Chapter Five

Planning
The Foundation of Successful
Management

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

Planning & Uncertainty

• Planning
 coping with uncertainty by formulating
future courses of action to achieved
specified results
 can be defined as setting goals and
deciding how to achieve them

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Planning
HOW CAN PLANNING HELP MANAGERS
DEAL WITH UNCERTAINTY?

•Planning is used together with strategic

management and evolves from the company’s
mission and vision
•Planning covers strategic planning (done by
top managers, tactical planning (done by middle
managers), and operational planning (done by
first-line managers)

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Planning

Figure 5.1: Planning and Strategic Management

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Planning

Managers need to be cautious when planning

for two reasons:
1. Planning requires managers to set aside their
regular responsibilities to develop plans
2. Managers need to be flexible enough to react
to new events because there may not always
be enough time to plan

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How Planning Helps You

1. Helps you check on your progress

2. Helps you coordinate activities
3. Helps you think ahead
4. Helps you cope with uncertainty

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Uncertainty

There are three types of uncertainty:

1. When the environment is considered
unpredictable there is state uncertainty
2. When the effects of environmental changes
are unpredictable there is effect uncertainty
3. When the consequences of a decision are
uncertain there is response uncertainty

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Planning & Uncertainty

Four strategies to respond to uncertainty:

1. defenders are expert at producing and selling

narrowly defined products or services
2. prospectors focus on developing new products or
services and in seeking out new markets, rather than
waiting for things to happen
3. analyzers let other organizations take the risk of
product development and marketing and then imitate
what seems to work best
4. reactors make adjustments only when finally forced
to by environmental pressures

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The Adaptive Cycle

• Adaptive Cycle
 businesses are continuously cycling
through decisions about three kinds of
business problems: (1) entrepreneurial, (2)
engineering, and (3) administrative

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Planning & Uncertainty
Firms continuously make decisions about three
kinds of business problems:
1. entrepreneurial - selecting and making
adjustments of products and markets
2. engineering - producing and delivering the
products
3. administrative - establishing roles,
relationships, and organizational processes

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Fundamentals Of Planning
WHAT IS INVOLVED WITH PLANNING?

•Planning translates an organization’s mission

(purpose or reason for being) into objectives
•The mission statement answers the question
“what is our reason for being?”
•The vision statement answers the question
“what do we want to become?”
•Planning begins with the mission statement

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Fundamentals Of Planning
Figure 5.2: Making Plans

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Three Types of Planning for Three
Levels of Management
• Strategic planning
 Is done by top management where long-
term goals are determined and available
resources are identified
 determine what the organization’s long-
term goals should be for the next 1-5 years
with the resources they expect to have
available

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Three Types of Planning for Three
Levels of Management
• Tactical planning
 is done by middle management where
contributions their departments or similar
work units can make are determined
 determine what contributions their
departments can make during the next 6-
24 months

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Three Types of Planning for Three
Levels of Management
• Operational planning
 by first-line managers where how specific
tasks will be accomplished using available
resources is determined
 how to accomplish specific tasks within the
next 1-52 weeks

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Three Levels of Management, Three
Types of Planning

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Goals, Action Plans, & Operating
Plans
• Goals
 specific commitment to achieve a
measurable result within a stated period of
time
 also known as an objective
 strategic, tactical, operational

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Goals, Action Plans, & Operating
Plans
Type of Goals
•Strategic goals focus on objectives for the
organization as a whole
•tactical goals focus on the actions needed to
achieve strategic goals
•operational goals are concerned with short-
term matters associated with realizing tactical
goals

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Types of Planning Reports

•action plan which defines the course of action needed

to achieve stated goals
•operating plan defines how the firm will conduct
business based on the action plan - it identifies clear
targets such as revenues, cash flow, and market share
•standing plans are plans developed for activities that
occur repeatedly over a period of time
•Standing plans consist of policies (a standing plan that
outlines the general response to a designated problem
or situation), procedures (a standing plan that outlines
the response to a particular problem or circumstance),
and rules (a standing plan that designates specific
required action)
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Setting SMART Goals

• Specific
• Measurable
• Attainable
• Results-oriented
• Target dates

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What Is Management by Objectives
(MBO)?
• A planning technique for setting goals
developed by Peter Drucker in 1954
1. Jointly set objectives
2. Develop action plan
3. Periodically review performance
4. Give performance appraisal and
rewards, if any

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The Planning/Control Cycle

WHY HAVE PLANNING AND CONTROL?

•Once an organization has a plan, it needs to make sure

it stays on track
•The planning/control cycle has two planning steps, and
two control steps:
•planning steps: make the plan, and carry out the plan
•control steps: control the direction by comparing results
with the plan, and control the direction by taking
corrective actions

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The Planning/Control Cycle

Figure 5.5

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Project Planning

• Project management
 achieving a set of goals through planning,
scheduling, and maintaining progress of
the activities that comprise the project

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The Project Life Cycle

Figure 5.6

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The Project Life Cycle
3. During the execution stage, the
management style and control tools are
established
4. Closing occurs when the client accepts
the project

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