1UNIT -3

PLANNING

Definition 2

According to Harold Koontz and O Donnell Planning is deciding in advance what is to be done in future. Plan Bridges the gap between where we are and where we want to go.

Approaches to Planning 3Planning decides the objectives, goals, and course of action in advance and the methods of implementing and achieving the plans. Planning aims at achieving the goals more economically and accurately. The some of the approaches of planning are.

Primary Planning

Contribute to objectives

Intellectual Activity

Higher Efficiency (Efficiency is the ratio between input and output)

Flexibility(Planning should proact and react to the environmental change)

Consistency( Planning should be in consistence with the strengths of the firm and opportunities provided by external environment)

Types of Plans 4“A strategy is defined as an organization’s activities and plans designed to match organization’s objectives with its mission and to match organization’s mission to its environment in an efficient manner”

1) Strategic Plan Strategic plan is a comprehensive, unified and integrated

plan of total organization.

Strategic plans are formulated and implemented to achieve strategies.

Normally strategic plans are formulated by top level management of an organization.

Normally strategic plans cover long-range of time horizons.

52) Tactical Plans

Tactical plans are a set of procedures for translating broad strategic goals and plans into specific plans and goals that are relevant to distinct portion of the organization.

Tactical plans aim at achieving tactical goals and implement a particular segment of the company’s plan.

Tactical plan provide detailed action based on the strategy for a particular department.

These plans cover shorter time horizon and middle level managers mostly deals with these plans

63) Operational Plan

Operational plans are normally designed by the lower level managers based on the tactical plans

Operational plans are course of actions that are to be carried out day to day activities.

4) Long range Plans

Long range plans normally deals with strategic plans covering 2 to 10 years and above

76) Intermediate Term Plans Intermediate term plans mostly deals with tactical plans normally covering one to two years.

Intermediate plans focus on a particular aspects of long term plans

7) Short Term PlansShort Terms Plans covers the time horizon upto one year

Planning in Dynamic Environment 8The Steps in Planning

1)Being Aware of Strengths and opportunities 2)Establishing the objective and goals3)Developing the premises

The next is getting acceptance from the employees regarding planning premises like forecast, policies. Forecast is an important planning premises which include

What will be the population? What new market will emerge? What will be the new product? What will be the supply of the competitor What will be the future price? What will be the salary levels of the employees? What will be the new trends of the financial market?

94) Determining alternative course 5) Evaluate alternative course 6) Selecting course 7) Formulating Derivative plans8) Budgeting

Organizational Design 10Organizational design is the “ process of systematic and logical grouping of activities, delegation of authority and responsibility and establishing working relationships that will enable both the company and employee to realize their mutual objective”

Steps in Organizational Design

1)The first step in organizational design is analysis of present and future circumstances and environmental factors

2)The next step deals organizational analysis which is a base for organizational design.

3)The organization analysis include an analysis of the following aspects.

111) External Environment (Social, Technical, Economic, International

& Natural)1) Overall aim and purpose of the enterprise( Survival, growth, Profit

maximization, & Wealth Maximization) 2) Objectives ( Specific aims or targets to be achieved)3) Activities ( assessment of work being done and what need to be

done if the company is to achieve its objective)4) Decisions (to be taken across and horizontal and vertical

decisions) 5) Relationships ( from the view point of communication) 6) Organizational Structure (Group of activities, Span of Management

& Management Levels)7) Job Structure ( Job Design, Job analysis, Job Description, Job

Specification etc)8) Organization Climate (work atmosphere of the enterprise)9) Management Style (Laiseez-faire, autocratic, democratic)10) Human Resource ( Availability of Human Resource)

Organizational Structure 12Organizational Structure is an established pattern of relationships among the component parts of an organization.

Formal organization is a group of people working together cooperatively, under authority towards goals that mutually benefit the employees and the organization.

Informal Organization can be viewed as a shadow organization. It rises naturally, spontaneously from the interactions of the people.

13Vertical / Tall Organization

Auth

ority

Top

bottom

Accountability

Tall organizational structure is one which has many levels of hierarchy.

In these organizations, there are usually many managers, and each manager has a small span of control – they are in charge of only a small group of people.

Tall structures tend to be more complicated and complex, and may be slower to respond to market changes than organizations where managers have a larger span of control.

14Flat / Horizontal Organizational Structure

Approaches to Organizational Structure 15

1) Entrepreneurial Structure

2) Functional Organizational Structure

3) Product Organizational Structure

4) Geographical Organizational Structure

5) Decentralized Business unit

6) Strategic business unit

7) Matrix Organization

8) Team Structure

9) Virtual Organization

Entrepreneurial Structure 16Generally the small businesses when they are started consist of Owner Manager – alone or also few employee.

These types of organization do not require an organizational chart and formal assignment of responsibilities

Owner cum Manager

Employee

Owner cum Manager

Manufacturing Manager Marketing Manager

Employee Employee

The business growth results in expansion of organizational structure both vertically and horizontal. The entrepreneurial organizational structure with expansion is shown below fig.,

Functional Organization Structure 17Functional Organizational structure is the most widely used structure.Each functional department consist of those jobs in which employees perform similar jobs at different levels.

Managing Director

General Manager

ChiefProductionManager

Chief MarketingManager

ChiefFinanceManager

Chief HRManager

Chief Manager

R&D

ProductionManager

ManagerEngineering

ManagerQuality Control

18Advantages Permits centralized control of strategic results Very well suited for structuring a single business Promotes in-depth functional expertise Enhances operating efficiency where tasks are routine and repetitive encourages collaborative workDisadvantagesThe horizontal diversification of the business reduces the efficiency of the functional structure.The departmental member may see the activities from the narrow viewpoint of the department rather than the total organization.Poses problems of functional coordination Can led to interfunctional rivalry and conflictEffective only in stable environmentResults in slower response to change

Product Organization 19Activities are divided on the basis individual products, product lines, services are grouped into department. All important functions like Marketing, production, finance, HR are contained within each department.

Managing Director

General Manager

Manager Bicycles

ManagerMotor Cycles

ManagerScooters

ManagerCars

20AdvantagesAppropriate for organization with multiple productsImproves coordination across functionsMove decision close to the problem Release Managing Director’s time Clarifies Profit/Loss Accountability

DisadvantagesResult in inconsistent decision from one department to anotherResults in duplication of equipment and personnelEncourages dysfunctional competition for resourcesEmphasis departmental rather than organizational goal.

Geographical Organization Structure 21Companies operating in various geographical regions of the country and / or world, structure their organizations based on geographical structure

The activities or functions are grouped into departments based on the activities performed in the geographical area.

Each geographical unit include all functions required to produce and market the product in a particular geographical area.

Advantages Product and services are better designed to the climatic and cultural need of specific geographical area. A geographical structure allows a firm to respond to the technical need of different international area This structure enables a company to adapt to varying legal system prevalent in the area.

22Disadvantages There would be duplication of equipment and facilities Difficulty in maintaining consistent company image/reputation from area to area when area managers exercise much strategic freedom . Results in inconsistence decisions from one region to another Emphasis regional rather than company goals

Decentralized Organization Structure 23Managing Director

General Manager

Chief Manager Business

A

Chief ManagerBusiness

B

Chief ManagerBusiness

C

Corporate Level Manager Marketing, Production, Finance, Human Resource and R&D

Marketing Manager

FinanceManager

ProductionManager

ManagerHR

ManagerR & D

24AdvantagesDiversification is generally managed by decentralized decision making and delegating authority and responsibility to a manager at each business unit. Each business unit should be managed by an entrepreneurially oriented and capable general manager who is delegated with authority to formulate and execute business strategy Each profit operates as stand alone profit centre

Disadvantages The major problem of this type of organization structure is absence of mechanism for coordinating related activities across business unit.

Strategic Business Unit 25 A single chief executive cannot control a number of decentralized units of broadly diversified company

The business can be effectively controlled, if the related business are grouped into a strategic units and an efficient and senior executive is delegated with authority and responsibility for its management.

A strategic business unit is a grouping of business subsidiaries based on some important strategic elements common to each.

26Managing Director

General Manager

Group Manager SBU

1

Group ManagerSBU

2

Group ManagerSBU

3

Corporate Level Manager Marketing, Production, Finance, Human Resource and R&D

Strategically Related Business Units

Strategically Related Business Units

Strategically Related Business Units

27Advantages Reduction of the corporate headquarters' span of control The structure permits better coordination between division with similar mission, products, market , technology It helps allocate corporate resources to areas with growth opportunities. Business units are organized based on the strategically relevant method.

Disadvantages The first disadvantage is that corporate headquarters become more distinct from the division.Conflicts between /among the strategic business unit manager for greater share of corporate resources can be dysfunctional

28Matrix Organization Structure Matrix organization structure is a combination of functional and project organizational structure.

Both the functional and project manager exercise authority over organizational activities in a matrix structure.

  A hierarchy organization is where one person manages direct reports and those reports manage direct reports in a cascading responsibility.

Cross functional teams work with shared responsibility for both projects and traditional tasks. 

29

30AdvantagesThe company can have the advantages of both project type of the organizational structure and functional organization structure. Functional personnel are paid for their service whenever, they are used by project managers. This structure is flexible The lower level functional employees are highly motivated and satisfied with their jobs as they are involved in decision making. Each project manager is the in-charge of the unit

DisadvantagesIn view of the two forms associated in this structure, they are characterized by the conflict between the functional manager and project manager. Functional employee experience stress by working in matrix structure Reporting two bosses create ambiguity and role conflict.

31Virtual Organization A virtual organization or company is one whose members are geographically apart, usually working by computer e-mail and groupware while appearing to others to be a single, unified organization with a real physical location.

Characteristics1)Flexi Work, flexi time, and flexi workplace2)Part-time work 3)Home based working4)Dependency on IT5)Loose organizational boundaries6)Goal directed7)Customer centric

32 Organization Culture J.C Spender defines organization Culture as a belief system shared by an organization’s members.

Factors shaping Organizational Culture

1)Environmental Analysis2)Business Goal3)Formulation of Strategy 4)Formulation of strategic values5)Create New Cultural Values6)Implement New Cultural Value7)Achieve Strategic Values (Strategic Values are the basic belief about an organization’sEnvironment those shape its strategy. For example adopting the participative management style to grow at faster rate)