice
of management is not restricted to
individuals with a special degree.

Chapter 1 intro to mgmt + planning 4 students

Copyright © 2006 Thomson Business and
Economics. All rights reserved.

1–18


1–19

Management Skills and Functions


Differences among management levels in skill
needed and the functions performed:

Planning

Controlling

Organizing

Leading

1–20
Exhibit

DIFFERENT ROLES OF A
MANAGER
 INTERPERSONAL ROLES
 INFORMATIONAL ROLES

 DECISION ROLES

 Interpersonal Roles:
1. The figurehead role (performing ceremonial/social duties
as
the organization’s chief)
2. The leader role
3. The liaison role (particularly communicating with the
outsiders)
 Informational Roles:
1. The recipient role (receiving information about the
organization)
2. The disseminator role (passing information to
subordinates)
3. The spokesperson role (transmitting information to those
outside)
 Decision Roles:
1. The entrepreneurial role
2. The disturbance-handler role
3. The resource allocator role

Levels of Management
Board of Directors
Managing Director

TOP
MANAGEME
NT

Executive Directors

MIDDLE
MGT

Marketing Manager

Finance Manager

Personnel Manager

Branch Manager

Chief Accountant

Labor Officers

Sale Officers

Finance Officers

LOWER MGT

FUNCTIONS OF TOP activities of the
LEVEL
1. To provide a basic sense of direction to the
company by setting its MANAGEMENTtranslating into clear
long range mission and
set of objectives
2. To design the organization structure of the company in terms of
differentiated and integrated activities, role of various positions,
authority & responsibility between them.
3. Top management must ensure the quality of personnel in terms
of their skills, orientations and commitment
4. To ensure that the resource conversion and exchange systems
are
designed and operated efficiently.

5. Periodic review of objectives for necessary modifications is a
part of this function

FUNCTIONS OF MIDDLE LEVEL
MANAGEMENT








To interpret and explain the plans and
policies formulated by top management
To monitor & control the operating
performance
To cooperate among themselves so as to
integrate the various activities of a
department
To train, motivate and develop supervisory
personnel; and
To lay down rules & regulations to be
followed by supervisory personnel.

FUNCTIONS OF LOWER LEVEL
MANAGEMENT
1. To plan day to day production within the goal laid
down by higher authorities
2. To assign jobs to workers and to make arrangements
for their training and development
3. To issue orders & instructions
4. To supervise & control workers’ operations and to
maintain personal contact with them
5. To arrange materials and tools and to maintain
machinery
6. To advise & assist workers by explaining work
procedures, solving their problems etc.
7. To maintain discipline and good human relations
among workers
8. To report feedback information and workers’
problems to the higher authorities.

FUNCTIONS OF MANAGEMENT
 PLANNING:

Plans give the org its objectives and set up the best procedures for
reaching them.
 ORGANISING:

It is the process of arranging and allocating work, authority and
resources among organization’s members so they can achieve the
org’s goals.
 LEADING:

It involves directing, influencing, and motivating employees to perform
essential tasks.
 CONTROLLING:

There are three main elements of controlling:
1. establishing standard of performance
2. measuring current performance
3. Comparing these performance to the established standards
4. taking corrective action

Organizational Performance
Efficiency
 A measure of how well or how
productively resources are used to
achieve a goal
Effectiveness
 A measure of the appropriateness of
the goals an organization is pursuing
and the degree to which they are
achieved.


Figure 1.3

Areas of Managers
Department
 A group of managers and employees
who work together and possess
similar skills
or use the same
knowledge, tools,
or techniques

• First line managers - Responsible for
daily supervision of the non-managerial
employees who perform many of the
specific activities necessary to produce
goods and services
• Middle managers - Supervise first-line
managers. Responsible for finding the
best way to organize human and other
resources to achieve organizational goals

• Top managers –
 Responsible for the performance of all
departments and have crossdepartmental responsibility.
 Establish organizational goals and
monitor middle managers
 Decide how different departments
should interact
 Ultimately responsible for the success or
failure of an organization

 Chief executive officer (CEO) is

company’s most senior and important
manager
 Central concern is creation of a smoothly
functioning top-management team
 CEO, COO, Department heads

Relative Amount of Time That Managers
Spend on the Four Managerial Functions

Figure 1.4

Question?
What skill is the ability to understand, alter, lead, and
control the behavior of other individuals and
groups?
A. Conceptual
B. Human
C. Technical
D. Managerial

Managerial Skills
 Conceptual skills
 The ability to analyze and diagnose a situation and
distinguish between cause and effect.
 Human skills
 The ability to understand, alter, lead, and control the
behavior of other individuals and groups.
 Technical skills
 Job-specific skills required to perform a particular
type of work or occupation at a high level.

Skill Types Needed

Figure 1.5

Core Competency
Specific set of departmental skills, abilities,
knowledge and experience that allows one
organization to outperform its competitors

Discussion Question
What is the biggest challenge for management in a

Global Environment?
Building a Competitive Advantage
B. Maintaining Ethical Standards
C. Managing a Diverse Workforce
D. Global Crisis Management
A.

Movie Example: Office Space
What type of manager
is Bill Lumbergh in the movie
― Office Space‖?

The Range of Management Activities
Planning

Investigating

Organizing

Communicating

Commanding

Securing Efforts

Coordination

Formulating purposes

Controlling

Staffing

Directing

Motivating

Leading

Innovating

Representing

Decision making

Activating

Evaluating

The Management Process under Pressure

When you are up to your elbows in alligators,
it’s hard to remember that your objective was to
drain the swamp.

Chapter Two
The Evolution of
Management Thought

The Evolution of Management Theory
 The driving force behind the evolution of

management theory is to search for better ways
to utilize organizational resources.
 Advances in management thought occur as

managers and researchers find better ways to
perform the principal management tasks:
planning, organizing, leading and controlling
organizational resources.

The Evolution of Management Theory
 The evolution of modern management began

in the closing decades of the 19th century,
after the industrial revolution had swept
through Europe and America.
 Many major economic, technical and cultural

changes were taking place at this time.
 There has been a shift from small-scale crafts

production to large-scale mechanized
manufacturing. Managers began to search for
new techniques to manage their
organizations.

Scientific Management theory
 Modern management began in the

late 19th century.
 Organizations

were seeking ways to
better satisfy customer needs.

 Machinery

was changing the way goods
were produced.

 Managers

had to increase the efficiency
of the worker-task mix.

Job specialization
 Adam Smith, 18th century economist,

found firms manufactured pins in two
ways:
 Craft

-- each worker did all steps.
 Factory -- each worker specialized in one step.
 Smith found that the factory method had

much higher productivity.
 Each

worker became very skilled at one,
specific task.

 Breaking down the total job allowed for

the division of labor.

The Evolution of Management
Theory

Job Specialization and
the Division of Labor
 Adam Smith (18th century economist)
 In a study of factories that

manufactured pins, he observed two
different ways of production:
 - Craft-style—each worker did all steps.
 - Production—each worker specialized in

one step.

Job Specialization and the Division of Labor
 Job Specialization
 process by which a division of labor

occurs as different workers specialize in
specific tasks over time

F.W. Taylor and Scientific
Management
 Scientific Management
 The systematic study of the

relationships between people and
tasks for the purpose of redesigning
the work process to increase
efficiency.

F.W. Taylor and Scientific Management
1) Study the way workers perform their tasks,

gather all the informal job knowledge that
workers possess and experiment with ways
of improving how tasks are performed:
Time-and-motion study
2) Codify the new methods of performing tasks
into written rules and standard operating
procedures
3) Carefully select workers who possess skills
and abilities that match the needs of the
task, and train them to perform the task
according to the established rules and
procedures
4) Establish a fair or acceptable level of
performance for a task, and then develop a

The 4 Principles
 Four Principles to increase efficiency:

1. Study the way the job is performed now &
determine new ways to do it.



Gather detailed, time and motion information.
Try different methods to see which is best.

2. Codify the new method into rules.


Teach to all workers.

3. Select workers whose skills match the
rules set in Step 2.
4. Establish a fair level of performance and
pay for higher performance.


Workers should benefit from higher output.

Problems of Scientific Management
 Managers often implemented only the

increased output side of Taylor’s plan.
 They

did not allow workers to share in
increased output.
 Specialized jobs became very boring, dull.
 Workers ended up distrusting Scientific
Management.
 Workers could purposely “under-

perform”
 Management responded with increased
use of machines.

Problems with Scientific
Management
 Managers frequently implemented only the

increased output side of Taylor’s plan.

 Workers did not share in the increased output.

 Specialized jobs became very boring, dull.
 Workers ended up distrusting the Scientific Management
method.
 Scientific Management brought many workers

more hardship than gain and a distrust of
managers who did not seem to care about
workers’ well-being.

Scientific Management
 Defined by Frederick Taylor, late 1800’s.
 The systematic study of the relationships

between people and tasks to redesign
the work for higher efficiency.
 Taylor

sought to reduce the time a worker
spent on each task by optimizing the way the
task was done.

The Gilbreths
 Frank and Lillian Gilbreth refined Taylor’s

methods.
 Made

many improvements to time and motion
studies.

 Time and motion studies:
 1.

Break down each action into components.
 2. Find better ways to perform it.
 3. Reorganize each action to be more
efficient.
 Gilbreths also studied fatigue problems,

lighting, heating and other worker issues.

Administrative Management
 Seeks to create an organization that

leads to both efficiency and
effectiveness.
 Max Weber developed the concept of

bureaucracy.
 A formal

system of organization and
administration to ensure effectiveness and
efficiency.
 Weber developed the Five principles shown in

Bureaucratic Principles
Figure 2.2
Written rules

System of task A Bureaucracy
should have
relationships

Fair evaluation
and reward

Hierarchy of
authority

Key points of Bureaucracy
Authority is the power to hold people
accountable for their actions.
Positions in the firm should be held based on
performance not social contacts.
Position duties are clearly identified. People
should know what is expected of them.
Lines of authority should be clearly identified.
Workers know who reports to who.
Rules, Standard Operating Procedures
(SOPs), & Norms used to determine how the
firm operates.
 Sometimes, these lead to ―red-tape‖ and other
problems.

Fayol’s Principles
 Henri Fayol, developed a set of 14

principles:
1. Division of Labor: allows for job specialization.


Fayol noted firms can have too much specialization leading to poor
quality and worker involvement.

2. Authority and Responsibility: Fayol included both
formal and informal authority resulting from special
expertise.
3. Unity of Command: Employees should have only
one boss.
4. Line of Authority: a clear chain from top to bottom of
the firm.
5. Centralization: the degree to which authority rests at
the very top.

6. Unity of Direction: One plan of action to guide
the organization.
7. Equity: Treat all employees fairly in justice and
respect.
8. Order: Each employee is put where they have
the most value.
9. Initiative: Encourage innovation.

10. Discipline: obedient, applied, respectful
employees needed.

11. Remuneration of Personnel: The payment
system contributes to success.
12. Stability of Tenure: Long-term employment is
important.
13. General interest over individual interest: The
organization takes precedence over the
individual.

14. Esprit de corps: Share enthusiasm or devotion
to the organization.

Behavioral Management
 Focuses on the way a manager should

personally manage to motivate
employees.
 Mary Parker Follett: an influential
leader in early managerial theory.
 Suggested

workers help in analyzing their
jobs for improvements.
 The worker knows the best way to improve
the job.
 If workers have the knowledge of the task,
then they should control the task.

The Hawthorne Studies
 Study of worker efficiency at the

Hawthorne Works of the Western
Electric Co. during 1924-1932.
 Worker

productivity was measured at
various levels of light illumination.
 Researchers found that regardless of
whether the light levels were raised or
lowered, productivity rose.
 Actually, it appears that the workers

enjoyed the attention they received as
part of the study and were more
productive.

Theory X and Y
 Douglas McGregor proposed the two

different sets of worker assumptions.
Theory

X: Assumes the average worker is
lazy, dislikes work and will do as little as
possible.


Managers must closely supervise and control
through reward and punishment.

Theory

Y: Assumes workers are not lazy,
want to do a good job and the job itself will
determine if the worker likes the work.


Managers should allow the worker great latitude,
and create an organization to stimulate the
worker.

Theory X v. Theory Y
Figure 2.3
Theory X

Theory Y

Employee is
lazy

Employee is not
lazy

Managers must
closely
supervise

Must create work
setting to build
initiative

Create strict
rules & defined
rewards

Provide authority
to workers

Theory Z
 William Ouchi researched the cultural

differences between Japan and USA.
USA culture emphasizes the individual, and
managers tend to feel workers follow the Theory X
model.
 Japan culture expects worker committed to the
organization first and thus behave differently than
USA workers.


 Theory Z combines parts of both the USA

and Japan structure.


Managers stress long-term employment, workgroup, and organizational focus.

Management Science
 Uses rigorous quantitative techniques to

maximize resources.
Quantitative management: utilizes linear
programming, modeling, simulation systems.
Operations management: techniques to
analyze all aspects of the production system.
Total Quality Management (TQM): focuses on
improved quality.
Management Information Systems (MIS):
provides information about the organization.

Organization-Environment Theory
 Considers relationships inside and

outside the organization.
 The

environment consists of forces, conditions,
and influences outside the organization.

 Systems theory considers the impact of

stages:
Input: acquire external resources.
Conversion: inputs are processed into goods
and services.
Output: finished goods are released into the
environment.

Systems Considerations
 An open system interacts with the

environment. A closed system is selfcontained.
 Closed

systems often undergo entropy and
lose the ability to control itself, and fails.

 Synergy: performance gains of the

whole surpass the components.
 Synergy

system.

is only possible in a coordinated

The Organization as an Open System
Figure 2.4
Input Stage

Conversion
Stage

Output
Stage

Raw
Materials

Machines

Goods
Services

Human skills

Sales of outputs
Firm can then buy inputs

Contingency Theory
 Assumes there is no one best way to

manage.
 The

environment impacts the organization
and managers must be flexible to react to
environmental changes.
 The way the organization is designed, control
systems selected, depend on the
environment.
 Technological environments change

rapidly, so must managers.

Structures
 Mechanistic: Authority is centralized at

the top. (Theory X)
 Employees

closely monitored and managed.
 Very efficient in a stable environment.
 Organic: Authority is decentralized

throughout employees. (Theory Y)
 Much

looser control than mechanistic.
 Managers can react quickly to changing
environment.

The Gilbreths
Followers of Taylor: Frank & Lillian GILBRETH
(1878-1972) They continued with time and
motion studies.
Ø

Ø
Ø

Break up and analyze every individual action necessary
to perform a particular task into each of its component
actions
Find better ways to perform each component action
Reorganize each of the component actions so that the
action as a whole could be performed more efficiently-at
less cost in time and effort

Theory
 Administrative

Management
 The study of how to

create an
organizational
structure that leads to
high efficiency and
effectiveness.

Theory
 Max Weber
 Developed the principles of bureaucracy as a formal

system of organization and administration designed to
ensure efficiency and effectiveness.

Weber’s Principles of
Bureaucracy

Figure 2.2

Weber’s Principles of Bureaucracy
1)
2)

3)

4)

5)

A manager’s formal authority derives from the
position he holds in the organization.
People should occupy positions because of their
performance, not because of their social standing
or personal contacts.
The extent of each position’s formal authority and
task responsibilities and it’s relationship to other
positions should be clearly specified.
Authority can be exercised effectively when
positions are arranged hierarchically, so employees
know whom to report to and who reports to them.
Managers must create a well-defined system of
rules, standard operating procedures, and norms
so they
can effectively control behavior .

Weber’s Principles of Bureaucracy
 Bureaucracy: A formal system of organization and

administration designed to ensure efficiency and
effectiveness.
 Authority: The power to hold people accountable

for their actions and to make decisions
concerning the use of organizational resources.

Rules, SOPs and Norms
 Rules
 formal written instructions that specify actions to be taken
under different circumstances to achieve specific goals
 Standard Operating Procedures (SOPs)
 specific sets of written instructions about how to perform a
certain aspect of a task
 Norms
 unwritten, informal codes of conduct that prescribe how
people should act in particular situations

Fayol’s Principles of
Management
 Fayol had identified 14 principles that he thought were essential to

increase efficiency and effectiveness:
 Division of Labor
 Allows for job specialization. However; jobs can have too much

specialization leading to poor quality and worker dissatisfaction.
 Authority and Responsibility
 Managers have the right to give orders and the power to exhort

subordinates for obedience.
 Unity of Command
 Employees should only have one boss

 Line of Authority
 A clear chain of command from top to bottom of the firm.

 Centralization
 Authority should not be concentrated at the top of the chain of command.

Fayol’s Principles of Management
 Unity of direction
 There should be a single plan to guide the managers and the

workers.
 Equity
 All organizational members are entitled to be treated with justice and

respect.
 Order
 The arrangement of employees where they will be of the most value

to the organization and to provide career opportunities.
 Initiative
 Managers should allow employees to be innovative and creative.

 Discipline
 Obedient, applied, respectful employees are necessary for the

organization to function.

Fayol’s Principles of Management
 Remuneration of personnel
 An equitable uniform payment system that motivates

contributes to organizational success.
 Stability of Tenure of Personnel
 Long-term employment is important for the development of
skills that improve the organization’s performance.
 Subordination of Individual Interest to the Common Interest
 The interest of the organization takes precedence over that of
the individual employee.
 Esprit de corps
 Comradeship, shared enthusiasm foster devotion to the
common cause (organization).

Discussion Question?
Which of the following is the most
important aspect of Fayol’s principles of
management?

Division of Labor
B. Unity of Command
C. Remuneration of Personnel
D. Esprit de corps
A.

Behavioral Management Theory
 Behavioral Management
 The study of how managers should personally behave to

motivate employees and encourage them to perform at
high levels and be committed to the achievement of
organizational goals.

Behavioral Management
 Mary Parker Follett
 Concerned that Taylor ignored the human side of the

organization
 Suggested workers help in analyzing their jobs
 If workers have relevant knowledge of the task, then they should

control the task, they should participate in the work development
process
 Unlike Fayol, she believed that power is fluid, it should flow to the
person who can best help the organization achieve its goals.
 Her approach was very radical for her time.

 Studies of how characteristics of the work setting

affected worker fatigue and performance at the
Hawthorne Works of the Western Electric Company
from 1924-1932.
 Worker productivity was measured at various levels of

light illumination.

 Human Relations Implications
 Hawthorne effect — workers’ attitudes toward their

managers affect the level of workers’ performance

 This finding led many researchers to turn their

attention to managerial behavior and
leadership.
 If supervisors could be trained to behave in

ways that would elicit cooperative behavior
from their subordinates, then productivity
could be increased.
 From this view emerged the human relations

movement.

 Human relations movement
 advocates that supervisors be behaviorally trained to

manage subordinates in ways that elicit their
cooperation and increase their productivity

Implications of the Hawthorne
Studies
 Behavior of managers and workers in the work setting is

as important in explaining the level of performance as the
technical aspects of the task
 Demonstrated the importance of understanding how the

feelings, thoughts, and behavior of work-group members
and managers affect performance
 Led to the development of an area of management known

as ―organizational behavior‖:

 The study of the factors that have an impact on how individuals

and groups respond to and act in organizations.

Theory X vs. Theory Y

Figure 2.3

Management Science Theory
 Management Science Theory
 Contemporary approach to management that focuses on

the use of rigorous quantitative techniques to help
managers make maximum use of organizational
resources to produce goods and services.
 It is like the contemporary extension of scientific
management developed by Taylor

 Quantitative management
 utilizes mathematical techniques, like linear

programming, modeling, simulation and chaos theory
 Operations management
 provides managers a set of techniques they can use to

analyze any aspect of an organization’s production
system to increase efficiency

 Total quality management
 focuses on analyzing an organization’s input,

conversion, and output activities to increase product
quality
 Management information systems
 help managers design systems that provide information

that is vital for effective decision making

Organizational Environment
Theory
 Organizational Environment
 The set of forces and conditions that operate beyond an

organization’s boundaries but affect a manager’s ability
to acquire and utilize resources

The Open-Systems View
 Open System
 A system that takes resources from its external

environment and transforms them into goods and
services that are then sent back to that environment
where they are bought by customers.

The Organization as an Open System

Figure 2.4

The Open-Systems View
 Input stage
 organization acquires resources such as raw materials,
money, and skilled workers to produce goods and
services
 Conversion stage
 inputs are transformed into outputs of finished goods
 Output stage
 finished goods are released to the external environment

Closed System
 Closed system
 A self-contained system that is not affected by changes

in its external environment.
 Likely to experience entropy and lose its ability to control
itself
 Entropy: The tendency of a closed system to lose its ability to

control itself and thus dissolve and disintegrate.

The Organization as an Open
System
 Synergy
 the performance gains that result from the combined

actions of individuals and departments
 Possible only in
an organized system

Contingency Theory
 Contingency Theory
 The idea that the organizational structures and control

systems managers choose are contingent on
characteristics of the external environment in which the
organization operates.
 ―There is no one best way to organize‖

Contingency Theory

Figure 2.5

Type of Structure
 Mechanistic Structure

 Authority is centralized at the top.
 Emphasis is on strict discipline and order
 Employees are closely monitored and

managed.
 Can be very efficient in a stable
environment.

Type of Structure
 Organic Structure
 Authority is decentralized throughout the organization.

 Departments are encouraged to take a cross-

departmental or functional perspective
 Works best when environment is unstable and rapidly
changing

Type of Structure
 Nokia’s organic approach to operating:
 Control is much looser and decentralized
 Reliance on shared norms and common

expectations to guide organizational activities is
greater
 Organic structure can react more quickly to a
changing environment
 More expensive due to increasing coordination
costs

Overview of Planning
 Objectives
 End states or targets
 Plans
 Means to hit the
desired targets
 Strategic, Tactical, Operational
 Planning
 Decision-making process focused on the future of
an organization and how it will achieve its goals

Types of Plans
 Strategic plans
 Broad future of the
organization
 External environmental demands
 Internal resources

 Tactical plans
 Translate strategic plans into specific goals
 Specific parts of the organization

Types of Plans
 Operational plans
 Translate tactical plans

into specific goals and
 Small units of the organization
 Near term

actions

Types of Plans
Strategic Plans

Tactical Plans

Operational Plans

Time horizon

Typically 3-5 years

Often focused on 1-2
years in the future

Usually focused on the
next 12 months or less.

Scope

Broadest,originating
with a focus on the
entire organization

Rarely broader than a
strategic business unit

Narrower, usually centered on departments or
smaller units of the
organization

Complexity

The most complex and
general, because of the
different industries and
business potentially
covered

Somewhat complex but
more specific, because
of the more limited
domain of application

The least complex,
because they usually
focus on small
homogenous units

Adapted from Exhibit 8.1: Types of Plans: Key Differences

Types of Plans
Strategic Plans
Impact

Tactical Plans

Have the potential to
dramatically impact,
both positively and
negatively, the fortunes
and survival of the
organization

Can affect specific
businesses but
generally not the
fortunes or survivability
of the entire
organization

Impact is usually
restricted to specific
department or
organization unit

Moderate interdependence, must take into
account the resources
and capabilities of
several units within a
business

Low interdependence,
the plan may be linked to
higher-level tactical and
strategic plans but is less
interdependent with
them

Interdependence High interdependence,
must take into account
the resources and
capabilities of the entire
organization and its
external environments

Operational Plans

Adapted from Exhibit 8.1: Types of Plans: Key Differences

Organizational Levels
 Corporate level (Strategic)
 What industries should the firm be in?
 What markets should the firm be in?
 In which businesses should the firm invest money?
 Business level (Tactical0
 Who are our direct competitors?
 What are their strengths and weaknesses? What
advantages do we have over them?
 What are our own strengths and weaknesses?
 What do customers value in our products/services?

Organizational Levels
 Functional level (Operational)
 What activities must my unit perform well in order to
meet customer expectations?
 What information about competitors does my unit
need in order to help the firm compete effectively?
 What are our unit’s strengths and weaknesses?

According to Syllabus
 Types of Plan
 Single Use Plans
 Programm, Projects, Budgets, Standards,
Schedules
 Repeated Use Plans
 Objectives
 Mission
 Strategies
 Policies
 Rules n Methods
 Procedures

 Objectives: Objectives are very basic to the

organisation and they are defined as ends which the
management seeks to achieve by its operations. They
serve as a guide for overall business planning.
 Strategy: strategy is a comprehensive plan for
accomplishing an organisation objectives. This
comprehensive plan will include three dimensions,
(a) determining long term objectives,
(b) adopting a particular course of action, and
(c) allocating resources necessary to achieve the
objective.
 Policy: They are guides to managerial action and

decisions in the implementation of strategy.
 Procedure: Procedures are routine steps on how to

carry out activities. Procedures are specified steps to

 Method: Methods provide the prescribed ways or manner

in which a task has to be performed considering the
objective. It deals with a task comprising one step of a
procedure and specifies how this step is to be performed.
 Rule: Rules are specific statements that inform what is to

be done. They do not allow for any flexibility or discretion.
 Programme: Programmes are detailed statements about a

project which outlines the objectives, policies, procedures,
rules, tasks, human and physical resources required and
the budget to implement any course of action.
 Budget: It is a plan which quantifies future facts and

figures. It is a fundamental planning instrument in many
organisations.

Planning Process
Analysis of
External
Environment
Analysis of Inner
Environment
Set of Goals to be
achieved

Establishing
Planning
Premises

Wal-Mart Venture in India
Govt, Tech, Mkt, Political,
Sociological,
Maruti India -- 5M

Nissan – Expand Dealership
Introduce low cost Datsun

Nissan – Fuel Costs,
Sales Forecasts, Gen Econo
Special Cond

Planning Process
Determining
Alternative
Course of Action

Fiat India Tie up with Tata n
break up, Renualt Mahindra Ti

Evalu & selecting
Best Course

Fiat India – Parallel Dealershi

Establishing
Sequence of
Activities
Formulation of
Long Range &
Functional Plans

Nissan – Mini Dealerships
Further break up of twns

Ponds – Olay – Fair n lovely
example

Planning Process
Formulation of
Action Plan

TATA Nano new plant and
relocation

Measuring &
Controlling the
process

Bajaj Auto – Talks fail

Analyzing the Environment

The Planning Process
 Analyzing the environment
 Forecasts: what does the future look like?
 Environmental uncertainty
 Contingency plans: identify key factors that could
affect the desired results and specify what actions
will be taken if key events change
 Benchmarking
 Investigation of the best results among
competitors and non competitors and the
practices that lead to those results

Discussion – Wall Mart & Easy
Day
 Study complete business environment
 Parameters Wal-Mart considers before entering a






country
Easy Day (Airtel Wal-Mart Joint Venture)
Fallout reasons
Future (Role Play Session)
Presentation – Advantages & Disadvantages of
Planning 5 slides

Setting Objectives

 Setting objectives
 Priorities and multiple objectives
 Establish which objectives are most
important and which have priorities,
 Measuring objectives
 Financial




performance

Profits relative to sales
Profits relative to assets
Many others

 Non-financial

performance

Determining Requirements

 Determining requirements
 Assess current performance
 What will it take in order to get from
current levels of performance to that
level specified in the objectives?
 What drives market share?
 What capital will be required?

Assessing Resources

 Assessing resources
 Resources required
 What resources are needed to achieve the stated objectives?
 Resources available
 Do we have the needed human talent to meet the
requirements?
 Do we have the financial resources available?
 Do we have the required technology?

Developing Action Plans

 Developing action plans
 Sequence and timing
 Raw materials, manpower
and components must be
brought together in the right amounts
and sequences

 Accountability
 Who is accountable for which actions?

Implementing Plans

 Implementing Plans
 Monitoring the implementation
 Monitor the progress of the plan and its
implementation
 Monitor the level of support that the plan
receives as it is being implemented
 Monitor the level of resistance

 Real-time adjustment

Monitoring Outcomes

 Monitoring outcomes
 Unanticipated consequences
 Negative unanticipated consequences
 Positive unanticipated consequences
 Feedback loop
 Apply what has been learned to modify
and improve the planning process

Planning Tools
 Budgets

 Capital expenditure budget
 Specifies the amount of money to be spent
on specific items that have long-term use
and require significant amounts
 Expense budget
 Includes all primary activities on which a
unit or organization plans to spend money
and the amount allocated for the upcoming
year

Planning Tools
 Budgets
 Proposed budget
 Provides a plan for how much money is
needed, and is submitted to a superior or
budget review committee
 Approved budget
 Specifies what the manager is actually
authorized to spend money on and how
much

Planning Tools
 Two budgetary approaches
 Incremental budgeting approach
 From the approved budget of the previous
year present arguments for why the
upcoming budget should be more or less

 Zero-based budgeting approach
 Justify all allocations of funds from zero
each year

 What’s the planning of organizations?
 Management by objectives
 The strategic management process
 Benchmarking / ISO9000 series /six sigma
 Entrepreneurship: a special case of strategic planning

What’s the planning of
organizations?
 The content of planning
 Advantages and disadvantages of planning
 Types of plans

Planning Encompasses:
 Defining the organization’s objectives or goals.
 Establishing an overall strategy for achieving those

goals.
 Developing a comprehensive hierarchy of plans to
integrate and coordinate activities.

Advantages of Planning
 It gives direction to managers and nonmanagers

alike.
 Planning can reduce the impact of change.
 It minimize waste and redundancy.
 Planning establishes objectives or standards that
facilitate control.

Disadvantages of Planning
 Planning may create rigidity.

can’t be developed for a dynamic
environment.
 Formal plans can’t replace intuition and creativity.
 Planning focuses managers’ attention on today’s
competition, not on tomorrow’s survival.
 Formal planning reinforces success, which may
lead to failure.
 Plans

Exhibit 4-1 Types of Plans
Breadth

Time frame

Specificity

Frequency
of use

Strategic Long term

Directional Single use

Tactical

Specific

Short term

Standing

Strategic and Tactical Plans
 Strategic plans are plans that apply to the entire organization,

establish the organization’s overall objectives, and seek to
position the organization in terms of its environment.
 Tactical plans (sometimes referred to as operational plans)
specify the details of how the overall objectives are to be
achieved.
 Strategic and tactical plans differ in three primary ways—
their time frame, scope, and whether they include a known set
of organizational objectives.

Short-term and Long-term
Plans
 Short-term plans are plans that cover less than one

year.
 Long-term plans are plans that extend beyond five
years.
 Their differences lie in the length of future
commitments and the degree of variability
organizations face.

Specific and Directional Plans
 Specific plans have clearly defined objectives and leave

no room for misinterpretation.
 Directional plans are flexible plans that set out general
guidelines.

Single-use and Standing Plans
 Single-use plans are used to meet the needs of

particular or unique situation.
 Standing plans are ongoing, and provide guidance for
repeatedly performed actions in an organization.

Chapter 1 intro to mgmt + planning 4 students

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