chap07.ppt

Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 2002 7-1  Learning Objectives You should learn to: – Define planning – Explain why managers plan – Describe what role goals play...

Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 2002 7-1  Learning Objectives You should learn to: – Define planning – Explain why managers plan – Describe what role goals play in planning – Distinguish among the different types of plans – Tell how goals are established – Describe the characteristics of well-designed goals © Prentice Hall, 2002 7-2  Learning Objectives (cont.) You should learn to: – Identify three contingency factors in planning – Explain the approaches to developing plans – Discuss the criticisms of planning – Describe what it takes to effectively plan in a dynamic environment © Prentice Hall, 2002 7-3  What Is Planning? Planning – involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work – 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 7-4  Why Do Managers Plan? Purposes of Planning – planning is the primary management function that establishes the basis for all other management functions – planning establishes coordinated effort – planning reduces uncertainty – planning reduces overlapping and wasteful activities – planning establishes goals and standards used in controlling © Prentice Hall, 2002 7-5  Why Do Managers Plan? (cont.) Planning and Performance – generally speaking, formal planning is associated with: higher profits higher return on assets – quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning – external environment may undermine the effects of formal planning – planning/performance relationship is influenced by the planning time frame © Prentice Hall, 2002 7-6  How Do Managers Plan? The Role of Goals and Plans in Planning – goals - desired outcomes provide direction for all management decisions represent the criteria against which actual work accomplishments can be measured – plans - outline how goals are going to be met – Types of Goals all organizations have multiple objectives no single measure can evaluate whether an organization is successful financial goals - relate to financial performance strategic goals - relate to other areas of performance © Prentice Hall, 2002 7-7  Stated Objectives From Large US Companies © Prentice Hall, 2002 7-8  How Do Managers Plan? (cont.) The Role of Goals and Plans in Planning (cont.) – Types of Goals (cont.) stated goals - official statements of the organization’s goals real goals - those goals that an organization actually pursues © Prentice Hall, 2002 7-9  How Do Managers Plan? (cont.) The Role of Goals and Plans in Planning (cont.) – Types of Plans strategic plans - apply to the entire organization – establish organization’s overall goals – seek to position the organization in terms of its environment operational plans - specify the details of how the overall goals are to be achieved – tend to cover short time periods © Prentice Hall, 2002 7-10  Types Of Plans Frequency Breadth Time Frame Specificity of Use Strategic Long term Directional Single use Operational Short term Specific Standing © Prentice Hall, 2002 7-11  How Do Managers Plan? (cont.) The Role of Goals and Plans in Planning (cont.) – Types of Plans (cont.) long-term plans - time frame beyond three years – definition of long term has changed with increasingly uncertain organizational environments short-term plans - cover one year or less specific plans - clearly defined with little room for interpretation – required clarity and predictability often do not exist directional plans - flexible plans that set out general guidelines – provide focus without limiting courses of action © Prentice Hall, 2002 7-12  Specific Versus Directional Plans © Prentice Hall, 2002 7-13  How Do Managers Plan? (cont.) The Role of Goals and Plans in Planning (cont.) – Types of Plans (cont.) single-use plans - one-time plans specifically designed to meet the needs of a unique situation standing plans - ongoing plans that provide guidance for activities performed repeatedly – include policies, procedures, and rules © Prentice Hall, 2002 7-14  How Do Managers Plan? (cont.) Establishing Goals – Approaches to Establishing Goals traditional goal setting - overall goals established at the top of the organization – overall goals broken down into subgoals for each level of the organization » higher-level goals must be made more specific at lower levels » network of goals creates a means-ends chain – subgoals constrain subordinates’ behavior » assumes that top managers know what is best for the organization © Prentice Hall, 2002 7-15  Traditional Objective Setting Top “We need to improve Management’s the company’s performance” Objective Division “I want to see a Manager’s significant improvement Objective in this division’s profits” Department “Increase profits, regardless Manager’s of the means” Objective Individual “Don’t worry about Employee’s quality: just work fast” Objective © Prentice Hall, 2002 7-16  How Do Managers Plan? (cont.) Establishing Goals (cont.) – Approaches to Establishing Goals (cont.) 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 7-17  Steps in a Typical MBO Program © Prentice Hall, 2002 7-18  How Do Managers Plan? (cont.) Establishing Goals (cont.) – Approaches to 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 7-19  How Do Managers Plan? (cont.) Establishing Goals (cont.) – Characteristics of Well-Designed Goals should be written in terms of outcomes should be measurable and quantifiable should be clear as to a time frame should be challenging but attainable should be written down should be communicated to all organization members who need to know the goals © Prentice Hall, 2002 7-20  How Do Managers Plan? (cont.) Establishing Goals (cont.) – Steps in Goal Setting 1 - Review the organization’s mission 2 - Evaluate available resources 3 - Determine the goals individually or with input from others – should be congruent with the organizational mission and goals in other organizational areas 4 - Write down the goals and communicate them to all who need to know them 5 - Review results and whether goals are being met © Prentice Hall, 2002 7-21  How Do Managers Plan? (cont.) Developing Plans – Contingency Factors in Planning level in the organization – operational planning dominates managers’ planning efforts at lower levels – strategic planning more characteristic of planning at higher levels © Prentice Hall, 2002 7-22  Planning In The Hierarchy Of Organizations Strategic Planning Top Executives Middle-Level Managers First-Level Operational Managers Planning © Prentice Hall, 2002 7-23  How Do Managers Plan? (cont.) Developing Plans (cont.) – Contingency Factors in Planning (cont.) degree of environmental uncertainty – when uncertainty is high, plans should be specific, but flexible length of future commitments – commitment concept - plans should extend far enough to meet those commitments made when the plans were developed » the more that current plans affect future commitments, the longer the time frame for which managers should plan © Prentice Hall, 2002 7-24  How Do Managers Plan? (cont.) Developing Plans (cont.) – Approaches to Planning traditional, top-down approach – planning done by top managers – formal planning department - specialists whose sole responsibility is to help to write organizational plans – plans flowed down to lower levels » tailored to particular needs at each lower level – most effective if plan is a workable document used by organizational members for direction and guidance © Prentice Hall, 2002 7-25  How Do Managers Plan? (cont.) Developing Plans (cont.) – Approaches to Planning (cont.) inclusive approach – employees at each level develop plans suited to their needs – employees acquire greater sense of the importance of planning when they participate in the process – plans more likely to be used in directing and coordinating work © Prentice Hall, 2002 7-26  Contemporary Issues In Planning Criticisms of Planning – 1. Planning may create rigidity unwise to force a course of action when the environment is fluid – 2. Plans can’t be developed for a dynamic environment flexibility required in a dynamic environment can’t be tied to a formal plan – 3. Formal plans can’t replace intuition and creativity mechanical analysis reduces the vision to some type of programmed routine © Prentice Hall, 2002 7-27  Contemporary Issues In Planning (cont.) Criticisms of Planning (cont.) – 4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival plans concentrate on capitalizing on existing business opportunities hinders managers who consider creating or reinventing an industry – 5. Formal planning reinforces success, which may lead to failure success may breed failure in an uncertain environment © Prentice Hall, 2002 7-28  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 7-29