Chp 8 - Foundations of Planning

Criticisms of planning; Benefits of planning, Why managers plan; Types of plans; Characteristics of Effective Goal setting; Contingency factors in planning

4 Reasons Why Managers Plan

-Planning provides direction, -Planning reduces uncertainty, -Planning minimizes waste and redundancy, -Planning establishes goals and standards

Benefits of Planning

Positive financial results, Higher performance

Types of Plans

1) Breadth (Strategic vs Operational), 2) Time Frame (Short-term vs Long-term), 3) Specificity (Directional vs Specific), 4) Frequency of Use (Single-use vs Standing), 5) Planning Conditions (Static vs Scenario)

Strategic Plans

Long-term plans applying to the entire organization that establish overall objectives and seek to position the organization in terms of it’s environment. Evolves from company mission.

Operational Plans

Short-term plans that specify details of how overall objectives are to be achieved

Short-term Plans

Plans that cover one year or less

Long-term Plans

Plans that cover five years or more

Specific Plans

Plans that are clearly defined with no room for interpretation. Requires clarity and a sense of predictability in the environment

Directional Plans

Plans that are flexible and set out general guidelines. Doesn’t lock management into specific courses of action when uncertainty is high.

Single-use Plans

A one-time plan specifically designed to meet the needs of a unique situation

Standing Plans

Ongoing plans providing guidance for activities performed repeatedly (e.g. policies, rules, procedures)

Static Plans

Plans made under the assumption that the business environment and internal conditions will remain unchanged. Unresponsive.

Scenario Plans

Plans that make assumptions about the future and determine how the company will respond. Enables quick and decisive reactions to crises and opportunities

Contingency Factors in Planning

1) Level in the Organization, 2) Degree of Environmental Uncertainty, 3) Length of Future Commitments

Level in the Organization Contingency Factor

Lower levels of management are mostly concerned with operational planning, and as levels in the organization go up managers are more concerned with strategic planning.

Degree of Environmental Uncertainty Contingency Factor

The greater the environmental uncertainty, the more directional, short-term, scenario plans are used.

Length of Future Commitments Contingency Factor

The more that current plans affect future commitments, the longer the time frame for which management should plan. Relates to commitment concept.

Commitment Concept

Plans should extend far enough to meet those commitments made when the plans were developed

Characteristics of Effective Planning

S.M.A.R.T. (Specific, Measurable, Achievable, Relevant, Time-Bound) + Challenging; Written down; Include feedback; and Communicated to all organizational members

Criticisms of Planning

1) Rigidity, 2) Can’t replace Intuition & Creativity, 3) Reinforces successes that may lead to failure, 4) Focuses on today’s competition rather than tomorrow’s survival

Planning

Defining organizational goals, establishing overall strategy to achieve those goals, and developing plans for organizational work activities