MANAGEMENT PLANNING PROCESS

Ms. PALLAVI GHANSHYALA LECTURER, ASB

PLANNING
Planning includes all the activities that lead

to the definition of objectives and to the determination of appropriate courses of action to achieve those objectives. Planning involves defining the organizations goals, establishing an overall strategy for achieving those goals and developing plans for organizational work activities. Its concerned with both ends (whats to be done) and means (how its to be done).

WHAT IS THE NEED OF PLANNING?

PLANNING AND PERFORMANCE

Formal planning is associated with positive

financial results Higher profits. Higher returns on assets. The quality of planning and implementation is more closely linked to high performance than the extent (how wide) of planning. The external environment (e.g. government regulations) constrains managers options (choices) and can reduce the impact (effect) of planning on performance. Formal planning must be used for several years before it begins to positively affect performance.

HOW DO MANAGERS PLAN?

The Role of Goals and Plans in Planning
Goals or Objectives are desired outcomes for

individuals, groups, or entire organizations.

They provide direction (focus) for plans and

decisions. They form the criteria for evaluating results.

Plans are documents that outline how goals are going to be met (accomplished). They determine resource allocations , timetables and other necessary actions to accomplish the goals.

STEPS IN GOAL SETTING

Review the organizations mission, the

purpose of an organization Evaluate available resources Determine the goals individually or with input from others Write down the goals and communicate them to all who need to know I mplement the goals Review results and whether goals are being met

CHARACTERISTICS OF WELL DEFINED GOALS

Written in terms of outcomes rather than

actions. Measurable and quantifiable Clear as to a time frame Challenging yet attainable Written down Communicated to all necessary organizational members

STATED GOALS OF LARGE GLOBAL COMPANIES

TYPES OF PLANS

FEATURES OF PLANNING

GOAL-ORIENTED. PRIMARY FUNCTION. MENTAL-EXERCISE. CONTINUOUS. INVOLVES CHOICE. FORWARD LOOKING. FLEXIBLE. INTEGRATED PROCESS. INCLUDES EFFICIENCY & EFFECTIVENESS DIMENSION

IMPORTANCE OF PLANNING
PROVIDES DIRECTION UNIFYING FRAMEWORK ECONOMICAL

FACILITATES DECISIONMAKING

PLANNING

REDUCES RISK OF UNCERTAINTY

IMPROVES MORALE FACILITATES CONTROL

ENCOURAGES INNOVATION & CREATIVITY

TYPES OF PLANNING

TYPES OF PLANNINGcontd.

STRATEGIC PLANNING
Strategic planning is conducted at a higher level of an

organization than tactical planning and is broad in scope. It is both continuous and irregular in response to nonroutine stimuli. Is heavily dependent upon subjective assessments. Usually involves choice among a range of alternatives. Uncertainty is high in strategic planning. The problems confronted by strategic planning are unstructured and usually unique.

STRATEGIC PLANNINGcontd.
It requires large amounts of information and tends to

encompass the entire scope of activity of an organization. other planning, especially tactical planning.

It constitutes the point of reference or framework for Involves only the senior managers of an organization. The effectiveness and efficiency of a strategy is hard

to evaluate.

Strategic planning is usually conducted from the

perspective of the organization as a whole.

OPERATIONAL PLANNING
Operational planning is related to anticipating and scheduling day-to-day

activities in a wide variety of organizational settings. The time frame for an operational plan is usually 1 year or less. It is a plan for a connected series of activities to achieve senior management's objectives within a given time frame. A business operational plan contains: 1. business process changes 2. major activities in functional areas like marketing and finance 3. any organizational culture issues 4. budget plans 5. logistics plans for delivering products or services 6. human resource and managerial policy decisions critical to running the business. Strategic plans include the formulation of goals whereas operational plans define ways to achieve the goals.

TACTICAL PLANNING
Tactical plans have shorter time frames and

narrower scopes than strategic plans. It provides the specific ideas for implementing the strategic plan. It is the process of making detailed decisions about what to do, who will do it, and how to do it. Tactical planning is often done on a fixed schedule. The problems confronted in tactical planning tend to be of a repetitive nature. It usually has a short time horizon. Tactical planning concentrates on a narrow operational planning task. Tactical planning is usually done from a functional point of view.

PLANNING TIME LINE

Strategic 2 Years 6 months 5 Years

Plans

Tactical

2 years 30 days

Operational

6 months 0 1 2 3 Years 4 5 6

ASSIGNMENT
Microsoft, Google and Yahoo are the most

discussed, analyzed, critiqued, and reviewed companies in the world. Using the internet and other sources, find statements that represent the firms strategic, operational, and tactical planning approaches. You should prepare few brief statements that indicate what these organizations are doing in these three different planning areas.

ELEMENTS OF PLANNING

THE PLANNING PROCESS

FEEDBAC K

ESSENTIALS TO OBJECTIVES

Major objectives are profitability, competitiveness, Efficiency, flexibility and quality

Objectives need to emphasize quality over quantity

ACTIONS
FORECASTING: the process of using past and current

information to predict future events. External conditions to be measured include the price of the competing products, the levels of consumer income, consumer interest rates and other measures of local economic activity. SCENARIO CONSTRUCTION: is a technique for combining possible environmental developments in a systematic way to help managers assess possible consequences of alternative courses of action.

MEANS OF IMPLEMENTING PLANS

AUTHORITY: a legitimate form of power,

which comes because of the position and not person. PERSUASION: process of selling a plan to those who must implement it and communicating relevant information so Flexibility individuals understand all implications. POLICY: Clarity Comprehensiveness

Ethical

Coordination

STEPS IN PLANNING

PLANNING IN THE HIERARCHY OF ORGANIZATIONS

LIMITATIONS OF PLANNING
RIGID COSTLY TIMELY

RESISTANCE PLANNING

MANAGERIAL DEFICIENCIES

FALSE SENSE OF SECURITY PREVENTS INNOVATION NATURAL CALAMITIES

UNCERTAINTY CANT BE RULED OUT FULLY

MANAGEMENT BY OBJECTIVES (MBOs)

Management by Objectives(MBO) is a

process of agreeing uponobjectiveswithin an organization so thatmanagementandemployeesagree to the objectives and understand what they are in the organization. The term "management by objectives was first popularized byPeter Drucker in1954, in his book 'The Practice of Management'.

MBOs
The essence of MBO is participative goal setting,

choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employees actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

STEPS IN A TYPICAL MBO PROGRAM

The organizations overall objectives and strategies are

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

PRINCIPLES OF MBOs
Cascading of organizational goals and

objectives. Specific objectives for each member. Participative decision making. Explicit time period. Performance evaluation and feedback.

ADVANTAGES OF THE MBO PROCESS

Motivation Involving employees in the whole process

of goal setting and increasing employee empowerment increases employee job satisfaction and commitment. Better communication and Coordination Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period. Clarity of goals Subordinates have a higher commitment to objectives that they set themselves than those imposed on them by their managers. Managers can ensure that objectives of the subordinates are linked to the organization 's objectives.

OBJECTIVES IN CONTEXT OF MBOs

Management By Objectives also introduced

the SMART method for checking the validity of objectives. According to them, goals/objectives should be: Specific Measurable Achievable Realistic Time- related

HIERARCHIES OF OBJECTIVES (MEANS- ENDS CHAIN)

Mission and purpose Objectives Ends (Objectives) (Ends) Set by Top Management

Means Middle Management Means to achieve objectives (ends) set By Top Management Sub- Means Middle management establishes objectives (ends) that lower management must achieve Sub- sub Means

Lower Level Management prepares plans (means) for accomplishing Middle Management Objectives (ends)

FORECASTING
Forecastingis the process of making statements

about events whose actual outcomes (typically) have not yet been observed.
Forecasting can be described as predicting what the

futurewilllook like, whereas planning predicts what the futureshouldlook like.

There is no single right forecasting method to use.

Selection of a method should be based on your objectives and your conditions (data etc.).

Forecasts are used to predict hiring requirements,

factory space needs, employee training expenditures and health care costs, among other decisions important to the firm. For instance a sales forecast would include past and current information about the firms product, price, advertising and cost of goods sold. External conditions to be measured include the price of competing products, the levels of consumer income, consumer credit interest rates and other measures of local economic activity.

WHY IS BUSINESS FORECASTING IMPORTANT?

Provides a competitive edge for making changes Anticipate and avoid problems in business operations Direct and guide sales and marketing activities Manage cash Reduce inventories and obsolete products

STEPS IN FORECATING

Feedback

WHAT ARE THE USEFUL SOURCES OF FORECASTING INFORMATION?

Primary sources Company data Surveys Secondary sources Government reports Private forecasts Library resources World-wide web sources

MAJOR FORECASTING TECHNIQUES

Quantitative Techniques Econometric models and simulations Regression Other Time series models Qualitative Techniques Judgmental methods like Sales Force Estimates Customer Surveys Delphi method Scenario development

STRATEGIC PLANNING

STRATEGIC PLANNINGINTRODUCTION
STRATEGY: the larger vision that guides

the activities of managers and other employees in an organization. It is a process that results in an outcome, which is the basis for organizational decisions and actions. STRATEGIC THINKING: The determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

STRATEGIC PLANNING
STRATEGIC PLANNING is a process that involves:
review of market conditions customer needs competitive strengths and weaknesses sociopolitical, legal and economic

conditions technological developments availability of resources that lead to the specific opportunities or threats facing the organization.
It involves taking information from the environment

and deciding upon the organizational mission and upon objectives, strategies and a strategic architecture.

STRATEGIC PLANNING PROCESS

Organizational environment Sociocultu ral milieu Technological developments Economic conditions Political environm ent Stakeholde r strategies Strategic Planning Process Organizational outcomes Organization al mission statement Organization al goals and objectives Operating strategies

STRATEGIC PLANNING PROCESS

LEVELS OF ORGANIZATIONAL STRATEGY

WHY IS STRATEGIC PLANNING IMPORTANT?

It results in higher organizational

performance.
It requires that managers examine and

adapt to business environment changes.

It coordinates diverse organizational units,

helping them focus on organizational goals.

It is very much involved in the managerial

decision-making process.

MAJOR COMPONENTS OF THE STRATEGIC PLAN / DOWN TO ACTION

Strategic Plan

Mission Vision Goals Objectives Initiatives

AI1 O1 AI2 AI3

Why we exist
What we want to be

Action Plans Evaluate Progress

What we must achieve to be successful O2

Specific outcomes expressed in measurable Actions to Planned terms (NOT activities) Objectives Achieve Indicators and Monitors of success Desired level of performance and timelines

Measures M1 M2 M3 Targets
T1 T1 T1

STRATEGIC THINKING FRAMEWORKS

PROTERS FIVE FORCES

BARGAINING POWER OF SUPPLIERS

The term 'suppliers' comprises all sources for

inputs that are needed in order to provide goods or services. Supplier bargaining power is likely to be high when:
o The market is dominated by a few large suppliers rather

than a fragmented source of supply o There are no substitutes for the particular input o The switching costs from one supplier to another are high o There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins

BARGAINING POWER OF CUSTOMERS

The bargaining power of customers determines how much

customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when: o They buy large volumes o There is a concentration of buyers o The supplying industry comprises a large number of small operators o The product is undifferentiated and can be replaced by substitutes o Switching to an alternative product is relatively simple and is not related to high costs o Customers have low margins and are price sensitive o Customers could produce the product themselves o The product is not of strategic importance for the customer o The customer knows about the production costs of the product

COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS

This force describes the intensity of competition

between existing players (companies) in an industry. Competition between existing players is likely to be high when:
o There are many players of about the same size o Players have similar strategies o There is not much differentiation between players and their

products, hence, there is much price competition o Low market growth rates (growth of a particular company is possible only at the expense of a competitor) o Barriers for exit are high (e.g. expensive and highly specialized equipment)

THREAT OF NEW ENTRANTS

The threat of new entries will depend on the extent to

which there are barriers to entry. These are typically:

o o o o o o o

o Economies of scale (minimum size requirements for profitable

operations) High initial investments and fixed costs Brand loyalty of customers Protected intellectual property like patents, licenses etc Scarcity of important resources, e.g. qualified expert staff Access to raw materials is controlled by existing players Distribution channels are controlled by existing players Existing players have close customer relations, e.g. from long-term service contracts

THREAT OF SUBSTITUTES
A threat from substitutes exists if there are alternative

products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products. Similarly to the threat of new entrants, the threat of substitutes is determined by factors like:
o Brand loyalty of customers o Close customer relationships o Switching costs for customers o The relative price for performance of substitutes

SWOT ANALYSIS
SWOT analysisis astrategic planning

method used to evaluate theStrengths,Weaknesses,Opportunities, andThreats involved in aprojector in a businessventure. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.

ecialist marketing expertise Lack of marketing expertise clusive excess to natural resourcesUndifferentiated products and servic ents Location of your business

w, innovative product or service Competitors have superior access to cation of your business business channels st advantage through propriety know how Poor quality goods or services ality processes and procedures Damaged reputation ong brand or reputation

eloping market (China, Internet)A new competitor in your home market gers, joint ventures or strategicPrice war alliances Competitor has a new, innovative subs ing into new attractive market segments product or service

New regulations ew international market Increased trade barriers sening of regulations Taxation may be introduced on your moval of international trade barriers arket led by a weak competitor product or service

DECISION MAKING

DECISION MAKING CONCEPT

A decision can be defined as a conscious choice

among alternatives followed by actions to implement the decision.

Decision makingcan be regarded as the

mental processes (cognitive process) resulting in the selection of a course of action among several alternatives. Every decision making process produces a finalchoice.

DECISION MAKING VARIABLES

TYPES OF DECISIONS

PROGRAMMED & NONPROGRAMMED DECISIONS

PROGRAMMED DECISIONS NONPROGRAMMED DECISIONS Novel, unstructured, much uncertainty Types of Frequent, repetitive, Regarding cause and effect relationships problem routine, much certainty regarding cause and effect Necessity for creativity, intuition, tolerance Procedure Relationships For ambiguity, creative problem solving Dependence on policies, Business: diversification into new products rules and definite procedures. And markets Examples Business: periodic recorders of Inventory University: construction of new classroom Facilities Hospital: purchase of experimental Equipment University: necessary GPA Government: reorganization of state for good Government agencies academic standing Hospital: procedures for

PROACTIVE AND REACTIVE DECISIONS

INTUITIVE AND SYSTEMATIC DECISION MAKING

INTUITIVE v/s SYSTEMATIC DECISION MAKING

INTUITIVE SYSTEMATIC

My hunch is that we should Customer surveys have indicated that we improve need to improve post sale support. Customer support after we sell Control charts indicate that this process has them our Product. been operating beyond the control limits for seven consecutive weeks. Therefore somethin This process is out of control needs to be done. and needs Based on success Ive observed with TQM in Adjustment. firms similar to ours, we too could probably benefit from its principles and techniques. My feeling is that this firm could benefit from TQM.

THE DECISION-MAKING PROCESS

Identifying a problem and decision criteria and allocating weights to the criteria. Developing, analyzing, and selecting an alternative that can resolve the problem.

Implementing the selected alternative.

Evaluating the decisions effectiveness.

THE DECISION-MAKING PROCESS

DECISIONS IN THE MANAGEMENT FUNCTIONS

TYPES OF PROBLEMS AND DECISIONS

Structured Problems
Involve goals that are clear. Are familiar (have occurred before). Are easily and completely defined

information about the problem is available and complete.

Programmed Decision
A repetitive decision that can be

handled by a routine approach.

TYPES OF PROGRAMMED DECISIONS

Policy
A general guideline for making a decision

about a structured problem.

Procedure
A series of interrelated steps that a manager

can use to respond (applying a policy) to a structured problem.

Rule
An explicit statement that limits what a

manager or employee can or cannot do.

PROBLEMS AND DECISIONS (CONTD)

Unstructured Problems
Problems that are new or unusual and for which

information is ambiguous or incomplete.

Problems that will require custom-made

solutions.
Nonprogrammed Decisions
Decisions that are unique and nonrecurring. Decisions that generate unique responses.

DECISION-MAKING CONDITIONS
Certainty
A situation in which a manager can make an accurate

decision because the outcome of every alternative choice is known.

Risk
A situation in which the manager is able to estimate the

likelihood (probability) of outcomes that result from the choice of particular alternatives.
Uncertainty
Limited information prevents estimation of outcome

probabilities for alternatives associated with the problem and may force managers to rely on intuition, hunches, and gut feelings.

RATIONALITY IN DECISION MAKING

Rationality is the ability to follow a

systematical, logical, thorough approach in decision making. Three dimensions to determine rationality: i. The extent to which a given action satisfies human interests ii. Feasibility of means to the given end iii.Consistency If appropriate means are chosen to reach desired ends, the decision is said to be rational.

TYPES OF DECISION MAKERS

Directive
Use minimal information and consider few

alternatives.

Analytic
Make careful decisions in unique situations.

Conceptual
Maintain a broad outlook and consider many

alternatives in making decisions.

Behavioral
Avoid conflict by working well with others and being

receptive to suggestions.

DECISION-MAKING MATRIX

COMMON DECISION-MAKING ERRORS AND BIASES

DECISION-MAKING BIASES AND ERRORS

Heuristics
Using rules of thumb to simplify decision

making.
Overconfidence Bias
Holding unrealistically positive views of ones self

and ones performance.

Immediate Gratification Bias
Choosing alternatives that offer immediate

rewards and that to avoid immediate costs.

 Anchoring Effect
Fixating on initial information and

ignoring subsequent information.

Selective Perception Bias

Selecting organizing and

interpreting events based on the decision makers biased perceptions.

Confirmation Bias
Seeking out information that

reaffirms past choices and discounting contradictory information.

Framing Bias
Selecting and highlighting certain aspects of a

situation while ignoring other aspects.

Availability Bias
Losing decision-making objectivity by focusing on the

most recent events.

Representation Bias
Drawing analogies and seeing identical situations

when none exist.

Randomness Bias
Creating unfounded meaning out of random events.

Sunk Costs Errors

Forgetting that current actions cannot

influence past events and relate only to future consequences.

Self-Serving Bias
Taking quick credit for successes and

blaming outside factors for failures.

Hindsight Bias
Mistakenly believing that an event could

have been predicted once the actual outcome is known (after-the-fact).

GUIDELINES FOR MAKING EFFECTIVE DECISIONS:

1 2 3
Understand cultural differences. Know when its time to call it quits.

Use an effective decisionmaking process

CHARACTERISTICS OF AN EFFECTIVE DECISIONMAKING PROCESS

It focuses on what is important. It is logical and consistent. It acknowledges both subjective and

objective thinking and blends analytical with intuitive thinking. analysis as is necessary to resolve a particular dilemma.

It requires only as much information and

It encourages and guides the gathering of It is straightforward, reliable, easy to use,

relevant information and informed opinion. and flexible.

THANK YOU!!!!