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Essentials of Planning and
Management by Objectives(MBO)
Chapter 3
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Essentials of Planning (Class 5)
Contents Planning and its Importance
Advantages ofPlanning
Types ofPlans FormalPlanning Process
Level ofPlanning and Planning in theHierarchy of Organizations
Types ofPlans According to Their Use
Criticisms ofPlanning
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Planning:
Precede the execution of all other managerial functions.
Involves selecting missions & objectives and the actionsto achieve them.
Requires decision making i.e., choosing amongalternative future courses of action
Bridges the gap from where we are to where we want togo.
Requires that we consciously determine courses ofaction and base our decisions on purpose, knowledgeand considered estimates.
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WhyPlanning Is Important
Participation: all managers areinvolved in setting future goals.
Sense of direction and purpose:
planning sets goals and strategies for allmanagers.
Coordination: plans provide all parts of
the org with understanding about howtheir systems fit with the whole.
Control: Plans specify who is inchargeof accomplishing a goal.
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ADVANTAGES OF PLANNING:
Reduces uncertainty and Risk
Focuses attention on Objectives and Results
Improves efficiency.
Provides basis for controlling Improves coordination
Provides sense of direction
A useful way of participation of all managers in
decision making Encourages innovation and creativity.
Planning can reduce the impact of change.
It minimize waste and redundancy .
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Types of Plans
PlansDocuments/Statements that outline how goals are to be
accomplished
Describe how resources are to be allocated and establishactivity schedules
1. Mission or Purpose
It is the basic function or fundamental reasons forexistence.
Mission Statement:It is a broad statement of basic, unique purpose and scopeof operations that distinguish the organization from other ofits type.
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2.Goals or Objectives:
These terms are interchangeably used. These arefuture Targets orEnd results that an organization
wishes to achieve. Simply a desired outcome
3. Strategy:
It is a long term plan for interacting with theenvironment in order to achieve long term goals,adoption of courses of action and allocation ofresources necessary to achieve them.
4. Policies: Policies are plans and statements that guide or
channel thinking in decision making. Policies define an area within which a decision is to
be made and ensure that the decision will be
consistent with, and contribute to an objective.
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5. Procedures:
Procedures are plans that guides for actions in a detailedand exact manner. These are prescribed series of
related steps to be taken under certain recurringcircumstances
6. Rules:
These are statements that spell out specific actions to betaken or not taken in a given situation. Rules allow no
discretion and they reflect managerial decisions.7. Programs:
A comprehensive plan that coordinates a complex set ofgoals, policies, procedures, rules task assignments, stepto be taken, resources to be mobilize and other elements
necessary to carry out a given course of action8. Budgets: A budget is a statement ofexpected results expressed in
numerical terms. It may be called a Quantified plan orFinancial plan.
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Situational analysis/Aware of Opportunities
Identifying Alternative
Evaluation of theAlternatives
Selection of Goals and Plan
Implementation
Monitor and control
FormalPlanning StepsInformation collection ,opportunities seeking, Study past & futureconditions& forecast future, Internal recourses, org strengths &
weaknesses, ExternalEnvironment
What are the most promising alternatives to accomplishingthe objectives?
Best option is finally selected on the basis of evaluation
of various options (appropriate and feasible)
Monitor the actual performance in relation to the goals and plans,develop control systems to take corrective action
Setting Objectives Or Goals What we want to be, what we want to accomplish and when?
Implement properly, managers must understand the plan,
Have the necessary resources, and be motivated to implement it
Evaluate the advantages, disadvantages, and potential effectsof each alternative goal and plan, prioritize those goals considerthe implications of alternative plans
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Level ofPlanning
Strategic Planning decisions of senior executives about theorganizations long-term goals and strategies
Apply to the entire organization
Establish the organizations overall goals. Seek to position the organization in terms of its
environment.
strategic goals/Objectives - major targets that relateto the long-term survival, value, and growth of theorganization
strategy- pattern of actions and resource allocationsdesigned to achieve the goals of the organization
matches the skills and resources of the organization to
the opportunities found in the external environment
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Level ofPlanning
Tactical planning translates broad strategic goals and plans into
specific goals and plans that are relevant to a definiteportion of the organization
focuses on the major actions that a unit/departmentmust take to fulfill its part of the strategic plan
OperationalPlanning
identifies the specific procedures and processes
required at lowerlevels of the organization Cover short time period and focus on routine tasks
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Planning in the Hierarchy of Organizations
Tactical Planning
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Types ofPlans (contd)
Long-Term Plans Plans with time frames extending beyond
three years
Short-Term Plans
Plans with time frames on one year orless
Specific Plans
Plans that are clearly defined and leave no
room for interpretation DirectionalPlans
Flexible plans that set out general guidelines,provide focus, yet allow discretion in
implementation.
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Specific Versus DirectionalPlans
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Types ofPlans (contd)
Single-Use Plan
A one-time plan specifically designed to meetthe need of a unique situation.
Standing Plans
Ongoing plans that provide guidance foractivities performed repeatedly.
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Criticisms ofPlanning
Planning may create rigidity.
Plans cannot be developed fordynamicenvironments
Formal plans cannot replace intuition andcreativity.
Planning focuses managers attention on
todays competition not tomorrows survival. Formal planning reinforces todays success,
which maylead to tomorrows failure.
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Management by MBO (Class 6)
Contents
Goal or Objectives
Characteristics of Goals/Objectives Steps in Goal Setting
Approaches to Establishing Goals Traditional Objective Setting
Management By Objectives (MBO)
Steps in MBO processes
Strength And Weaknesses Of MBO
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Goals/Objective
These are future Targets orEnd
results that an organization wishes toachieve.
Simply a desired outcome
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Characteristics of Goals/Objectives
S M A R T S. Specific and clearly understandable
M. Measurable and quantifiable
A. Attainable/Achievable andchallenging
R. Realistic and relevant to the
purpose of the organization. T. Time limited (defined period of
completion)
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Objective:Increase the number of scholarships available to Business& Law students by introducing 3 new scholarships for
students to apply in 2008. Each scholarship awarded willbe a minimum $3,000 per scholarship.
Breakdown of Objective
Specific - says what the staff member will do (increasethe number of scholarships offered to Business & Lawstudents)
Measurable - states how many scholarships to beintroduced (3) and how much is to be awarded ($3,000per scholarship)
Achievable - staff member has the necessary contactsand resources from previous years, other faculties andrelevant policies to refer to
Relevant - links with the faculty's goal to increasestudent attraction and retention numbers
Timely - indicates that new scholarships must be readyfor students to apply by2008.
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Steps in Goal Setting
1. Review the organizations mission statement.1.Do goals reflect the mission?
2. Evaluate available resources.
1.Are resources sufficient to accomplish themission?
3. Determine goals individually or with others.
1.Are goals specific, measurable, and timely?
4. Write down the goals and communicate all theemployees.
1. Is everybody on the same page?
5. Review results and whether goals are being met.
1.What changes are needed in mission, resources, orgoals?
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Approaches to Establishing Goals
Traditional Goal Setting Broad goals are set at the top of theorganization.
Goals are then broken into sub goals for each
organizationallevel. Assumes that top management knows best
because they can see the big picture.
Goals are intended to direct, guide, andconstrain from above.
Goals lose clarity and focus as lower-level managersattempt to interpret and define the goals for theirareas of responsibility
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Traditional Objective Setting
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Approaches to Establishing Goals (contd)
Management By Objectives (MBO)
MBO is a process through which specific goals are
set collaboratively for the organization as a wholeand every unit and individual within it. The goals are
then used as a basis forplanning, managingactivities and assessing performance and rewarding
contributions.
Key elements of MBO:
Goal specificity, participative decisionmaking, an explicit Time period andperformance feedback
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Cascading of Objectives
Overall
organizational
objectives
Divisional
objectives
Departmental
objectives
Individual
objectives
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Steps in MBO processes1. Develop Overall OrganizationalGoals
These goals are essentially strategic goals set bythe top management.
2. Establish Specific goals forVarious Divisions,Departments, Sections and Individuals
These goals are usually developed in collaborationwith the managers at the next Lowerlevels.
3. Formulate Action Plan
Once the goals are set, action plans must be
developed that focus on the methods or activitiesnecessary to achieve them.
Describes What is to be done, How, When, where,and By whom to achieve a goal.
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Steps in MBO processes4. Implement and Maintain Self control
After developing action plans, individuals aregiven considerable latitude in carrying outthese activities.
5. Review Progress Periodically
Regular reviews provide a good opportunity forchecking performance to date, identifying andremoving obstacles and updating action plans.
6. Appraise Performance
The appraisal session includes achievement oftargets, reasons for short falls, actions forrectification and prevention. It also includespraise, rewards and recognition for goodperformance
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STRENGTHAND WEAKNESSES OF MBO
Strengths or Benefits:
Fosters employs motivation
Facilitates vertical and Horizontalcommunication
Helps clarify priorities and expectations
Development of effective controls thatmeasure results and lead to correctiveactions
Encouragement of commitment topersonal and organizational goals
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STRENGTHAND WEAKNESSES OF MBO
Weaknesses orDisadvantages:Needs considerable training of
managers
Can be misused as a punitivedevice
Lack of flexibility in changing goalsdue to environmental changes