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