Managerial Planning

Planning Defined
Process of outlining the activities that are
necessary to achieve the goals of the organization.

Plan
Blueprint for action that prescribes the activities
necessary for an organization to realize their goals.

Purpose of Planning
To ensure that the organization is both effective
and efficient in its activities.
 Goals and Controls
Goals
Provide a clear, engaging sense of direction and
specify what is to be accomplished.

Control
Monitor the extent to which goals have been
achieved and ensure the organization is moving in
the right direction.
Figure 4.1 Planning as a Linking Mechanism
 The Benefits of Planning
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.

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.
 The Benefits of Planning (contd)
More Effective Control Systems
An organization s plan provides a foundation for
control of the processes and progress of the
company.
The implementation of the plan can be evaluated
and progress toward the achievement of
performance objectives can be monitored.
Controls provide mechanism for ensuring that the
organization is moving in the right direction and
making progress toward achieve its goals.
Where Should Planning Begin?

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
Advantages of Each Planning Approach

Top-Down Planning
Top managers, who are the most knowledgeable
about the firm as a whole, drive the development of
the plan.

Bottom-Up Planning
The people closest to the operating system,
customers, and suppliers drive the development of
the plan.
 Top-Down Bottom-Up

Organizational CEO, Board of Directors People/department closest to product,

level service, customer.

Role of As the plan moves down the Units develop goals and plans. As plans
organizational hierarchy, units determine actions move up the hierarchy, they are
evaluated
unit needed to support the plan. and adjusted for accuracy and feasibility.

Specificity Begins broad, becomes more Begins specific and probably

fragmented;
of plan specific as it moves down the becomes cohesive and integrated as it
hierarchy. moves up the hierarchy.

Potential Plans are driven by top-level Those closest to customers, suppliers,

and
advantages managers who are most operating systems provide focus of
plans.
knowledgeable about all factors
affecting the organization.

Potential Top-level managers may be Lower-level managers may lack under-

disadvantages removed from the front line. standing of all factors affecting the
organization.
 Strategic Planning
Strategic Planning
Focuses on enhancing the competitive position and
overall performance of the organization in the long
term.

Strategic Plans
Are to move the organization from where it is to
where it wants to be.
eg. Markets; Customers; products and services delivery to the
market
 Operational Planning
Operational Planning
Focuses on the day-to-day activities that are
necessary to achieve the long-term goals of the
organization.

Operational Plans
Are more specific, address shorter-term issues, and
are formulated by mid- and lower-level managers
Can be categorized as either standing or single-use
plans.
 Standing Plans
Standing Plans
Designed to deal with organizational issues or
problems that recur frequently. They include:
Policies: general guidelines that govern how
certain organizational situations will be addressed.
Procedures: more specific and are designed to
give explicit instructions on how to complete a
recurring task.
Rules: provide detailed and specific guidelines
and limits for action.
 Single-Use Plans
Single-Use Plans
Are developed to address a specific organizational
situation. They include:
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.
Budgets: specify how financial resources should
be allocated.
 Individual Plans
Organizations nowadays are looking for ways to
translate boarder organizational plans to the level
of individual employees.
Two approaches for doing so include:
Management by Objectives
The Balanced Scorecard
 Figure 4.2 Management by Objectives: The Cycle

Source: K. Davis and J. Newstrom,

Behavior at Work: Organizational
Behavior (New York: McGraw-Hill,
1989), 209. Reproduced with
permission of the McGraw-Hill
Companies.
 The Balanced Scorecard (BSC)

The Balanced Scorecard Communicate: (1)

what to accomplish; (2) align the day-to-day
work; (3) prioritize projects, products, and
services, and (4) measure and monitor progress
 Contingency Planning
Contingency 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?

Necessary in business environments that change
rapidly and in unpredictable ways.
Useful when a firms effectiveness is dependent on a
particular set of business conditions.
The Impact of Information Technology

Advances in information technology have

improved both the effectiveness and
efficiency of the planning function.

Information technology can be used to

establish and implement the strategic and
operational plans of an organization.
Barriers to
Effective
Planning

Demands on the managers 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.
Take Advantage of 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.