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Planning & MBO.ppt

  1. 1 Essentials of Planning & MBO
  2. How to Bake a Cake?
  3. Develop a business plan for..... • A retail store in a mall • Selling used clothes • House cleaning service • Pet sitting • Shopping service for seniors • Child care • Lemonade and Hot dog stand • Travel services
  4. BUSINESS PLAN QUESTIONS •How can you describe the only one paragraph please? •What is your product, or service? •Who will buy it? •Where should you locate the business? •How can you attract customers? •What is your competition? •How much should you charge for the products or service? •What advice do you need and who can provide it? •How will you organize the managers and/or workers of the business? •How will you split the profits? Who is responsible for the losses? •What should you consider to be able to produce the product and get it to the customer?
  5. •How much money is needed to get the business started? •How many customers will you have per month and how much will they buy per month? •How much does it cost to make the product or provide the service? •What are your operating costs? (Include your own salary) •How much money will your business earn each month by selling your product or service? •How much investment will you need to keep the business going until you make a profit? •What is your potential profit per year for Year I, Year II, and Year III? •How much money do you need to borrow to start this business? •How will you make the business grow in the future?
  6. What Is Planning? – involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work – Planning is an intellectual process, the conscious determination of courses of action, the basing of decisions on purpose, acts and considered estimates – informal planning - nothing is written down • little or no sharing of goals • general and lacking in continuity – formal planning - written • defines specific goals • specific action programs exist to achieve goals © Prentice Hall, 2002
  7. Reduce the Impact of Change Provide Direction Minimize Waste / Redundancy Set Control Standards Reasons for Planning Growing complexities Growth of trade union Rapid socio- Economic changes Need for R&D activity
  8. Benefits of planning • Reduces uncertainty • Encourage innovation & creativity • Improves motivation • Achieve better coordination • Facilitates control • Planning leads to success • Focuses attention
  9. Arguments Against Strategic Planning Rigid Assumptions of Stability Intuition and Creativity Environmental Turbulence Focus on Today’s Competition Preoccupation with Current Success
  10. Does Planning Improve Performance? • Financial results • Environmental concerns • Quality and implementation
  11. Hierarchy of Plans (cont..) Plans can be classified as (1) mission or purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets
  12. Hierarchy of Plans (cont..) • The mission, or purpose, identifies the basic purpose or function or tasks of an enterprise or agency or any part of it • Objectives, or goals, are the ends toward which activity is aimed • Strategy is the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals • Policies are general statements or understandings that guide or channel thinking in decision making • Procedures are plans that establish a required method of handling future activities
  13. Hierarchy of Plans – cont. • Rules spell out specific required actions or non actions, allowing no discretion • Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action • A budget is a statement of expected results expressed in numerical terms
  14. Steps in Planning
  15. STEPS IN PLANNING • Being aware of opportunity :In light of Market, Competition Customer desire, Our strengths Our weaknesses • Setting objectives or goals: Where we want to be& what we want to accomplish & when • Considering planning premises: In what environment will our plans operate • Identifying alternatives: What are the most promising alternatives to accomplishing our objectives • Comparing alternatives in light of goals sought Which alternative meets our goals at lowest cost &at highest profit • Choosing an alternative Selecting the course of action • Formulating derivative plans such plans as to :- Buy equipment Buy materials, Hire& train workers, • Budgets: Develop such budgets as Volume & price of sales, operating expenses necessary for plans, Capital expenditure
  16. Types Of Plans Breadth Strategic Operational Specificity Directional Specific Frequency of Use Single use Standing Time Frame Long term Short term © Prentice Hall, 2002
  17. Specific Versus Directional Plans © Prentice Hall, 2002
  18. Planning In The Hierarchy Of Organizations Strategic Planning Operational Planning Top Executives Middle-Level Managers First-Level Managers © Prentice Hall, 2002
  19. Contemporary Issues In Planning (cont.) • Effective Planning in Dynamic Environments – develop plans that are specific, but flexible – recognize that planning is an ongoing process – change directions if environmental conditions warrant – stay alert to environmental changes © Prentice Hall, 2002
  20. Barriers to effective planning • Difficulty of accurate premising • Problems of rapid change • Internal inflexibilities policy & procedural inflexibility capital investment • External inflexibility political climate trade unions technology changes • Time & cost factors • Failure of people in planning
  21. How Do Managers Plan? • Traditional Objective Setting • Management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers – progress toward accomplishing these goals is periodically reviewed – rewards are allocated on the basis of this progress – MBO consists of four elements » goal specificity » participative decision making » explicit time period » performance feedback © Prentice Hall, 2002 7-21
  22. Traditional Objective Setting 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”
  23. Management by Objectives
  24. Establishing Goals (cont.) • Management by objectives (cont.) – increases employee performance and organizational productivity » depends on support of top managers for MBO » problems with MBO - can be useless in times of dynamic change -overemphasis on personal rather than organizational goals -may be viewed simply as an annual exercise in paperwork © Prentice Hall, 2002
  25. Hierarchy of Goals FIGURE 4–1
  26. Principles of Goal-Setting  Set SMART goals—make them specific, measurable, attainable, relevant, and timely. Choose areas (sales revenue, costs, and so forth) that are relevant and complete.  Assign specific goals.  Assign measurable goals.  Assign doable but challenging goals.  Encourage participation.  Use executive assignment action plans, or management by objectives.