TOPIC 4 OTHER FUNCTIONS OF MANAGEMEN PLANNING Managerial functions are the general administrative duties that are performed by managers in virtually all productive organizations. They include: Planning © Organizing « Staffing © Controlling Definition of Planning Planning involves determining ahead of ting What is going to be done, how, when, by who, where and why. It involves decidisfy in'the present what is going to be done in the future. It is a systematic thought thatyprecedes action. Planning involves setting objectives and formulating causes of action @ychieve the set objectives The critical activities in planning include: « Objective setting e Environmental analysis ¢ Forecasting Decision Making Characteristics of planning 1. Planning is goal oriented. The basic purpose of planning is to attain some specified objectives. 2. Planning forward looking. Planning involves looking ahead of time and preparing for the future. - . Planning involves making of choices among alternative causes of action.IMPORTANCE OF PLANNI ib 2 3 4 5 6. 3 8 9 10. REAS' Planning is an intellectual process ft involves imagination and scenario building s planning has Planning is a continuous process — it is a never-ending proce: a finite planning period which will lapse, for example a 5-year plan 3 months budget etc. Further existing plans have to revised to make the relevant as relevant factors in the environment shift. Planning is an integrative process that tries to synchronize the different parts of (he organization, goals, the past the present and the future pervasive. Planning is undertaken at all levels of the organization. irected towards efficiency. Planning has no value if it doesn’t te attainment of the set goals in the most economical way. . Planning precedes the execution of all the other managerial functions. 3 TO AN ORGANIZATION Planning provides direction to the organizational members. It reduces uncertainty and risks, fo It guides decision making. It facilitates control of activities. ah It enhances efficiency of operations, ~ It facilitates evaluation cece It facilitates coordination “\\ It facilitates optimal allocution of resources. It precedes the execution of all the other managerial functions. It focuses attention on objectives hence all the organizational effort becomes purposeful directed towards attainment of organizational goals, ONS FOR PLANNING Douglas B. Gehram provided the following answers to the question “why plan?” lL 2. a 4. 5 Planning increases the chances of success by focusing on results and not activities. . It forces analytical thinking. It establishes a framework for decision making. }. Planning orients people towards action instead of reaction. . Planning modifies the management style from day to day management to future based management.6. 4s 8. 11P AND MANAG Planning avoids crisis management and provides d Planning provid ision making flexibility. s a basis for measuring performance. Planning increases employee involvement and improves communication. BARRIERS OR CONSTRAINTS TO EFFECTIVE PLANNING 1. Lack of planning skills. 2. Uncertainty and risk. 3. Resistance from the employees. 4. Lack of commitment to the planning process. 5. Inferior and inadequate information. 6. Insufficient resources. 7. Lack of past records/statistics. 8. The people who plan are not the ones who implement the plans. 9. Political influence. 10. Planning may create rigidity. 11. Poor leadership. 12. Pessimism 13. Shortsightedness 14. Lack of creativity. Ways of overcoming barriers to effective planning PeN= en aH . Participation and involvement of all the stakeholders in the planning process. . Carrying out proper environmental scanning before the plans are drawn. . Plans should be made flexible to accommodate changes and new ideas. . Contingency planning which involves developing an alternative plan in case the planning premises fail to hold. . Involvement of experts to facilitate planning. . Providing training to the managers. Communication. . Provision of adequate resources including timeHIP AND MANAGEMENT STUDY LEADERS! THE PLANNING PROCESS 1. Identification of the mission and vision of the organization. 3. Environmental scanning - analyze the internal and external environmen, 3. Objective setting. 4. Determining the planning premises - assumptions made in planning. 5. Identify alternative strategies to achieve the set objectives. 6. Evaluate the alternative strategies and select the most suitable option, 7. Formulate derivative and contingent plans. 8. Securing co-operation. 9, Formulate programs for implementation. GOALS SETTING What is a goal? A goal is a broad statement of what the organizati OPhes to achieve at a stated time j the future. They are the ends towards which the, organization effort is directed to achiey Quantitative goals are known as objectives whiJé the non-quantitative goals are known aims. Goals are broad and general while ciyeatves are specific and quantitative. Classification of goals . Corporate goals: These are goals that relate to the company as a whole. What th company as whole hopes to achieve. . Operational goals: These are goals relating to a spec activity e.g. marketing. Long term and short-term goals: Long term goals focus on 5 to 10 years to come while short term goals focus on the immediate future that is, next twelve functional area or x ES months. Economic and non-economic goals - Economic goals relate to profitability while non-economic relates to any other goal that increase cost and no corresponding s income. 5. Primary and secondary goals; Primary goals are basic goals for which an organization has been established to pursue. Secondary goals on the other hand ar goals that support primary goal.aracteristics of good objectives Chi Good objectives should be SMART, that is, the objectives must be specific, measurable, stiainable, and realistic and time bound. 1, Specific means that, the goals should state in clear terms that which is to be achieved. This eliminates ambiguity and ensures that everyone in the organization js clear about what is to be achieved. Measurable means that, the objectives should be capable of being quantified to facilitate assessment of the extent to which the objectives have been achieved. , Attainable means that, the objectives should be achievable and should not be beyond reach. Objectives however should not be too easy but should incorporate a level of challenge so that they can have motivational potential. 4. Realistic means that, good objectives should be aligned with reality. It means that in setting the objectives all the factors that impinge on their attainment should be taken into consideration. SS 5. Time bound means that, good objectives sMGuld provide a lime frame within which they are to be achieved. This will hamess anxiety towards attainment of the same. A ‘Additionally, good objectives shoul 62 1. Flexibility; Good objective Should provide room for change when such changes become necessary. This is because the environment keeps changing. 2. Consistency: The different goals of an organization should be synchronized so that they complement each other rather than conflict. 3. Simplicity: Good objectives should not be complicated. The organization member s should be able to comprehend the objectives. 4, Validity; Good objectives should be revised to ensure that they are still valid owing to the fact that the business environment is not static. IMPORTANCE OF GOALS IN AN ORGANIZATION 1. Goals provide direction and clarifies expectation. 2. Goals eliminate hazard action since every action becomes purposeful direct towards attainment of the stated goals. 3. Goals facilitate evaluation of performance.IT STUDY 1 SHIP AND MANAG tate control by identifying problem and deviations so that remedial action can be taken 5. Goals provide motivation to the organizational members as they act as milestone .d over by the organizational members. n of the organizational resources. to be cross Goals facilitate optimal allocat Go ate coordination pa . Goals facilitate planning. . -Goals facilitate decentralization and delegation. icularly voluntary coordination eens Areas to focus on when setting organizational goals According to Peter Druker an organization should not just focus on one area when selling organizational goals as this can jeopardize the survival of the firm. Objectives are needed in every area where performance and results directly and rivalry affect the survival and prosperity of it. Druker identified 8 key areas to focus, gn when setting organizational oy goals. They include: 1. Market standing A“ 2. Innovation SS 3. Physical and financial resours 4. Profitability ne 5. Productivity S 6. Worker performance and attitude. 7. Managers performance and development 8. Public responsibility MANAGEMENT BY OBJECTIVE Management by objectives (MBO) is a modem to philosophy to management and goal setting which is collaborative in nature. The management and the subordinates collaboratively set the goals. MBO Philosophy was first advanced by Peter F. Drucker in the 1950's. Process of M.B.O 1. The overall organizational goals are first set by the senior managers through consultation with the organizational members.Features of MBO. ayeene + Collaboratively the manager and the subordinates agree on responsibilitie tasks, - Collaboratively the manager and the subordinates agree on the key residts or objectives to be achieved. . Jointly the manger and the subordinates agree o the resources needed to achieve the agreed results. The worker is provided with the necessary resources and left to work. - On periodic basis the manager meets the subordinate to review the progr s and to Provide support where necessary. At the end of the agreed period the manager meets the subordinates to determine whether the agreed goals have been achieved. If the subordinate has achieved, he is rewarded and the process begins again. If a worker has not achieved, he is facilitated to go back and achieve. Superior subordinate participation Joint goal settings, oO. Joint decision on methodology. . Support from superiors. S Subordinates freedom to be geative. Iereates ways of attaining ynaximum results by focusing on attainable objectives. Advantages of MBO . It minimizes resistance to change. . It motivates the staff due to the participation. There is increased employee commitment . It enhances self- discipline and self- regulation. . Itimproves communication between the management and the stal'f. . It clarities the specific roles and responsibilities of each individual. . It facilitates participative management. . It ensures that attention is focused o the key areas. It saves managerial time in terms of supervision. It acts as a platform for employee training and development.LEADERSHIP AND MANAGEMENT STUDY TEXT Limitations of MBO . Itis time consuming . The environment changes too frequently for M.B.O. to work . It over emphasizes on quantitative goals at the expense of quantitative goals, . It over emphasizes on short term goals at the expense of long- term goals. . It involves a lot for paperwork. . It may lack the top management support who may wish to maintain control. |. There is the danger of the management forgetting that there is more to management than goal setting. . It may be restricted by subordinates who are not good in goal setting. . It may lead to internal rigidity. aauswVno ee Conditions necessary for successful execution of M.B.O 1. There must be support from all the organizatigg@aj members. 2. Acceptance of the MBO by managers - aighern must be mentally convinced that it is a good program. 3. Organizational members must be traifie? on the philosophy. | Adequate time and resources must be*allocated. 5. There must be uninterrupted sfdision of information feedback S TYPES / CLASSIFICATION OF PLANS. Plans may be classified based on scope and on time frame. Scope means the coverage 0! the plan while the time frame means the time period covered by the plan — Classification based on scope © Strategie plan * Tactical plan ‘© Operational plan Classification based on the time-frame * Long-range plans/strategic plans-5 to 10 years + Medium-term plans -2 to 4 years * Short-term plans 0 to 12 months eh eee een ee eee Eee etENT STUDY TEXT STRATEGIC PLAN These are broad complex plan that cover the whole organization as a single business portfolio. The plans are concerned with the long-term direction of the entity a whole and positioning the entity as a whole strategically in the external environment. They are formulated by the top-level management Components of strategic plan 1. Strategic plans: These are broad complex plan that cover the whole organization as a single business portfolio. The plans are concemed with the long-term direction of the entity as a whole and positioning the entity as a whole strategically in the external environment. They are formulated by the top-level management 2. Mission statement: The mission statement is an all-embracing, time invariant expression of the purpose and goal of the organization. Itis the rationale for the business existence which legitimizes its existence in the society. 3. Vision statement: ‘This is the roadmap to the company’s destination and addresses where the company wants to be 5 to 10 years: 4. Values statement or guiding principles: Ph passionate, and distinctive core beliefs; They're guiding principles that never change and are part of the strategic feuidation. 5. SWOT: A SWOT is a summarize view of your current position, specifically the company’s strengths, weaknéssés, opportunities, and threats. includes what the firm outshines the competition at. ese are the long-term strategic focus areas now. statements are enduring, 6. Competitive advantage 7. Long-term strategic objectives: 1 spanning for three-year (or more) time horizon. They answer the question of what you must focus on to achieve your vision. 8. Strategies: Strategies are the approaches or methods that will be employed to use to realize the vision. 9. Short-term goals/priorities/initiatives: the short-term goals and initiatives convert the strategic goals into specific performance targets that fall within the One- to two-year time horizon, 10. Action items/plans: These specific statements that explain how a .goal will be accomplished. Theyre the areas that move the strategy to operations and are generally executed by teams or individuals within one to two years. 11 Scorecard: This is a tally that will be used to report the data of the entity’s key Performance indicators (KPIs) and track your performance against the monthly targets,12. Financial assessment: Based on historical record and future projections, this as: control over your organization’s financial performance Characteristics of Plans ‘ment helps plan and predict the future, allowing you to gain much better OPERATIONAL ‘ASPECT | STRATEGIC PLAINS — | TACTICAL PLANS L_ PANS =o Planner Top level managers Tactical managers Tactical managers Scope Broad scope covering the | Moderate scope Narrow scope entire organization as u covering at specific covering a specific single business portfolio _| functional area, activity department, branch or a strategic business unit Time frame | The plan focuses on the —_| Moderate time-frame, _| Short-term plans long-term direction of the _ | covering 2-5 years covering 0-12 firm five to 10 years months : Environment | Focuses of the external Mofforate focus on the | Internal environment éxtefnal environment _ | environment focus Pand internal ‘| environment Complexity | It is a complex of maa, ° Relatively simple Simple plans plans covering the-svhole organization. "Thephan incorporates uncertainty due to its diversity, time frame and the fact that it aligns the organization to the external environment of which the management as no control over Resources | The plans focus on the The plans focus on how | Tlie plans focus on corporate resources will be | the already allocated _| accomplishing the obtained and how they will | resources will be task within budget be allocated between the —_| utilized different parts of the organization Bete Z Values The plans are shaped by the | Derived from the Must be within the values of those in power as | strategic plan and policy framework they make unstructured therefore cannot be decisions shaped by the value of ee ee slieremipaceeeinieee arLEADERSHIP AND MAN. MENT STUDY TEXT the decision maker | a Orientation | Focus on effectiveness as] Focus moderately on —_| Focuses on Opposed to efficiency effectiveness and | efficiency | moderately on efficiency he 2. TACTICAL PLANS These plans have moderate scope and moderate time frame. They are plans relating to Subunits of the organization which could be a department, branch or a Strategic Business Unit (SBU). These plans are derived from the strategic plans and they are formulated by the middle level managers. 3. OPERATIONAL PLANS plese plans have the narrowest focus and the shortest time frame. They are concerned with specific activities. They are divided into two: © Standing plans and * Single use plans. a) Standing plans A ny These are plans that are developed. 16 jandle routine recurring activities. They include: 1) Procedures - a procedure is a chronological sequence of steps undertaken to complete a given task. 2) Rules - a rule is a rigid and definite plan that prescribes what ought to be done or not done in a given situation and the consequences of non-compliance. Rules have no room for discretion. 3) Policy - a policy is a guide to decision making. Jt provides a framework within which a decision is to be made. Policies are put in place to entrance uniformity of decisions. They give the decision maker some degree of discretion. Importance of policies in an organization 1. Policies establish indirect control over independent action by clearly stating how things are to be done and defining discretion policies in effect control decisions yet empowers employees to perform without direct interventions by top management,a }MENT STUDY TEX 2 imilar activities which reduc €S fp arising from favoritism and discrimination ition 3. Policies ensure quicker decisions by standardizing answers to previo, " is questions which would otherwise recur and be pushed back to the bi ‘ NALEMe, again and again. nt 4, Policies reduce uncertainty in repetitive day to day decision making henge coordinated efficient effort. 5. Policies afford managers a mechanism for avoiding hasty and ill-conceiveg decisions in changing operations. 6. Policies supply a convenient and authoritative reference, 7. Clearly stated policies can help reinforce the main functions of the organizations by reducing dependency on the actions of individual manager, 8. Policies counteract resistance to change. 9. Policies clarify the ideas and responsibilities of managers and other members staff and provides guidelines for managerial behavior. 10. Supply a convenient and authoritative reference b) Single use plans oO These are plans that are developed to lle one- time- off activities that arc unlikely to recur again. Ss They include programs, projects and budgets. 1. Programs: A program is a concrete scheme of action designed to accomplish a given task. It puts together all aspects and activities required to complete the tas! i.e. the goals to be achieved, the activities to be undertaken, timing of activities, assignment or responsibilities, resources to be employed. 2. Projects: Projects are similar to programs but narrower in scope. They are small separate portions of a program. 3. Budgets: A budget is a statement of expected outcomes expressed in numeric term. Budgets are designed to control the organization activities.LEADERSHIP AND MANAGEMENT STUDY APPROACHES TO PLANNING ‘all organizations plan; the only difference is their approach. Prior to starting a new sdrategie planning process it will be necessary to access the past planning approach that has been used within the organization and determine how the organization: have been affected. Addressing these cultural issues is critical to the suc current planning process. cultural may s of the ‘The four possible approaches to planning are: 1. Reactive - past oriented Reactive planning is an active attempt to turn back the clock to the past. The past, no matter how bad, is preferable to the present. And definitely better than the future will be. The past is romanticized and there is a desire to return to the "good old days.” These people seek to undo the change that has created the present, and they fear the future, which they attempt to prevent. 2, Inactive - present oriented S Inactive planning is an attempt to preserve Present, which is preferable to both the past and the future. While the preserfi may have problems it is better than the past. The expectation is that things ate a8 good as they are likely to get and the future will only be worse. Any adifitidnal change is likely to be for the worse and should therefore be avoided. 4\ eZ 3. Preactive - predict the TON Preactive planning is an attempt to predict the future and then to plan for that predicted future. Technological change is seen as the driving force bringing about the future, which will be better than the present or the past. The planning process will seek to position the organization to take advantage of the change that is happening around them. 4. Proactive - create the future Proactive planning involves designing a desired future and then inventing ways to create that future state. Not only is the future a preferred state, but the organization can actively control the outcome. Planners actively shape the future, rather than just trying to get ahead of events outside of their control. The predicted changes of the preactive planner are seen not as absolute constraints, but as obstacles that can be addressed and overcome.REVIEW QU Case has had a very successful history since CDD Ltd., a manufacturer of motor vehicle tyres, it was j established in 1984. However, recently the company has been experiencing difficulties in its I operations and almost closed down in the year 2004 due to increased competition, falling market j share and profitability and cash flow problems all of which had a negative impact on the company and its operations. In 2005, CDD Ltd. was acquired by EFF Ltd., a foreign motor vehicle tyre manufacturing company, which immediately injected substantial capital in the company to finance the company’s operations. EFF Ltd. also introduced a new management team to help turn- around the company. The new management team found out that the company had problems making decisions in a dynamic business environment. They also realized that despite the company having a tremendous potential, it faced a number of challenges that included cheap imported tyres flooding the market, falling market share and lack of a product diversification strategy. oY In an attempt to revive the company the managément team made the following key A decisions: _ Immediate improvement in theopbrating efficiency. . Enhancing quality of the company’s products. Downsizing of labour force TO save on costs. . Hiring additional expert staff in all departments . Diversifying the company’s products in order to expand its market vaRene The recovery programme for the company required the management to make both strategic and operational decisions. At the operational level, decisions had to be taken on how to improve the company’s immediate position while at the strategic level, decisions were necessary to ensure the continued long-term success of the company, Required: 1) Identify and briefly explain the key strategic and operational decisions facing the company’s management. 2) Discuss the analytical model of the decision-making process and demonstrate how it can be used by the company’s managementLEADERSHIP AND MANAGEMENT STUDY TEXT - SL 2. Examine six distinguishing characteristics between “strategic decisions” and “tactical decisions.” 3. With reference to the planning function, explain a) The benefits of panning to an organization ») Constraints to effective planning in an organization, ©) Ways of overcoming constraints to effective planning. 4) Forecasting involves accurately predicting future events. 4. Describe the difficulties managers may encounter when forecasting. 5. What factors are considered when selecting a method of forecasting?