Chapter 3: Planning PDF

# Chapter 3: Planning ## Planning Planning is a process that involves the setting of the organization's goals, establishing strategies for accomplishing those goals, and developing plans of actions that managers intend to use to achieve said organizational goals. ## Importance of Planning PLANNI...

# Chapter 3: Planning ## Planning Planning is a process that involves the setting of the organization's goals, establishing strategies for accomplishing those goals, and developing plans of actions that managers intend to use to achieve said organizational goals. ## Importance of Planning PLANNING is important because: it provides direction to all of the organization's human resource managers and employees, reduced uncertainty, and minimizes wastes of time, effort, and resources. ## Goals and Plans GOALS are the targets that management desires to reach while PLANS are the means or actions which management intends to use to achieve the said goals/targets. ## Describing Plans Plans are best described in terms of their: - Comprehensiveness - Time Frame - Specificity - Frequency of Use ## Planning Steps Planning steps include: - Defining of goals/objectives; determining where one stands in relation to set goals/objectives - Developing premises regarding future conditions - Analyzing and choosing action alternatives - Implementing the plan - Evaluating results and taking corrective action ## How does a Manager Plan? This is represented in a diagram that shows the steps in a circle, going clockwise: - Defining of goals/objectives - Developing premises regarding future conditions - Analyzing and choosing action alternatives - Implementing the plan - Evaluating results and taking corrective action ## Planning Types Planning types include: 1. Strategic 2. Tactical 3. Operational 4. Long-Term 5. Short-Term 6. Directional 7. Specific 8. Single Use 9. Standing Plans ## Types of Planning ### Strategic Planning - Strategic planning sets the long-term direction of the organization in which it wants to proceed in the future. - It focuses on the broad future of the organization. Incorporating both external information gathered by analyzing the company's competitive environment and the firms internal resources, managers determine the scope of the business to achieve the long-term objectives. - Strategic planning involves the analysis of various environmental factors and the competition. - Most strategic plans focus on how to achieve goals three to five years into the future. - It has the potential to impact dramatically, both positively and negatively, on the survival and success of the organization. - Typically 3-5 years of horizon - Top management is involved in framing the strategic plans. ### Tactical Planning - Tactical plans translate the strategic plans into specific goals for specific parts of the organizations. - They are for shorter time frames and usually focused for 1-2 years. - Instead of focusing on the entire corporation, tactical plans typically affect a single business within an organization. - Although tactical plans should complement the organization's overall strategic plan, they are often somewhat independent of other tactical plans. - Tactical plans are concerned with implementation of strategic plans by coordinating the work of different departments in the organization. - They try to integrate various organization units and ensure the commitment to strategic plans. ### Operational Planning - Operational plans translate the tactical plans into specific goals and actions for small units of the organization. - They typically focus on the short term, usually 12 months or less. - These plans are least complex than strategic and tactical plans, and rarely have a direct effect on other plans outside of the department or unit for which the plan was developed. ### Long-Term Planning - Long-term planning is of strategic nature and involves long periods, say 3-5 yrs. The long-term plans usually encompass all the functional areas of the business and are affected within the existing and long-term framework of economic, social, and technological factors. ### Short-Term Planning - Short-term planning is usually a plan made for one year. These are aimed at sustaining organization in its production and distribution of current products or services to the existing markets. These plans directly affect functional groups (production, marketing, finance). ### Standing Plans - Standing plans are put to use again and again over a long period of time. Once established they continue to apply until they are modified or abandoned. Standing plans help managers in dealing with routine matters in a pre-determined and consistent manner. - Examples of standing plans are: organizational mission and long-term objectives, strategies, policies, procedures, and rules. ### Single-Use Plans - Single-use plans are relevant for a specified time and after the lapse of that time, these plans are formulated again for the next period. - Single-use plans are non-recurring in nature and deal with problems that probably will not be repeated in the same form in the future. - Generally these plans are derived from the standing plans. - Examples: projects, budgets, targets. ## Standing vs. Single Use Plans This is represented in a diagram that shows the two plan types branching out from "PLANS": - **Standing Plans:** 1. Objectives 2. Policies & Strategies 3. Procedures 4. Methods 5. Rules - **Single Use Plans:** 1. Programmes 2. Projects 3. Budgets ### Specific Plans - Plans that are clearly defined and leave no room for interpretation. ### Directional Plans - Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation. ## Directional vs. Specific Plans This is represented by a diagram that shows two maps with different routes marked on them: - **Directional Plans:** A route that goes at a diagonal from point A to point B across the city. - **Specific Plans:** A route that goes straight from Point A to Point B across the city. ## Planning at Different Levels ### Corporate Level - Most corporations of even moderate size have a corporate headquarters. The heads of these groups are typically part of the group of senior executives at the corporate headquarters. Executives at the corporate level in large firms include both those in the headquarters and those heading up the large corporate groups such as finance, human resources, marketing, etc. - These corporate-level executives primarily focus on the questions such as: - What industries should we get into? - What markets should the firm be in? - In which business should the corporation invest money? - What resources should be allocated to each business? ### Business Level - At this level, managers focus on determining how they are going to compete effectively in the market. - At this level, managers attempt to address questions such as: - Who are our direct competitors? - What are their strengths and weaknesses? - What are our strengths and weaknesses? - What advantages do we have over competitors? ### Functional Level - At this level, managers focus on how they can facilitate the achievement of the competitive plan of the business. These managers are often the heads of departments such as finance, marketing, human resources, or product development. - Depending on the business structure this can include managers responsible for business within a specific geographic region or managers responsible for specific retail stores. - Functional managers attempt to address questions such as: - What activities does my unit need to perform well in order to meet customer expectations? - What information about competitors does my unit need in order to help the business compete effectively? ## Interrelationship Between Plan Types and Levels This is represented by a diagram: - **Types of plans:** - Strategic Plans - Tactical Plans - Operational Plans - **Organizational Levels:** - Corporate Level - Business Level - Functional Plans ## Decision Making ### Rational - A type of decision making in which choices are logical and consistent and maximize value. - Assumptions of rationality: a rational decision maker would be fully objective and logical. They will have a clear and specific goal and know all the possible alternatives and consequences. - Making decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal. - Decisions are made in the best interest of the organization. ### Bounded Rationality - It is a more realistic approach. - Managers make decisions rationally but are bounded by their ability to process the information. Because they can't possibly analyze all the information on all the alternatives, managers satisfice rather than maximize, i.e., they accept solutions that are good enough. - They are being rational within the limits of their ability to process information. ### Intuition Based - Making decisions on the basis of experience, feelings, and judgment. - It can be cognitive-based, experience-based, value or ethics-based, or subconscious mental processing. ## Decision Making Styles ### Linear Thinking Style - Characterized by a person's preference for using external data and facts and processing this information through rational, logical thinking to guide decisions and actions. ### Non-Linear Thinking Style - Characterized by a person's preference for using the internal sources of information (feeling and intuitions) and processing this information with the internal insights, feelings, and hunches to guide decisions and actions. ## Decision Making Errors and Biases ### Selective Perception Bias - When decision-makers selectively organize and interpret events based on their biased perception, they are using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the alternatives they develop. ### Availability Bias - It causes decision-makers to tend to remember events that are the most recent and vivid in their memory. The bias distorts their ability to recall events in an objective manner and results in distorted judgments and probability estimates. ### Sunk Cost Errors - Decision-makers forget that current choices can't correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing their choice. ## Other Important Planning Concepts - Forecasting - Contingency Plans - Scenario Planning - Benchmarking - Participatory Planning