Online Module Week 2

Introduction to Planning and Controlling

 Planning is a crucial function of the management process, providing guidance for the
other important functions of organising, leading and controlling.
 Planning produces a solid base from which further managerial actions can occur.
These are:
- Organising by allocating and arranging resources to achieve key tasks
- Leading by guiding the efforts of the organisation's staff to ensure high levels of
task accomplishment
- Controlling by monitoring and assessing task accomplishment and taking
necessary corrective action.
 Planning involves setting the organisation's goals, establishing strategies for
achieving those goals, and developing plans to integrate and coordinate work
activities. It is concerned with both the ends (what is to be done) and the means
(how it is to be done).

Planning establishes the goals or standards that are used in controlling. If we are unsure of
what we are trying to accomplish, how can we determine if we have achieved our goals?

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Planning has the following purposes:

 Planning establishes goals or standards that are used in controlling.
- When managers plan, they develop goals and plans. When they control, they see
whether plans have been carried out and the goals met.
- Without planning, there would be no goals against which to measure work effort.
 Planning provides direction to managers and non-managers.
- When employees know where the organisation or the work unit is going, and
what they must contribute to reach the goals, they can coordinate their
activities, cooperate with each other and do what it takes to accomplish these
goals.
- Without planning, departments and individuals might be working at cross-
purposes, preventing the organisation from moving efficiently towards its goals.
 Planning reduces uncertainty by forcing managers to look ahead, anticipate and
consider the impact of change, and develop appropriate responses.
- Even though planning cannot eliminate change or uncertainty, managers plan in
order to anticipate changes and to develop the most effective response to them.
 Planning minimises waste.
- When work activities are coordinated around established plans, wasted time and
resources can be minimised. Furthermore, when means and ends are made clear
through planning, inefficiencies become obvious and can be corrected or
eliminated.
Benefits Drawbacks
 Managers and employees exert greater  Planning can impede change and
effort when following a plan adaptation
 Planning leads to persistence. In fact, - Sometimes organisations can be so
planning encourages persistence even committed to fulfilling existing
when there may be little chance of plans that they fail to see they are
short-term success not working or need to change.
 Planning also encourages the creation  Planning can create a false sense of
of task strategies certainty.
 Planning encourages people to engage - Planners sometimes feel that they
in behaviours directly related to goal know exactly what the future holds
accomplishment for their competitors, their
suppliers and their companies.
- However, for plans to work, the
assumptions on which they are
based must hold true. If the
assumptions turn out to be false,
then the plans based on them are
likely to fail.
 Detachment of planners
- Top managers often focus on the
big-picture plan rather than the
details of implementation. This
means planners often plan for
things they do not understand.
Unless planners are familiar with
the daily details of their business,
plans are unlikely to work.

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Goal Setting
An important part of the planning process involves goal setting. Organisational goals are
more effective when employees are committed to achieving them. Managers can increase
commitment in the following ways:
 Adopt a participatory approach by involving employees in goal setting
- Participative approaches improve understanding of goals, reduce employee
resistance and increase buy-in and produce goals that are realistic and
challenging.
 Make the goal public.
- This not only improves transparency, but also drives home the message that goal
achievement is important. When goals are made public, organisational members
cannot easily ignore or resist them. This visibility also creates motivation.
 Obtaining the support of top management.
- When top managers support a goal, they can generate awareness and allocate
necessary funding.

When setting goals, managers can use the SMART acronym (Specific, Measurable,
Attainable, Relevant, Time-bound)

Levels of Planning:

Planning for different levels of an organisation involves setting goals that are relevant to top,
middle and first-level managers. Goals at all levels of the organisation should align so that
everyone in an organisation is helping to achieve the overall vision and mission.

Plans differ in terms of the following:

 Breadth (strategic versus operational),
 Time frame (short term versus long term)
 Specificity (directional versus specific), and
 Frequency of use (single use versus standing)

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Management by objectives is a four-step process in which managers and employees work

together to create an agreement about:
1. Performance objectives (i.e. goals) for a given time period
2. Tactical plans to accomplish those objectives
3. Standards for measuring whether objectives have been accomplished (i.e.
controlling)
4. Procedures for measuring performance (i.e. controlling)
5. Managers and employees should meet regularly to review progress towards goal
accomplishment

Plans created by top managers:

 Apply to the whole organisation
 Planning starts at the top of the organisation with a clear definition of the company
vision.
- A vision is typically a short statement that captures the reason for the
organisation’s existence
- A vision has the purpose of giving the organisation legitimacy with external
stakeholders such as customers, the government, labour unions and the media
 Top managers also outline their organisation’s mission
- A mission statement should outline the organisation's basic scope and should
distinguish it from similar organisations.
 Top managers also outline the values of their organisation
- Organisational values are fundamental beliefs and attitudes that guide behaviour
at all levels of an organisation e.g. excellence, respect, customer-focus and
integrity

Plans created by middle managers:

 Middle managers typically create and implement plans with less breadth than top
managers.
- Tactical plans specify how an organisation will use resources, budgets and people
over the next six months to two years to accomplish the strategic plan.
 For example, UQ has developed a number of tactical plans and goals to help meet its
long term objectives. These include plans about what infrastructure to invest in
(campus investments), how the university can work respectfully with Aboriginal and
Torres Strait Islander students, staff and communities (reconciliation), and how to
enhance how students experience university life and learning (student strategy).

Plans created by first-level managers:

 First level managers create and implement plans related to the day-to-day running of
the departments in an organisation.
 Operational plans outline the specific results expected from departments and
employees. They are intended to direct the behaviour, efforts and priorities of
employees for period ranging from 30 days to six months.

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Planning in the context of change

 In the context of today’s rapidly changing environment, plans can quickly become
outdated as customer preferences change, new competitors emerge, the effects of
climate change become apparent or when the laws governing an industry change
 Moreover, managers often need to make non-programmed decisions in response to
unique, poorly defined and unstructured situations

There are a number of planning tools that can help managers prepare for unexpected
situations:

Forecasting
 Forecasting is a systematic process for making predictions about the future.
- Managers can use economic and social information to predict future trends in
consumer spending, business investment, interest rates and inflation  make
better plans for the future
 Forecasting may involve expert opinions or the use of statistical analysis.
- Financial newspapers, economists and governments all engage in forecasting.
- Although forecasting is based on data, it always involves an element of human
judgement.

Contingency Planning
 Contingency plans outline how an organisation should respond to emergencies,
setbacks or unexpected conditions
 Involves thinking through how an organisation would respond in the event of a crisis
such as an economic recession, a labour strike, a natural disaster, a cyber-attack, a
terrorist attack, or a pandemic.
Involves 3 steps:
1. Try to prevent crises by developing good relationships with stakeholders
- This might involve taking steps to prevent a cyber-attack, being proactive about
reducing emissions to minimise the impact of climate change or developing a
good relationship with unions to avoid a strike.
2. Prepare for crises by assembling information and nominating a spokesperson who
will be able to disseminate information at the time of a crisis.
- This may involve deciding who is responsible for certain tasks e.g. who will
coordinate the response, who will keep employees up to date
3. Respond to the crisis in a timely manner.
- This involves ensuring that the relevant people are informed and appropriate
steps taken to resolve or respond to the crisis.

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Scenario Planning
 Scenario planning is a long-term version of contingency planning
 Involves visualising future possibilities by extrapolating current trends and
considering how these might be disrupted in the future
 Different to forecasting because its purpose is not to make predictions about the
future but to plan for many possible futures
- Scenario planners develop multiple plausible scenarios of the future that are
relevant to an organisation
- They consider highly unlikely scenarios would have significant consequences for
the organisation should they eventuate. Managers can then consider how they
might respond in the event that elements of the scenarios do unfold
Typically scenario planning involves a workshop with key experts and experienced managers
conducting the following:
1. Identifying driving forces that would serve as a game changers (e.g. driving forces
might include climate change, the political and economic rise of China, the decline of
trust in the media). This includes considering variables that may seem impossible
from the standpoint of the present (e.g. the end of democracy in Australia).
2. Building scenarios where the driving forces change significantly. Varying the driving
forces in a systematic way to develop new scenarios.
3. Considering options available in the scenario, even if they are unlikely. Trying to
anticipate how the driving forces might react.
4. Generating new options for products, processes or services that address the
requirements of the scenario.
5. Examining how these scenarios might impact the outcome of existing strategies.
6. Developing an action plan to monitor and respond to driving forces.

Scenario planning is important because it helps organisations to improve focus and

flexibility, to remain action oriented, to improve coordination, to improve time management
and improve control.

The Control Process

 Control is a regulatory process of establishing standards to achieve organisational
goals, comparing actual performance against the standards and taking corrective
action when necessary to restore performance to those standards
 Control is achieved when behaviour and work procedures conform to standards and
company goals are accomplished

Four steps of the Control Process:

1. Establish performance objectives and standards
- The control process begins when managers set goals. They then specify the
performance standards that must be met to accomplish these goals. Standards
are a basis of comparison for measuring the extent to which organisational
performance is satisfactory or unsatisfactory
2. Measure actual performance

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- To determine actual performance, the manager must acquire information about

it. Managers can use personal observations, statistical reports, oral and written
reports as input sources. Most work activities can be expressed in quantifiable
and measurable terms.
3. Compare actual performance with objectives and standards
- The comparing step determines the degree of variation between actual
performance and the standard. Although some variation in performance can be
expected in all activities, it is critical to determine the acceptable range of
variation. Deviations that exceed this range become significant and need the
manager’s attention.
4. Take necessary action
- Managers can choose between three possible courses of action: they can do
nothing; they can correct the actual performance; or they can revise the
standards.
- Doing nothing is self-explanatory.
- Correcting actual performance involves the manager taking different corrective
actions depending on the problem. The manager could correct it through
training, disciplinary action, or giving rewards or punishment among others.
- It is also possible that the variance was a result of an unrealistic standard, that is,
the goal may have been too high or low. In such cases, it is the standard that
needs corrective action, and not the performance

Control is a continuous and dynamic process. Managers must repeat the entire process
again and again in an endless feedback loop (a continuous process). Thus, control is not a
one-off achievement or result. It continues over time (i.e. it is dynamic) and requires daily,
weekly and monthly attention from managers to maintain performance levels at the
standard (i.e. it is cybernetic).

Types of Control
Feedforward, concurrent and feedback control:
 Managers can
implement controls
before an activity
begins, during the time
the activity is going on
and after the activity
has been completed

1. Feedforward control takes place before a work activity is done. This is the most
desirable type of control because it prevents anticipated problems. The key to
feedforward control is taking managerial action before a problem occurs.

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2. Concurrent control takes place while an activity is in progress. When control is

applied during the work, managers can correct problems as they arise. This prevents
problems from becoming too costly.

3. Feedback control takes place after the work is completed. This is the most costly
control because the damage has already been done. However, managers do get
useful information that can help them to improve the process for the next time.

The balanced scorecard

 Most organisations measure performance using standard financial and accounting
measures such as return on capital, return on assets, return on investments, cash
flow, net income and net margins
 The balanced scorecard encourages managers to look beyond traditional financial
measures to four different perspectives on company performance
- These are financial, customer, internal operations, and innovation and learning

1. The financial perspective is a traditional approach to controlling focused on

accounting tools, such as cash flow analysis, balance sheets, income statements,
financial ratios and budgets. These tools must be used together to tell the whole
financial story of an organisation.

2. The customer perspective addresses the question, ‘how do customers see us?’.
Although many organisations rely on customer satisfaction surveys to answer this
question, surveys can be deceptive. Customers may not bother raising problems or
may defect to a competitor even if they are satisfied. Instead, organisations should
identify which customers are leaving the company and measure the rate at which
they are leaving. Ex-customers are more likely to tell an organization what they are
doing wrong and provide guidance on how to prevent other customers leaving.

3. The internal perspective consists of the processes, decisions and actions that
managers and workers make within the organization. Companies must decide
whether to focus on excellence, value or conformance to expectations when
measuring quality. A focus on excellence will involve producing a product or service
of unsurpassed performance and features. Focusing on value will ensure that the
customer perception of a product’s quality is suitable for the price offered. A focus
on conformance to specifications is usually associated with manufacturing, but can
also be applied to non-manufacturing jobs.

4. The innovation and learning perspective addresses the question, ‘how can we
continue to improve and create value?’ This involves continuous improvement of
products and services, as well as relearning and redesigning the processes by which
products and services are created.

The balanced scorecard has a few advantages over traditional control processes because
it:
 Forces managers at each level of the company to set specific goals and measure
performance in each of the four areas.

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 Minimises the chance that performance improves in one area at the expense of
others.
 Is linked to a well-defined organisational strategy and goals.