Introduction to Management

BBA(Hons) 2nd Semester

Lecture 12

I. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?

A. Introduction

1. It is the primary management function, setting the basis for the other

functions.

2. It encompasses defining the organization’s objectives or goals,

establishing an overall strategy, and developing a comprehensive

hierarchy of plans to integrate and coordinate.

a) It is concerned with ends (what is to be done) and with means (how it

is to be done).

3. Planning can be further defined in terms of whether it is informal or

formal.

a) In informal planning, very little, if anything, is written down.

b) In formal planning, specific objectives are written down and made

available to organization members.

B. Why Should Managers Formally Plan?

1. Managers should engage in planning for at least four reasons.

a) Planning provides direction

b) It reduces the impact of change.

c) Planning minimizes waste and redundancy

d) It sets the standards to facilitate control.

2. Planning establishes coordinated effort.

a) Understanding where the organization is going and what must be contributed to

reach the objectives, helps members to coordinate their activities and fosters teamwork.

3. A lack of planning can cause various organizational members or their units to

work against one another.

4. Planning reduces uncertainty.

5. It clarifies the consequences of actions.

6. It is precisely what is needed when managing in a chaotic environment.

7. Planning also reduces overlapping and wasteful activities.

8. Finally, planning establishes objectives or standards that facilitate control.

C. What Are Some Criticisms of Formal Planning?

1. Formal planning by managers makes intuitive sense.

a) An organization needs direction.

2. Planning may create rigidity.

a) Formal planning efforts lock an organization into specific goals and specific
timetables.

b) The assumption may be that the environment won’t change during the time
period the objectives cover.

(1) If that assumption is faulty, managers who follow a plan may have trouble.

(2) Forcing a course of action when the environment is fluid can be a recipe for
disaster.

3. Formal plans can’t replace intuition and creativity

a) Visions have a tendency to become formalized as they evolve.

b) Formal planning efforts typically follow a methodology that reduces the vision to
a programmed routine.
(1) The rapid rise of Apple Computer in the late 1970s and throughout the 1980s was
attributed, in part, to the creativity and anti-corporate attitudes of one of its
cofounders, Steven Jobs.

(2) Ultimately Jobs was ousted and with his departure came increased
organizational formality—the very thing he despised because it hampered
creativity.

4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s

survival.

a) Formal planning tends to focus on how to best capitalize on existing business

opportunities within the industry.

b) It often does not allow for managers to consider creating or reinventing the
industry.

c) Some companies have found much of their success to be the result of forging into
uncharted waters, designing and developing new industries as they go.

5. Formal planning reinforces success, which may lead to failure.

a) Success may, in fact, breed failure in an uncertain environment.

b) It is hard to change or discard successful plans.

c) Successful plans may provide a false sense of security.

D. Does Planning Improve Organizational Performance?

1. Contrary to the critics, the evidence generally supports having formal plans.

2. However, organizations that formally plan do not always outperform those that
don’t.

3. Conclusions from studies of the relationship between planning and performance.

a) There are generally higher profits, higher return on assets with a formal planning
process.

b) The quality of the process and appropriate implementation of the plans probably
contribute more to high performance than does the extent of planning.

c) Finally, in those organizations in which formal planning did not lead to higher
performance, the environment was typically the culprit.