FOUNDATION OF PLANNING

Planning DefinedPlanning Defined• 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

Planning is concerned with ends (what is to be done) as well as with means (how it is to be done).

Planning and PerformanceThe Relationship Between Planning And

PerformanceFormal planning is associated with:

Higher profits and returns on assets. Positive financial results.

Because of changes in environment

ManageManagers rs

engage engage in in

planing planing to :to :

Provides direction

Reduces Uncertainty

Minimizes waste and redundancy

Sets the standards for controlling

Reasons For

Planing

Types of planningTypes of planning

Informal: not written down, short-term focus; specific to an

organizational unit.

Formal: written, specific, and long-term focus, involves shared

goals for the organization.

Criticisms Of Criticisms Of Formal Planning:Formal Planning:• Planning may create rigidity.• Plans 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.

Elements of Planning

Goals (also Objectives) Desired outcomes for individuals, groups, or entire

organizations Provide direction and evaluation performance criteria

Plans Documents that outline how goals are to be

accomplished Describe how resources are to be allocated and establish

activity schedules

Types of GoalsFinancial Goals

Are related to the expected internal financial performance of the organization.

Strategic GoalsAre related to the performance of the firm

relative to factors in its external environment (e.g., competitors).

Types of Plans

Planning: Focus Planning: Focus and Time and Time Strategic plans

Plans that are organization-wide, establish overall objectives, and position an organization in terms of its environment

Tactical plansPlans that specify the details of how an organization’s overall objectives are to be achieved

Short-term plansPlans that cover less than one year

Long-term plansPlans that extend beyond five years

Strategic PlanningStrategic plans

Apply broadly to the entire organizationEstablish the organization’s overall objectivesSeek to position the organization in terms of its

environment Provide direction to drive an organization’s

efforts to achieve its goals.Serve as the basis for the tactical plans.Cover extended periods of timeAre less specific in their details

Tactical PlanningTactical plans (operational plans)

Apply to specific parts of the organization.Are derived from strategic objectivesSpecify the details of how the overall objectives

are to be achieved.Cover shorter periods of timeMust be updated continuously to meet current

challenges

Specific and Directional PlansSpecific plans

Plans that have clearly defined objectives and leave no room for misinterpretation “What, when, where, how much, and by whom”

(process-focus)

Directional plansFlexible plans that set out general guidelines

“Go from here to there” (outcome-focus)

Directional versus Specific Plans

Single-Use and Standing PlansSingle-use plans

A plan that is used to meet the needs of a particular or unique situation Single-day sales advertisement

Standing planA plan that is ongoing and provides guidance for

repeatedly performed actions in an organization Customer satisfaction policy

Establishing Goals and Developing PlansTraditional Goal Setting

Broad goals are set at the top of the organization.

Goals are then broken into sub-goals for each organizational level.

Assumes that top management knows best because they can see the “big picture.”

Goals are intended to direct, guide, and constrain from above.

Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility.

The Downside of Traditional Goal Setting

Management by ObjectivesManagement by Objectives (MBO)

A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress.

Links individual and unit performance objectives at all levels with overall organizational objectives

Focuses operational efforts on organizationally important results.

Motivates rather than controls

Cascading of Objectives

Elements of MBO

• Goal specificity

• Participative decision making

• Explicit time period for performance

• Performance

feedback

Does MBO Work?Reason for MBO Success

Top management commitment and involvement

Potential Problems with MBO ProgramsNot as effective in dynamic environments that

require constant resetting of goals.

Overemphasis on individual accomplishment may create problems with teamwork.

Allowing the MBO program to become an annual paperwork shuffle.

Characteristics of Well-Designed Goals Written in terms of

outcomes, not actions Focuses on the ends, not

the means. Measurable and

quantifiable Specifically defines how

the outcome is to be measured and how much is expected.

Clear as to time frame How long before

measuring accomplishment.

Challenging yet attainable Low goals do not motivate. High goals motivate if they

can be achieved. Written down Focuses, defines, and makes

goals visible. Communicated to all

necessary organizational members

Puts everybody “on the same page.”

S.M.A.R.T.S.M.A.R.T.The acronym S.M.A.R.T. outlines the set of criteria that your goal must follow in order for it to be a well- focused and achievable goal.

SpecificSpecific Do you know what you Do you know what you

want to accomplish with all the want to accomplish with all the details?details?

MeasurableMeasurable Are you able to assess Are you able to assess your progress?your progress?

AttainableAttainable Is your goal within your Is your goal within your

reach given your current situationreach given your current situation??

RelevantRelevant Is your goal relevant Is your goal relevant towards your purpose in life?towards your purpose in life?

Time SensitiveTime Sensitive What is the What is the deadline for completing your goal?deadline for completing your goal?

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Steps in Goal Setting1. Review the organization’s mission statement.

Do goals reflect the mission?

2. Evaluate available resources.

Are resources sufficient to accomplish the mission?

3. Determine goals individually or with others.

Are goals specific, measurable, and timely?

4. Write down the goals and communicate them.

Is everybody on the same page?

5. Review results and whether goals are being met.

What changes are needed in mission, resources, or goals?

Developing PlansContingency Factors in A Manager’s Planning

Manager’s level in the organization Strategic plans at higher levels Operational plans at lower levels

Degree of environmental uncertainty Stable environment: specific plans Dynamic environment: specific but flexible plans

Planning in the Hierarchy of Organizations

Strategic ManagementWhat managers do to develop the

organization’s strategies.

StrategiesThe decisions and actions that determine

the long-run performance of an organization.

Strategic ManagementStrategic Management Process

A nine-step process that involves strategic planning, implementation, and evaluation

The organization’s current identity Mission statement

Defines the purpose of the organizationObjectivesStrategic plan

A document that explains the business founders vision and describes the strategy and operations of that business.

The Strategic Management Process

Analyze the EnvironmentEnvironmental scanning

Screening large amounts of information to detect emerging trends and create a set of scenarios

Competitive intelligenceAccurate information about competitors that

allows managers to anticipate competitors’ actions rather than merely react to them

SWOT: Identifying Organizational Opportunities

SWOT analysisAnalysis of an organization’s

strengths, weaknesses, opportunities, and threats in order to identify a strategic niche that the organization can exploit

WeaknessesStrengths

TreatsOpportunities

Internal Environment

External Environment

SWOT Analysis

SWOT AnalysisStrengths (strategic)

Internal resources that are available or things that an organization does well Core competency: a unique skill or resource that

represents a competitive edgeWeaknesses

Resources that an organization lacks or activities that it does not do well

Opportunities (strategic)Positive external environmental factors

ThreatsNegative external environmental factors

Grand StrategiesGrowth strategy

A strategy in which an organization attempts to increase the level of its operations;

Retrenchment strategyA strategy characteristic of a company that is

reducing its size, usually in an environment of decline

Combination strategyThe simultaneous pursuit by an organization of two

or more of growth, stability, and retrenchment strategies

Stability strategyA strategy that is characterized by an absence of

significant change

Growth StrategiesMerger

Occurs when two companies, usually of similar size, combine their resources to form a new company

AcquisitionOccurs when a larger company buys a smaller

one and incorporates the acquired company’s operations into its own

Competitive StrategiesStrategies that position an organization in

such a way that it will have a distinct advantage over its competitionCost-leadership strategy

Becoming the lowest-cost producer in an industryDifferentiation strategy

Attempting to be unique in an industry within a broad market

Focus strategy Attempting to establish an advantage

(cost/differentiation) in a narrow market segment

BenchmarkingBenchmarking

The search for the best practices among competitors or noncompetitors that lead to their superior performance

ISO 9000 seriesStandards designed by the International

Organization for Standardization that reflect a process whereby independent auditors attest that a company’s factory, laboratory, or office has met quality management standards

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