CHAPTER-5

UNIT 2

PLANNING
PLANNING DEFINED
 Planning
 A primary managerial activity that involves:
 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).
Formal planning:
 Specific goals covering a specific time period
 Written and shared with organizational members
HOW DO MANAGERS PLAN?
 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

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TYPES OF GOALS
 Financial Goals - related to the expected
internal financial performance of the
organization.
 Strategic Goals - related to the performance of
the firm relative to factors in its external
environment (e.g., competitors).
PURPOSE OF PLANNING
CHALLENGES OF 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.
PLANNING AND PERFORMANCE

 Formal planning generally means higher profits,

higher return on assets, and other positive
financial results.
 Planning process quality and implementation
probably contribute more to high performance
than does the extent of planning.
 When external environment restrictions allowed
managers few viable alternatives, planning did
not lead to higher performance.
STEPS IN PLANNING
TYPES OF PLANS

BREADTH TIME SPECIFICITY FREQUENCY

OF USE FRAME OF USE

Strategic Long term Directional Single use

Tactical Short term Specific Standing
 Strategic plans
 Plans that are organization-wide, establish overall
objectives, and position an organization in terms of
its environment
 Tactical plans
 Plans that specify the details of how an
organization’s overall objectives are to be achieved
 Short-term plans
 Plans that cover less than one year
 Long-term plans
 Plans that extend beyond five years
 Strategic plans
 Apply broadly to the entire organization
 Establish the organization’s overall objectives
 Seek 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 time
 Are less specific in their details
 Tactical plans (operational plans)
 Apply to specific parts of the organization.
 Are derived from strategic objectives
 Specify the details of how the overall objectives are to
be achieved.
 Cover shorter periods of time
 Must be updated continuously to meet current
challenges
DIRECTIONAL VS SPECIFIC PLANS
 Specific plans
 Plans that have clearly defined objectives and leave
no room for misinterpretation
 “What, when, where, how much, and by whom” (process-
focus)

 Directional plans
 Flexible plans that set out general guidelines
 “Go from here to there” (outcome-focus)
 Single-use plans
 A plan that is used to meet the needs of a particular
or unique situation
 Single-day sales advertisement
 Standing plan
 A plan that is ongoing and provides guidance for
repeatedly performed actions in an organization
 Customer satisfaction policy
STRATEGIES & POLICIES
 Strategy is the determination of the mission (or
the fundamental purpose) and the basic long-
term objectives of an enterprise, and the adoption
of courses of action and allocation of resources
necessary to achieve these aims.
 Policies are general statements or
understandings that guide managers' thinking in
decision making.
STRATEGIC PLANNING PROCESS
STRATEGIC PLANNING PROCESS
 Inputs to the organization
 Industry analysis

 Enterprise profile

 Orientation, values, and vision

 Mission (purpose), major objectives, and strategic

intent
 Present and future external environment

 Internal environment
CONTD.
 Development of alternative strategies
 Evaluation and choice of strategies

 Medium- and short-range planning

 Implementation through reengineering, staffing,

leadership, and control
 Consistency testing and contingency planning
DECISION MAKING
 Decision-making process
 A set of eight steps that includes identifying a
problem, selecting a solution, and evaluating the
effectiveness of the solution
 Problem
 A discrepancy between an existing and a desired
state of affairs
 Decision criteria
 Factors that are relevant in a decision
EXAMPLES OF PLANNING FUNCTION
DECISIONS

 What are the organization’s long-term

objectives?
 What strategies will best achieve those
objectives?
 What should the organization’s short-term
objectives be?
 What is the most efficient means of completing
tasks?
 What might the competition be considering?
 What budgets are needed to complete
department tasks?
 How difficult should individual goals be?
DECISION MAKING PROCESS
CRITERIA AND WEIGHT IN CAR-BUYING
DECISION (SCALE OF 1 TO 10)
CRITERION WEIGHT
Price 10
Interior comfort 8
Durability 5
Repair record 5
Performance 3
Handling 1
SETTING GOALS AND DEVELOPING PLANS
 Traditional 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.

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 Copyright © 2010 Pearson
Education, Inc. Publishing as
7–25

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EXHIBIT 7–2 THE DOWNSIDE OF TRADITIONAL GOAL
SETTING
Setting Goals and Developing
Plans
 Maintaining the Hierarchy of Goals
 Means–Ends Chain
 The integrated network of goals that results from establishing a
clearly-defined hierarchy of organizational goals.
 Achievement of lower-level goals is the means by which to reach
higher-level goals (ends).

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SETTING GOALS AND DEVELOPING PLANS

 Management By Objectives (MBO)

 Specific performance goals are jointly determined by
employees and managers.
 Progress toward accomplishing goals is periodically
reviewed.
 Rewards are allocated on the basis of progress towards the
goals.
 Key elements of MBO:
 Goal specificity, participative decision making, an explicit
performance/evaluation period, feedback

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 Education, Inc. Publishing as
EXHIBIT 7–3 STEPS IN A TYPICAL MBO PROGRAM

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1. The organization’s overall objectives and strategies are

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formulated.
2. Major objectives are allocated among divisional and
departmental units.
3. Unit managers collaboratively set specific objectives for
their units with their managers.
4. Specific objectives are collaboratively set with all
department members.
5. Action plans, defining how objectives are to be achieved,
are specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and
feedback is provided.
8. Successful achievement of objectives is reinforced by
performance-based rewards. 7–28
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EXHIBIT 7–4 WELL-WRITTEN GOALS

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• Written in terms of • Challenging yet

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outcomes, not actions attainable
 Focuses on the ends, not  Low goals do not motivate.
the means.  High goals motivate if
• Measurable and they can be achieved.
quantifiable • Written down
 Specifically defines how  Focuses, defines, and
the outcome is to be makes goals visible.
measured and how much • Communicated to all
is expected.
necessary organizational
• Clear as to time frame members
 How long before  Puts everybody “on the
measuring same page.” 7–29
accomplishment.
DOES MBO WORK?
 Reason for MBO Success
 Top management commitment and involvement
 Potential Problems with MBO Programs
 Not 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.

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STEPS IN GOAL SETTING
1. 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
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goals?
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