Foundations of Planning
What Is Planning?
•Planning
A primary managerial activity that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing plans for organizational work activities
Formal planning
• Specific goals covering a specific time period.
• Written and shared with organizational members.
Why Do Managers Plan?
• Purposes of Planning
– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling
Planning and Performance
– Formal planning is associated with:
–Higher profits and returns on assets.
–Positive financial results.
–The external environment can reduce the impact of
planning on performance.
– Formal planning must be used for several years
before planning begins to affect performance.
Planning in Arab Culture
• Planning is underdeveloped in Arab societies
– some attribute this to an Arab culture that is supposedly fixated on
the past and resists planning for the future.
• Fatalism
– the belief in predestination, in the sense that a person has no control
over things that happen to him as things have already been
predestined from God.
• This is a mistaken understanding of Qadar.
– Belief in Qadar does not mean that people should not plan.
planning is required to succeed and this
must be in harmony with religious teachings
How Do Managers Plan?
•Elements of Planning
Goals (also Objectives)
• Desired outcomes for individuals, groups, or entire
organizations
• Provide direction and evaluation performance criteria
Plans
• Documents that outline how goals are to be accomplished
• Describe how resources are to be allocated and establish
activity schedules
Types of Goals
• Financial Goals
are related to the expected internal financial performance of the
organization.
• Strategic Goals
are related to the performance of the firm relative to factors in its
external environment (e.g., competitors).
• Stated goals
can be found in an organization’s charter, annual report, or public
relations announcements, or in public statements made by
managers.
only one goal = other long-term goals will be ignored
SMART Objectives
S Specific S
M Measurable M
A Attainable
A
R Relevant
R
T Time bound
T
Exhibit 7–1 Types of Plans
Traditional Goal Setting
– Broad goals are set at the top of the
organization.
– Goals are then broken into sub-goals for each
organizational level.
– Assumes that top management knows best
because they can see the “big picture”.
– Goals are intended to direct, guide, and constrain
from above.
– Goals lose clarity and focus as lower-level
managers attempt to interpret and define the
goals for their areas of responsibility.
Exhibit 7–2
The Downside of Traditional Goal Setting
Maintaining The Hierarchy of Goals
Means–Ends Chain
• The integrated network of goals that results from
establishing a clearly-defined hierarchy of
organizational goals.
• Achievement of lower-level goals is the means by
which to reach higher-level goals (ends).
Management By Objectives (MBO)
– Specific performance goals are jointly
determined by employees and managers.
– Progress toward accomplishing goals is
periodically reviewed.
– Rewards are allocated on the basis of progress
towards the goals.
– Key elements of MBO:
- Goal specificity. - participative decision making
- an explicit performance/evaluation period.
- feedback.
Does MBO Work?
•Reason for MBO Success
– Top management commitment and involvement
•Potential Problems with MBO Programs
– Not as effective in dynamic environments that
require constant resetting of goals.
– Overemphasis on individual accomplishment
may create problems with teamwork.
Steps in Goal
• 1. Review the organization’s mission statement.
Do goals reflect the mission?
• 2. Evaluate available resources.
Are resources sufficient to accomplish the mission?
• 3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
• 4. Write down the goals and communicate them.
Is everybody on the same page?
• 5. Review results and whether goals are being met.
What changes are needed in mission, resources, or
goals?
Developing Plans:
Contingency Factors in Planning
1. Manager’s level in the organization
– Strategic plans at higher levels
– Operational plans at lower levels
2. Degree of environmental uncertainty
– Stable environment: specific plans
– Dynamic environment: specific but flexible plans
3. Length of future commitments
– Commitment Concept: current plans affecting future
commitments must be sufficiently long-term to meet those
commitments.
Exhibit 7–5
Planning in the Hierarchy of Organization
Developing Plans:
Developing Plans: Approaches to Planning
Approaches to Planning
• 1. Establishing a formal planning
department
– A group of planning specialists who help managers write
organizational plans.
– Planning is a function of management; it should never become
the sole responsibility of planners.
• 2. Involving organizational members in the
process
– Plans are developed by members of organizational units at
various levels and then coordinated with other units across the
organization.
Contemporary Issues in Planning
Criticisms of Planning
– Planning may create rigidity.
– Plans cannot be developed for dynamic
environments.
– Formal plans cannot replace intuition and
creativity.
– Planning focuses managers’ attention on today’s
competition not tomorrow’s survival.
– Formal planning reinforces today’s success,
which may lead to tomorrow’s failure.
– Just planning isn’t enough.
Contemporary Issues in Planning
Effective Planning in Dynamic Environments
– Develop plans that are specific but flexible.
– Understand that planning is an ongoing
process.
– Change plans when conditions warrant.
– Persistence in planning eventually pay off.
– Flatten the organizational hierarchy to foster
the development of planning skills at all
organizational levels.
Terms to Know
•planning •traditional goal setting
•goals •means-ends chain
•plans •management by objectives
•stated goals (MBO)
•strategic plans •mission
•operational plans •formal planning department
•long-term plans
•short-term plans
•specific plans
•directional plans
•single-use plan
•standing plans