Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 2002 7-1

Chapter 7

FOUNDATIONSOF PLANNING

© Prentice Hall, 2002 7-7-11

Learning ObjectivesYou should learn to:

1. Define planning

2. Explain why managers plan

3. Describe what role goals play in planning

4. Distinguish among the different types of plans

5. Tell how goals are established

6. Describe the characteristics of well-designed goals


Learning Objectives (cont.)You should learn to:

1. Identify three contingency factors in planning

2. Explain the approaches to developing plans3. Discuss the criticisms of planning4. Describe what it takes to effectively plan in a

dynamic environment


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Homework

Answer the questions on chapters, 2 and 7.

Three weeks from today.

Research.

Write an operational plan to company\ institute. Try to be practical not theoretical.

Go and visit the company you would conduct the plan to.

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Case studyIn 2003 it was announced that British Airways (BA) would install 190

IBM self service kiosks at Heathrow Airport and all British Airways destination airports across Europe. The Kiosks are designed to make check in faster and more convenient, whilst optimizing space at airports. Customers can use the touch sensitive screens to check in, select seats and ask for upgrades without having to queue at desks. The new system was expected to reduce check in queues, providing a major boost to the volume of passengers that BA could handle at peak times. This was part of transportation strategy that BA could handle at peak times. The new strategy will change how customers do business with the Airline. BA expected to achieve 50% self service check in by 2005. the new service would improve customer service and high efficiency.

1- Explain the objectives that BA may have had in its transportation strategy?

2- what is the strategy used by BA?

What Is Planning?Planninginvolves defining the organization’s goals, establishing an

overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work

• informal planning - nothing is written down• little or no sharing of goals• general and lacking in continuity• Exist in small and large businesses.• formal planning – written• defines specific goals• specific action programs exist to achieve goals


Why Do Managers Plan?Purposes of Planning

1. planning is the primary management function that establishes the basis for all other management functions

2. planning establishes coordinated effort

3. planning reduces uncertainty

4. planning reduces overlapping and wasteful activities

5. planning establishes goals and standards used in controlling


Why Do Managers Plan? (cont.)Planning and Performance• formal planning is associated with:1. higher profits2. higher return on assets• quality of the planning process and the appropriate

implementation of the plans probably contribute more to high performance than does the extent of planning

• external environment may undermine the effects of formal planning

• planning/performance relationship is influenced by the planning time frame. It takes at least 4 years before performance is impacted.


How Do Managers Plan?Planning is called the primary management function. Why?The Role of Goals and Plans in Planning• goals - desired outcomes1. provide direction for all management decisions2. represent the criteria against which actual work

accomplishments can be measured• plans - outline how goals are going to be met• Types of Goals• all organizations have multiple objectives• no single measure can evaluate whether an organization is

successful• financial goals - relate to financial performance• strategic goals - relate to other areas of performance


Stated Objectives From Large US Companies


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© Prentice Hall, 2002

Group work

Write down some of the university goals?

How Do Managers Plan? (cont.)The Role of Goals and Plans in Planning (cont.)

• Types of Goals (cont.)1. stated goals - official statements of the

organization’s goals. They reflect what society (stakeholders) believes organization should do.

Ex. Growing our customer base, building market leadership, increasing profitability. These quite irrelevant and vague.

2. real goals - those goals that an organization actually pursues. Ex. Limiting class size.


How Do Managers Plan? (cont.)The Role of Goals and Plans in Planning (cont.)Types of PlansFirst: by breadth:1. strategic plans - apply to the entire organization• establish organization’s overall goals• seek to position the organization in terms of its

environment.• Covers a longer time frame. 2. operational plans - specify the details of how the overall

goals are to be achieved– tend to cover short time periods– Short-term 1 year or less.


Types Of Plans

Breadth

StrategicOperational

Specificity

DirectionalSpecific

Frequency of Use

Single useStanding

Time Frame

Long termShort term


How Do Managers Plan? (cont.)The Role of Goals and Plans in Planning (cont.)

Types of Plans (cont.)Second: by time frame:long-term plans - time frame beyond three years. Definition of long term

has changed with increasingly uncertain organizational environments.short-term plans - cover one year or less.Third: by specificity:specific plans - clearly defined with little room for interpretation.

Required clarity and predictability often do not exist, because of environment dynamic. Ex. (setting a plan with specific objective, procedures, budgets and time frame.

directional plans - flexible plans that set out general guidelinesprovide focus without limiting courses of action. It is flexible to respond

to unexpected change.


Specific Versus Directional Plans


How Do Managers Plan? (cont.)The Role of Goals and Plans in Planning (cont.)Types of Plans (cont.)Fourth: by frequency of use: single-use plans - one-time plans specifically

designed to meet the needs of a unique situation. Ex. Setting a plan to introduce a new service.

standing plans - ongoing plans that provide guidance for activities performed repeatedly

• include policies, procedures, and rules


How Do Managers Plan? (cont.)Establishing Goals

• Approaches to Establishing Goals• traditional goal setting - overall goals established at the top

of the organization. overall goals are broken down into sub-goals for each level of the organization.

• higher-level goals must be made more specific at lower levels.

• network of goals creates a means-ends chain.• Sub-goals constrain subordinates’ behavior.• assumes that top managers know what is best for the

organization• Achieving the goals at a low level becomes the means to

reach the goals at the next level.© Prentice Hall, 2002 7-7-1818

Traditional Objective Setting


IndividualEmployee’sObjective

TopManagement’s

Objective

DepartmentManager’sObjective

DivisionManager’sObjective

“Increase profits, regardlessof the means”

“I want to see asignificant improvementin this division’s profits”

“We need to improvethe company’s performance”

“Don’t worry aboutquality: just work fast”

How Do Managers Plan? (cont.)Approaches to Establishing Goals (cont.)• management by objectives (MBO) - specific

performance goals are jointly determined by employees and their managers

• progress toward accomplishing these goals is periodically reviewed

• rewards are allocated on the basis of this progress• MBO consists of four elements :1. goal specificity2. participative decision making3. explicit time period4. performance feedback


Steps in a Typical MBO Program


How Do Managers Plan? (cont.)Approaches to Establishing Goals (cont.)

management by objectives (cont.)

Benefits:

1. increases employee performance and organizational productivity

2. depends on support of top managers for MBO• problems with MBO

1. can be useless in times of dynamic change

2. overemphasis on personal rather than organizational goals

3. may be viewed simply as an annual exercise in paperwork


Characteristics of Well-Designed Goals1. should be written in terms of outcomes

2. should be measurable and quantifiable

3. should be clear as to a time frame

4. should be challenging but attainable

5. should be written down

6. should be communicated to all organization members who need to know the goals

• SMART: Specific, Measurable, Attainable. Realistic, Timing.


Steps in Goal Setting• 1 - Review the organization’s mission

• 2 - Evaluate available resources

• 3 - Determine the goals individually or with input from others. -should be congruent with the organizational mission and goals in other organizational areas

• 4 - Write down the goals and communicate them to all who need to know them

• 5 - Review results and whether goals are being met


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Group work

Write down some of specific objectives”

Ex. Improving company market share. (goal)

Increasing company market share by 10% in the year 2006. (objective)

Developing Plans

Three Contingency Factors affect Planning:

• 1- level in the organization–operational planning dominates managers’

planning efforts at lower levels

–strategic planning more characteristic of planning at higher levels


Planning In The Hierarchy Of Organizations

StrategicPlanning

OperationalPlanning

TopExecutives

Middle-LevelManagers

First-LevelManagers


Developing Plans (cont.)– Contingency Factors in Planning (cont.)– 2- degree of environmental uncertainty– when uncertainty is high, plans should be specific, but

flexible.– 3- length of future commitments– commitment concept - plans should extend far enough to

meet those commitments made when the plans were developed

– the more that current plans affect future commitments, the longer the time frame for which managers should plan


Approaches to Planning• traditional, top-down approach• planning done by top managers• formal planning department - specialists whose sole

responsibility is to help to write organizational plans– plans flowed down to lower levels

» tailored to particular needs at each lower level– most effective if plan is a workable document used

by organizational members for direction and guidance


Approaches to Planning (cont.)– inclusive approach:

– employees at each level develop plans suited to their needs

– employees acquire greater sense of the importance of planning when they participate in the process

– plans more likely to be used in directing and coordinating work


Contemporary Issues In PlanningCriticisms of Planning

1. Planning may create rigidity• unwise to force a course of action when the environment is fluid • 2. Plans can’t be developed for a dynamic environment

• flexibility required in a dynamic environment• can’t be tied to a formal plan

– 3. Formal plans can’t replace intuition and creativity• mechanical analysis reduces the vision to some type of programmed

routine


Contemporary Issues In Planning (cont.)Criticisms of Planning (cont.)

– 4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival• plans concentrate on capitalizing on existing business

opportunities• hinders managers who consider creating or reinventing an

industry– 5. Formal planning reinforces success, which may lead to failure

• success may breed failure in an uncertain environment


Contemporary Issues In Planning (cont.)Effective Planning in Dynamic Environments

• develop plans that are specific, but flexible

• recognize that planning is an ongoing process

• change directions if environmental conditions warrant

• stay alert to environmental changes


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Operational plan for the faculty of commerce

The goal: Promote quality of graduates.

Objective: Develop skills and knowledge of staff Strategies\ activities

Who is responsible

Date Evaluation cost

Strategy: Train staff on different skills

Activities: Two Training courses for all staff on teaching skills

Deputy dean

March- May 2008

Report, Questionnaire results

2000$

Two training courses in English

Deputy dean

June- July 2008

Report, Questionnaire results

2000$

Documents

Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 2002 7-1