MODULE 3 – PLANNING: THE BASIC FUNCTION OF MANAGEMENT 31

MODULE 3 – PLANNING: THE BASIC FUNCTION OF MANAGEMENT

INTRODUCTION

Benjamin Franklin was known for the following saying, “By failing to prepare, you
are preparing to fail”. Setting goals and plans ahead of time is vital for the
success of the set objectives. Failing to prepare is like constructing a building
with no assurance of its stability and concreteness. Just like in doing a business,
establishing such is not like a magic that will just appear in a snap an instead,
those successful businesses are products of great minds who plan in ahead of
time with the vision of achieving their goals in certain period of time.
In addition, according to the words of Urwick , “Planning is a mental predisposition to
do things in orderly way, to think before acting and to act in the light of facts rather than
guesses”. In management, planning is considered to be the basic foundation as it sets
the criteria on what, when and how it should be done and who is accountable to do a
specific task needed in the achievement of the organizational goal.
This module will provide necessary facts about planning along with the different
procedural steps needed in generating business strategies as well as the different types
of planning.

LEARNING OUTCOMES:

After reading this module, the learner should be able to:

1. Define Planning and associate it’s importance to every day’s living,

2. Identify the different types of planning and its uses,
3. Realize the procedural steps necessary in planning.
4. Analyze the different analysis use in decision making.

TIME:

The time allotted for this module is 3 hours.

LEARNER DESCRIPTION

The participants in this module are BSA and BSBA students

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MODULE CONTENTS:

LESSON 3.1: Planning: Its definition and nature

In the words of Koontz & O’Donnell, “Planning is deciding in advance what to do,
how to do and who is to do it. Planning bridges the gap between where we are to
and where we want to go. It makes possible things to occur which would not
otherwise occur”.
Planning is as important as it is in the field of management. Many believe planning is
the most fundamental of the managerial functions because all other functions,
including organizing, leading, controlling, and staffing, stem from the planning
function.

Nature of Planning

1. Contribution to purpose and objectives

Planning is required to facilitate accomplishment of business purposes and
objectives. This statement is taken from the nature of organized business.

2. Planning as the first basic function

Because management functions of organization, personnel, management and
control are structured to facilitate the achievement of business goals, planning is
logically carried out prior to the execution of all other management functions. In
fact, a strategy for achieving the goals must be drawn up before any boss
understands what kind of organizational structure and job requirements and skills
there are.

3. Planning as a function of all managers

Having a plan is a good practice for everyone, especially for managers.
Here are some of the reasons why it is a good idea for managers to plan:

 Managers can examine critical issues facing the organization instead of waiting
for them to blow up in their face. Allowing uncertainty, high risk and doubt to rule
in an organization is never a good idea. Planning allows a manager to determine
organizational goals and define a means of achieving them.
 A manager can set explicit guidelines for decision-making when done in
advance. This allows the manager to be both small picture- and big picture-
minded when making decisions.

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 A manager is able to be more proactive than reactive in decisions. Failing to plan

will take away your ability to look into the future and potentially predict an
inevitable event before it becomes an issue. Planning increases the likelihood of
long-term survival of an organization.
 A manager can focus attention on organizational goals and results.
 A manager is able to create ownership of the plan and develop a team that buys
into and accepts accountability for their role in the plan.
 A manager can provide a sense of direction, vision, rationale and purpose for the
plan, which can be easily communicated to other members of the organization,
showing them how serious a manager is about reaching organizational goals.
 A manager can create a competitive advantage by taking the time to plan - a
process that allows an organization to examine who they are in relation to their
competition and thus provide a good deal of insight into how to be better than
that competition.

4. Planning for efficient organization

The efficiency of a plan is evaluated by the amount it contributes to purpose and
objectives as offset by the expenses and other things required to formulate and
implement it. A plan contributes to the attainment of objectives, but sometimes at
too high or unnecessarily high costs. Plans may also become inefficient in the
attainment of objectives by affecting group satisfaction. The new president of a
company that was experiencing bankruptcy attempted quickly to reorganize and
cut expenses by wholesale and drastic lay-offs of key employees. The? results
are fear, resentment and loss of morale affecting productivity and thereby defeat
his objective of eliminating losses and making profits. Attempts to install
management evaluation and development program fail because of group
resentment of the method used, regardless of the basic effectiveness of the
programs.

Activity 3.1.1:
1. In your own words, Explain the statement the following statement:
a. “Well plan is half done”
b. A goal without plan is just a wish

References:

Juneja, P ( 2020). Planning function of management. Retrieved from: https: // www.

managementstudyguide.com/planning_function.htm

Planning as a Function of Management. Retrieved from: https: //study. com/ academy/ lesson/
planning-as-a-function-of-management.html

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LESSON 3.2: Vision, Mission, Goals and Objective: The Basis of Planning

Have you ever experience thinking of the success of your business yet you don’t know
how to achieved or start with? Probably, during that time, your organization does not
have a clear basis for you to plan necessary things needed in obtaining the
organizational objective. Below are a series of steps or statements of how to give your
organization direction.

The first is a statement of vision. It provides a destination for the organization. Next is a
statement of mission. This is a guiding light of how to get to the destination. These are
critical statements for the organization and the individuals who run the organization.

Vision Statement
A vision statement is generated as a convincing verbal image , creating a mental picture
of the future. This should identify what an organization is striving to become given a
period of time. The dream will produce human energy and determination. In other terms
, the company will have guidance and emphasis.

To develop a vision statement, ask yourself these questions:

 How do you see your organization/ company in the next 5-10 years?

Then, convince others of the value of that vision. Express it in a way that aligns with
their best interests. Encourage them to buy into your purpose for the organization. Keep
the statement brief and memorable. Use it to focus your activities.

Mission Statement

Mission is the business reason for the organization’s existence. The mission statement
provides the basis for setting your goals and is used to allocate resources.

A typical mission statement format might be:

To provide (product) to (customers) for (reason) in (marketplace).

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To define your mission, begin by describing why your organization exists. Identify
your scope of products and services. Identify your customers and the audience for
your offerings. Then, write a brief and succinct mission statement.

Statements of vision and mission are important so that everyone involved in the
organization, including outside stakeholders, understand what the organization will
accomplish and how it will be accomplished. In essence this means “keeping
everyone on the same page” so they are all "pulling in the same direction".

Strategies, Goals, Objectives and Action Plans

Once you have created statements of vision and mission, and possibly core values, you
can then develop the strategies, goals, objectives and action plans needed to activate
your mission and achieve your vision.

Strategies – A strategy is a statement of how you are going to achieve something.

More specifically, a strategy is a unique approach of how you will use your mission to
achieve your vision. Strategies are critical to the success of an organization because
this is where you begin outlining a plan for doing something. The more unique the
organization, the more creative and innovative you need to be in crafting your
strategies.

Goals – A goal is a general statement of what you want to achieve. More specifically, a
goal is a milestone(s) in the process of implementing a strategy. Examples of business
goals are:

 Increase profit margin

 Increase efficiency
 Capture a bigger market share
 Provide better customer service
 Improve employee training
 Reduce carbon emissions

Be sure the goals are focused on the important aspects of implementing the strategy.
Be careful not to set too many goals or you may run the risk of losing focus. Also,
design your goals so that they don’t contradict and interfere with each other. A goal
should meet the following criteria:

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Objectives – An objective turns a goal’s general statement of what is to be

accomplished into a specific, quantifiable, time-sensitive statement of what is going to
be achieved and when it will be achieved. Examples of business objectives are:

Objectives should meet the following criteria:

 Measurable: What specifically will be achieved and when will it be achieved?

 Suitable: Does it fit as a measurement for achieving the goal?
 Feasible: Is it possible to achieve?
 Commitment: Are people committed to achieving the objective?
 Ownership: Are the people responsible for achieving the objective included in the
objective-setting process?

Action Plans – Action plans are statements of specific actions or activities that will be
used to achieve a goal within the constraints of the objective. Examples of action plans
within the context of goals and objectives are:

Activity 3.2.1:
Group Activity: From the business ideas of the group formulate your business vision,
mission, short term and long term goals and objectives.

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Activity 2.2:
Direction: Make a research and analysis of the existing Vision and Mission of UB CBA.
Identify its readability using the fog index and the criteria in writing vision and mission
posted in LMS.

References:

Beck, B (2020). Vision, Mission, Values, Goals, and Objectives. Retrieved from:
https://www.whittingtonassociates.com/2016/12/vision-mission-values-goals-objectives/

Hofstrand, D (2020). Vision and Mission Statements -- a Roadmap of Where You Want
to Go and How to Get There. Retrieved from: https://www.extension. iastate.edu/
agdm/ wholefarm/html/
Vision And Mission Pictures.https://www.fpiautoparts.com/vision-mission/

Juneja, P ( 2020). Planning function of management. Retrieved from: https: // www.

managementstudyguide.com/planning_function.htm

Planning as a Function of Management. Retrieved from: https: //study. com/ academy/ lesson/
planning-as-a-function-of-management.html

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LESSON 3.3: Types of Plans

Standing Plans

These plans serve as guidelines to managerial action. Managerial efficiency is enhanced

because once the decision is made, it stands without the necessity of deliberation each
time a similar situation arises. Standing plans are used where an activity occurs
repeatedly.

Single-use Plans

These plans are designed for a specific purpose or period. The plan ceases to exist when
the goals are achieved. One common single use plan is the budget

Long-range Plans

These are the strategic plans of the organization. Under this plan, assumptions must be
made about uncontrollable and controllable variables. The time span of long-range plans
cannot be stated specifically because circumstances vary from organization to
organization. In practice they m ay range from 3 to 5 years.

Intermediate Plans

These plans follow once the long-range plans are formulated. To become a leader in its
industry (the long-range plan an organization m ay plan to set up regional sales offices).
Intermediate plans are made for the realization of long-range goals. These plans usually
cover a one to three-year period.

Short-range Plans

These plans provide the guidelines for day-to-day actions in the organization. These plans
may cover up to a year.

Marketing Plans

The common objectives of marketing plans are to increase their present market share and
develop new products. These objectives are converted into operational plans.

Production Plans

These focus on producing the desired amount of goods demanded at the market place.
Production planning involves routing, scheduling, and dispatching processes. Routing
determines the path for the flow of production. Scheduling sets up a time-table.
Dispatching signals the flow of time and find reasons for delays.

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Financial Plans

They provide a quantitative basis for decision making and control. The financial data tells
managers how well they are doing, the need for working capital, the need for expansion
and the sources of funds.

Manpower Plans

These involve a systematic w ay of determining the types of personnel needed in the long
and short-range for an organization. Personnel of various qualities and quantities must' be
recruited and made available at appropriate times.

Strategic Plans

These involve determining the major goals of the entire organization and the policies to
guide the achievement of these goals. This occurs at higher levels and involves a longer
period of time. All types of forecasts are needed for this type of planning.

Tactical Plans

They deal with the determination of the short term-specific utilization of the resources of
the organization in achieving its strategic goals. The reliance for tnese plans is on past
performance and as to how an organization previously allocated its resources.

Functional Plans

In addition to being long-range or short-range, plans are often classified by function or use.
The most frequently encountered types of functional plan are sales and marketing plans,
production plans, financial plans, and personnel plans. Sales and marketing plans are for
developing new products/services and setting both present and future products/services.
Production plans deal with producing the desired product/services on a time schedule.

Operational versus Strategic Plans

Strategic planning is the process which sets forth organizational objectives to be achieved,
strategies and policies needed to reach those objectives, and short-range plans to make
sure that the strategies are successfully implemented. Operational or tactical planning is
short-range planning and concentrate on the formulation of functional plans. Production
schedules and day-to-day plans are examples of operational plans. However, the
distinctions between strategic and operational planning are relative, not absolute. The
major difference is the level at which the planning is done. Strategic planning is primarily
done by top-level managers; operational planning is done by managers at all levels in the
organization and specially by middle-and lower-level managers.

Reference:
Conrado, Inigo Jr. (2017). Management for Filipinos: Principles and Application

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LESSON 3.4: Steps in Business Planning

1. Define the business idea.

2. Establish goals and objectives.

Planning is an initiative of achieving business goals and objectives, therefore a
well define plan shall have its basis for the course of action needed and it could
be done if goals and objectives are well established.

3. Evaluate the ideas, goals and objectives.

Strategies are product of collaborative ideas of people working in an organization
with specific intention of getting their goals and objectives. Ideas are all welcome
as part of probable things to be done and undergo deeper consideration and
selection before its final implementation.

4. Forecast cash needs.

Most of the activities needed in the accomplishment of certain goal requires
budget and therefore in planning each activity went through the assessment of
the budget needed and compared to the availability of funds.

5. Identify sources of funds.

Funds are potentially available to business from a wide variety of sources. These
can possibly be taken from personal equity or borrowing from any banking
institution, one's own funds, and what additional funds can be obtained from
various outside sources.

6. Write a business plan

A completed business plan is a review and description of the business concept. It
indicates the chance of success, the potential of the values to succeed.

References:
Juneja, P (2020). Planning Function of Management. Retrieved from:
https://www.managementstudyguide.com/planning_function.htm

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LESSON 3.5: Importance of Business Planning in Business

Planning is an important function of management; it tells the manager where the

organization should be headed. It also helps the organization reduce uncertainty. Let us
take a look at some important functions of planning.

1] Planning provides a sense of Direction

It actually states in advance what and how the work is to be done. This helps provide the
workers and the managers with a sense of direction, guidance in a way. Without planning
their actions would be uncoordinated and unorganized.

2] Planning reduces Uncertainty

Planning not only sets objectives but also anticipates any future changes in the industry or
the organization. So it allows the managers to prepare for these changes, and allow them
to deal with the uncertainties. Planning takes into consideration past events and trends
and prepares the managers to deal with any uncertain events.

3] Planning reduces Wastefulness

The detailed plans made keep in mind the needs of all the departments. This ensures that
all the departments are on the same page about the plan and that all their activities are
coordinated. There is clarity in thought which leads to clarity in action. All work is carried
out without interruptions or waste of time or resources,

4] Planning invokes Innovation

Planning actually involves a lot of innovation on the part of the managers. Being the first
function of management it is a very difficult activity. It encourages the manager to broaden
their horizons and forces them to think differently. So the managers have to be creative,
perceptive and innovative.

5] Makes Decision-Making Easier

In business planning the goals of the organization have been set, an action plan
developed and even predictions have been made for future events. This makes it easier
for all managers across all levels to make decisions with some ease. The decision-making
process also becomes faster.

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6] Establishes Standards

Once the business planning is done, the managers now have set goals and standards.
This provides the manager’s standards against which they can measure actual
performances. This will help the organization measure if the goals have been met or not.
So planning is a prerequisite to controlling.

References:

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LESSON 3.6: Decision Making

It is process of choosing a specific procedure or course of action from among several

possible alternatives. In this section, we .will discuss some other techniques used in the
decision making process. Our discussions will cover only the basic aspects of these
techniques
Marginal Analysis

This tool is used in decision making to figure out how much more output will result if one
more variable (worker) is added. Samuelson defines a marginal product as the extra
product or output added by one extra unit of that factor while other factors are being
held constant. This technique is particularly useful for evaluating alternatives in the
decision making process.
Financial Analysis

This is another tool in decision making used for estimating the profitability of an
investment, calculating the payback period, and analyzing cash inflows and outflows.
Investment alternatives can be evaluated using a discounted peso analysis of cash
inflows and outflows.
Break-even Analysis

This is another tool which enable a manager to see the effects of alternatives available
based on price, fixed cost, and variable cost per unit. With this tool it is possible to
determine what will be the breakeven point for a company as a whole or any of its
product. At breakeven point, total revenue equals total cost and there is no profit.
Ratio Analysis
It is an accounting tool used for the interpretation of accounting information. The basic
financial ratios compare costs and revenue for a particular period. These ratios bring out
a relationship between two financial aspects.

Operations Research Technique

1. Queuing or Waiting-line Method

This method uses mathematical techniques for balancing waiting lines and services
provided. When there is irregular demand, waiting lines occur and the manager must
decide how to handle the situation.

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2. Linear Programming
This technique is used in decisions involving the allocation of resource or limited
resources to reach a particular objective such as, least cost, highest margin, and so on.
3. Game Theory
This involves selecting the best strategy, taking into consideration one's actions and the
action of one's competitors. Thus, it is a "conflict of interest" situation where one
individual tries to win. Minimizing the maximum loss (minimax) and maximizing the
minimum gain (maximini) are the two concepts used in the game theory.
4. Simulation
This technique involves the building of a model that represents a real or an existing
system. These models are useful in evaluating and selecting the best one. The blueprint
of a proposed building is an example of simulation.
5. Decision Tree
This is an interesting technique used in analyzing a decision. Through a graphic
illustration, the alternative solutions can be identified and probability estimates are
assigned to these alternatives and pay-offs relating to alternatives can be determined.
DECISION MAKING ENVIRONMENT
Strategic-level managers determine long-term strategies and set corporate objectives
and policy consistent with these objectives.
Tactical-level managers are charged with the responsibility of implementing the
objectives and policies set forth at the strategic level of management. To do this, the
manager identifies specific tasks that need to be accomplished.
Operational-level managers complete specific tasks as directed by tactical-level
managers.
Decision Making Process

1. Set objectives
2. Identify constraints
3. Identify alternatives
4. Gather appropriate information
5. Evaluate alternatives
6. Choose the most acceptable alternatives

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Activity 3.6.1:
As a decision-maker, in a one hour period during the day, list the top five decisions you
made. Were they based primarily on intuition, the scientific approach, or the
professional approach? Why?

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LESSON 3.7: Why Do Managers Fail to Plan?

There are many reasons why managers fail in planning. The more obvious one is
because planning requires commitments to be made today for an uncertain future.
Events often do not turn out as we expect. A m ong the most important reasons for
ineffective planning are the following:

a. Lack of real commitment in planning.

In every work to be done, strong commitment is very important in such a way that
the attainment of the goals and objectives will be easier if on the first hand, people
are devoted and inspired to achieved the desired output.

2. Interchanging planning studies with plans.

Changes is inevitable so with the plans that has been already prepared. Due to
circumstances, some changes are needed to incorporate in order to re align or re
design the necessary adjustment needed for the accomplishment of the goal.

3. Failure to develop and Implement sound strategies.

Planning is a collaborative effort by people in an organization with the intension of
forming best strategies needed for the achievement of the goals. Failure to develop
strategies will greatly affect on achieving the goals since there will be no unified
decisions made.

4. Lack of meaningful objectives and goals.

Planning cannot be effective unless goals are clear (Do people understand them?),
attainable (Can they be accomplished and verifiable?) Like supporting plans, goals
must be defined in the light of strengths and weaknesses and the m any internal and
external environment forces that m ay influence their achievement

5. Tendency to underestimate the Importance of planning premises.

6. Failure to see the scope of plans.

There are lots of things to be consider in formulating plans that managers
sometimes neglected to consider: mission, vision, objectives or goals and other
factors necessary in decision making.

7. Failure to see planning as a rational process.

Planning is practical exercise in rationalization. It requires dear goals, a knowledge
of alternatives, an ability to analyze alternatives in the light of goals sought,
information and a desire to com e up w ith the best possible answer.

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8. Too much reliance on experience.

Experience for others are the best teacher, or basis for making decisions but in
reality, managers should not only rely on experience since not all of our experiences
are applicable in all situations on present times.

9. Failure to use the principle of limiting factor.

It will be recalled that this principle requires managers to search out those factors
that would make the most problem situation, there are so many variables that no one
can solve for all of them.

10. Lack of top management support.

It would be more inspirational to formulate strategies and even setting plans if
managers felt that they have the support from the top management.

11. Lack of clear delegation.

It is obviously very difficult for people to plan if they do not know what their jobs are,
if they are unaware of how their jobs relate to others in an organization, and if they
do not have clear authority to make decisions.

12. Lack of adequate control techniques and Information.

Since the task of managerial control is to follow up plans and to assure that these
are actually succeeding. Planning can hardly be very difficult but effective unless the
people responsible for these know how well they are working.

ONLINE READING MATERIALS:

 Read Chapter III of Management for Filipinos by Conrado, Inigo Jr. (2017)

ONLINE VIDEO LINKS AND MATERIALS:

 Watch the online video lecture of the course instructor uploaded at NEO LMS and to the
class shared Google drive (if applicable).

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TEST YOUR KNOWLEDGE:

To be posted in LMS
MODULE REFERENCES:

Conrado, I (2017). Management for Filipinos: Principles and Application

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