Planning in the Contemporary Organization

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Chapter 4
Planning in the Contemporary Organization
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Planning Defined

• The process of outlining the activities that are
  necessary to achieve the goals of the
  organization.
• The purpose of planning is simple - to ensure
  that the organization is both effective and
  efficient in its activities.

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Planning as a Linking Mechanism
Plans
Goals
Control
Relationship among goals, plans, and controls
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Benefits of Planning Slide 1 of 5

• Better Coordination
• Planning provides a foundation for the
  coordination of a broad range of organizational
  activities.
• A plan helps to define the responsibilities of
  individuals and work groups and helps coordinate
  their activities.

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Benefits of Planning Slide 2 of 5

• Focus on Forward Thinking
• The planning function forces managers to think
  ahead and consider resource needs and potential
  opportunities or threats that the organization
  may face in the future.

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Benefits of Planning Slide 3 of 5

• Participatory Work Environment
• Successful planning requires the participation of
  a wide range of organizational members. This
  creates a more participatory work environment.

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Benefits of Planning Slide 4 of 5
A participatory work environment is good for two
reasons
The organization benefits by having access to a
broad base of experience and knowledge in the
planning process.
Organizational members are more likely to buy
in to a plan that they have helped develop.
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Benefits of Planning Slide 5 of 5

• More Effective Control System
• An organizations plan provides a foundation for
  control. A plan provides a mechanism for
  ensuring that the organization is moving in the
  right direction and making progress toward
  achieving its goals.

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Costs of Planning

• Managerial Time
• Done properly, the planning process requires a
  substantial amount of managerial time and energy.
• Delay in Decision Making
• Planning can result in delays in decision making,
  which must be weighed against the importance of
  speed in response time.

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Weighing the Benefits Against the Costs of
Planning
In the final analysis, managers plan because
planning leads to higher performance. Planning
also helps managers cope with the many complex
situations they face.
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Where Does Planning Start? Slide 1 of 3
Top-Down Vs. Bottom-Up Planning
Top-Down Planning
Bottom-Up Planning
Planning efforts begin with the board of
directors and top executives of the firm.
Planning is initiated at the lowest level in the
organization.
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Where Does Planning Start? Slide 2 of 3

• Top-Down Planning
• The advantage is that the top managers, who are
  the most knowledgeable about the firm as a whole,
  drive the development of the plan.
• Bottom-Up Planning
• The primary advantage is that the people closest
  to the operating system, customers, and suppliers
  drive the development of the plan.

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Where Does Planning Start? Slide 3 of 3

• Which Approach is Better - Top-Down or Bottom-Up?
• Top-down planning works best when success is
  dependent upon the ability to make high-level
  organizational changes in response to general
  threats and pressures.
• A bottom-up approach works best when success is
  dependent upon sensitivity to customer needs and
  demands.

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Strategic Operational Planning
In general, most organizations engage in both
strategic and operational planning. Although
strategic and operational planning differ in a
number of ways, they are also interrelated.
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Strategic Planning
Slide 1 of 7

• Strategic Planning
• Is the process by which an organization makes
  decisions and takes actions that affect its
  long-run performance.
• A strategic plan is the output of the strategic
  planning process. Strategic plans define both
  the markets in which the firm competes and the
  ways in which it competes in those markets.

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Strategic Planning
Slide 2 of 7
The purpose of strategic planning is to move the
organization from where it is to where it wants
to be.
Today
Vision for the Future
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Strategic Planning Slide 3 of 7
Levels of strategic planning and their focus
Functional
Corporate
Business
Specifies the specific activities necessary to
implement the firms corporate and business
strategies.
Defines how each of the firms business units
will operate in its market arena.
Addresses the question, What business should we
be in?
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Strategic Planning Slide 4 of 7
Levels of strategic planning and their
participants
Corporate
Business
Functional
Board of directors and top-level executives
Top-level executives and managers within the
business unit
Middle-level managers and lower-level managers
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Strategic Planning Slide 5 of 7
Levels of strategic planning, the specificity of
their strategies, and their time horizons
Corporate
Business
Functional
Broad strategies 5-10 year time horizon
More specific strategies than the corporate
level 1-5 year time horizon
Very specific strategies 1-2 year time horizon
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Strategic Planning Slide 6 of 7

• Functional Strategic Planning
• Functional strategic planning leads to the
  development of functional strategy.
• Functional strategy specifies the operations,
  RD, financial, human resource management, and
  marketing activities necessary to implement the
  organizations corporate and business strategies.

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Strategic Planning Slide 7 of 7

• Customizing the Strategic Planning Process
• In general, a successful planning process must
  fit the organization's focus on creating value
  for its customers and its shareholders.
• In other words, it must be customized for the
  organization based on its specific and unique
  needs.

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Operational Planning

• Operational Planning
• Focuses on determining the day-to-day activities
  that are necessary to achieve the long-term goals
  of the organization.
• Operational plans
• Are more specific than strategic plans, address
  shorter-term issues, and are formulated by the
  mid- and lower-level managers who are responsible
  for the work groups in the organization.
• Operational plans can be categorized as standing
  or single-use plans.

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Standing Plans

• Standing Plans
• Are designed to deal with organizational issues
  or problems that recur frequently.
• Standing plans include policies, procedures, and
  rules
• Policies - general guidelines that govern how
  certain organizational situations will be
  addressed.
• Procedures - are more specific and are designed
  to give explicit instructions on how to complete
  a recurring task.
• Rules - provide detailed and specific guidelines
  for action.

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Single-Use Plans Slide 1 of 2

• Single-Use Plans
• Are developed to address a specific
  organizational situation.
• Single-use plans include programs, projects, and
  budgets
• Programs - govern a relatively comprehensive set
  of activities that are designed to accomplish a
  particular set of goals.
• Projects - direct the efforts of individuals or
  work groups toward the achievement of specific,
  well-defined objectives.
• Budgets - specify how financial resources should
  be allocated.

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Management by Objectives Slide 1 of 3

• Benefits of Management by Objectives
• Provides a foundation for a more integrated and
  system-oriented approach to planning.
• Requires communication between employees and
  their managers since they must agree on the
  performance goals outlined in the plan.
• Creates a participatory work environment where
  employees have a voice in how their jobs are
  designed and what their performance targets
  should be.

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Management by Objectives Slide 2 of 3

• Disadvantages of Management by Objectives
• Requires time and commitment of top management.
• May require excessive paperwork.
• May create a tendency to focus on short-term vs.
  long-term planning.
• Can be difficult to establish and operationalize.

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Management by Objectives Slide 3 of 3
Preparation of next periods objectives by
employees
Mutual setting of objectives by employee and
supervisor
End-of-period review by employee and supervisor
Mutual agreement on criteria for measuring
accomplishment of objectives
Intermittent review of ongoing performance as
needed
Action planning and job performance by employee
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Contingency Planning Slide 2 of 2

• When is Contingency Planning Needed?
• Contingency planning is necessary in business
  environments that change rapidly and in
  unpredictable ways.
• Contingency planning is useful when a firms
  effectiveness is dependent on a particular set of
  business conditions.

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Barriers to Effective Planning

• Demands on the Managers Time
• Ambiguous and Uncertain Operating Environments
• Resistance to Change

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Overcoming the Barriers to Planning

• Involve Employees in Decision Making
• Input from all levels of a firm is essential for
  successful planning.
• Tolerate a Diversity of Views
• Diverse views lead to a broader assessment of
  organizational problems and opportunities.
• Encourage Strategic Thinking
• Effective strategic thinking can be developed
  through training and practice.

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Precursors of Effective Planning

• Recognize and communicate the importance of
  planning in achieving organizational success.
• Understand and appreciate the relationship
  between strategic and operational planning.
• Involve those responsible for implementing the
  plan in the planning process.
• Look to contingency planning as a means of
  maintaining flexibility in rapidly changing
  business environments.
• Utilize technology to enhance the effectiveness
  and efficiency of the planning process.
• Remove the barrier to planning at the work group
  and individual levels.
• Reward those who think strategically and follow
  through with operational planning.