Chapter 3 PLANNING TECHNICAL ACTIVITIES If managing organization is to be pursued vigorously, planning will constitute the most important activity. Managers who plan are afforded with the opportunity to carefully analyze situations which directly contribute to effective decision-making. ‘The engineer manager, regardless of his management level, will have to devote some of his time to planning. The higher the management level the engineer manager is in, the more sophisticated his planning activity becomes. Why and how this is so shall be discussed in this chapter. THE NATURE OF PLANNING There are many instances when managers are overwhelmed by various activities which are at times beclouding his judgment. This must be expected since anybody who is confronted by several situations happening simultaneously will loose sight of the more Important concerns. To minimize mistakes in decision-making, planning is undertaken. A plan, which is the output of planning, provides a methodical way of achieving desired results. In the implementation of activities, the plan serves as a useful guide. Without the plan, some minor tasks may be afforded major attention which may, later on, hinder the accomplishments of activities, 8 An example of the difficulty of not having a plan is illustrated below. ‘The management of an engineering firm was able to identify the need to hire additional three employees. The manager proceeded to invite applicants, screen them, and finally hired three of them. When the hiring expense report was analyzed, it involved more than double the amount spent by other firms in hiring the same number of people. When an inquiry was made, it was found out that the manager committed some errors in judgment. For instance, he used an expensive advertising layout in a newspaper when a simple message will do. Also, it was found out that the absence of a hiring plan contributed to the high cost of hiring. PLANNING DEFINED Various experts define planning in various ways, all which are designed to suit specific purposes. Planning, according to Nickels and others, refers to “the management function that involves anticipating future trends and determining the best strategies and tactics to achieve organizational objectives.” This definition is useful because it relates the future to what could be decided now. ‘Aldag and Steams, on the other define planning as “the selection and sequential ordering of tasks required to achieve an organizational goal.” This definition centers on the activity required to accomplish the goals.The definition of Cole and Hamilton provides a better guide on how to effectively perform this vital activity. Planning, according to them is “deciding what will be done, who will do it, where, when, and how it will be done,” and the standards to which it will be done.”” For our purpose, it will suffice to define planning as selecting the best course of action so that the desired result may be achieved. It must be stressed that the desired result takes priority and the course of action chosen is the means to realize the goal. PLANNING AT VARIOUS MANAGEMENT LEVELS The term strategic planning refers to the process of determining the major goals of the organization and the policies and strategies for obtaining and using resources to achieve those goals. The top management of any firm is involved in this type of planning. In strategic planning, the whole company is considered, specifically its objectives and current resources. The output of strategic planning is the strategic plan which spells out “the decision about long-range goals and the course of action to achieve these goals.” Intermediate Planning Intermediate planning refers to “the process of determining the contributions that subunits can make with allocated resources.” This type of planning is undertaken by middie management. Under intermediate planning, the goals of a subunit are determined and a plan is prepared to provide a guide to the realization of the goals. The intermediate plan is designed to support the strategic plan. Figure 3.1 Types of Planning MANAGEMENT LEVEL PLANNING HORIZON Top Chief Executive Officer, Management Goes Strategic Planning General Manager, Ga Division Heads Middle Functional Mangers, Management Product Line Managers, Intermediate planning Division Heads (six months to two) Lower Unit Managers, Operational planning Management First Line Supervisors (one week to one year)Figure 3.2 The Organization and Types of Planning Undertaken MARKETING PRODUCTION FINANCE PERSONNEL MANAGER MANAGER MANAGER MANAGER responsible responsible responsible responsible for for for for INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE PLANNING PLANNING PLANNING PLANNING Pooeeetees "ci ar [Ug Oe RSL INDUSTRIAL FACTORY QUALITY ENGINEERING MANAGER CONTROL MANAGER MANAGER responsible responsible responsible for for for OPERATIONAL OPERATIONAL OPERATIONAL PLANNING PLANNING PLANNING Operational Planning The term operational planning refers to “the process of determining how specific tasks can best be accomplished on time with available resources.” This type of planning is a responsibility of lower management. It must be performed In support of strategic plan and the intermediate plan. THE PLANNING PROCESS The process of planning consists of various steps depending on the management level that performs the planing task, Generally, however, planing involves the folowing: setting organizational, divisional, or unit goats z developing strategies or tactics to reach those goals 3. determining resources needed 4. setting standards Setting Organizational, Divisional or Unit Goals The first task of the manager is to provide a sense of direction to his firm (if he is the chief executive), to his division (if division chief), or to his unit (if a supervisor). The setting of goals provides an answer to the sald concern. If everybody in the firm (or division or unit, as the case may be) is aware of the goals, there is a big chance that everybody will contribute his share in the realization of such goals.Goals may be defined as the “precise statement of results sought, quantified in time and magnitude, where possible.” Example of goals are provided in Fig. 3.3 Figure 3.3 Examples of Goals, By Organizational Level ORGANIZATIONAL EXAMPLE OF GOAL LEVEL To attain a return COMPANY On investment of Josh Construction Corporation To increase the number of coaapaney: Projects undertaken by the company Project Management Division To increase the number COMPANY: Of project engineers Personnel Services Unit Developing Strategies or Tactics to Reach Goals After determining the goals, the next task is to devise some means to realize them. The ways to realize the goals are called strategies and these will be the concern of top management. The middle and the lower management will adapt their own tactics to implement their plans. A strategy may be defined as a “course of action aimed at ensuring that the organization will achieve its objectives.” An example of a strategy is as follows: ‘The decision of a construction firm’s management to diversify its business by engaging also in the trading of construction materials and supplies. When the above mentioned strategy is implemented, it may help the construction firm realize substantial savings in the material end supply requirements used in thelr construction activities. The firm will also have greater control in the timing of deliveries of materials and supplies. ‘A tactic Is a short-term action taken by management to adjust to negative internal or external influences. They are formulated and implemented in support of the firm’s strategies. The decision about short-term goals and the courses of action are indicated In the é2ctica/ plan, An example of a tactic is the hiring of contractual workers to augment the company’s current workforce.Determining Resources Needed When particular sets of strategies or tactics have been devised, the manger will, then, determine the human and nonhuman resources required by such strategies or tactics. Even if the resource requirements are currently available, they must be specified. The quality and quantity of resources needed must be correctly determined. Too much resources in terms of either quality or quantity will be wasteful. Too little will mean loss of opportunities for maximizing income. To satisfy strategic requirements, a general statement of needed resources will suffice. The specific requirements will be determined by the different units of the company. To illustrate: Suppose the management of 2 construction firm has decided, in addition to its current undertakings, to engage in the trading of constructions materials and supplies. A general statement of required resources will be as follows: A new business unit will be organized to deal with the buying and selling of construction materials and supplies. The amount of Php 50 million shall be set aside to finance the activity. Qualified persons shall be recruited for the purpose. * Setting Standards The standards for measuring performance may be set at the planning stage. When actual performance does not match with the planned performance, corrections may be made or reinforcements given. A standard may be defined as “a quantitative or qualitative measuring device designed to help monitor the performances of people, capital goods, or processes.” ‘An example of a standard Is the minimum numbers of units that must be produced by a worker per day in a given work situation. TYPES OF PLANS Plans are different types. They may be classified in terms of functional areas, time horizon, and frequency of use. Functional Area Plans Plans may be prepared according to the needs of the different functional areas. Among the types of functional area plans are the following: 1. Marketing Plan - this is the written document or blueprint for implementing and controlling an organization’s marketing activities related to a particular marketing strategy. 2. Production plan — this a written document that states that the quantity of output a company must produce in broad terms and by product family. 3. Financial Plan — it is a document that summarizes the current finandal situation of the firm, analyzes the finandial needs, and recommends a direction for financial activities.4, Human resource management plan — it is a document that indicates the human resource needs of a company detailed in terms of quantity and quality and based on the requirements of the company's strategic plan. Plans With Time Horizon Plans with time horizon consist of the following: 1. Short-range plans - these are plans intended to cover a period of less than one year. First-line supervisors are mostly concemed with these plans. 2. Long-range plans - these are plans covering a time span of more than one year. These are mostly undertaken by middle and top management. - Plans According to Frequency Use According to frequency use, plans may be classified as: 1. Standing Plans 2. Single-Use Plans Standing Plans. These are plans that are used again and again, and they focus on managerial situations that recur repeatedly. Standing plans may further classified as follows: 1. Policies - they are broad guidelines to aid managers at every level in making dedsions about recurring situations or function. 2. Procedures ~ they are plans that describe the exact series of actions to be taken in a given situation. 3. Rules — they are statements that either require or forbid a certain action. Single-Use Plans. May be further classified as follows: 1. budgets 2. programs 3. projects ‘A budget, according to Weston and Brigham, is “a plan which sets forth the projected expenditure for a certain activity and explains where the required funds will come from.” Aprogram is a single-use plan use designed to coordinate a large set of activities. A project is a single-use plan that is usually more limited in scope than a program and is sometimes prepared to support a program. PARTS OF THE VARIOUS FUNCTIONAL AREA PLANS The Contents of the Marketing Pian The structure and content of marketing plans vary depending on the nature of the ‘organizations adapting them. William Cohen maintains that the following must be included ion the marketing plan. 1. The Executive Summary — which presents an overall view of the marketing project and its potential. 2, Table of ContentsSituational Analysis and Target Market Marketing Objectives and Goals Marketing Strategies Marketing Tactics Schedules and Budgets Financial Data and Control; PAM NRW The contents of the Production Plan The production plan must contain the following: 1. the amount of capacity the company must have 2. how many employees are required 3. how much material must be purchased The Contents of the Financial Plan 1, An analysis of the firm’s current financial condition as indicated by an analysis of the most recent statements A sales forecast . The capital budget . The cash budget Asset of proforma (or projected) financial statements The external financing plan eran Contents of the Human Resources Plan 1. Personnel requirements of the company 2. Plans for recruitment and selection 3. Training Plan 4. Retirement Plan PARTS OF THE STRATEGIC PLAN 1, Company or corporate mission 2. Objectives or goals 3. Strategies Company of corporate mission refers to the “strategic statement that identifies why an organization exists, Its philosophy of management, and its purpose as distinguished from other similar organizations in terms of products, services, and markets.” MAKING PLANNING EFFECTIVE Planning Is done so that some desired results may be achieved, At times, however, failure in planning occurs. Planning may be made successful if the following are observed: 1. recognize the planning barriers 2. _use of alds to planning The planring barriers, according to Plunket and Aftner, are as follows: 4. manager's inability to plan . improper planning process . lack of commitment to the planning process . Improper information . focusing on the present at the expense of the future . too much reliance on the planning department PuaUNe7. concentrating on only the controllable variables ‘Among the aids to planning that may be used are: 1. Gather as much information as possible 2. Develop multiple sources of information 3. Involve others in the planning process QUESTIONS FOR REVIEW AND DISCUSSION 1. Why is planning an important activity for managers? 2. How may “planning” be defined? 3. What planning activities are undertaken at various management levels? 4, What are the steps in the planning process? 5. What are the types of plans? How may they be classified? 6. What is a production plan? 7. What is a budget? 8. What is meant by “company mission”? 9. What are the barriers to planning? 10. What may be used as aids in planning? SUGGESTED ITEM FOR RESEARCH Interview the chief executive/general manager of a firm and inquire about planning activities undertaken by the firm.