Chapter Five

Planning: The Foundation of

Successful Management

E5-1

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Planning

Planning: previously defined as setting goals and deciding how to achieve them—another definition: Planning is coping with uncertainty by formulating future courses of action to achieve specified results.

E5-2

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Why not plan?

Planning requires you to set aside time to do it

- Most managers busy with their works so it’s difficult for them to set a free time.

- Need a lot of procedures such as managers have to go outside to find out more information about products, market and competitor.

You may have to make some decisions without a lot of time to plan

- Suddenly consumer boycott your products.- An important supplier may let you down.- So you may not have the time to make a decision.

The Benefits of Planning1) Planning helps you check on your progress

- Planning shows how well your work is going in an organization.

- You need to have some expectations of what you’re supposed to do.

2) Planning helps you coordinate activities

- The organization should have a plan for dealing with the media during emergencies.

- A plan defines the responsibilities of various departments and coordinates their activities to achieve common goals.

3) Planning helps you think ahead

- At some point the service or product will probably reach maturity and sales will begin to reduce. So at that time you have to think something new.

- So plan will helps you to be ahead compare with your competitors.

4) Above all, planning helps you cope with uncertainty

Three Types of Uncertainty

State Uncertainty: when the environment is considered unpredictable.“What possible harmful event could occur?”

Effect Uncertainty: when the effects of environmental changes are unpredictable. “What possible harmful effect might an environmental change have?”

Response Uncertainty: when the consequences of a decision are uncertain. ”What possible harmful consequence might a decision have?”

E5-5

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Responding to Uncertainty with 4 basic strategy types

Defenders: are expert at producing and selling narrowly defined products and services.

Analyzers: let the organizations take the risks of product development and marketing and then imitate what seems to work best.

Prospectors: focus on developing new markets or services and in seeking out new markets rather than waiting for things to happen.

Reactors: make adjustments only when finally forced to by environmental pressures.

E5-6

Panel 5.1

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Making Plans

Mission Statement “What is our reason for being?”

Vision Statement “What do we want to become?”

Strategic Planning Done by top managers for the next 1-5 years

Goals

Action plans

Tactical Planning Done by middle managers for the next 6-24 months

Goals

Action plans

Operat-ional Planning Done by first-line managers for the next 1-52 weeks

Goals

Action plans

Mission & Vision Statements

Mission Statements: expresses the purpose of the organization.“What is our reason for being?”

Vision Statement: expresses what the organization should become, where it wants to go strategically.“What do we want to become?”

E5-9

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Types of Planning

Strategic planning: top managers decide what the organization’s long-term goals should be for the next 1-5 years with the resources they expect to have available.

Tactical planning: middle managers decide what contributions their departments or similar work units can make with their given resources during the next 6-24 months.

Operational planning: first-line managers determine how to accomplish specific tasks with available resources within the next 1-52 weeks.

E5-10

Panel 5.2

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Three Levels of Management, Three Types of Planning

Top Managers:Chief executive officer,

president, vice presidentgeneral managers,

division heads

Middle Managers:Functional managers,

product-line managers,department managers

First-line Managers:Unit manager, team leaders,

first-line supervisors

Strategic Planning

1-5 Years

Tactical Planning

6-24 Months

Operational Planning

1-52 Weeks

E5-11

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Types of Goals

Strategic Goals: are set by and for top management and focus on objectives for the organization as a whole.

Tactical Goals: are set by and for middle managers and focus on the actions needed to achieve strategic goals.

Operational Goals: are set by and for first-line managers and are concerned with short-tem matters associated with realizing tactical goals.

E5-13

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Setting SMART Goals

S pecific

easurable

ttainable

esults-Oriented

arget Dates

M

A

R

T

SMART• Specific—goals should be stated in specific

rather than unclear terms.• Measurable—whenever possible, goals should

be measurable or can calculate.• Attainable—goals should be challenging, but

realistic and attainable.• Results-Oriented—only a few goals be chosen

and they should be results-oriented. Refer page 157 (3rd edition )

• Target Dates—goals should specify the target dates or deadline dates when they are to be attained.

E5-15

Panel 5.4

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Planning Control Cycle

The Two Planning Steps

The Two Control Steps

Make the Plan Carry out the plan

Control the direction in two ways:

(a) By correcting deviations in the plan being carried out (return to Step 2) or

(b) By improving future plans (go to Step 1 to start over

Control the direction in by comparing the results with the plan

E5-16

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Management By Objectives

Peter Drucker

Is a four-step process in which: Managers and employees jointly set

objectives for the employee Managers develop action plans Managers and employees

periodically review the employee’s performance

The manager makes a performance appraisal and rewards the employee according to the results

E5-17

Panel 5.5

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Three Types of Objectives Used in MBO

Improvement objective: Increase sport utility sales by 10%

Personal development objective: attend five days of leadership training

Maintenance by objectives: continue to meet the increased sales goals specified last quarter

E5-19

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Cascading Objectives: MBO from the Top Down

1) The commitment of top management is essential

2) It must be applied organization wide3) Objectives must “cascade”

THE IMPORTANCE OF PROJECT DEADLINES

• Deadlines are an essential component in the project planning process

• Deadlines help keep managers on track