NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

Department of Electronic Engineering

Engineering Management [TEE 3255]

2: Management Functions:
Planning
Introduction
Introduction

PLANNING
(& DECISION MAKING)
Setting the organisation’s ORGANISING
goals and deciding how
best to achieve them

CONTROLLING LEADING
 Introduction

• Planning is specifying the goals to be achieved

and deciding in advance the appropriate actions to
be taken to achieve those goals.
 Introduction

• Planning is the work done by an engineering

manager to predetermine a course of action to
achieve desired goals.
• Planning defines who will do what, how, where,
when, with which resources, and for what
objectives.
Purpose of Planning
 Purpose of Planning

• The purpose of planning is to enhance the

effectiveness and efficiency of the company by
providing focus and direction
• Planning bridges the gap between where we are
and where we want to be.
 Purpose of Planning

• Establishes coordinated human effort

• Reduces uncertainty in operation – planning
involves forecasting of future events which can
reduce the uncertainties in business
• Reduces overlapping and wasteful activities
The Foundation for Planning
 The Foundation for Planning

• Vision : what the firm wants to be in the future

(absence of a vision normally leads to a disaster)
• Mission : bold goal with clear finish line and specific
time frame, what do we want to do?
• Purpose : fundamental reason for firm’s existence
• Goal/Aim : What? Why? For whom? How? Is it
consistent with organization? (official and operative)
• Objectives : Clarifies goals, how do we go about it?
 The Foundation for Planning

Planning process
2. Listing 3. Selecting best
1. Setting
alternative ways way to achieve
company goals
of achieving the the goals
(objectives)
goals (objectives) (objectives)

4. Developing
plans to pursue 5. Putting plans
chosen into action
alternative
Types of Planning
 Types of Planning

• Managers engage in two types of planning:

1. Strategic planning
2. Operational planning
• Both types of planning add value to the company
 Types of Planning

• Strategic planning sets the goals, purpose, and

direction of a company.
• Specifically, strategic planning ensures that the
company applies its resources effectively to
achieve its short and long-term goals.
• Resources include:
• core competencies, corporate know-how, proprietary
technologies, skilled manpower, financial, business
relationships etc.
 Types of Planning

• Strategic planning deals with questions such as

1. What are the company’s mission, vision, and values?
2. What business should the company be in?
3. Does the company need any changes?
4. What specific goals to pursue (what? when? How?)
5. What business networks should the company establish?
6. Which new products should the company offer?
7. What core technologies should the company maintain,
develop, acquire, or utilize?
8. Which performance metrics to use?
9. How can innovation be central?
 Types of Planning

• Operational planning outlines the specific tactics

and action steps needed to accomplish the goals
specified by top management (Duggan 2011).
• Operational planning ensures that the company
applies its resources efficiently to achieve its
stated goals.
 Types of Planning

• Questions considered in operational planning

include the following:
1. What is the most efficient way of accomplishing a
project with known objectives?
2. What is the best way to link up with three top
suppliers in the marketplace for needed parts?
3. What are the operational guidelines for performing
specific work?
 Types of Planning

Breadth Time Frame Specificity Frequency

of Use

Strategic Entire Org. Long term Directional Single use

Planning
Operational Unit / dept. Short term Specific Standing
Planning
 Strategic Plans
Types of Planning

Operational Plans
Who Should Do the Planning?
 Who Should Do the Planning?

• The most effective way of creating strategic plans

for specific businesses or activities is to entrust
such planning to those who are intimately
involved with the particular businesses and
activities.
 Who Should Do the Planning?
Traditional (top-down) Approach Inclusive approach
 Planning done by top managers
 Formal planning department -
specialists whose sole
responsibility is to help to write
organizational plans
 Plans flowed down to lower levels
 Tailored to particular needs at each
lower level
 One of its key weaknesses is that
the planners are outsiders insofar
as the various business functions.
 Abolish corporate strategic
planning departments.
 Employees at each level
develop plans suited to their
needs
 Employees acquire greater
sense of the importance of
planning when they participate
in the process
 Plans more likely to be used in
directing and coordinating work
Inexact Nature of Strategic Planning
 Inexact Nature of Strategic Planning

• Strategic planning requires an immense amount

of critical thinking (Spender 2014).
• It also involves synthesis, intuition and creativity.
 Inexact Nature of Strategic Planning

• Strategic planners use various kinds of inputs.

• The most effective managers rely on both hard
data and soft information to develop plans.
• Once information becomes available, strategic
thinkers comprehend it, synthesize it, and learn
from it.
 Inexact Nature of Strategic Planning

• Strategic planning should be a continuous

process and not a single task or event.
• In situations involving the definition of the
company’s future direction, most planning inputs
are based on assumptions about the future.
• As a result, the success rate of the resulting plans
is typically low. Since the ratio of assumptions to
facts is usually high.
 Inexact Nature of Strategic Planning

• Strategic planning is difficult because of three

inherent characteristics of such planning:
1. Prediction of the future - Certain future events are more
predictable while others are virtually impossible to predict
accurately.
2. Applicable experience and insight - Planners must have in-
depth knowledge and relevant hands-on experience of the
subject at hand in order to set forth useful strategies.
3. Random process of strategy making: The strategy-making
process involves synthesis (not deduction) and thus cannot
be formalized.
 Inexact Nature of Strategic Planning

• Strategic plans often fail due to one or more of:

1. Not thinking strategically; for example, by limiting the strategy only to
the short term needs and processes of the company.
2. Failure to identify critical success factors for the company.
3. Not having both an internal and an external focus.
4. Lack of long-term commitment from company management.
5. Reluctance of senior management to accept responsibility for tough
decisions.
6. Not leaving enough flexibility in the plans, thus causing difficulties in
adjusting to the changing environment.
7. Failure to properly communicate the plan and thus not securing support
and management buy-in.
 Inexact Nature of Strategic Planning

• Methods Used by managers to Plan Strategically:

1. Deduction: This method needs a lot of data, and is
useful for mature and stable industries.
2. Trial and error: Experiment with several options and
select one. This is good for ambiguous, novel, or
complex situations.
3. Analogies: Decision-makers think back to a familiar
situation, draw lessons from it, and apply those
lessons to the current situation.
 Inexact Nature of Strategic Planning

• Technique to Gain Strategic Insights

• The “Three Circles” technique is used to deepen
strategic insights
Inexact Nature of Strategic Planning

Company’s Customer
offerings F A E needs

B
D C

G Competitors’
offerings
 Inexact Nature of Strategic Planning
• A: Area representing our advantages. How big and sustainable
are our advantages? Are they based on distinctive capabilities?
• B: Area designating points at parity. This area indicates that we
are on par with our competitors. Are we delivering effectively in
the area of parity?
• C: Areas depicting our competitor’s strength. How can we counter
our competitor’s advantages?
• E: White space. This is the area for growth. Ask customers how
our strengths can be made useful to them?
• D, F, and G: Areas denoting values produced by the company and
the competitors that the customers do not need.
 Inexact Nature of Strategic Planning

• A key planning question to ask is:

• How can we devise strategies that would
increase area A, while reducing D and F?
Planning Roles of Engineering Managers
 Planning Roles of Engineering Managers

• As engineering managers scale up the corporate

ladder, they participate increasingly in strategic
planning, with emphasis placed on technology,
product, and production planning.
• Engineering managers are encouraged to engage
their staff and other employees in the planning
activities in order to optimally benefit from the
knowledge, expertise, and insights of staff.
 Planning Roles of Engineering Managers

• Engineering managers’ planning tasks:

1. Time Management
2. Projects and Programs
3. Corporate Know-How
 Patents , operational manuals, troubleshooting guides and insights
related to procedures or perfected ways of designing the specific
products and services
4. Proactive Tasks
 These tasks include: utilizing new technologies, creating business
networks, offering new or enhanced services, promoting healthy
customer relationships, developing novel products/services,
reengineering and simplifying specific operational processes and
outsourcing specific tasks.
Tools for Planning
 Tools for Planning

• Planning Tools:
1. Market Research
2. SWOT Analysis
3. Financial What-If Analysis and Modelling
4. Scenario Planning
5. Performance Benchmarks
6. Technology Forecasting
 Tools for Planning

• Market Research
• The market research establishes the company’s
current marketing position and future growth
opportunities in the marketplace.
• Market research tries to discover the preference of
customers and brand reputation in the marketplace.
• Examples of such tools include focus groups, polling
by questionnaires, product concept testing and pilot
testing.
 Tools for Planning

• SWOT Analysis
• A well performed SWOT analysis will bring to the fore
an assessment of the company’s current position.
• The analysis answers questions such as (a) What
does the company have in place today? (b) In which
direction is the company headed in the next three to
five years, and (c) What is the company’s process of
managing changes?
 Tools for Planning
Scan External Identify Strategic
Environment: Factors:
 National  Opportunities
 Global  Threats

Implementing Strategy via

Changes in:
Evaluate Current: Formulate
Define New: Strategy:  Leadership/ Culture
 Mission
SWOT  Mission  Corporate  Structure
 Goals
 Goals  Business  Human resources
 Strategies
 Grand Strategy  Functional  Information & control
systems

Scan Internal Identify Strategic

Environment: Factors:
 Core  Strengths
Competence
 Weaknesses
 Synergy
 Value Creation
 Tools for Planning

• SWOT Analysis
• What are some of the outcomes of the Strategic
Planning:
1. Portfolio strategy
2. Differentiation
3. Cost leadership
4. Focus strategy
5. Innovation from Within
6. Strategic Partnerships (Alliances)
 Tools for Planning

• Financial What-If Analysis and Modelling

• What-if analyses are readily performed to discover
the sensitivity of the company’s financial performance
relative to the changes of specific input variables.
• What-if analyses and Monte Carlo simulations may be
applied to assess the impact of some of risk factors
on a company’s business.
• In addition, such analyses permit the verification of
various assumptions incorporated into the financial
models (Ragsdale 2014).
 Tools for Planning

• Scenario Planning
• Scenario planning defines the major forces that may
move a company in different directions, maps out a
small number of alternatives futures (scenarios)
• Whenever the future needs to be assessed, scenario
planning is applicable.
• Scenario Planning applies generally to decision-
making under uncertainty.
Tools for Planning
 Tools for Planning

• Performance Benchmarks
• During planning, it is important to define benchmarks
for the purpose of measuring corporate progress.
• These metrics serve well as industrial benchmarks
against which to assess the current status of a
specific company and to define its new strategic
direction.
 Tools for Planning

• Performance Benchmarks
• Hubbard (2014) suggests a set of broad-based benchmarks:
1. Customer-related measures: Product defects, customer satisfaction score,
order processing efficiency, percentage sales from new customers,
service quality,
2. Process-related measures: Time to market, quality standards, unit product
cost,, labour hours per product
3. Financial measures: Gross margin, net income-to-sales ratio, sales per
employees, return on equity, sales growth rate, market share percentage,
4. Employee-related measures: Turnover ratio, employee satisfaction score,
skill building and development expenses per employee
5. Competition-related measures: Market share, cost of innovation,
acquisition cost per new customer, number of new products
commercialized per year
 Tools for Planning

• Technology Forecasting
• Engineering managers need to understand the value
that any of the emerging technologies may have on
the products and services offered by their employers
and plan accordingly.
• Another technological example is the speed of
computing.
Planning Activities
 Planning Activities

• Strategic planning requires;

• forecasting, action planning, and issuing policies.
• Operational planning necessitates;
• action planning, issuing policies, and establishing
procedures.
 Planning Activities

• Forecasting
• The objective of forecasting is to estimate and predict
future conditions and events.
• All forecasting activities centre on assessing future
conditions in technology, products, marketplace etc.
affecting the business success of the company.
• Forecasting also involves new facility planning, work
force scheduling and production planning,
• Forecasting helps to define potential obstacles and
opportunities.
 Planning Activities

• Forecasting
• The farther an event is projected into the future, the
greater the probability of significant deviations
between the forecast and reality.
• Certain future events tend to result from current and
past occurrences, as long as there are no disruptive
changes in technology or society, such as wars,
natural disasters, or major incidents.
 Planning Activities

• Forecasting
• Engineering managers are likely to get involved primarily in
technology forecasting.
• Forecasting the impact of new technologies on future
businesses is particularly difficult.
• E.g. in the past, few companies understood the significance of
the Internet to company operations and the marketplace.
• Teams with diverse backgrounds in engineering, product
design, manufacturing, marketing are better equipped in
handling technology forecasting because they benefit from the
divergent experience and insights of team members.
 Planning Activities

• Action Planning
• The process of establishing specific objectives, action
steps, and a schedule and budget related to a
predetermined program, task, or project (Kerzner 2013).
• It helps to focus on critical projects that need attention
and action.
• It states specific results to be accomplished.
• It also permits an effective delegation of responsibilities,
encourages teamwork, and ensures an evaluation of the
overall performance on a continuous basis.
 Planning Activities

• Issuing Policies
• For companies to operate smoothly and consistently,
corporate rules and regulations are used to prescribe
acceptable practices.
• Company policies address important issues such as
employee hiring, employment termination, equal
employment opportunity (EEO) policies, annual
performance appraisals, savings plans, benefits,
medical insurance, pension plans, sick leave, safety,
contact with representatives of competitors etc.
 Planning Activities

• Issuing Policies
• Managers may write policies to offer uniform
answers to questions of common concern.
• In general, policies are continuing directives
promulgated to address repetitive issues, tasks, and
problems in an organization.
 Planning Activities

• An effective Policy:
1. Applies uniformly to the organization (or unit) at large
2. Remains relatively permanent, unless and until repealed
3. Fosters the objectives of the company
4. Frees managers and employees to focus on important
matters
5. Encourages effective teamwork by reducing conflicts,
disagreements, and differences in interpretation
6. Is issued by top management or authorized managers
with perspective, balance, and objectivity.
 Planning Activities

• Establishing Procedures
• Companies perform many important tasks e.g. plant
operation, product design, project management,
equipment installation, facility maintenance, parts
procurement, manufacturing etc.
• Companies preserve the “tried-and-true” procedures
in manuals in order to preserve the best way to
perform repetitive work (& achieve high productivity).
• Establishing and preserving procedures is part of the
planning responsibility of managers.
 Planning Activities

• Establishing Procedures
• Developing procedures is also of critical importance
because it:
1. Provides the basis for method improvements
2. Ensures standardized action e.g. quality control,
resource saving, and work reproducibility
3. Simplifies training
4. Retains corporate memory e.g. proven safety
practices, problem-solving techniques etc.
Considerations when Planning
 Considerations when Planning

1. Assumptions
• Plans are typically built on both hard data and
assumptions.
2. Resistance to Change
• Change may induce business instability, technology
obsolescence, organizational restructuring, and other
unwanted disruptions.
• As such, most people resist particularly sudden changes.
• People may be more amenable to gradual changes if they
occur at a rate that they can understand and accept.
 Considerations when Planning

3. Benefit versus Cost

• Efforts applied should be commensurate with the
value added by the expected results.
4. Small but Sure Steps
5. Contingency Planning
• Have predetermined back-up steps to take, if and
when a planned action step fails to deliver.
6. Commitment
• Managers need to secure company commitment
before any plan can be implemented successfully.
Decision Making
Decision Making
Conclusion
 Conclusion

• Both strategic and operational planning are

important, because the success of a company
• depends on creating new paths to the future as
well as on implementing short-term operational
plans to secure profitability at the present time.
End of Management Functions: Planning