Plan & Control

Dr. Sanchayan Mukherjee

B.M.E. (1st Class Hons.), M.E.(Distinction), M.I E., F.A.E.,
Ph.D. (Engineering)
Member of Faculty
Department of Mechanical Engineering
Kalyani Government Engineering College
Kalyani 741235, Nadia, West Bengal, India

Planning
Strategic Planning
Operational Planning

Strategic Planning or Long-Range Planning

It covers a longer period of time that may
extend from five to twenty or more years. A
capital-intensive industry, e.g. a public utility
service, or a company dealing in international
markets must plan for a longer period.
It refers to planning for the total enterprise
over a longer duration. Planning for a duration
of fifteen, twenty or more years is also known
as perspective planning.

Operational Planning, Tactical Planning or

Short-Range Planning
It usually extends over a period of one year and is
more detailed. While strategic plans indicate the
activities to be undertaken or goals to be achieved
in general terms, and are an instrument of planning
and control in hands of top management,
operational plans are prepared in more specific
terms. These plans are directly concerned with
operations and deal with the various functional
areas of the enterprise like production, marketing,
finance, research, development etc. They guide
lower levels of managers in their day-to-day
activities and serve as a yardstick for measuring
their performance.

Operational Planning

Strategic Planning

Focus

Operational Problems

Long-Term Survival and Development

Objective

Present Profits

Future Profits

Constraints

Present Resources Environment

Future Resources Management

Rewards

Efficiency, Stability

Development of Future Potential

Information

Present Business

Future Opportunities

Organisation

Bureaucratic/Stable

Entrepreneurial/Flexible

Leadership

Conservative

Inspires Radical Change

Problem-solving

Reacts, Relies on Past Experience

Anticipates, Finds New Approaches

Degree of Risk

Low Risk

High Risk

Long-range plans and short-range plans are not mutually

exclusive. They overlap and, in fact, an operational plan is
a part of the strategic plan in the sense that it contributes
to the attainment of some part of the objectives or goals
laid
down
in
the
strategic
plan.
All too often the relation between the operational
plan and the strategic plan may be forgotten, and policies
may be framed under the operational plan that may prove
unfavourable for the attainment of long-term goals. For
example, the long-term plan may aim at increasing labour
productivity per hour by 50 %. However, the operational
plan aimed at cost reduction might lead to the curtailment
of expenditure on manpower development, which, in the
long run, may actually decrease productivity rather than
increase it.

Plan Formulation Steps

Perception of opportunities: Plans determine a course of action to be

adopted today in order to obtain the desired results tomorrow.
Planning requires a realistic diagnosis of opportunities.
Establishment of goals: To establish goals that are to be achieved
during the specified period. This implies establishment of goals for the
whole enterprise as also for each of the sub-units. The goals will be
used to evaluate the performance of the units and the managers.
Appraisal of the Planning Premises: Premises refer to the factors in
the environment that affect the achievement of goals. Government
policies is one of those factors that can have significant impact either
favourable or unfavourable on any plan formulated by an enterprise.
Planning in any organisation rests on several premises. An assumption
about the expected environment conditioning the plan. A change in
any condition will necessitate an alteration in the plans.
Exploration and Determination of Action Paths: Once the goals
have been established and the factors affecting the plans taken care of,
actual action plan in the form of programmes and budgets are
formulated.

Planning Framework (Planning Premises)

External or Business Environment
Internal Premises (capital investment made,
approved sales forecasts, values and beliefs
of top management, policies adopted and
given organisational structure)

Business Environment
It refers to the totality of economic,
political, social, cultural and technological
conditions that affect the formulation of
plans. A rise in per capita income may
signify more purchasing power in the hands
of the consumers. On the other hand,
political instability has an undesirable
impact on the plans of a business enterprise.

Steps of Planning Framework

(Internal Premises)

Capital Investment
Sales forecasts a two-step process:
Make industry-wise demand forecast
Make sales forecast for a specified company

Values and Policies of Top Management

Organisational Structure

Barriers to Effective Planning

Inability to plan or inadequate planning: Managers are not born with the
ability to plan. Some managers are not successful planners because they lack
the background, education, and/or ability. Others may have never been taught
how to plan. When these two types of managers take the time to plan, they
may not know how to conduct planning as a process.
Lack of commitment to the planning process: The development of a plan
is hard work; it is much easier for a manager to claim that he or she doesn't
have the time to work through the required planning process than to actually
devote the time to developing a plan. (The latter, of course, would save them
more time in the long run!) Another possible reason for lack of commitment
can be fear of failure. As a result, managers may choose to do little or nothing
to help in the planning process.
Inferior information: Facts that are out-of-date, of poor quality, or of
insufficient quantity can be major barriers to planning. No matter how well
managers plan, if they are basing their planning on inferior information, their
plans will probably fail.

Barriers to Effective Planning (contd.)

Focusing on the present at the expense of the future: Failure to consider the
long-term effects of a plan because of emphasis on short-term problems may
lead to trouble in preparing for the future. Managers should try to keep the big
picture their long-term goals in mind when developing their plans.
Too much reliance on the organization's planning department: Many
companies have a planning department or a planning and development team.
These departments conduct studies, do research, build models, and project
probable results, but they do not implement plans. Planning department results
are aids in planning and should be used only as such. Formulating the plan is
still the manager's responsibility.
Concentrating on controllable variables: Managers can find themselves
concentrating on the things and events that they can control, such as new
product development, but then fail to consider outside factors, such as a poor
economy. One reason may be that managers demonstrate a decided preference
for the known and an aversion to the unknown.
The good news about these barriers is that they can all be overcome. To plan
successfully, managers need to use effective communication, acquire quality
information, and solicit the involvement of others.

McKinsey 7S Framework

The McKinsey 7S Framework is a management model developed by wellknown business consultants Robert H. Waterman, Jr. and Tom Peters (who
also developed the MBWA-- "Management By Walking Around" motif, and
authored In Search of Excellence) in the 1980s. This was a strategic vision for
groups, to include businesses, business units, and teams. The 7S are structure,
strategy, systems, skills, style, staff and shared values.
The model is based on the theory that, for an organization to perform well,
these seven elements need to be aligned and mutually reinforcing. So, the
model can be used to help identify what needs to be realigned to improve
performance, or to maintain alignment (and performance) during other types
of change.
Whatever the type of change restructuring, new processes, organizational
merger, new systems, change of leadership, and so on the model can be
used to understand how the organizational elements are interrelated, and so
ensure that the wider impact of changes made in one area is taken into
consideration.

McKinsey 7S Framework

The 7S model can be used in a wide variety of situations

where an alignment perspective is useful, for example to
Improve the performance of a company.
Examine the likely effects of future changes within a
company.
Align departments and processes during a merger or
acquisition.
Determine how best to implement a proposed strategy.

McKinsey 7S Framework
The McKinsey 7S model involves seven interdependent factors which are
categorized as either "hard" or "soft" elements:

"Hard" elements are easier to define or identify and management can directly influence
them: These are strategy statements; organization charts and reporting lines; and formal
processes and IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are less
tangible and more influenced by culture. However, these soft elements are as important
as the hard elements if the organization is going to be successful.

McKinsey 7S Framework

McKinsey 7S Framework

Strategy: the plan devised to maintain and build competitive

advantage over the competition.
Structure: the way the organization is structured and who reports to
whom.
Systems: the daily activities and procedures that staff members
engage in to get the job done.
Shared Values: called "superordinate goals" when the model was first
developed, these are the core values of the company that are evidenced
in the corporate culture and the general work ethic.
Style: the style of leadership adopted.
Staff: the employees and their general capabilities.
Skills: the actual skills and competencies of the employees working
for the company.

McKinsey 7S Framework
How to Use the Model
The model is based on the theory that, for an organization to perform well,
these seven elements need to be aligned and mutually reinforcing. So, the
model can be used to help identify what needs to be realigned to improve
performance, or to maintain alignment (and performance) during other types of
change.
Whatever the type of change restructuring, new processes, organizational
merger, new systems, change of leadership, and so on the model can be used
to understand how the organizational elements are interrelated, and so ensure
that the wider impact of changes made in one area is taken into consideration.
One can use the 7S model to help analyze the current situation (Point A), a
proposed future situation (Point B) and to identify gaps and inconsistencies
between them. It's then a question of adjusting and tuning the elements of the
7S model to ensure that his/her organization works effectively and well once
one reaches the desired endpoint.

7S Checklist Questions
Strategy:
What is our strategy?
How do we intend to achieve our objectives?
How do we deal with competitive pressure?
How are changes in customer demands dealt with?
How is strategy adjusted for environmental issues?
Structure:
How is the company/team divided?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized? Is this as it
should be, given what we're doing?
Where are the lines of communication? Explicit and implicit?

7S Checklist Questions (contd.)

Systems:
What are the main systems that run the organization? Consider financial and
HR systems as well as communications and document storage.
Where are the controls and how are they monitored and evaluated?
What internal rules and processes does the team use to keep on track?
Shared Values:
What are the core values?
What is the corporate/team culture?
How strong are the values?
What are the fundamental values that the company/team was built on?

7S Checklist Questions (contd.)

Style:
How participative is the management/leadership style?
How effective is that leadership?
Do employees/team members tend to be competitive or cooperative?
Are there real teams functioning within the organization or are they just
nominal groups?
Staff
What positions or specializations are represented within the team?
What positions need to be filled?
Are there gaps in required competencies?
Skills:
What are the strongest skills represented within the company/team?
Are there any skills gaps?
What is the company/team known for doing well?
Do the current employees/team members have the ability to do the job?
How are skills monitored and assessed?

SWOT Analysis
SWOT is an acronym for Strengths, Weaknesses, Opportunities and
Threats. By definition, Strengths (S) and Weaknesses (W) are considered to
be internal factors over which one has some measure of control. Also, by
definition, Opportunities (O) and Threats (T) are considered to be external
factors over which one has essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the
overall strategic position of the business and its environment. Its key purpose
is to identify the strategies that will create a firm specific business model that
will best align an organizations resources and capabilities to the
requirements of the environment in which the firm operates. In other words, it
is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It
views all positive and negative factors inside and outside the firm that affect
the success. A consistent study of the environment in which the firm operates
helps in forecasting/predicting the changing trends and also helps in including
them in the decision-making process of the organization.

Overview of the Four Factors

(Strengths, Weaknesses, Opportunities and Threats)

Strengths- Strengths are the qualities that enable us to accomplish the organizations
mission. These are the basis on which continued success can be made and
continued/sustained. Strengths can be either tangible or intangible. These are what one
is well-versed in or what one has expertise in, the traits and qualities ones employees
possess (individually and as a team) and the distinct features that give ones
organization its consistency. Strengths are the beneficial aspects of the organization or
the capabilities of an organization, which includes human competencies, process
capabilities, financial resources, products and services, customer goodwill and brand
loyalty. Examples of organizational strengths are huge financial resources, broad
product line, no debt, committed employees, etc.
Weaknesses- Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate influences on
the organizational success and growth. Weaknesses are the factors which do not meet
the standards we feel they should meet. Weaknesses in an organization may be
depreciating machinery, insufficient research and development facilities, narrow
product range, poor decision-making, etc. Weaknesses are controllable. They must be
minimized and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other examples of organizational weaknesses are huge
debts, high employee turnover, complex decision making process, narrow product
range, large wastage of raw materials, etc.

Overview of the Four Factors (contd.)

Opportunities- Opportunities are presented by the environment within which

our organization operates. These arise when an organization can take benefit
of conditions in its environment to plan and execute strategies that enable it to
become more profitable. Organizations can gain competitive advantage by
making use of opportunities. Organization should be careful and recognize the
opportunities and grasp them whenever they arise. Selecting the targets that
will best serve the clients while getting desired results is a difficult task.
Opportunities may arise from market, competition, industry/government and
technology. Increasing demand for telecommunications accompanied by
deregulation is a great opportunity for new firms to enter telecom sector and
compete with existing firms for revenue.
Threats- Threats arise when conditions in external environment jeopardize
the reliability and profitability of the organizations business. They compound
the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at stake.
Examples of threats are - unrest among employees; ever changing technology;
increasing competition leading to excess capacity, price wars and reducing
industry profits; etc.

Advantages of SWOT Analysis

It is a source of information for strategic planning.

Builds organizations strengths.
Reverses its weaknesses.
Maximizes its response to opportunities.
Overcomes organizations threats.
It helps in identifying core competencies of the firm.
It helps in setting of objectives for strategic planning.
It helps in knowing past, present and future so that by
using past and current data, future plans can be chalked
out.

SWOT Analysis Framework

Limitations of SWOT Analysis

There are certain limitations of SWOT Analysis which are not in control of
management. These includePrice increase;
Inputs/raw materials;
Government legislation;
Economic environment;
Searching a new market for the product which is not having overseas market
due to import restrictions; etc.
Internal limitations may include
Insufficient research and development facilities;
Faulty products due to poor quality control;
Poor industrial relations;
Lack of skilled and efficient labour; etc

Prerequisites of Control
A Plan
A structure with following basic
characteristics
Appropriate
Strategic
Acceptable
Reliable and Objective
Cost-effective

Feedback System of Control

Identification of deviations

Analysis of causes of deviations

Comparison of actual
against standard

Programme of corrective action

Measurement of actual
performance

Implementation of corrections

Actual
performance

Desired
performance

Feedforward System of Control

Desired values of outputs

(standards)

Inputs

Feedforward

Process

Outputs

Simple Feedback

Effective control systems should overcome the deficiency of

common or simple feed back systems to be modified as feed
forward systems. Feedforward systems monitor inputs into a
process to ascertain whether the inputs are planned; if they are
not, the inputs, or perhaps the processes, are changed in order to
ensure the desired action.

Methods of Control

Nine Methods of Control & Their Frequency of Use

Constant Controls
Self-Control: managers need to exercise more selfcontrol to minimise the need for other control methods and
making control in the organisation acceptable and
effective. Self-control means giving a fair days work for a
fair days pay, reporting to work on time, discharging
duties and responsibilities properly and respecting the
rights of others in the organisation. Respect for selfcontrol in an organisation can be a motivating factor. A
sense of appreciation for self-control can be promoted
among employees through training in behaviour
modification.

Constant Controls (contd.)

Group Control: Work groups are a source of control. Group-defined norms

exert greater influence in organisations than the norms that managements
may choose to set unilaterally and thrust on groups. Group norms and group
control can aid or hinder formal authority. Organisations would do well to
develop and use group control processes to reinforce formal authority. While
in some organisations group control processes helped increase output and
improve quality, in others they resulted in restricting output. For group
norms to contribute to organisational goals, there should be a climate of trust
and openness, a culture of cooperation than confrontation. Quality circle,
quality of worklife programmes and work redesign experiments being taken
up in some organisations are examples that point to organisational thrust
towards reinforcing group control processes for achieving organisational
goals through integration of members interests with those of the
organisation.

Constant Controls (contd.)

Policies/Procedures/Rules:
These
are
essentially
bureaucratic control mechanisms referred to in the
discussion of control strategies. They reflect past
managerial experience and include a variety of aspects
concerning how to make certain decisions, deal with
resources etc. If the polices, procedures and rules are
properly formulated, clearly communicated and
implemented consistently through out the organisation,
they can be effective in controlling individual and work
group behaviour.

Periodic Methods

Management Information Systems: A Management Information System is

a mechanism designed to collect, combine, compare, analyse and
disseminate data in the form of information. As such MIS links various
decision-making centres within an enterprise and serves as a useful function
in providing feedback for control purposes.
External Audits: The annual financial audit by an outside accounting firm
is one form of external audit, mainly of the finances of an organisation.
Forward looking progressive private companies have in the past sought to
have a social audit, not for evaluating financial performance, but to find out
whether and how well they have been discharging their social obligations.
Budgets: Budgets are plans that deal with the future allocation and
utilisation of various resources to different enterprise activities over a given
period of time. Budgets help establish plans and also serve as the basis for
measuring or evaluating the standards of performance. Budgetary control is
a good example of bureaucratic control strategy.

The External Environment

All outside factors that may affect an organization make up the external
environment . The external environment is divided into two parts:

Directly interactive: This environment has an immediate and firsthand

impact upon the organization. A new competitor entering the market is an
example.
Indirectly interactive: This environment has a secondary and more distant
effect upon the organization. New legislation taking effect may have a great
impact. For example, complying with the Americans with Disabilities Act
requires employers to update their facilities to accommodate those with
disabilities.

Directly Interactive Forces

Owners expect managers to watch over their interests and
provide a return on investments.
Customers demand satisfaction with the products and
services they purchase and use.
Suppliers require attentive communication, payment, and
a strong working relationship to provide needed resources.
Competitors present challenges as they vie for customers
in a marketplace with similar products or services.
Employees and employee unions provide both the people
to do the jobs and the representation of work force
concerns to management.

Indirectly Interactive Forces

The second type of external environment is the indirectly
interactive forces. These forces include sociocultural,
political and legal, technological, economic, and global
influences. Indirectly interactive forces may impact one
organization more than another simply because of the
nature of a particular business. For example, a company
that relies heavily on technology will be more affected by
software updates than a company that uses just one
computer. Although somewhat removed, indirect forces
are still important to the interactive nature of an
organization.

Sociocultural Dimension
The sociocultural dimension is especially important
because it determines the goods, services, and standards
that society values. The sociocultural force includes the
demographics and values of a particular customer base.
Demographics are measures of the various characteristics
of the people and social groups who make up a society.
Age, gender, and income are examples of commonly used
demographic characteristics.
Values refer to certain beliefs that people have about
different forms of behaviour or products. Changes in how a
society values an item or a behaviour can greatly affect a
business. (One can think of all the fads that have come and
gone!)

Political and Legal Dimensions

The political and legal dimensions of the external
environment include regulatory parameters within which an
organization must operate. Political parties create or
influence laws, and business owners must abide by these
laws. Tax policies, trade regulations, and minimum wage
legislation are just a few examples of political and legal
issues that may affect the way an organization operates.

Technological Dimensions
The technological dimension of the external environment
impacts the scientific processes used in changing inputs
(resources, labour, money) to outputs (goods and services).
The success of many organizations depends on how well
they identify and respond to external technological
changes.
For example, one of the most significant
technological dimensions of the last several decades has
been the increasing availability and affordability of
management information systems (also known as MIS).
Through these systems, managers have access to
information that can improve the way they operate and
manage their businesses.

Economic Dimensions

The economic dimension reflects worldwide financial

conditions. Certain economic conditions of special concern
to organizations include interest rates, inflation,
unemployment rates, gross national product, and the value
of the Rupee against other currencies.

Management by Objectives

Management by objectives (MBO) is a process of defining objectives within

an organization so that management and employees agree to the objectives
and understand what they need to do in the organization in order to achieve
them.
The term "management by objectives" was first popularized by Peter Drucker
in his 1954 book 'The Practice of Management'.
The essence of MBO is participative goal setting, choosing course of actions
and decision making. An important part of the MBO is the measurement and
the comparison of the employees actual performance with the standards set.
Ideally, when employees themselves have been involved with the goal setting
and choosing the course of action to be followed by them, they are more likely
to fulfil their responsibilities.
According to George S. Odiorne, the system of management by objectives can
be described as a process whereby the superior and subordinate jointly
identify its common goals, define each individual's major areas of
responsibility in terms of the results expected of him, and use these measures
as guides for operating the unit and assessing the contribution of each of its
members.[

The Five-Step MBO Process

Steps of MBO
1. Set or Review Organizational Objectives
MBO starts with clearly defined strategic organizational objectives. If the
organization isn't clear where it's going, no one working there will be either.

2. Cascading Objectives Down to Employees

To support the mission, the organization needs to set clear goals and
objectives, which then need to cascade down from one organizational level
to the next until they reach the everyone.
To make MBO goal and objective setting more effective, Drucker used the
SMART acronym to set goals that were attainable and to which people felt
accountable. He said that goals and objectives must be:
Specific
Measurable
Agreed (relating to the participative management principle)
Realistic
Time related

Steps of MBO (contd.)

3. Encourage Participation in Goal Setting

Everyone needs to understand how their personal goals fit with the
objectives of the organization. This is best done when goals and objectives
at each level are shared and discussed, so that everyone understands "why"
things are being done, and then sets their own goals to align with these.
This increases people's ownership of their objectives. Rather than blindly
following orders, managers, supervisors, and employees in an MBO system
know what needs to be done and thus don't need to be ordered around. By
pushing decision-making and responsibility down through the organization,
one motivates people to solve the problems they face intelligently and gives
them the information they need to adapt flexibly to changing
circumstances.
Through a participative process, every person in the organization will set
his or her own goals, which support the overall objectives of the team,
which support the objectives of the department, which support the
objectives of the business unit, and which support the objectives of the
organization.

Steps of MBO (contd.)

4. Monitor Progress
Because the goals and objectives are SMART, they are measurable. They don't measure
themselves though, so one has to create a monitoring system that signals when things are off
track. This monitoring system has to be timely enough so that issues can be dealt with
before they threaten goal achievement. With the cascade effect, no goal is set in isolation, so
not meeting targets in one area will affect targets everywhere.
On the other hand, it is essential that one ensures that the goals are not driving adverse
behaviour because they have not been designed correctly. For instance, a call centre goal of
finishing all calls within seven minutes might be useful in encouraging the staff to handle
each call briskly, and not spend unnecessary time chatting. However, it might be that
customers' calls were becoming more complex, perhaps because of a faulty new product,
and call centre operators were terminating the call after 6 minutes 59 seconds in order to
meet their target, leaving customers to call back, frustrated. In this situation, the monitoring
process should pick up the shift in the goal environment and change the goal appropriately.
Set up a specific plan for monitoring goal performance (once a year, combined with a
performance review is not sufficient!) Badly-implemented MBO tends to stress the goal
setting without the goal monitoring. Here is where one can take control of performance and
demand accountability.
Think about all the goals one has set and didn't achieve. Having good intentions isn't
enough, one needs a clear path marked by accountability checkpoints. Each goal should
have mini-goals and a method for keeping on top of each one.

Steps of MBO (contd.)

5. Evaluate and Reward Performance

MBO is designed to improve performance at all levels of the
organization. To ensure this happens, one needs to put a comprehensive
evaluation system in place.
As goals have been defined in a specific, measurable and time-based
way, the evaluation aspect of MBO is relatively straightforward.
Employees are evaluated on their performance with respect to goal
achievement (allowing appropriately for changes in the environment).
All that is left to do is to tie goal achievement to reward, and perhaps
compensation, and provide the appropriate feedback.
Employees should be given feedback on their own goals as well as the
organization's goals. One should remember the participative principle:
When one presents organization-wide results one has another
opportunity to link individual groups' performances to corporate
performance. Ultimately this is what MBO is all about and why, when
done right, it can spur organization-wide performance and productivity.

Steps of MBO (contd.)

Repeat the Cycle
Having gone through this five-stage process, the cycle
begins again, with a review of the strategic, corporate
goals in the light of performance and environmental
monitoring.
When one rewards goal achievers one sends a clear
message to everyone that goal attainment is valued and
that the MBO process is not just an exercise but an
essential aspect of performance appraisal. The importance
of fair and accurate assessment of performance highlights
why setting measurable goals and clear performance
indicators are essential to the MBO system.