PLANNING

4/12/2008

Lecture Notes 6

The planning process culminates in the generation of various types of plans Plans may be either standing plans which are made to be used over and over again or single-use plans which are made to be used only once (nonrepetitive) Standing plans are policies, procedures and rules developed for handling repetitive situations. Their purpose is to guide employees in decision making
4/12/2008 Lecture Notes 6

Policies are general guidelines to be followed when making decisions Examples are Human Resource policies such as Employees will receive due process in grievances Eg. At Telkom HR policies are contained in what is known as the HR Manual. Managers must interpret, apply and explain company policies to employees
4/12/2008 Lecture Notes 6

Procedure is a sequence of actions to be followed in order to achieve an objective. They are more specific than policies and entail a series of decisions rather than one decision and may involve more than one functional area. Some operational environments will set Standard Operating Procedures (SOP)

4/12/2008

Lecture Notes 6

Rules are statements of exactly what should or should not be done

Employees have no discretion Violation of rules could result in disciplinary proceedings being instituted against employees Examples are No smoking rules, No eating or drinking in the lab etc. Managers are responsible for establishing rules in a uniform manner

4/12/2008

Lecture Notes 6

Single-Use Plans are programmes and budgets developed for handling nonrepetitive situations Programme describe a set of activities and is designed to accomplish an objective over a specified time period Budgets is the funds allocated to operate a unit for a fixed period of time. When that time is passed a new budget is needed. A budget is a planning tool, and when implemented it is a control tool. Contingency plans are alternative plans to be implemented if uncontrollable events occur eg. A machine may break down etc.
4/12/2008 Lecture Notes 6

What is planning?
The planning process culminates in the generation of various types of plans Plans may be either standing plans which are made to be used over and over again or single-use plans which are made to be used only once (nonrepetitive) But what is planning???
4/12/2008 Lecture Notes 6

What is planning?
Planning is the process of setting objectives and determining in advance exactly how these objectives will be met Since objectives differ according to scope and time, we get:
Long term objectives or goals and Short term objectives
4/12/2008 Lecture Notes 6

Long-term or long range objectives: Are those objectives which take longer than one year to achieve. Typically 5 years or more Long term objectives culminate in a strategy

4/12/2008

Lecture Notes 6

Note that the longer it takes to achieve a business objective, the greater the risk. This is because the chances of a change in one or more external environmental factors such as the political climate is higher.

4/12/2008

Lecture Notes 6

Recall that in South Africa, general elections to install a party into government are held every 5 years and thus a possibility of installing a political party that is not business friendly exists. Therefore, it can be seen that long term objectives are affected by factors existing outside the organization and can present threats or opportunities to the organization

4/12/2008

Lecture Notes 6

We can see from this that, long term objectives dictate the direction of the organization. They therefore, influence the reason why the organization exists and the posture of the organization. We say that they are strategic in nature

4/12/2008

Lecture Notes 6

Management has to, therefore, assess the macro environment for these external forces which can destabilize the organization (if left unchecked) and or threaten the existence of the organization. The word macro is an adjective meaning:
Of great size; large. Large in scope or extent;
4/12/2008 Lecture Notes 6

Therefore the macro environment is that larger environment existing outside the organization

4/12/2008

Lecture Notes 6

Management has to assess this macro environment for opportunities and threats by screening a large amount of information to detect emerging trends so as to create a set of scenarios. This situation analysis is also known as Environmental Scanning and is usually performed using tools such as SWOT analysis and / or PESTLE Analysis
4/12/2008 Lecture Notes 6

The information could be obtained from newspaper articles, market research, general research, internet, or the general media

4/12/2008

Lecture Notes 6

Environmental Scanning could uncover a possible threat to the organization or it could lead to the identification of possible opportunities and hence (executive, strategic) top management will decide on a direction to take, in order to offset the negative effects of the change (if it is a threat) and devise ways and means of taking advantage or exploiting the positive opportunities
4/12/2008 Lecture Notes 6

Based on the various scenarios generated, upper management will decide that it is going to do one set of things rather than another. It makes decisions which commit the whole organization to a particular set of actions. These are strategic decisions.

4/12/2008

Lecture Notes 6

By strategic we mean:
They are widespread in their effect Define the position of the organization relative to its environment Move the organization closer to its long term goals

4/12/2008

Lecture Notes 6

A strategy then is the total pattern of the decisions and actions which position the organization in its environment and is intended to achieve its long-term goals [6]

4/12/2008

Lecture Notes 6

Definition 2 A strategy is the approach that an organization takes in order to achieve the objectives and mission [4] Definition 3 A strategy is the plan for pursuing the mission and achieving the objectives [5] Informally a strategy is what top management does
4/12/2008 Lecture Notes 6

To do all this (executive, strategic, upper level) top management will have to embark on an annual strategic planning workshop. At this workshop those issues which are affecting or can affect a business either positively or negatively are analyzed. This is like guarding the organization.

4/12/2008

Lecture Notes 6

At this workshop, they also review and revise the current mission of the organization if it exists or develop a new one if does not exist. By mission we mean:
A statement declaring what business the organization is in and what it is intending to achieve. The purpose or reason for being of the organization.

4/12/2008

Lecture Notes 6

At this workshop, they also review and revise the current mission of the organization if it exists or develop a new one if does not exist.

4/12/2008

Lecture Notes 6

This process of developing a mission and setting long range objectives and how these objectives will be accomplished is know as Strategic Planning [5] Out of these series of meetings which can run up to a week or two, a strategic plan is usually created
4/12/2008 Lecture Notes 6

Strategic Planning Process

2. 1. Identify the organizations current mission, objectives and strategies Analyze the environment 3. Identify opportunities and threats 5. Identify strengths and weaknesses 7. Formulate strategies 6. Re-assess the organizations mission and objectives

4. Analyze the organizations resources 8. Implement strategies

9. Evaluate results

4/12/2008

Lecture Notes 6

Tools that can be used

Step No. 1 2, 3 4 5 6 8, 9

Tool/s MOST, Business Portfolio Analysis (BPA), BCG PESTLE, SWOT, Porters five forces 7S Mckinsey Model, BPA SWOT MOST, BPA Balanced Business Scorecard (BBS), 7S Mckinsey Model
Lecture Notes 6

4/12/2008

The MOST analysis technique examines the current mission, objectives, strategy and tactics Tactics are the detailed means by which the strategy is implemented The Boston Consulting Group (BCG) Share-Growth Matrix can also be used to analyze a business portfolio
4/12/2008 Lecture Notes 6

Out of these series of meetings which can run up to a week or two, a strategic plan is usually created

4/12/2008

Lecture Notes 6

Strategic Plans are plans that are organization wide, establish overall objectives and position the organization in terms of its environment [7] By reviewing and revising these plans every year, this ensures that a long term strategic plan is always available.

4/12/2008

Lecture Notes 6

10

Example of strategic planning workshop is the lekgotla. In South Africa, the President calls his Cabinet of government ministers to a lekgotla. This meeting is called to discuss strategy planning. The term lekgotla is a loan word from Sesotho, meaning court.
4/12/2008 Lecture Notes 6

Recall that planning is the process of setting objectives and determining in advance exactly how these objectives will be met and that objectives differ according to scope and time eg.
Long term objectives or goals (> 1year, typically 5 years) Short term objectives (typically < 1 year)
4/12/2008 Lecture Notes 6

Recall that there are various levels of management responsible for different aspects of the enterprise We can see therefore, that plans could differ not only according to scope and time but also according to levels of management as well as repetitiveness The diagrams below depicts the various levels of management and type of plans which each management level is responsible
4/12/2008 Lecture Notes 6

11

Board of Directors CEO

Upper / Executive/ Strategic

Strategic Plans Functional / Plans Operational / Tactical Plans

Lecture Notes 6

Middle Management

Lower Management

4/12/2008

Levels of planning
Recall that strategic plans are focused on the organization as a whole and since business can be diverse in their product offering. This diversity leads to various levels of strategies being developed These are corporate level strategy, business level strategy and functional level strategy

4/12/2008

Lecture Notes 6

Levels of planning
Corporate level strategy is a plan for managing multiple lines of business , business level strategy and functional level strategy Business level strategy is a plan for managing one line of business Functional level strategy is the plan for managing one functional area of the business eg, marketing, finance etc
4/12/2008 Lecture Notes 6

12

Types of Plans
Management Level Type of Plan Scope Time Repetitiveness

Upper and Middle

Strategic

Broad / Directional

Long Range

Single Use

Middle and Lower

Operational

Narrow / Specific

Short Range

Standing

4/12/2008

Lecture Notes 6

From the table above we can see therefore that middle to lower management tend to rely on policies, procedures and rules

4/12/2008

Lecture Notes 6

We have already mentioned that objectives differ according to scope and time, we get:
Long term objectives or goals (which culminates in strategic plans) and Short term objectives This can be extended to include medium term objectives
4/12/2008 Lecture Notes 6

13

Operational planning is the process of setting short-range objectives and determining in advance how they will be achieved. Operational plans sometimes referred to tactical plans specify the details of how the organizations overall objectives are to be achieved
4/12/2008 Lecture Notes 6

References
[1] David Needle, Business in context: An introduction to business and its environment , Chapman and Hall, 2nd Edition. [2] Cronje, et al, Introduction to business management, Oxford University Press, 5th Edition.

4/12/2008

Lecture Notes 6

References
[3] David L. Olson, Introduction to Information Systems Project management, McGraw-Hill, 2nd [4] Debra Paul, Donald Yates Business Analysis, BCS [5] RN Lussier, Management Fundamentals, Thomson, 3rd Edition

4/12/2008

Lecture Notes 6

14

References
[6] Mike Pycraft et al, Operations Management, Pearson Education, Southern African Edition [7] Steven P. Robbins, David A. Decenzo, Fundamentals of Management: Essential Concepts and Applications, Pearson Prentice Hall, 4th Edition
4/12/2008 Lecture Notes 6

References
[8] RN Lussier, Management Fundamentals: Concepts, Applications, Skills Development, South-Western Cengage Learning, 4th Edition

4/12/2008

Lecture Notes 6

15