Chapter 8 Planning - Engage. Explore. ENDEAVOUR. … · !Chapter 8: Planning and Controlling !Chapter 9: ... 6 STUDY QUESTION 4 ... Controlling "The process of measuring performance

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BOH4M Unit 2: Planning, Controll ing, and Strategizing Ms. Schirk

CHAPTER 8: PLANNING AND CONTROLLING

COURSE PROGRESS

Ø Unit 1: Management Fundamentals Ø Unit 2: Planning, Controlling, and Strategizing

Ø Chapter 8: Planning and Controlling Ø Chapter 9: Strategic Management

Ø Unit 3: Leading Ø Unit 4: Management Challenges Ø Unit 5: Organizing

PLANNING AHEAD — CHAPTER 8 STUDY QUESTIONS

Ø How do managers plan? Ø What types of plans do managers use? Ø What are the useful planning tools and

techniques? Ø What is the control process? Ø What are the common organizational controls?

STUDY QUESTION 1: HOW DO MANAGERS PLAN?

§ Key terms to know: § Planning § The process of setting objectives and determining

how to best accomplish them. § Objectives § Identify the specific results or desired outcomes

that one intends to achieve. § Plan § A statement of action steps to be taken in order to

accomplish the objectives.

STUDY Q.1: HOW DO MANAGERS PLAN?

¡ Planning: § Is the proactive process of setting objectives and

determining how to accomplish them. § Helps anticipate problems before they happen § Bridges the gap between where the business is

now and where it wants to be


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¡ Steps in the planning process: 1.  Define your objectives. §  Identify desired outcomes or results in very

specific ways 2.  Determine where you stand vis-à-vis objectives. §  Evaluate current accomplishments relative to

the desired results. 3.  Develop premises regarding future conditions. §  Generate alternative scenarios for what may

happen in the future, and identify things that may help or hinder progress toward your objectives.


¡ Steps in the planning process: 4.  Analyze and choose among action alternatives. §  Evaluate plans, policies, and procedures, and

decide what must be done to follow the course of action.

5.  Implement the plan and evaluate results. §  Carefully measure progress toward objectives,

taking corrective actions and revising plans as needed.


¡ Figure 8.1 The roles of planning and controlling in the management process.


§ Benefits of planning:

§ Improves focus and flexibility.

§ Improves action orientation.

§ Improves coordination.

§ Improves time management.

§ Improves control.


§  Figure 8.2 A sample means-ends chain for total quality management.

STUDY Q.1: HOW DO MANAGERS PLAN? STUDY Q.1: HOW DO MANAGERS PLAN?

Explaination Link

Time Management Matrix

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Consider the following: ¡ What kind of a planner are you? ¡ When you are assigned a major project, do you map

out a plan for completing it? ¡ Do you manage your time well? ¡ Do you prioritize important tasks to make sure they

are completed first? ¡ What is the biggest “time waster” that prevents you

from completing essential tasks on time? ¡ Have you created a plan for what you will do after

completing high school?


STUDY QUESTION : WHAT TYPES OF PLANS DO MANAGERS USE?

¡ Short-range plans = 1 year or less § Action plan: used to operationalize any other

type of plan § Reaction plan: developed to react to an

unforeseen circumstance ¡ Intermediate-range plans = 1 – 4 years § Central focus of planning activities for many

organizations ¡ Long-range plans = more than 5 years § Difficult for managers in complex, volatile

environments

STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?

¡ Lower management levels focus on short-range plans

¡ Intermediate plans are important for middle and first-line managers

¡ Top or higher management levels focus on setting long-range plans and directions for the organization



¡ Strategic plans: § Set by board of directors or top management to

establish broad, comprehensive, and longer-term action directions for the entire organization

§  General plan outlining decisions of resource allocation, priorities, and action steps


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¡ Tactical plans: § Used by upper and middle management to

achieve tactical goals and implement parts of a strategic plan

§ Specify relevant resource and time issues and identify human resources commitments

§ Monitor horizontal and vertical communication and integration of activities

§ Have a shorter time horizon and a more specific and concrete focus


¡ Operational plans: § Developed by middle and lower-level managers

to define what needs to be done in specific areas to implement strategic plans

§ Focus on carrying out tactical plans to achieve operational goals

§ E.g. Production plans, financial plans, marketing plans


¡ Operational plans continued: § Single-use plans: Only used once to meet the

objectives of a well-defined situation in a timely manner § Program: A single-use plan for a large set of

activities § Projects: One-time activities with clear

beginning and end (less scope & complexity than a program)

§ Budgets: Commit resources to activities, projects, or programs


¡ Standing plans: § Policies and procedures that are designed for

repeated use § Policies: broad guidelines for making decisions

and taking action in specific circumstances. § Rules/standard operating procedures: plans

that describe exactly what actions are to be taken in specific situations


STUDY QUESTION 3: WHAT ARE THE USEFUL PLANNING TOOLS AND

TECHNIQUES?

¡ Forecas-ng § Process of predic-ng what will happen in the future

§ Qualita-ve forecas-ng uses expert opinion § Quan-ta-ve forecas-ng uses mathema-cal and sta-s-cal analysis.

§ All forecasts rely on human judgment.

STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?

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¡ Con-ngency planning § Iden-fies alterna-ve courses of ac-on that can be implemented to meet the needs of changing circumstances

§ Helps managers cope with uncertainty and an-cipate changing condi-ons

§ Contain trigger points


¡ Scenario planning § A long-‐term version of con-ngency planning § Involves iden-fying alterna-ve future scenarios and making plans for each

§ Increases organiza-on’s flexibility and prepara-on for future shocks


¡  In early 1973, Pierre Wack, head of Corporate Planning for Royal Dutch/Shell , was frustrated because he felt that Shell (and indeed the en-re world) was opera-ng on the basis of two ques-onable assump-ons: that the supply of oi l would remain plen-ful and that the price of oi l would remain low.

¡  Wack developed an approach now referred to as Scenario Planning where he presented a series of short stories about possible futures to senior management at Shell .

¡  In one scenario, an accident in Saudi Arabia led to the severing of an oil pipeline, which in turn decreased produc-on and supply, thus crea-ng a market reac-on that increased oil prices (al lowing OPEC na-ons to pump less oi l but make more money).

¡  Senior management, when confronted with the scenario, re-‐examined its assump-ons about oi l price and supply. Inves-ga-ng further, they concluded that OPEC was preparing to increase oi l prices.

¡  When the oil price shocks of 1973 hit, Shell was the only major western company (or na-on for that ma[er) that was prepared. Within two years, Shell moved from the eighth biggest oi l company to the second.


¡ Benchmarking § Use of external comparisons to be[er evaluate current performance and iden-fy possible ac-ons for the future

§ Adop-ng best prac-ces of other organiza-ons that achieve superior performance


¡ Participation and involvement § Participatory planning requires that the planning

process include people who will be affected by the plans and/or will help implement them.

§ Management by objectives (MBO): process of collaborative goal setting by manager and subordinate

§ Benefits of participation and involvement: § Promotes creativity in planning § Increases available information § Fosters understanding, acceptance, and

commitment to the final plan



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STUDY QUESTION 4: WHAT IS THE CONTROL PROCESS?

¡ Controlling § The process of measuring performance and taking

action to ensure desired results. § Has a positive and necessary role in the

management process. § Ensures that the right things happen, in the right

way, at the right time. § Organizational learning and after-action review.

STUDY Q.4: WHAT IS THE CONTROL PROCESS?

¡ Steps in the control process:

§ Step 1 — establish objectives and standards.

§ Step 2 — measure actual performance.

§ Step 3 — compare results with objectives and

standards.

§ Step 4 — take corrective action as needed.


¡ Figure 8.4 Four steps in the control process.


¡ Step 1 — establishing objectives and standards § Output standards § Measure performance results in terms of

quantity, quality, cost, or time. § Input standards § Measure effort in terms of amount of work

expended in task performance.


¡ Step 2 — measuring actual performance

§ Goal is accurate measurement of actual

performance results and/or performance efforts.

§ Must identify significant differences between

actual results and original plan.

§ Effective control requires measurement.


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¡ Step 3 — comparing results with objectives and standards § Need for action reflects the difference between

desired performance and actual performance § Comparison methods: § Historical comparison § Relative comparison § Engineering comparison


¡ Step 4 — taking corrective action § Taking action when a discrepancy exists between

desired and actual performance. § Management by exception § Giving attention to situations showing the

greatest need for action. § Types of exceptions § Problem situation § Opportunity situation


¡ Feedforward controls:

§ Employed before a work activity begins.

§ Ensure that:

§ Objectives are clear.

§ Proper directions are established.

§ Right resources are available.

§ Focuses on quality of resources.


¡ Concurrent controls:

§ Focus on what happens during work process.

§ Monitor ongoing operations to make sure they are being done according to plan.

§ Can reduce waste in unacceptable finished products or services.


¡ Feedback controls:

§ Take place after work is completed.

§ Focus on quality of end results.

§ Provide useful information for improving future

operations.


¡ Figure 8.5 The role of feedforward, concurrent, and feedback controls in organizations.


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¡ Internal and external control

§ Internal control

§ Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations.

§ External control

§ Occurs through personal supervision and the use of formal administrative systems.


STUDY QUESTION 5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?

¡ Management by Objectives (MBO)

§ A structured process of regular communication.

§ Supervisor/team leader and workers jointly set

performance objectives.

§ Supervisor/team leader and workers jointly review

results.

STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?

¡ Figure 8.6 Management by objectives as an integrated planning and control framework.


¡ MBO involves a formal agreement specifying: § Workers’ performance objectives for a specific

time period.

§ Plans through which performance objectives will be accomplished.

§ Standards for measuring accomplishment of performance objectives .

§ Procedures for reviewing performance results.


¡ The MBO process: § Supervisor and workers jointly set objectives,

establish standards, and choose actions. § Workers act individually to perform tasks;

supervisors act individually to provide necessary support.

§ Supervisor and workers jointly review results, discuss implications, and renew the MBO cycle.


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¡ Types of MBO performance objectives § Improvement § Personal development § Maintenance

¡ Criteria for effective performance objectives § Specific § Time defined § Challenging § Measurable


¡ Pitfalls to avoid in using MBO

§ Tying MBO to pay.

§ Focusing too much attention on easily quantifiable objectives.

§ Requiring excessive paperwork.

§ Having managers tell workers their objectives.


¡ Advantages of MBO § Focuses workers on most important tasks and

objectives. § Focuses supervisor’s efforts on important areas

of support. § Contributes to relationship building. § Gives workers a structured opportunity to

participate in decision making.


¡ Employee discipline systems § Discipline is the act of influencing behavior

through reprimand. § Discipline that is applied fairly, consistently, and

systematically provides useful control.


¡ To be effective, reprimands should: § Be immediate. § Be directed toward actions, not personality. § Be consistently applied. § Be informative. § Occur in a supportive setting. § Support realistic rules.


¡ Employee discipline systems § Progressive discipline ties reprimands to the

severity and frequency of the employee’s infractions.

§ Progressive discipline seeks to achieve compliance with the least extreme reprimand possible.


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¡ Important financial aspects of organizational performance § Liquidity: The ability to generate cash to pay bills. § Leverage: The ability to earn more in returns than

the cost of debt. § Asset management: The ability to use resources

efficiently and operate at minimum cost. § Profitability: The ability to earn revenues greater

than costs.


¡ Break-even analysis: § Determination of the point at which sales

revenues are sufficient to cover costs. § Break-Even Point = Fixed Costs / (Price – Variable

Costs) § Used in evaluating: § New products § New program initiatives


¡ Figure 8.7 Graphical approach to break-even analysis.


¡ Purchasing control: § A productivity tool § Trends in purchasing control: § Leveraging buying power § Committing to a small number of suppliers § Working together in supplier-purchaser

partnerships


¡ Inventory control

§ Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost.

§ Methods of inventory control:

§ Economic order quantity

§ Just-in-time scheduling


¡ Statistical quality control § Quality control involves checking processes,

materials, products, and services to ensure that they meet high standards.

§ Statistical quality control involves: § Taking samples of work. § Measuring quality in the samples. § Determining the acceptability of results.


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Chapter 8 Planning - Engage. Explore. ENDEAVOUR. … · !Chapter 8: Planning and Controlling !Chapter 9: ... 6 STUDY QUESTION 4 ... Controlling "The process of measuring performance