Topic 3Topic 3

Planning in the Contemporary Organization

Planning in the Contemporary Organization

Planning DefinedThe process of outlining the activities that are necessary to achieve the goals of the organization.

What is planning?

Planning is a particular kind of decision making that addresses the specific future that managers desire for their org.

• Planning is not a single event but an on going process that reflects and adapts to changes in the environment

• Planning is a process of setting goals and designing strategies to achieve these goals.

Purpose of planning• The purpose of planning is simple - to

ensure that the organization is both effective and efficient in its activities.

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Planning as a Linking Mechanism

GoalsGoals ControlControlPlansPlans

Relationship among goals, plans, and controls

The link between planning and control

• 1.Control cannot takes place unless a plan exists.

• 2.A plan has little chance of success unless some efforts are made to monitor its progress

• The need for planning exists at all levels and increases at higher levels.

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The benefits of planning• 1Clearly defines responsibilities

• 2.Create a participatory working environment• 3.Better coordination• 4.Better control of activities• 5.Encourage forward thinking• 6.Better Coordination– Planning provides a foundation for the coordination

of a broad range of organizational activities.– A plan helps to define the responsibilities of

individuals and work groups and helps coordinate their activities.

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Benefits of Planning• Focus on Forward Thinking– The planning function forces managers to

think ahead and consider resource needs and potential opportunities or threats that the organization may face in the future.

• Participatory Work Environment– Successful planning requires the participation

of a wide range of organizational members. This creates a more participatory work environment.

Benefits of Planning

A participatory work environment is good for two reasons:

The organization benefits by having access to a broad

base of experienceand knowledge in

the planning process.

The organization benefits by having access to a broad

base of experienceand knowledge in

the planning process.

Organizationalmembers are more

likely to “buy in” to aplan that they have

helped develop.

Organizationalmembers are more

likely to “buy in” to aplan that they have

helped develop.

Benefits of Planning

• More Effective Control System– An organization’s plan provides a foundation for

control. A plan provides a mechanism for ensuring that the organization is moving in the right direction and making progress toward achieving its goals.

Barriers to effective planning

1.Managers reluctance to establish goals e.g fear of failure,lack of knowledge, lack of confidence

2.Employees resistance to change e.g uncertainty about the cause and effect of change

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Overcoming barriers to planning

• 1.Involve employees in decision making• 2.Tolerate a diversity of view• 3.Encourage strategic thinking• 4.Communicate the importance of

planning

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The cost of planning• A) Managerial time• B) Delay in decision making• Managerial Time– Done properly, the planning process

requires a substantial amount of managerial time and energy.

• Delay in Decision Making– Planning can result in delays in decision

making, which must be weighed against the importance of speed in response time.

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Weighing the Benefits Against the Costs of Planning

In the final analysis, managers plan because planning leads to higher performance. Planning also helps managers cope with the many complex situations they face.

Contingency planningRequire the development of two or more plans, each of which is based on a different set of conditionContingency planning is impt.in a rapidly changing environment (hyperchange)

Where Does Planning Start?

Top-Down Vs. Bottom-Up Planning

Top-Down Planning

Planning efforts begin with the board of directors and top

executives of the firm.

Bottom-Up Planning

Planning is initiated at the lowest level in the

organization.

Where Does Planning Start?

• Top-Down Planning– The advantage is that the top managers, who

are the most knowledgeable about the firm as a whole, drive the development of the plan.

• Bottom-Up Planning– The primary advantage is that the people

closest to the operating system, customers, and suppliers drive the development of the plan.

Where Does Planning Start?

• Which Approach is Better - Top-Down or Bottom-Up?– Top-down planning works best when success is

dependent upon the ability to make high-level organizational changes in response to general threats and pressures.

– A bottom-up approach works best when success is dependent upon sensitivity to customer needs and demands.

Basic steps in Planning

• Step 1-Establish the goals• Step 2-Define the present situation• Step 3-Determine aids and barriers• Step 4-Develop a set of action

programs

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Step 1 Establish the goals• The importance of goals:• 1.Provide a sense of direction• 2.Focus effort• 3.Guide plans and decisions• 4.Evaluate progress

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Step 2. Define the present situation

• A) The internal situation e.g products, promotion, distribution, manufacturing, etc• B) The external situation e.g

competition,economic,politic, technology, culture,etc

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Step 3.Identify aids and barriers

• Conduct a “SWOT” analysis--Strength, weaknesses, opportunities and threats analysis.

Step 4.Developing action programs• Develop a detail program specifying what

is to be done, who is responsible ,where, when and how the tasks will be managed and coordinated.

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Strategic Versus Operational Planning

In general, most organizations engage in both strategic and operational planning.

Although strategic and operational planning differ in a number of ways, they

are also interrelated.

Strategic versus operational plans

• Strategic planning is a process of developing a strategic fit between the firm’s objectives, resources and its environment.

• Operational plans provide details as to how the strategic plans will be accomplished.

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Five elements to compare strategic and operational plans

• 1.Level of conduct :S.P-Top mgt, O.p-Lower mgt

• 2.Time:S.P-Long term, O.P-Short term• 3.Regularity: S.P-Continuous and

irregular,O.P-fixed time schedule • 4.Subjective values :S.P-Greater subjective

values, O.P-Specific• 5.Nature of the problem :S.P-Unstructured,

O.P-Structured23

Levels of strategy

• 1.Corporate level strategy• 2.Business unit strategy• 3.Functional level strategy

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Strategic Planning

• Strategic Planning– Is the process by which an organization makes

decisions and takes actions that affect its long-run performance.

– A strategic plan is the output of the strategic planning process. Strategic plans define both the markets in which the firm competes and the ways in which it competes in those markets.

Strategic Planning

The purpose of strategic planning is to move the organization from where

it is to where it wants to be.

Today Vision for the Future

Strategic Planning

Levels of strategic planning and their focus:

Corporate Business

Defines how each of the

firm’s business units will

operate in its market arena.

Addresses the question, “What business should

we be in?”

Functional

Specifies the specific activities

necessary to implement the

firm’s corporate and business

strategies.

Strategic Planning

Levels of strategic planning and their participants:

Corporate Business Functional

Board of directors and

top-level executives

Top-level executives and

managers within the business unit

Middle-level managers and

lower-level managers

Strategic Planning

Levels of strategic planning, the specificity of their strategies, and their time horizons:

Corporate Business Functional

Broad strategies

5-10 year time horizon

More specific strategies than the corporate

level

1-5 year time horizon

Very specific strategies

1-2 year time horizon

Strategic Planning

• Functional Strategic Planning– Functional strategic planning leads to the

development of functional strategy.• Functional strategy specifies the operations, R&D,

financial, human resource management, and marketing activities necessary to implement the organization’s corporate and business strategies.

Strategic Planning

• Customizing the Strategic Planning Process– In general, a successful planning process must

fit the organization's focus on creating value for its customers and its shareholders.

– In other words, it must be customized for the organization based on its specific and unique needs.

Strategic Planning as a Process

Strategy formulation

Strategy formulation

Strategyimplementation

Strategyimplementation

Strategicanalysis

Strategicanalysis

Strategiccontrol

Strategiccontrol

Feedback

Mission statement

• A broad statement specifying the co.lines of business and what it want to achieve in the larger environment.• E.g “To meet the challenges of

tomorrow to become a better bank”

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Characteristics of good mission statement

• 1.Market oriented• 2.Realistic• 3.Specific• 4.Distinctive competencies• 5.Motivating• 6.Vision

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Operational Planning

• Operational Planning– Focuses on determining the day-to-day activities

that are necessary to achieve the long-term goals of the organization.

– Operational plans• Are more specific than strategic plans, address shorter-

term issues, and are formulated by the mid- and lower-level managers who are responsible for the work groups in the organization.• Operational plans can be categorized as standing or

single-use plans.

Standing Plans• Standing Plans– Are designed to deal with organizational issues

or problems that recur frequently.– Standing plans include policies, procedures,

and rules:• Policies - general guidelines that govern how

certain organizational situations will be addressed.• Procedures - are more specific and are designed to

give explicit instructions on how to complete a recurring task.• Rules - provide detailed and specific guidelines for

action.

Single-Use Plans• Single-Use Plans– Are developed to address a specific

organizational situation. – Single-use plans include programs, projects,

and budgets:• Programs - govern a relatively

comprehensive set of activities that are designed to accomplish a particular set of goals.• Projects - direct the efforts of individuals or

work groups toward the achievement of specific, well-defined objectives.

Single-Use Plans• Single-Use Plans– Budgets - specify how financial resources

should be allocated.

Management by Objectives

A method for developing individualized plans which guide the activities of individual members of an organization.

Contingency PlanningContingency planning requires the development of two or more plans, each of which is based on a different set of strategic or operating conditions that could occur.

When is Contingency Planning Needed?Contingency planning is necessary in business environments that change rapidly and in unpredictable ways.Contingency planning is useful when a firm’s effectiveness is dependent on a particular set of business conditions.

Barriers to Effective Planning

• Demands on the Manager’s Time• Ambiguous and Uncertain Operating

Environments• Resistance to Change

Overcoming the Barriers to Planning• Involve Employees in Decision Making– Input from all levels of a firm is essential for

successful planning.

• Tolerate a Diversity of Views– Diverse views lead to a broader assessment of

organizational problems and opportunities.

• Encourage Strategic Thinking– Effective strategic thinking can be developed

through training and practice.

Precursors of Effective Planning Slide 1 of 2

• Recognize and communicate the importance of planning in achieving organizational success.

• Understand and appreciate the relationship between strategic and operational planning.

• Involve those responsible for implementing the plan in the planning process.

Precursors of Effective Planning Slide 2 of 2

• Look to contingency planning as a means of maintaining flexibility in rapidly changing business environments.

• Utilize technology to enhance the effectiveness and efficiency of the planning process.

• Remove the barrier to planning at the work group and individual levels.

• Reward those who think strategically and follow through with operational planning.