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Chapter 7 Foundations Of Planning

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Chapter 7 Foundations Of Planning

  1. 1. Chapter 7 FOUNDATIONS OF PLANNING 7.1 © 2003 Pearson Education Canada Inc.
  2. 2. LEARNING OBJECTIVES <ul><li>You should be able to: </li></ul><ul><ul><li>Define planning </li></ul></ul><ul><ul><li>Explain why managers plan </li></ul></ul><ul><ul><li>Describe what role goals play in planning </li></ul></ul><ul><ul><li>Distinguish among the different types of plans </li></ul></ul><ul><ul><li>Tell how goals are established </li></ul></ul><ul><ul><li>Describe the characteristics of well-designed goals </li></ul></ul>7.2
  3. 3. LEARNING OBJECTIVES (continued) <ul><li>You should learn to: </li></ul><ul><ul><li>Identify three contingency factors in planning </li></ul></ul><ul><ul><li>Explain the approaches to developing plans </li></ul></ul><ul><ul><li>Discuss the criticisms of planning </li></ul></ul><ul><ul><li>Describe what it takes to effectively plan in a dynamic environment </li></ul></ul>7.3
  4. 4. WHAT IS PLANNING? <ul><li>Planning </li></ul><ul><ul><li>Involves defining the organization’s goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate organizational work </li></ul></ul><ul><ul><li>Informal planning - nothing is written down </li></ul></ul><ul><ul><li>Formal planning - written </li></ul></ul>7.4
  5. 5. WHY DO MANAGERS PLAN? <ul><li>Purposes of Planning </li></ul><ul><ul><li>Planning is the primary management function that establishes the basis for all other management functions as it gives direction </li></ul></ul><ul><ul><li>Planning establishes coordinated effort </li></ul></ul><ul><ul><li>Planning reduces uncertainty </li></ul></ul><ul><ul><li>Planning reduces overlapping and wasteful activities </li></ul></ul><ul><ul><li>Planning establishes goals and standards used in controlling </li></ul></ul>7.5
  6. 6. WHY DO MANAGERS PLAN? (continued) <ul><li>Planning and Performance </li></ul><ul><ul><li>Generally speaking, formal planning is associated with higher profits </li></ul></ul><ul><ul><li>Quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning </li></ul></ul><ul><ul><li>External environment may undermine the effects of formal planning </li></ul></ul><ul><ul><li>Planning/performance relationship is influenced by the planning time frame </li></ul></ul>7.6
  7. 7. HOW DO MANAGERS PLAN? <ul><li>The Role of Goals and Plans in Planning </li></ul><ul><ul><li>Goals - desired outcomes </li></ul></ul><ul><ul><ul><li>provide direction for all management decisions </li></ul></ul></ul><ul><ul><ul><li>represent the criteria against which actual work accomplishments can be measured </li></ul></ul></ul><ul><ul><li>Plans - outline how goals are going to be met </li></ul></ul>7.7
  8. 8. STATED OBJECTIVES FROM LARGE COMPANIES (Exhibit 7.1) 7.8
  9. 9. HOW DO MANAGERS PLAN? (continued) <ul><li>The Role of Goals and Plans in Planning (continued) </li></ul><ul><ul><li>Types of Goals </li></ul></ul><ul><ul><ul><li>all organizations have multiple objectives </li></ul></ul></ul><ul><ul><ul><li>no single measure can evaluate whether an organization is successful </li></ul></ul></ul><ul><ul><ul><li>stated goals - official statements of the organization’s goals </li></ul></ul></ul><ul><ul><ul><li>real goals - those goals that an organization actually pursues </li></ul></ul></ul>7.9
  10. 10. HOW DO MANAGERS PLAN? (continued) <ul><li>The Role of Goals and Plans in Planning (continued) </li></ul><ul><ul><li>Types of Plans </li></ul></ul><ul><ul><ul><li>strategic plans - apply to the entire organization </li></ul></ul></ul><ul><ul><ul><ul><li>establish organization’s overall goals </li></ul></ul></ul></ul><ul><ul><ul><ul><li>seek to position the organization in terms of its environment </li></ul></ul></ul></ul><ul><ul><ul><li>operational plans - specify the details of how the overall goals are to be achieved </li></ul></ul></ul><ul><ul><ul><ul><li>tend to cover short time periods </li></ul></ul></ul></ul>7.10
  11. 11. TYPES OF PLANS Breadth Strategic Operational Time Frame Long term Short term Specificity Directional Specific Frequency of Use Single use Standing 7.11
  12. 12. HOW DO MANAGERS PLAN? (continued) <ul><li>The Role of Goals and Plans in Planning (continued) </li></ul><ul><ul><li>Types of Plans (continued) </li></ul></ul><ul><ul><ul><li>long-term plans - time frame beyond three years </li></ul></ul></ul><ul><ul><ul><li>short-term plans - cover one year or less </li></ul></ul></ul><ul><ul><ul><li>specific plans - clearly defined with little room for interpretation </li></ul></ul></ul><ul><ul><ul><li>directional plans - flexible plans that set out general guidelines </li></ul></ul></ul>7.12
  13. 13. SPECIFIC VERSUS DIRECTIONAL PLANS (Exhibit 7.3) 7.13 © 2003 Pearson Education Canada Inc.
  14. 14. HOW DO MANAGERS PLAN (continued) <ul><li>The Role of Goals and Plans in Planning (continued) </li></ul><ul><ul><li>Types of Plans (continued) </li></ul></ul><ul><ul><ul><li>single-use plans - one-time plans specifically designed to meet the needs of a unique situation </li></ul></ul></ul><ul><ul><ul><li>standing plans - ongoing plans that provide guidance for activities performed repeatedly </li></ul></ul></ul>7.14
  15. 15. HOW DO MANAGERS PLAN (continued) <ul><li>Establishing Goals </li></ul><ul><ul><li>Approaches to Establishing Goals </li></ul></ul><ul><ul><ul><li>traditional goal setting - overall goals established at the top of the organization </li></ul></ul></ul><ul><ul><ul><ul><li>overall goals broken down into sub-goals for each level of the organization </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>network of goals creates a means-ends chain </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>sub-goals constrain subordinates’ behaviour </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>assumes that top managers know what is best for the organization </li></ul></ul></ul></ul></ul>7.15
  16. 16. TRADITIONAL OBJECTIVE SETTING (Exhibit 7.4) 7.16 © 2003 Pearson Education Canada Inc. Individual Employee’s Objective Top Management’s Objective Department Manager’s Objective Division Manager’s Objective “ Increase profits, regardless of the means” “ I want to see a significant improvement in this division’s profits” “ We need to improve the company’s performance” “ Don’t worry about quality: just work fast”
  17. 17. HOW DO MANAGERS PLAN? (continued) <ul><li>Establishing Goals (continued) </li></ul><ul><ul><li>Approaches to Establishing Goals (continued) </li></ul></ul><ul><ul><ul><li>management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers </li></ul></ul></ul><ul><ul><ul><ul><li>progress toward accomplishing these goals is periodically reviewed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>rewards are allocated on the basis of this progress </li></ul></ul></ul></ul><ul><ul><ul><ul><li>MBO consists of four elements </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>goal specificity </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>participative decision making </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>explicit time period </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>performance feedback </li></ul></ul></ul></ul></ul>7.17
  18. 18. STEPS IN A TYPICAL MBO PROGRAM (Exhibit 7.5) 7.18 © 2003 Pearson Education Canada Inc.
  19. 19. HOW DO MANAGERS PLAN (continued) <ul><li>Establishing Goals (continued) </li></ul><ul><ul><li>Approaches to Establishing Goals (continued) </li></ul></ul><ul><ul><ul><li>management by objectives (continued) </li></ul></ul></ul><ul><ul><ul><ul><li>increases employee performance and organizational productivity </li></ul></ul></ul></ul><ul><ul><ul><ul><li>problems with MBO </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>can be useless in times of dynamic change </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>overemphasis on personal rather than organizational goals </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>may be viewed simply as an annual exercise in paperwork </li></ul></ul></ul></ul></ul>7.19
  20. 20. HOW DO MANAGERS PLAN? (continued) <ul><li>Establishing Goals (continued) </li></ul><ul><ul><li>Characteristics of Well-Designed Goals </li></ul></ul><ul><ul><ul><li>written in terms of outcomes </li></ul></ul></ul><ul><ul><ul><li>measurable and quantifiable </li></ul></ul></ul><ul><ul><ul><li>clear as to a time frame </li></ul></ul></ul><ul><ul><ul><li>challenging but attainable </li></ul></ul></ul><ul><ul><ul><li>written down </li></ul></ul></ul><ul><ul><ul><li>communicated to all organization members who need to know the goals </li></ul></ul></ul>7.20
  21. 21. HOW DO MANAGERS PLAN? (continued) <ul><li>Establishing Goals (continued) </li></ul><ul><ul><li>Steps in Goal Setting </li></ul></ul><ul><ul><ul><li>1 - Review the organization’s mission </li></ul></ul></ul><ul><ul><ul><li>2 - Evaluate available resources </li></ul></ul></ul><ul><ul><ul><li>3 - Determine the goals individually or with input from others </li></ul></ul></ul><ul><ul><ul><li>4 - Write down the goals and communicate them to all who need to know them </li></ul></ul></ul><ul><ul><ul><li>5 - Review results and whether goals are being met </li></ul></ul></ul>7.21
  22. 22. HOW DO MANAGERS PLAN? (continued) <ul><li>Developing Plans </li></ul><ul><ul><li>Contingency Factors in Planning </li></ul></ul><ul><ul><ul><li>level in the organization </li></ul></ul></ul><ul><ul><ul><ul><li>operational planning dominates managers’ planning efforts at lower levels </li></ul></ul></ul></ul><ul><ul><ul><ul><li>strategic planning more characteristic of planning at higher levels </li></ul></ul></ul></ul>7.22
  23. 23. PLANNING IN THE HIERARCHY OF ORGANIZATIONS (Exhibit 7.7) Top Executives Middle-Level Managers First-Level Managers © 2003 Pearson Education Canada Inc. 7.23 Strategic Planning Operational Planning
  24. 24. HOW DO MANAGERS PLAN? (continued) <ul><li>Developing Plans (continued) </li></ul><ul><ul><li>Contingency Factors in Planning (continued) </li></ul></ul><ul><ul><ul><li>degree of environmental uncertainty </li></ul></ul></ul><ul><ul><ul><li>length of future commitments </li></ul></ul></ul><ul><ul><ul><ul><li>commitment concept - plans should extend far enough to meet those commitments made when the plans were developed </li></ul></ul></ul></ul>7.24
  25. 25. HOW DO MANAGERS PLAN? (continued) <ul><li>Developing Plans (continued) </li></ul><ul><ul><li>Approaches to Planning </li></ul></ul><ul><ul><ul><li>traditional, top-down approach </li></ul></ul></ul><ul><ul><ul><ul><li>planning done by top managers </li></ul></ul></ul></ul><ul><ul><ul><ul><li>formal planning department - specialists whose sole responsibility is to help to write organizational plans </li></ul></ul></ul></ul><ul><ul><ul><ul><li>plans flowed down to lower levels </li></ul></ul></ul></ul><ul><ul><ul><ul><li>most effective if plan is a workable document used by organizational members for direction and guidance </li></ul></ul></ul></ul>7.25
  26. 26. HOW DO MANAGERS PLAN? (continued) <ul><li>Developing Plans (continued) </li></ul><ul><ul><li>Approaches to Planning (continued) </li></ul></ul><ul><ul><ul><li>inclusive approach </li></ul></ul></ul><ul><ul><ul><ul><li>employees at each level develop plans suited to their needs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>employees acquire greater sense of the importance of planning when they participate in the process </li></ul></ul></ul></ul><ul><ul><ul><ul><li>plans more likely to be used in directing and coordinating work </li></ul></ul></ul></ul>7.26
  27. 27. CONTEMPORARY ISSUES IN PLANNING <ul><li>Criticisms of Planning </li></ul><ul><ul><li>Planning may create rigidity </li></ul></ul><ul><ul><ul><li>unwise to force a course of action when the environment is fluid </li></ul></ul></ul><ul><ul><li>Plans can’t be developed for a dynamic environment </li></ul></ul><ul><ul><ul><li>flexibility required in a dynamic environment </li></ul></ul></ul><ul><ul><ul><li>can’t be tied to a formal plan </li></ul></ul></ul><ul><ul><li>Formal plans can’t replace intuition and creativity </li></ul></ul><ul><ul><ul><li>mechanical analysis reduces the vision to some type of programmed routine </li></ul></ul></ul>7.27
  28. 28. CONTEMPORARY ISSUES IN PLANNING (continued) <ul><li>Criticisms of Planning (continued) </li></ul><ul><ul><li>4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival </li></ul></ul><ul><ul><ul><li>plans concentrate on capitalizing on existing business opportunities </li></ul></ul></ul><ul><ul><ul><li>hinders managers who consider creating or reinventing an industry </li></ul></ul></ul><ul><ul><li>5. Formal planning reinforces success, which may lead to failure </li></ul></ul><ul><ul><ul><li>success may breed failure in an uncertain environment </li></ul></ul></ul>7.28
  29. 29. CONTEMPORARY ISSUES IN PLANNING (continued) <ul><li>Effective Planning in Dynamic Environments </li></ul><ul><ul><li>develop plans that are specific, but flexible </li></ul></ul><ul><ul><li>recognize that planning is an ongoing process </li></ul></ul><ul><ul><li>change directions if environmental conditions warrant </li></ul></ul><ul><ul><li>stay alert to environmental changes </li></ul></ul>7.29

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