Chapter 7 Planning - to Set the Direction

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Chapter 7Planning - to Set the Direction

• Planning Ahead
• Why is planning an essential management function?
• What types of plans are used by managers?
• What are the different approaches to planning?
• What planning tools and techniques are useful?
• How does Management by Objectives facilitate
  planning?

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Planning as a Management Function

• To plan is to decide what to accomplish and how
  to do it
• define objectives
• evaluate accomplishments relative to objectives
• develop premises regarding future conditions
• analyze possible action alternatives
• implement plan and evaluate results

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Planning as a Management Function

• Benefits of Planning
• more focus and flexibility
• improved coordination
• better control
• better time management

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Types of Plans in Organizations

• Short-Range and Long-Range Plans
• Short-range 1 year or less
• Intermediate-range plans 1-2 years
• Long-range 3 or more years

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Types of Plans in Organizations

• Strategic and Operational Plans
• Strategic plans
• address long-term needs
• set comprehensive action directions for an
  organization
• responsibility of top management

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Types of Plans in Organizations

• Strategic and Operational Plans
• Operational plans
• define what needs to be done in specific areas to
  implement strategic plans
• production
• financial
• facilities
• marketing
• human resources

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Types of Plans in Organizations

• Policies and Procedures
• standing plans
• policy is a broad guideline for making decisions
  and taking action in specific circumstances
• procedures are plans that describe exactly what
  actions are to be taken in specific circumstances

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Budgets and Schedules

• Single-use plans
• budgets
• commit resources to activities, projects or
  programs
• help clarity and reinforce action priorities
• facilitate the evaluation and control of results
• types are fixed, flexible and zero-based

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Budgets and Schedules

• Fixed budget
• allocates resources on a single estimate of costs
• Flexible budget
• allows allocation of resources to vary in
  proportion with various levels of activity
• Zero-based
• project is budgeted as if it were brand new

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Budgets and Schedules

• Project Schedules
• single-use plans that identify the activities
  required to accomplish a specific major project

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Budgets and Schedules

• Business Plan
• typically used for new businesses
• describes details necessary to set direction and
  get financing

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Approaches to Planning

• Inside-Out Versus Outside-In Planning
• inside-out planning
• focus future effort on what already doing, but
  try to improve
• outside-in planning
• look to external environment for opportunities

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Top-Down Versus Bottom-Up Planning

• Top-Down
• senior management sets broad objectives
• ensures common direction
• can fail in implementation due to lack of lower
  level commitment
• Bottom-Up
• initiative that begins at lower levels of the
  organization
• potential to generate high commitment
• does not define an integrated direction

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Planning Tools and Techniques

• Forecasting
• making assumptions about what will happen in the
  future
• part of a good plan
• ultimately relies on human judgment

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Planning Tools and Techniques

• Types of forecasting
• qualitative
• quantitative
• econometric modeling
• statistical surveys

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Planning Tools and Techniques

• Use of Scenarios
• identifying alternative future states of affairs
• plans made for each scenario
• increases organizations flexibility

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Planning Tools and Techniques

• Benchmarking
• use of external comparisons to better evaluate
  ones current performance
• identify possible actions for the future
• incorporate successful ideas into ones own
  organization

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Planning Tools and Techniques

• Participation and Involvement
• Participative planning requires that workers who
  will be affected should be included in the
  planning and/or implementation

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Planning Tools and Techniques

• Role of Staff Planners
• lead and coordinate planning system
• help promote planning throughout organization
• sometimes used as advisors to line managers

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Management by Objectives (MBO)

• MBO
• structured process of regular communication
• supervisor and worker jointly set performance
  objectives
• jointly review results

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Steps in the MBO Process
1. Supervisor and employee discuss supervisors
job responsibilities
2. Supervisor and employee discuss employees job
5. Supervisor and employee meet at end of period
to review performance.
3. Supervisor and employee jointly set employees
specific measurable objectives for the
performance\ period.
4. Supervisor and employee meet periodically to
review employees progress
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Management by Objectives (MBO)

• How to make MBO work
• hire best people
• work with them to set challenging performance
  objectives
• give best possible support
• hole employee accountable

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Management by Objectives (MBO)

• Pitfalls to avoid
• tying MBO to pay
• focusing too much attention on easily
  quantifiable objectives
• requiring excessive paperwork
• have managers tell workers objectives