Chapter 7

FOUNDATIONS

OF PLANNING

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Learning Objectives

You 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 4. Distinguish among the different types of

plans

5. Tell how goals are established

6. Describe the characteristics of well-designed

goals© Prentice Hall, 2002 77--٢٢

Learning Objectives (cont.)You should learn to:

1. Identify three contingency factors in planning

2. Explain the approaches to developing plans

3. Discuss the criticisms of planning

4. Describe what it takes to effectively plan in a dynamic environment

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Example:

Iug plan

Goal: reducing the time pan for student registration

not to exceed 5 minutes.

Strategies:

1- recruiting 10 qualified staff

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2- providing more access to students to the data base.

Developing a plan

Developing a comprehensive plan

Activities

related to

strategy 1

date cost

advertising March 2006 100$

Application April 2006 -

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Application

revision and

interviews

April 2006 -

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

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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?Planning

involves 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• general and lacking in continuity

• Exist in small and large businesses.

• formal planning – written

• defines specific goals

• specific action programs exist to achieve goals

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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 uncertainty3. planning reduces uncertainty

4. planning reduces overlapping and wasteful

activities

5. planning establishes goals and standards used in

controlling

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Why Do Managers Plan? (cont.)Planning and Performance

• formal planning is associated with:

1. higher profits

2. higher return on assets

• quality of the planning process and the appropriateimplementation of the plans probably contribute more to high performance than does the extent of planninghigh 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.

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How Do Managers Plan?Planning is called the primary management function. Why?

The Role of Goals and Plans in Planning

• goals - desired outcomes

1. provide direction for all management decisions

2. represent the criteria against which actual work accomplishments can be measured

• plans - outline how goals are going to be met

• Types of Goals• 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

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Stated Objectives From Large US Companies

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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 marker Ex. Growing our customer base, building marker

leadership, increasing profitability. These quite

irrelevant and vague.

1. real goals - those goals that an organization

actually pursues. Ex. Limiting class size.

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

Types of Plans

First: 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.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.

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Types Of Plans

Breadth

Strategic

Operational

Specificity

Directional

Specific

Frequency

of Use

Single use

Standing

Time Frame

Long term

Short termOperational Specific StandingShort term

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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: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 guidelines

provide focus without limiting courses of action. It is flexible to respond to unexpected change.

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Specific Versus Directional Plans

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

• include policies, procedures, and rules

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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.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.

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Traditional Objective Setting

Top

Management’s

Objective

Division

Manager’s

Objective

“I want to see a

significant improvement

in this division’s profits”

“We need to improve

the company’s performance”

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Individual

Employee’s

Objective

Department

Manager’s

Objective

“Increase profits, regardless

of the means”

“Don’t worry about

quality: 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 reviewedperiodically reviewed

• rewards are allocated on the basis of this progress

• MBO consists of four elements :

1. goal specificity

2. participative decision making

3. explicit time period

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Steps in a Typical MBO Program

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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 MBO2. 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

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How Do Managers Plan? (cont.)

Establishing Goals (cont.)

Characteristics of Well-Designed Goals

1. 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 attainable4. 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. © Prentice Hall, 2002 77--٢٣٢٣

How Do Managers Plan? (cont.)

Establishing Goals (cont.)

• Steps in Goal Setting

• 1 - Review the organization’s mission

• 2 - Evaluate available resources

• 3 - Determine the goals individually or with input • 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© Prentice Hall, 2002 77--٢٤٢٤

How Do Managers Plan? (cont.)

Developing Plans

Contingency Factors in Planning

• level in the organization

–operational planning dominates managers’

planning efforts at lower levelsplanning efforts at lower levels

–strategic planning more characteristic of

planning at higher levels

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Planning In The Hierarchy Of Organizations

Strategic

Planning Top

Executives

Middle-Level

Operational

Planning

Middle-Level

Managers

First-Level

Managers

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How Do Managers Plan? (cont.)Developing Plans (cont.)

– Contingency Factors in Planning (cont.)

• degree of environmental uncertainty

– when uncertainty is high, plans should be specific,

but flexible

• length of future commitments• 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© Prentice Hall, 2002 77--٢٧٢٧

How Do Managers Plan? (cont.)

Developing Plans (cont.)– 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 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

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How Do Managers Plan? (cont.)

Developing Plans (cont.)

– 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

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Contemporary Issues In Planning

Criticisms 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 environmentenvironment

• 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

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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 • 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

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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

warrantwarrant

• stay alert to environmental changes

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