Ch 3 - Foundations of Planning 

Planning: is a primary managerial activity that involves:

• Defining the organisation’s goals
• Establishing an overall strategy for achieving those goals
• Developing plans for organisational work activities

Types of Planning:

• Informal: not written down, short-term focus, specific to an organisational unit
• Formal: written, specific, and long term focus, involved shared goals for the organisation

Purpose of Planning:

• Provides purpose

• Reduces uncertainty

• Minimises waste and redundancy

• Sets the standards for controlling

  \n The Relationship Between Planning and Performance:

Formal planning can lead to higher profits and returns on assets and positive financial results

• The quality of planning and implementation affects performance more than the extent of planning

• The external environment can reduce the impact of planning on performance

• Formal planning must be used for several years before planning begins to affect performance

  \n Elements of Planning:

• Goals (or objectives): desired outcomes for individuals, groups, or entire organisations, provide direction and evaluation performance criteria

• Plans: documents that outline how goals are to be accomplished, describe how resources are to be allocated and establish activity schedules

  \n Types of Goals:

• Financial Goals: are related to the expected internal financial performance of the organisation

• Strategic Goals: related to the performance of the firm relative to factors in its external environment

• Stated goals Vs. Real goals: broadly-worded official statements of the organisation (intended for public consumption) that may be irrelevant to its real goals (what goes on in the organisation)

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Types of Plans:

1- Breadth:

• Strategic Plans:
• Apply to the entire organisation
• Establish the organisation’s goals
• Seek to position the environment in terms of its environment
• Cover extended periods of time
• Operational Plans:
• Specify the details of how the overall goals are to be achieved
• Cover short time period

2-Time Frame:

• Long-Term Plans:
• Plans with time frames extending beyond three years
• Short-term Plans:
• Plans with time frames on one year or less

3- Specificity:

• 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

  \n 4-Frequency of Use:

• Single-Use Plan:

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

• Standing Plans:

• Ongoing plans that provide guidance for activities performed repeatedly

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Establishing Goals and Developing Plans:

Traditional Goal Setting:

• Broad goals are set at the top of the organisation
• Goals are broken into subgoals for each organisational level
• Assumes that top management knows best because they can see the “big picture”
• Goals lose clarity and focus on lower-level managers attempt to interpret the goals for their areas of responsibility
• Goals are intended to be direct

Disadvantages:

Maintaining the Hierarchy of Goals:

Means-end Chain:

• Network of goals that results from establishing a clearly defined hierarchy of organisational goals
• Achievement of lower-level goals is the means by which to reach higher-level goals (ends)

Management By Objectives (MBO):

• Specific performance are determined by employees and managers
• Progress towards accomplishing goals is periodically reviewed
• Rewards are allocated on the basis of progress towards the goals
• Key elements of MBO: goal specificity, participative decision making, an explicit performance/evaluation period, feedback

Does MBO Work:

MBO is successful as top management is committed and involved

Potential disadvantages with MBO:

• Not as effective in dynamic environments that require constant resetting of goals
• Overemphasis on individual accomplishment may create problems with teamwork
• Allowing the MBO program to become an annual paperwork shuffle

Characteristics of Well Designed Goals:

• Written in terms of outcomes, not actions (focuses on the ends, not the means)
• Measurable and quantifiable (specifically defines how the outcome is to measured and how much is expected
• Clear time frame (time estimate before measuring accomplishment)
• Challenging yet attainable (low goals do not motivate, high goals motivate if they can be achieved)
• Written down (focuses, defines, and makes goals visible)
• Communicated to all necessary organisational members (puts everybody on the same page)

Steps in Setting Goals:

1. Review the organisation’s mission statement (do goals reflect the mission)
2. Evaluate available resources (are resources sufficient?)
3. Determine goals individually or with others  (are goals specific/timely?)
4. Write down the goals and communicate them  (is everybody on the same page?)
5. Review results and whether goals are being met  (what changes are needed in mission/mission/goals?)

Developing Plans

Contingency Factors in a Manager’s Planning:

Manager’s level in the organisation:

• Strategic plans at higher levels
• Operational plans at lowers levels

Degree of environmental uncertainty

• Stable environment: specific plans
• Dynamic environment: specific but flexible plans

Length of future commitments

• Commitment concept: current plans affecting future commitments must be sufficiently long-term to meet those commitments

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Approaches to Planning:

• Establishing a formal planning department
• Group of planning specialists who help managers write organisational plans
• Planning is a function of management (it should never become the sole responsibility of planners)
• Involving organisational members in the process
• Plans are developed by members of organisational units at various levels and then coordinated with other units across the organisation

Issues in Planning:

• Disadvantages:
• May create rigidity
• Plans cannot be developed for dynamic environments
• Does not replace intuition and creativity
• Focuses managers' attention on today’s competition not tomorrow’s survival
• Formal planning reinforces today’s success, which may lead to tomorrow's failure

Effective planning in Dynamic Environments

• Develop plans that are specific but flexible
• Understand that planning is a process
• Plans change depending on the conditions
• Flatten the organisational hierarchy to foster the development of planning skills at the organisational levels