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Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—11
Planning As an Organizational Planning As an Organizational ActivityActivityPlanningPlanning The process by which managers establish goals and The process by which managers establish goals and
specify how these goals are to be attained.specify how these goals are to be attained. Outcome or goal statementsOutcome or goal statements—are the end states—the —are the end states—the
targets and outcomes managers hope to attain. targets and outcomes managers hope to attain. Action statements—the means by which an Action statements—the means by which an
organization moves forward to attain its goals.organization moves forward to attain its goals.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—22
Is Planning Important?Is Planning Important?
Why should managers plan?Why should managers plan? To offset uncertainty and change.To offset uncertainty and change. To focus organizational activity on a set of objectives.To focus organizational activity on a set of objectives. To provide a coordinated, systematic road map for future To provide a coordinated, systematic road map for future
activities.activities. To increase economic efficiency.To increase economic efficiency. To facilitate control by establishing a standard for later To facilitate control by establishing a standard for later
activity.activity.
Do managers really plan?Do managers really plan? Managers plan with varying levels of deliberateness and Managers plan with varying levels of deliberateness and
consciousness, but they do plan.consciousness, but they do plan.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—33
The Planning ProcessThe Planning Process
Step 4
Determining a
course of action
• Identifying
alternatives
• Evaluating
alternatives
• Selecting
alternatives
Step 5
Formulating
supportive plans
• Making
changes in
existing plans
• Creating new
supportive
plans
Step 3
Premising
• Forecasting
• Formulating
assumptions
Step 1
Developing an
awareness of
the present
state
Step 2
Establishing
outcome
statements
• Goal planning
• Domain
planning
• Hybrid
planning
FIGURE 10FIGURE 10–1–1
Source: Adapted from H. Koontz and C. O’Donnell, 1972. Principles of management: An analysis of managerial functions. New York: McGraw-Hill, 113.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—44
The Planning ProcessThe Planning Process
1.1. Developing an awareness of the present state Developing an awareness of the present state of the firm and its history.of the firm and its history.
2.2. Establishing outcome statementsEstablishing outcome statements• Goal planning—Goal planning—development of action statements to development of action statements to
move toward the attainment of a specific goal.move toward the attainment of a specific goal.• Domain (directional) planning—Domain (directional) planning—development of a development of a
course of action that moves an organization toward course of action that moves an organization toward one domain or direction (and, therefore, away from one domain or direction (and, therefore, away from other domains or directions).other domains or directions).
• Hybrid planning—Hybrid planning—the coupling of goal and domain the coupling of goal and domain planning.planning.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—55
The Planning Process (cont’d)The Planning Process (cont’d)
2.2. Establishing outcome statements (cont’d)Establishing outcome statements (cont’d)• Situations requiring domain planning:Situations requiring domain planning:
• When there is a recognized need for flexibility.When there is a recognized need for flexibility.• When people cannot agree on goals.When people cannot agree on goals.• When the external environment is uncertain and When the external environment is uncertain and
unstable.unstable.• When an organization is starting up or is in a When an organization is starting up or is in a
transitional period.transitional period.• Consequences of goal, domain, and hybrid planningConsequences of goal, domain, and hybrid planning
• Setting goals affects performance and encourages Setting goals affects performance and encourages managers to plan more extensively.managers to plan more extensively.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—66
The Planning Process (cont’d)The Planning Process (cont’d)
3.3. PremisingPremising• The success and quality of any plan depends on the The success and quality of any plan depends on the
quality of the underlying managerial assumptions that quality of the underlying managerial assumptions that result from scanning the organization’s external and result from scanning the organization’s external and internal environments.internal environments.
4.4. Determining a course of action (action Determining a course of action (action statements).statements).• Determining alternativesDetermining alternatives• Evaluating alternativesEvaluating alternatives• Selecting a course of actionSelecting a course of action
5.5. Formulating supportive plansFormulating supportive plans
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—77
Network of Organization PlansNetwork of Organization Plans
University—Goal 1
School ofBusiness—Goal 1
MarketingDepartment—Goal 1
Marketing CurriculumCommittee—Goal 1Means to Marketing
Curriculum Committee Goal 1
Means to MarketingDepartment Goal 1
Means to Schoolof Business Goal 1
Means to UniversityGoal 1
FIGURE 10FIGURE 10–2–2
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—88
Planning, Implementation, Planning, Implementation, ControllingControllingThe Deming (Shewart) CycleThe Deming (Shewart) Cycle PlanPlan——ccreate the plan.reate the plan. DoDo——iimplement the plan.mplement the plan. CheckCheck——mmonitor the onitor the
results of the plannedresults of the plannedcourse of action.course of action.
ActAct——on what was on what was learned, modify the learned, modify the plan, return to the firstplan, return to the first stage. stage. Check
Plan
DoAct
•••
1
2
5
6
7
3
4
FIGURE 10FIGURE 10–3–3
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—99
Types of PlansTypes of Plans
HierarchicalHierarchical Strategic plans—address an organization’s institutional-Strategic plans—address an organization’s institutional-
level needs and attempt to position it advantageously level needs and attempt to position it advantageously within its task environment.within its task environment.
Operating plans—cover the day-to-day (technical core) Operating plans—cover the day-to-day (technical core) operations of the organization.operations of the organization.
Administrative plans—serve to integrate institutional-Administrative plans—serve to integrate institutional-level plans with operating plans as well as integrate all level plans with operating plans as well as integrate all the operating plans in the allocation of organizational the operating plans in the allocation of organizational resources.resources.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1010
Types of PlansTypes of Plans
Frequency-of-use plansFrequency-of-use plans Standing plans—rules, policies, standard operating Standing plans—rules, policies, standard operating
procedures (SOP) about how to deal with issues that procedures (SOP) about how to deal with issues that managers face repeatedly.managers face repeatedly.
Single-use plans—plans (e.g., programs, projects, Single-use plans—plans (e.g., programs, projects, budgets) developed for unique situations or problems budgets) developed for unique situations or problems and one-time use.and one-time use.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1111
Types of PlansTypes of Plans
Time-frame plansTime-frame plans Short-range—used for planning up to one year.Short-range—used for planning up to one year. Medium-range—used for plans of one to five years.Medium-range—used for plans of one to five years. Long-range plans—used for plans of more than five Long-range plans—used for plans of more than five
years.years.
Organizational scope plansOrganizational scope plans Plans vary in their scope—how much of the organization Plans vary in their scope—how much of the organization
is covered by the plan.is covered by the plan.
Contingency plansContingency plans ““What if” plans dealing with alternative courses of action What if” plans dealing with alternative courses of action
the firm can take if their assumptions are incorrect.the firm can take if their assumptions are incorrect.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1212
Goal or Outcome StatementsGoal or Outcome Statements
Organizational goals:Organizational goals: Official goalsOfficial goals Operational goalsOperational goals
Purposes of goals:Purposes of goals:1.1. To guide and direct individual’s and group’s efforts.To guide and direct individual’s and group’s efforts.
2.2. Motivate individuals and groups to be more Motivate individuals and groups to be more productive.productive.
3.3. Influence the nature and content of the planning Influence the nature and content of the planning process.process.
4.4. Provide a standard by which to judge and control Provide a standard by which to judge and control organizational activity.organizational activity.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1313
Goal or Outcome StatementsGoal or Outcome Statements
Goal formulation (emergence)Goal formulation (emergence)—where do —where do organizational goals come from?organizational goals come from?
From managers’ efforts to balance the organization’s From managers’ efforts to balance the organization’s needs with those of its external environment.needs with those of its external environment.
From the interactions of organization’s internal From the interactions of organization’s internal components.components.
Multiple goals and the goal hierarchyMultiple goals and the goal hierarchy Organizations must simultaneously pursue multiple Organizations must simultaneously pursue multiple
goals and resolve internal conflicts. goals and resolve internal conflicts. Goal hierarchy—the interrelationship among an Goal hierarchy—the interrelationship among an
organization’s job-, department-, divisional-, and organization’s job-, department-, divisional-, and organizational-level goals.organizational-level goals.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1414
Formal Organizational Planning in Formal Organizational Planning in PracticePracticeEncouraging planningEncouraging planning Pre-planning (blue-print planning)—formulating outcome Pre-planning (blue-print planning)—formulating outcome
and action statements before moving ahead.and action statements before moving ahead. In-process planning—planning just before acting.In-process planning—planning just before acting. Encouraging pre-planning:Encouraging pre-planning:
Develop an organizational climate that encourages Develop an organizational climate that encourages planning,planning,
Have top management support for lower-level Have top management support for lower-level manager’s planning.manager’s planning.
Train people in planningTrain people in planning Create a reward system for good planning activitiesCreate a reward system for good planning activities Use plans once they have been created.Use plans once they have been created.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1515
Formal Organizational Planning in Formal Organizational Planning in PracticePracticeDoes planning really pay off?Does planning really pay off? Effective organizational goals should be:Effective organizational goals should be:
Difficult but reachable with effort.Difficult but reachable with effort. Specific and clearly identify what is desired.Specific and clearly identify what is desired. Accepted by and have the commitment of those who Accepted by and have the commitment of those who
will help achieve them.will help achieve them. Developed by employees to improve goal quality and Developed by employees to improve goal quality and
acceptance.acceptance. Monitored for progress regularly.Monitored for progress regularly.
Location of the planning activityLocation of the planning activity Participation by all organizational levels and Participation by all organizational levels and
individuals that will be affected by the plans.individuals that will be affected by the plans.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1616
Formal Organizational Planning in Formal Organizational Planning in PracticePracticePlanning specialistsPlanning specialists Provide in-depth research and specialized planning skills Provide in-depth research and specialized planning skills
to support and advise managers who plan.to support and advise managers who plan. May have more objectivity than managers and May have more objectivity than managers and
employees with vested interests in organizational employees with vested interests in organizational activities.activities.
Help coordinate planning activities across the various Help coordinate planning activities across the various levels within the organization.levels within the organization.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1717
Employee Responses to PlanningEmployee Responses to Planning
Characteristics of goals that motivate Characteristics of goals that motivate performance:performance: Goal specificity—clearly defined performance Goal specificity—clearly defined performance
expectations motivate better than “do your best.”expectations motivate better than “do your best.” Goal difficulty—difficult (but not impossible) goals Goal difficulty—difficult (but not impossible) goals
motivate performance better than easy goals.motivate performance better than easy goals. Goal acceptance—goals must be accepted by those who Goal acceptance—goals must be accepted by those who
are to achieve them.are to achieve them. Goal commitment—those who must accomplish goals Goal commitment—those who must accomplish goals
must be determined to achieve them.must be determined to achieve them. Goal feedback—provides information about the Goal feedback—provides information about the
adequacy or results of efforts to attain a goal.adequacy or results of efforts to attain a goal.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1818
The Effects of Goals on PerformanceThe Effects of Goals on Performance
FIGURE 10FIGURE 10–4–4
No Goal
General Goal
Easy Goal
Difficult Goal
Difficult Specific Goal
Performance LevelLow High
Typ
e o
f G
oal
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—1919
A Model of Goal SettingA Model of Goal Setting
GoalDifficulty
GoalSpecificity
GoalAcceptance
GoalCommitment
Goal-Directed Effort(Motivation Level)
FIGURE 10FIGURE 10–5–5
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2020
Employee Responses to PlanningEmployee Responses to Planning
The negative side of goalsThe negative side of goals Specific goals may inhibit creativity and innovation and Specific goals may inhibit creativity and innovation and
narrow the range of performance.narrow the range of performance. Goals can cause slacking off after attaining a goal.Goals can cause slacking off after attaining a goal. Difficult goals can cause acts of organizational Difficult goals can cause acts of organizational
citizenship to decline.citizenship to decline. Methods (means) of attaining goals may become goals Methods (means) of attaining goals may become goals
instead of the goals (ends).instead of the goals (ends). Organizational goals may conflict with personal goals.Organizational goals may conflict with personal goals. Ambiguous goals can fail in providing direction.Ambiguous goals can fail in providing direction. Organizational goals and reward systems may conflict.Organizational goals and reward systems may conflict.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2121
Determinants of Goal CommitmentDeterminants of Goal Commitment
Internal FactorsExpectancy of SuccessSelf-EfficacySelf-Administered Rewards
External InfluencesAuthorityPeer Group InfluenceExternal Rewards and Incentives
Interactive FactorParticipation
Goal Commitment
FIGURE 10FIGURE 10–6b–6b
Source: Adapted from E. A. Locke, G. P. Latham, and M. Erez. 1988. The determinants of goal commitment. Academy of Management Review 13:28. Copyright 1998 by Academy of Management. Reproduced with permission of Academy of Management in the format Textbook via Copyright Clearance Center; an from E. Erez and P. C. Earley. 1987. Comparative analysis of goal setting across cultures. Journal of Applied Psychology 72:658–665.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2222
Determinants of Goal CommitmentDeterminants of Goal Commitment
1. External influences: authority—being asked to do something by a person possessinglegitimate authority increases goal commitment;
peer group influence—group dynamics, such as peers acting as role
models and group norms, can produce commitment to goals;
rewards and incentives— commitment to goals is often the outgrowth
of rewards and incentives that are associated with goal attainment.
2. Interactive factor: participation— participation contributes to goal understanding and to
a sense of goal ownership for those who want to be involved in the
process.
3. Internal factors: expectancy of success—perceptions of being able to achieve goals
positively influence the commitment to those goals;
self-efficacy—people who have a strong belief in their ability to
accomplish goals are more likely to have strong commitment to
these goals;
self-administered rewards—self-generated feedback ( ”I did well ”) can
lead to high goal commitment.
FIGURE 10FIGURE 10–6a–6a
Source: Adapted from E. A. Locke, G. P. Latham, and M. Erez. 1988. The determinants of goal commitment. Academy of Management Review 13:28. Copyright 1998 by Academy of Management. Reproduced with permission of Academy of Management in the format Textbook via Copyright Clearance Center; an from E. Erez and P. C. Earley. 1987. Comparative analysis of goal setting across cultures. Journal of Applied Psychology 72:658–665.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2323
Employee Responses to PlanningEmployee Responses to Planning
Goal setting and employee job satisfactionGoal setting and employee job satisfaction Job satisfaction is most likely determined by the level of Job satisfaction is most likely determined by the level of
performance and an employee’s affective reaction to performance and an employee’s affective reaction to their performance in relation to their level of aspiration.their performance in relation to their level of aspiration.
Goal setting may contribute to performance by Goal setting may contribute to performance by facilitating employee performance.facilitating employee performance.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2424
Performance, Aspiration Level, and Performance, Aspiration Level, and SatisfactionSatisfaction
ExtrinsicOutcomes Desired,Aspiration Level,Intrinsic OutcomesDesired
If Yes Satisfaction
If No
Dissatisfaction
Performance Level
FIGURE 10FIGURE 10–7–7
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2525
Employee Responses to PlanningEmployee Responses to Planning
Managing through goal settingManaging through goal setting Encourage employees’ goal acceptance and Encourage employees’ goal acceptance and
commitment.commitment. Provide training to make goals attainable.Provide training to make goals attainable. Offer constructive feedback to encourage and inform Offer constructive feedback to encourage and inform
employees.employees. Encourage development of group norms that contribute Encourage development of group norms that contribute
to goal commitment.to goal commitment. Encourage the setting of specific and difficult goals.Encourage the setting of specific and difficult goals. Foster the development of a sense of ownership..Foster the development of a sense of ownership..
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2626
Controlling and the Control ProcessControlling and the Control Process
ControllingControlling The process of monitoring and evaluating The process of monitoring and evaluating
organizational effectiveness and the initiation of organizational effectiveness and the initiation of corrective actions needed to maintain or improve corrective actions needed to maintain or improve effectiveness.effectiveness.
A control modelA control model1.1. Establish standards.Establish standards.
2.2. Monitor ongoing organizational behavior and results.Monitor ongoing organizational behavior and results.
3.3. Compare actual behavior and results against Compare actual behavior and results against standards.standards.
4.4. Evaluate and take action.Evaluate and take action.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2727
Need for ControlNeed for Control
FIGURE 10FIGURE 10–8–8
Low Moderate
Moderate High
Static
Simple
Dynamic
Complex
Environmental Stability
En
viro
nm
en
tal C
om
ple
xit
y
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2828
The Traditional Control ModelThe Traditional Control Model
Monitor ongoingorganizationalbehavior and
results.
Compare actualbehavior and
results againststandards.
Evaluate andtake action.
Establishstandards.
FIGURE 10FIGURE 10–9–9
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—2929
Variations in Control SystemsVariations in Control Systems
Cybernetic controlCybernetic control Self-regulating control procedures that automatically Self-regulating control procedures that automatically
detect and correct deviations from planned activities and detect and correct deviations from planned activities and effectiveness levels.effectiveness levels.
NoncyberneticNoncybernetic Control systems that operate independently from the Control systems that operate independently from the
work system that is being monitored; a monitoring work system that is being monitored; a monitoring system that is external to the target of control.system that is external to the target of control.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3030
Variations in Control SystemsVariations in Control Systems
Time perspectivesTime perspectives Hybrid control system—a control system that exercises Hybrid control system—a control system that exercises
control prior to, during, and after the performance of a control prior to, during, and after the performance of a work activity.work activity.
Precontrols—controls designed to prevent deviation Precontrols—controls designed to prevent deviation from a desired plan of action before work actually from a desired plan of action before work actually begins.begins.
Concurrent controls—controls intended to prevent Concurrent controls—controls intended to prevent deviation from a planned course of action while work is deviation from a planned course of action while work is in progress.in progress.
Postaction controls—controls employed after a product Postaction controls—controls employed after a product or service is completed.or service is completed.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3131
Characteristics of Effective Control Characteristics of Effective Control SystemsSystemsA good control system:A good control system: Follows the prescriptions in the control model and Follows the prescriptions in the control model and
addresses each organizational target.addresses each organizational target. Uses the hybrid approach to monitor and correct Uses the hybrid approach to monitor and correct
activities at all points in the organization’s operations.activities at all points in the organization’s operations. Makes information readily available and accessible.Makes information readily available and accessible. Focuses on issues of importance to the organization; Focuses on issues of importance to the organization;
controls are used only where necessary.controls are used only where necessary. Has features that enhance the practicality of its use by Has features that enhance the practicality of its use by
the organization. the organization.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3232
The Impact of Control on The Impact of Control on Organizational MembersOrganizational Members
Positive effectsPositive effects Clarifies expectationsClarifies expectations Reduces ambiguityReduces ambiguity Provides feedbackProvides feedback Facilitates goal settingFacilitates goal setting Enhance satisfactionEnhance satisfaction Enhances performanceEnhances performance
Negative effectsNegative effects Consumes resourcesConsumes resources Creates feeling of frustration Creates feeling of frustration
and helplessnessand helplessness Creates “red tape”Creates “red tape” Creates inappropriate goalsCreates inappropriate goals Fosters inappropriate behaviorFosters inappropriate behavior Decreases satisfactionDecreases satisfaction Increases turnoverIncreases turnover Creates stressCreates stress
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3333
Management by Objectives (MBO)—Management by Objectives (MBO)—A Planning and Control TechniqueA Planning and Control Technique
Management by Objectives (MBO)Management by Objectives (MBO) A philosophy of management, a planning and controlling A philosophy of management, a planning and controlling
technique, and an employee involvement program in technique, and an employee involvement program in which managers ask workers to join them in deciding which managers ask workers to join them in deciding what their goals should be.what their goals should be.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3434
MBO and Its Effect on EmployeesMBO and Its Effect on Employees
MBOInvolvement
of the selfin work
Commitment
PsychologicalOwnership
Higher-OrderNeed Satisfaction(e.g., Self-esteem)
IntrinsicWork
Motivation
JobPerformance
FIGURE 10FIGURE 10–0–0
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3535
Management by Objectives (MBO)—Management by Objectives (MBO)—A Planning and Control TechniqueA Planning and Control Technique
The theory of MBOThe theory of MBO Major components of MBO:Major components of MBO:
Setting specific goalsSetting specific goals Setting realistic and acceptable goalsSetting realistic and acceptable goals Joint participation in goal setting, planning, and Joint participation in goal setting, planning, and
controllingcontrolling FeedbackFeedback
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3636
Management by Objective (MBO) Management by Objective (MBO) ProcessProcess
Collectively formulate
job objectives compatible
with overall departmental
objectives.
Collectively formulate
an action plan, evaluating
technique, and schedule.
Implement the plan.
Collectively monitor
performance (design
corrective action if
needed).
Stage 1
Stage 4
Stage 2
Stage 3
FIGURE 10FIGURE 10–11–11
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3737
Management by Objectives (MBO)—Management by Objectives (MBO)—A Planning and Control TechniqueA Planning and Control Technique
Factors affecting the success of an MBO Factors affecting the success of an MBO program:program: Gaining upper-level managers’ commitment to the MBO Gaining upper-level managers’ commitment to the MBO
programprogram Allowing sufficient time for the MBO process to take Allowing sufficient time for the MBO process to take
effect in the organization.effect in the organization. Integrating the MBO program into the overall philosophy Integrating the MBO program into the overall philosophy
of the organization.of the organization. Integrating employees’ personal goals into the goals of Integrating employees’ personal goals into the goals of
their work unit and the organization.their work unit and the organization.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 10—10—3838
The Control- and Involvement-The Control- and Involvement-oriented Approaches to Planning and oriented Approaches to Planning and ControllingControllingMechanistic organizationsMechanistic organizations
Planning and controlling activities are centralized within Planning and controlling activities are centralized within the management of the organizational hierarchy with the management of the organizational hierarchy with employees having only passive, non-participative roles.employees having only passive, non-participative roles.
Organic organizationsOrganic organizations Employees are active participants in planning and Employees are active participants in planning and
controlling activities; management takes an involvement-controlling activities; management takes an involvement-oriented approach to planning and controlling the oriented approach to planning and controlling the organization.organization.