Management 8e. - Robbins and Coulter

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What Is Planning?

• Planning
• A basic managerial function that involves
• Defining the organizations goals.
• Establishing an overall strategy for achieving
  those goals.
• Developing a comprehensive set of plans to
  integrate and coordinate organizational work.

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Types of planning

• Informal planning
• Not written down
• Short-term goals
• Done in small businesses or in single
  organizational units (little or no sharing of
  goals with others).

• Formal planning
• Written down
• Clearly defined long-term goals
• Goals are shared with other organizational
  members.

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Why Do Managers Plan?

• Four Purposes (reasons) of planning are
  identified
• It Provides direction (a focus)
• It Reduces uncertainty (being unsure)
• It Minimizes waste, inefficiencies and redundancy
  (unnecessary actions)
• It Sets the standards (criteria) for
  controlling

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Planning and Performance

• Studies of the Relationship Between Planning And
  Performance have concluded that
• Formal planning is associated with positive
  financial results
• Higher profits.
• Higher returns on assets.
• The quality of planning and implementation is
  more closely linked to high performance than the
  extent (how wide) of planning.
• The external environment (e.g. government
  regulations) constrains managers options
  (choices) and can reduce the impact (effect) of
  planning on performance.
• Formal planning must be used for several years
  before it begins to positively affect performance.

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How Do Managers Plan?

• The Role of Goals and Plans in Planning
• Goals or Objectives are desired outcomes for
  individuals, groups, or entire organizations.
• They provide direction (focus) for plans and
  decisions.
• They form the criteria for evaluating results.
• Plans are documents that outline (describe) how
  goals are going to be met (accomplished).
• They determine resource allocations
  (distribution), timetables and other necessary
  actions to accomplish the goals

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Types of Goals

• Financial Goals
• Are related to the financial performance of the
  organization.
• Strategic Goals
• Are related to the performance of the firm in
  connection with its external environment (e.g.
  customers, competitors).

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Types of Goals
Real Goals The goals that an organization
actually pursues, as can be seen in the actions
of its members
Stated Goals Official statements from the
organization, saying what it wants its
stakeholders and the public to believe.

• Knowing that an organizations stated and real
  goals are usually different is important to
  understand what seems to be management
  inconsistencies (contradictions).

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Stated Objectives from Large U.S. Companies

• Financial Objectives
• Faster revenue growth
• Faster earnings growth
• Higher dividends
• Wider profit margins
• Higher returns on invested capital
• Stronger bond and credit ratings
• Bigger cash flows
• A rising stock price
• Recognition as a blue chip company
• A more diversified revenue base
• Stable earnings during recessionary periods

• Strategic Objectives
• A bigger market share
• A higher more secure industry rank
• Higher product quality
• Lower costs relative to key competitors
• Broader or more attractive product line
• A stronger reputation with customers
• Superior customer service
• Recognition as a leader in technology and/or
  product innovation
• Increased ability to compete in international
  markets
• Expanded growth opportunities

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Types of Plans

• Strategic Plans
• Establish the goals of the entire organization.
• Cover long time periods.
• Aim to position the organization in relation to
  its environment.

• Operational Plans
• Define the ways to achieve the goals by
  organizational members.
• Cover short time periods.

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Types of Plans

• Long-Term Plans
• Plans with a time frame of more than three years.

• Short-Term Plans
• Plans with a time frame of one year or less.

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Types of Plans

• Specific Plans
• Plans that are clearly defined and leave no room
  for interpretation.
• There is no ambiguity and no problem with
  misunderstanding.

• Directional Plans
• Flexible plans that set out (indicate) general
  guidelines, provide focus, yet allow discretion
  (freedom) in implementation.
• They dont force managers into specific courses
  of action.

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Specific Versus Directional Plans
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Types of Plans

• Single-Use Plans
• One-time plans that are specifically designed to
  meet the needs of a unique situation.

• Standing Plans
• Ongoing plans that provide guidance for
  activities performed repeatedly.
• They include policies, rules and procedures.

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Types of Plans
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Approaches to Establishing Goals

• Traditional Goal Setting
• Broad (general) goals are set at the
  organizations top level and then split into sub
  goals for each lower level of the organization.
• This approach assumes that top managers know
  whats best because they can see the big
  picture.
• The goals serve to direct, guide, and constrain
  from above.
• Goals lose clarity and focus as lower-level
  managers apply their own interpretation
  (understanding) when defining and applying them
  to their areas of responsibility.

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Traditional Objective Setting
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Approaches to Establishing Goals

• MeansEnds Chain
• Establishing a clearly-defined hierarchy (order
  of accomplishment) of organizational goals that
  results in an integrated (complete) network
  (system) of goals.
• Accomplishment of goals at a lower level is the
  means (instrument) by which the goals (ends) at
  the next higher level are achieved.

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Approaches to Establishing Goals

• Management By Objectives (MBO)
• Specific performance goals are jointly (together)
  determined by employees and their managers.
• Progress toward accomplishing goals is
  periodically checked.
• Rewards are allocated (distributed) on the basis
  of progress.
• Key elements of MBO
• Specific goals employees motivation by
  participation in decisions explicit time period
  performance feedback/evaluation.

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Steps in a Typical MBO Program

1. The organizations overall objectives and
   strategies are formulated.
2. Major objectives are allocated among divisional
   and departmental units.
3. Unit managers collaboratively set specific
   objectives for their units with their managers.
4. Specific objectives are collaboratively set with
   all department members.
5. Action plans, defining how objectives are to be
   achieved, are specified and agreed upon by
   managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically
   reviewed, and feedback is provided.
8. Successful achievement of objectives is
   reinforced by performance-based rewards.

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Characteristics of Well-Designed Goals

• Written in terms of outcomes, not actions
• Focuses on the ends, not the means.
• Measurable and quantifiable
• Specifically defines how the outcome will be
  measured/evaluated.
• Clear as to time frame
• Specify a time frame for accomplishment.

• Challenging but attainable
• Low goals do not motivate.
• High goals motivate if they can be achieved.
• Written down
• Forces people to focus
• Written goals become visible.
• Communicated to all
• Ensures that all members work in ways to secure
  accomplishment of goals.

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Steps in Goal Setting

1. Review the organizations mission statement.
2. Does the goal reflect the purpose of the
   organization?
3. Evaluate available resources.
4. Are resources sufficient to achieve the goal?
5. Determine goals individually or with others.
6. Does it conflict with other organizational goals?
7. Write down the goals and communicate them.
8. Is everybody on the same page?
9. Review results and whether goals are being met.
10. Are any changes needed?

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Developing Plans

• Contingency Factors in a Managers Planning
• The managers level in the organization.
• Higher levels of management Strategic planning
• Lower levels of management Operational planning
• The Degree of environmental uncertainty.
• Stable environment Specific plans.
• Dynamic environment Specific but flexible
  plans.
• The time frame for accomplishment.
• The time frame should be long enough to allow
  fulfillment of all the commitments that are
  involved.
• Factors that have an effect on a managers
  planning.

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Planning in the Hierarchy of Organizations
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Approaches to Planning

• Establishing a formal planning department
• A group of planning specialists who help to write
  organizational plans.
• This approach can be effective only if managers
  are involved. Planning is a function of
  management, it should not be the sole (the only)
  responsibility of planners.
• Involving organizational members in the process
• Plans are developed by organizational members at
  various levels and then coordinated with other
  units across the organization.

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Contemporary Issues in Planning

• Criticisms of Planning
• Planning may create rigidity In achieving
  specific goals, managers may not be able to cope
  with the changing environment.
• Plans cannot be developed for dynamic
  environments These conditions may mean not
  being tied to formal plans.
• Formal plans cannot replace intuition and
  creativity They may reduce intuition to
  programmed routine.
• Planning focuses managers attention on todays
  competition not tomorrows survival They focus
  on existing business opportunities, not
  creativity.
• Formal planning reinforces todays success, which
  may lead to tomorrows failure Successful plans
  provide a false sense of security than is
  warranted (justified, called for).

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Contemporary Issues in Planning

• Criticisms of Planning
• How Valid are these criticisms?
• They have some merit when plans are rigid and
  inflexible. However, in todays management
  effective planners should understand dynamic,
  uncertain environments.

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Contemporary Issues in Planning

• Effective Planning in Dynamic Environments
• Develop plans that are specific but flexible.
• Understand that planning is an ongoing process.
• Make changes as needed if environmental
  conditions change.
• Continue in formal planning even in uncertain
  environment to see any effect on performance.
• Push the responsibility to lower organizational
  levels by training employees in setting goals and
  establishing plans.

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C H A P T E R R E V I E W 1/3

• What Is Planning? (slides 2, 3)
• Define planning.
• Differentiate between formal and informal
  planning.
• Why Do Managers Plan? (slides 4, 5)
• Describe the purposes of planning.
• Discuss the conclusions from studies of the
  relationship between planning and performance.
• How Do Managers Plan? (slides 68)
• Define goals and plans.
• Describe the types of goals organizations might
  have.
• Explain why its important to know an
  organizations stated and real goals.

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C H A P T E R R E V I E W 2/3

• How Do Managers Plan? (contd) (slides 1012, 14)
• Describe each of the different types of plans.
• Establishing Goals and Developing Plans (slides
  16, 18, 19, 21, 22, 23, 25)
• Discuss how traditional goal setting works.
• Explain the concept of the meansend chain.
• Describe the management by objective (MBO)
  approach.
• Describe the characteristics of well-designed
  goals.
• Explain the steps in setting goals.
• Discuss the contingency factors that affect
  planning.
• Describe the approaches to planning.

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C H A P T E R R E V I E W 3/3

• Contemporary Issues in Planning (Slides 2628)
• Explain the criticisms of planning and whether or
  not theyre valid.
• Describe how managers can effectively plan in
  todays dynamic environment.