Planning

Planning Process

• Planning is a process involving setting organizational goals, developing strategies for achieving those goals, and creating action plans to reach those goals.

Importance of Planning

• Planning provides direction to all organizational personnel (managers and employees).
• It reduces uncertainty.
• It minimizes waste of time, effort, and resources.

Goals and Plans

• Goals are targets management wants to achieve.
• Plans are the means (actions) to achieve those goals.

Characteristics of Plans

• Comprehensiveness: How broadly the plan covers.
• Time frame: Length of the plan (short-term, long-term).
• Specificity: Clarity and detail of the plan.
• Frequency of use: How often the plan is used (standing plans vs. single-use plans).

Steps in Planning

• Define goals/objectives, and evaluate current situation against those goals.
• Develop premises regarding future conditions.
• Analyze alternatives and make choices.
• Implement the plan.
• Evaluate results and take corrective action.

Types of Plans

• Strategic Plans: Long-term direction of an organization, encompassing 3-5 years. Analyze environmental factors, competition, and internal resources.
• Tactical Plans: Translate strategic plans into specific goals for different parts of the organization (1-2 years). Coordinate work across departments and keep units focused on strategic goals.
• Operational Plans: Translate tactical plans for smaller units (up to 12 months). Focus on short-term specifics. Less complex, effects are mainly within the department itself.
• Long-term Plans: Strategy-focused plans covering 3-5 years, considering economic, social, and technological factors.
• Short-term Plans: Usually covering one year; maintain production and distribution of current products to existing markets. Directly affects functional groups (marketing, finance).
• Standing Plans: Repeatedly used over a long period (organizational mission, objectives, strategies, policies, procedures, rules). Guide managers in routine matters consistently.
• Single-Use Plans: Non-recurring plans for specific events (programs, projects, budgets).

Planning at Different Levels

• Corporate Level: Focuses on industries, markets for investment, resources allocation. Senior executives participate.
• Business Level: Focus on competition (competitor analysis).
• Functional Level: Focus on departmental activities, customer expectations, competitor information. Functional heads (finance, marketing) participate.

Decision Making

• Rational Decision Making: Logical and consistent choices maximizing value. Assumes objective decision-makers with clear goals, knowing all alternatives and consequences.
• Bounded Rationality: Realistic approach; decision-makers are limited by their ability to process information. They make satisfactory (satisfice) rather than optimal (maximize) choices.
• Intuition-Based Decision Making: Decisions based on experience, feelings, and judgment. Can be based on cognitive analysis, experience, values, ethics, or subconscious thought processes.
• Decision Making Styles:
  • Linear Thinking: Preference for using external data and facts, processed through rational-logical thought.
  • Non-linear Thinking: Preference for internal information (feelings, intuitions), processed through insights, hunches.

Decision-Making Errors and Biases

• Selective Perception Bias: Decision-makers filter information based on their biased perception.
• Availability Bias: Decision-makers focus on recent, vivid events, ignoring objective information or probability estimates.
• Sunk Cost Errors: Decision-makers inappropriately focus on past expenditures (time, money, effort) when making present decisions.

Additional Planning Techniques

• Forecasting: Predicting future events.
• Contingency Planning: Creating backup plans for anticipated problems.
• Scenario Planning: Exploring different possible future scenarios.
• Benchmarking: Comparing performance to industry best practices.
• Participatory Planning: Involving multiple stakeholders in the planning process.