Learning Unit 7

Planning

INTRODUCTION AND AIM OF THE UNIT

Planning is the starting point of the management process and entails a systematic and
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intelligent description of the direction a business organisation must take to accomplish

the goals determined. Successful managers anticipate change in the environment and
plan accordingly. In this learning unit we will first look at the reasons why planning is
needed and define what the term “planning” means. Thereafter we will discuss the plan-
ning process. Finally, we will discuss the process of setting goals and the development
of plans to attain these set goals.

36 STUDY CHAPTER 7 (sections 7.2–7.4) IN ITBM

Contents of the learning unit:

 Why planning is needed

 Managerial goals and plans
 The planning process
 Setting organisational goals and developing plans
 Summary
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37 Learning objectives

When you have worked through learning unit 7, you should be able to

 explain why planning is needed in the organisation

 explain what a goal is
 discuss the steps in the planning process
 compare the different organisational goals as used by top, middle and lower management
 discuss the requirements that must be met when setting goals
 compare the different plans that can be used by the organisation
 differentiate between strategic, functional and operational planning
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KEY TERMS

goal functional (tactical) goals

top management, middle management operational goals
and lower management hierarchical approach
goal-setting by management development of plans
planning process management by objectives (MBO)
strategic goals

Refer to the end of chapter 7 in the prescribed book to familiarise yourself with the key
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terms for this learning unit before continuing.

7.1 WHY PLANNING IS IMPORTANT

Study section 7.2 in ITBM.

632 “If you are failing to plan, you are planning to fail” (Tariq Siddique)

The above quotation says a lot about why planning is needed. Planning is the starting
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point in any management process and has two components: the activities involved in
determining the organisation’s goals and showing the way forward (the plan), and how to
achieve these goals. It is only for the purpose of studying the work of a manager that we
distinguish between the different tasks of the manager (planning, organising, leadership
and control). The tasks of a manager can be depicted graphically as follows:

635 PLANNING ORGANISING

636 637 LEADERSHIP 638 CONTROL

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In practice, the CEO of a company may set some goals for the organisation to attain, for
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instance to manufacture 1 000 000 units of a product, or to reduce the costs incurred by
the organisation by 10% in the next financial year. These are goals that the CEO and the
organisation set for themselves. Goals can therefore be seen as the desired future state
that the organisation sets for itself over a fixed period of time – usually a financial year
or sometimes a longer period such as three or five years.

Getting to the second part of the planning activity we see that a plan must be devel-
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oped to show how we are going to achieve the set goals. The plan can therefore be
described as the design indicating how much money (capital) must be borrowed to
manufacture 1 000 000 units of the product, how many workers must be appointed,

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what training they will need and how much raw material must be bought to manufac-
ture these products.

Today’s environment is characterised by constant change and the more turbulent the
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environment, the greater the need for planning. Even though managers are not able to
predict the future, they need to be able to anticipate change in the environment and
adjust their goals and plans accordingly. Below are some of the main reasons why we
need to do planning as part of the management process.

 Planning gives direction to the organisation in the form of goals and plans. It provides
the road map telling the organisation where to go and how to get there.
 Planning helps to get the different functional areas to work together. It provides
information to the production people on how many units to manufacture, it informs
the marketing section about their job (i.e. to create a demand for the product and
to facilitate the process of selling the product) and it gives the financial section a
better idea about capital needs and cash flow required to run the business properly.
So we can say that planning helps with the coordination, cohesion and stability of
the organisation.
 Planning forces the organisation to take a hard look at what the future holds for the
organisation. Many managers get so involved in the day-to-day running of the busi-
ness that they tend to forget about the future. There is an old saying that nothing
in the future will be the same as it is today! This holds true for any business. One of
the most dramatic changes that we see in the business world is of course the rise
in technology. Technological changes are taking place rapidly and the organisation
must look to the future, anticipate changes and reflect on how they will influence
the business.

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Activity 7.1

Read through the following excerpt from the case study:

After 25 years of mining with an open-cast zinc mine, a deep-level mine was built to
further exploit the ore body. This resulted in huge challenges due to the different min-
ing practices required to mine a deep-level mine and projected production targets were
never met. Management realised that a significant intervention was required to unlock
the potential of the mine in terms of production, costs and skills.
Management decided that they needed to reduce direct costs by 15%, increase production
by 20% to achieve projected output and improve asset utilisation by 10%. A management
operating system was developed and implemented to focus on corrective, preventative
decisions and activities. Management also decided to redesign the engineering function to
ensure effective preventative and breakdown maintenance. Management further trained
and coached 75 managers and supervisors in accountability for key performance areas
centred on the three core elements of production, safety and cost management. By the
end of the 35 weeks of implementing the new system and activities, management was
able to reduce annualised direct costs by 18%, increase production by 22% and improve
asset utilisation by 15%.

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Evaluate what is said in this excerpt and test whether management is fulfilling the
basic tenets of planning as we have discussed in this section.

38 Feedback:

Contact your e-tutor via myUnisa for the answer to this activity.

7.2 MANAGERIAL GOALS AND PLANS

Study section 7.3 in ITBM.

Every business needs to set goals to determine in which direction it is headed. To accom-
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plish or reach these goals, businesses need a plan which will direct them towards these
goals. Managers therefore need to ask two questions: Firstly, where do we want this or-
ganisation to be at a specific future date (setting specific goals)? Secondly, how will the
organisation achieve these goals (formulating a plan)?

Different goals are set by the different managerial levels and range from strategic goals
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formulated by top-level managers, to operational goals formulated by lower-level manag-

ers. It is important that managers formulate goals that are specific, measurable, attainable,
relevant and time-bound.

When setting goals, management must consider the following general guidelines: First, it
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is important to recognise that goals provide guidance to the organisation; they must be
the road map used by every worker in the organisation. Second, goals must be measur-
able; if they are not quantifiable, then they cannot be controlled. Third, the responsibility
for attaining goals must be assigned to specific people in the organisation. Fourth, goals
must be set consistently so that the different functional areas work together. Finally, there
must be buy-in of the goals set, meaning that every worker must be informed and moti-
vated to attain the set goals. This further means that the remuneration system must be
set in such a manner that there is an incentive for workers to reach these goals.

Management by objectives (MBO) is a goal-setting technique whereby managers and

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employees jointly define goals for the business. The most obvious advantage of this
approach is that employees have a say in setting goals, which also improves worker mo-
tivation, as they have been part of the process. Below is an excerpt from a conference
paper by Dr Ed Lawler III, a very well-respected management guru from the University
of Southern California. He remarked that organisations in which people were linked to
strategy, structure, processes and rewards had a strong competitive advantage.

“In the high-performing organizations, employees know what to do, why they do it, and
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they are motivated to do it. A business requires [a] significant amount of power, business
information, knowledge, performance-based rewards at all levels of the organization.”

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Through his research, Dr Lawler has found goal-setting in the high-performance organ-
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isation to be directly connected to the overall business strategy of the organisation. The
research shows that performance goals, jointly set and driven by business strategy, are
the most effective.

650 Source: http://www.nceo.org1main1column.php1id1299

While goals are seen as the road map telling the organisation where to go and how to get
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there, a plan is the “blueprint” for achieving the goals and will indicate how the business
should use its resources and time to reach these goals. The planning process will now
be discussed in more detail.

7.3 THE PLANNING PROCESS

Study figure 7.1 and the components of the planning process in section 7.4.2
in ITBM.

It is important to understand that planning does not take place in isolation and as a one-
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off activity. It is an ongoing process. Below are the main steps of the planning process:

Goal-setting
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657 Reactive planning 655 Developing plans

Implementation
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As can be seen from the figure above, the planning process consists of various activities:
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goal-setting which takes into consideration the mission of the organisation, the develop-
ment of plans based on the information obtained from the environmental scan and the
implementation of the plans by means of the other management functions (organising,
allocation of resources, leading and exercising control). There is obviously the feedback
loop, which starts the whole process again and which is described as the reactive plan-
ning stage. Managers also refer to it as “learning from your mistakes”!

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661 It is important to remember that planning is

 not a static process, but a dynamic one. This means that it is a process that never
stands still; nor can it remain the same. Plans should be reviewed at regular intervals
and then adjusted (if necessary) to adapt to changing needs and circumstances (the
feedback loop)
 the foundation on which the other management tasks rest. It is important for you to
understand how planning is interlinked with the other management tasks. If plan-
ning is not done properly, it will have a detrimental effect on how the organising,
leading and control tasks are performed
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Activity 7.2

Let us take the planning process to a more personal level to clarify the differences
between goal-setting, developing plans and implementing the plans.
Unisa lecturers live very sedentary lives with long hours sitting in front of a computer
and at a desk marking assignments and conducting research. The medical scheme they
belong to has conducted research and identified that they must become more active to
live more productive lives. After all, both government and Unisa have invested thousands
of rands in training them.
The medical scheme develops a mission statement in which it states that its members
should be healthy and feeling well in themselves. The goal that the medical scheme set to
realise this mission statement was that obese lecturers must lose weight, which will also be
good for their blood pressure. To this end the medical scheme took the following action:

• evaluated research that was published and information obtained from its own database
• sent out a questionnaire to all lecturers about their current weight and physical exercise
regime
• compared the information obtained from the questionnaire with their own records
regarding the medical history of these lecturers
• identified the high-risk cases and invited these lecturers to join the High Performance
Training Centre in Pretoria to undergo further tests so that a personal trainer could
be assigned to them

The medical scheme decided to measure the success of this programme after one year
with a requirement that at least 30% of the obese lecturers would have a normal body–
fat ratio and that 40% of these lecturers would have a normal blood pressure reading.
You are asked to classify the above actions into the three activities of the planning
process (i.e. goal-setting, developing plans and implementation) completed by the
medical scheme.

Feedback:
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Contact your e-tutor via myUnisa for the answer to this activity.

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 7.4 SETTING ORGANISATIONAL GOALS AND DEVELOPING
PLANS

Study sections 7.4.1 and 7.4.3 in ITBM.

An organisational goal is defined as a specific achievement to be attained at a specific

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future date. It is important to understand that goals are not set in isolation. Goals are
influenced by the mission of the organisation, the business environment in which the
organisation operates, the values held by management and the experience gained by
management.

 The mission of the organisation refers to the purpose as set out by the manage-
ment of the organisation. For example, remember the mission statement of Pick n
Pay: “We serve – with our hearts we create a great place to be – with our minds we
create an excellent place to shop.” The first part, “we serve”, refers to the customer
orientation of the organisation. The second part of the statement refers to the dream
of the organisation that it will create a wonderful place for their employees to work
and the last part refers to the fact that they want to create a wonderful place for
their customers to shop.
 The business environment has been discussed previously and we will not go into
detail about the dynamic environment in which organisations operate. Obviously
management must consider the environment in which the organisation operates
when determining the goals of the organisation. It is very difficult for management
to keep track of all the changes in the dynamic business environment. Peter Drucker,
the world-renowned management thinker, said the following about predicting the
future: “Trying to predict the future is like trying to drive down a country road at
night with no lights while looking out the back window.”
 Management’s values also influence the goals. Taking Pick n Pay as an example again,
we see that they articulated the following values in their financial year report: “We
are passionate about our customers and will fight for their rights; we care for and
respect each other; we foster personal growth and opportunity; we nurture leader-
ship and vision and reward innovation; we live by honesty and integrity; we support
and participate in our communities; we take individual responsibility and we are all
accountable.”
 The experience of management also plays a role in the determination of organisa-
tional goals. Sean Summers, the previous CEO of Pick n Pay, was involved in opening
the first Pick n Pay Hypermarket outside South Africa, in Brisbane, Australia, in 1986
(later sold off on account of South Africa’s political pariah status at the time). He ac-
knowledged the fact that this was a tough time and that he had learnt from it. The
following excerpt summarises the value of experience in a business environment:
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The value of experience

“Recently, I was asked if I was going to fire an employee who made a mistake that cost the com-
pany $600,000. No, I replied, I just spent $600,000 training him. Why would I want somebody to
hire his experience?” (TJ Watson)

Different organisational goals must be set by different levels of management. Basically

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we see that the organisation has its goals while the people working for the organisation
have their separate goals which are subservient to the goals of the organisation. As stated
previously, the mission provides the guiding light for the organisation in setting its goals.
We distinguish between three types of goals:

 The strategic or long-term goals. These goals and plans to achieve them are set by
top management and are future-oriented with a time frame of three to ten years.
The plans to achieve these goals focus on the organisation as a whole. Various long-
term plans can be developed by top management, among other things market
development such as done by Telkom, which has set the goal of giving thousands
of individuals access to telephones in rural communities across South Africa.
 The tactical or functional goals. These goals are determined by middle management
and cover a period ranging from one to three years. Using the Telkom example again,
we see that it is promoting ASDL internet connections by means of an intensive
marketing campaign over a period of more than a year.
 The operational or short-term goals. These are set by lower-level management and
cover a maximum period of one year. Using the Telkom analogy again, we see the
use of promotional pamphlets included in the monthly telephone bill for the ASDL
service as an example of a short-term plan to increase the uptake of this service.
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Activity 7.3

In discussions by the top three retailers’ CEOs in South African trade journals, the
following general planning activities were mentioned:

• All three CEOs stated that they wanted to grow their organisations internationally so
that they could earn at least 30% of their total revenue outside South Africa.
• They also wanted to increase the number of consumers buying on the internet by
20%. They furthermore wanted to cap costs to grow at a rate lower than inflation.
• They wanted to raise their brand awareness inside South Africa in the next six months
by at least 10%.
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Which of these are strategic goals, functional goals and operational goals?

Feedback:
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Contact your e-tutor via myUnisa for the answer to this activity.

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 SUMMARY
By now you should have a clear understanding of the process of planning and how it in-
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terlinks with the various management activities (namely organising, leading and control).
We saw that planning is the first step in the management process that is done once top
management determines the mission and goals of the organisation.

Remember that planning is an ongoing process and that goals and plans need to be
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adjusted and reviewed continuously within a changing environment; and should there
be a deviation from the plan, reactive planning needs to take place.

The next step is to look at organising, which involves setting up a structure through which
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activities can be performed to attain the set objectives. Also needed in this process are
the necessary resources which must be assigned to certain individuals. These matters
will be discussed in the next learning unit.

BUSINESS IN CONTEXT
Refer to the recommended book entitled Business Cases, in particular case study number
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6 “Planning: Tsogo Sun”. This is not compulsory for you to do, but merely a business-in-
context addition to your learning of business management.

SELF-ASSESSMENT QUESTIONS

Let us test your understanding of the business terminology that you have been exposed
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to in this learning unit. Match the sentence in group A with the most likely explanation
in group B.

Group A Group B
1. The process of goal-setting, developing plans and a. Top management
implementation
2. The broad plan of how the organisation is going to compete b. Operational plan
in its industry
3. The managers who have middle managers as subordinates c. The planning process
4. The process whereby management and employees jointly d. Strategic planning
set goals and whereby the progress towards the attainment
of these goals is periodically assessed
5. A specific achievement to be attained at a future date e. Planning
6. The process of formulating shorter-term plans for implemen- f. Lower management
tation in an organisation’s strategic plan
7. The process of setting goals and deciding how to achieve g. Goal
them
8. The managers who do not have managers for subordinates h. Management by objectives

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THE ANSWERS TO THE SELF-ASSESSMENT QUESTIONS

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677 Question 1

The process of goal-setting, developing plans and implementation is called the planning
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process. (1 ::: c)

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680 Question 2

The broad plan of how the organisation is going to compete in its industry is named
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strategic planning. (2 ::: d)

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683 Question 3

The managers who have middle managers as subordinates are called top management.
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(3 ::: a)

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686 Question 4

The process whereby management and employees jointly set goals and whereby the
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progress towards the attainment of these goals is periodically assessed is called manage-
ment by objectives. (4 ::: h)

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689 Question 5

690 A specific achievement to be attained at a future date is called a goal. (5 ::: g)

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692 Question 6

The process of formulating shorter-term plans for implementation in an organisation’s

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strategic plan is called an operational plan. (6 ::: b)

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695 Question 7

696 The process of setting goals and deciding how to achieve them is called planning. (7 ::: e)

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698 Question 8

699 The managers who do not have managers for subordinates are lower management. (8 ::: f)

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