Summary Ch 8 Planning Processes and Techniques & Ch 9 Control Processes and

Systems

Chapter 8 Planning Processes and Techniques

Why and How Managers Plan

- Importance of planning:
1. Planning: the process of setting objectives and determining how to accomplish them.
2. Role of planning and controlling in the management process:

- The Planning Process:

1. 5 Basic Steps:
a. Define your objective.
b. Determine where you stand vis-a-vis objectives.
c. Develop premises regarding future conditions.
d. Analyze alternatives and make a plan.
e. Implement the plan and evaluate results.
2. Objective and Goals: specific results that one wishes to achieve.
3. Stretch goals: performance targets that one must work extra hard and stretch to reach.
4. Plan: Statement of intended means for accomplishing objectives.

- Benefits of Planning:
1. Improves focus and flexibility.
2. Improves action orientation.
 3. Improves coordination and control.

- Benefits of Planning:
Personal Time Management Tips:
1. Do say "no" to requests that divert you from what you really should be doing.
2. Don 't get bogged down in details you can address later or leave for others.
3. Do have a system for screening telephone calls, e-mails , and requests for meetings.
4. Don 't let drop-in visitors or instant messages use too much of your time.
5. Do prioritize what you will work on in terms of importance and urgency.
6. Don 't become calendar-bound by letting others control your schedule.
7. Do follow priorities and work on the most important and urgent tasks first.

Types of Plan Used by Managers

- Long-Range and Short-Range Plans:

1. Long-term plans: typically look three or more years into the future.
2. Short-term plans: typically cover one year or less.

- Strategic and Tactical Plans:

1. Strategic plan: identifies long term directions for the organization.
2. Vision: clarifies the purpose of the organization and expresses what it hopes to be in the
future.
 3. Tactical plan: helps to implement all or parts of a strategic plan.
4. Functional plans: indicate how different operations within the organization will help
advance the overall strategy.

- Functional plans might include:

1. Production plans
2. Financial plans
3. Facilities plans
4. Logistics plans
5. Marketing plans
6. Human resource plans

- Operational Plans: identifies short term activities to implement strategic plans.

- Policies & procedures:

1. Policy: standing plan that communicates broad guidelines for decisions and action.
2. Procedure: rule describing actions that are to be taken in specific situations.

- Budgets: plan that commits resources to projects or activities.

1. Zero based budget: allocates resources as if each budget were brand new.

Planning Tools and Techniques

- Forecasting: Attempts to predict the future.

1. Qualitative forecasting: uses expert opinions to predict the future.
2. Quantitative forecasting: Uses mathematical models and statistical analyses of
historical data and surveys to predict future events.

- Contingency Planning: Identifies alternative courses of action to take when things go

wrong.

- Scenario Planning: Identifies alternative future scenarios and make plans to deal with
each.

- Benchmarking: Uses external and internal comparisons to plan for future improvements.
1. Best practices: things people and organizations do that lead to superior performance.

- Staff Planning: Strategic planning process by which a company assesses and identifies
the person et needs of the organization.
Implementing Plans to Achieve Results

- Goal Setting: SMART GOALS (Great Goals)

- Goal Management:
1. Learning goals: set targets to create the knowledge and skills required for performance.
2. Outcome goals: set targets for actual performance results.

- Goal Alignment:
1. Hierarchy of goals /hierarchy of objectives: lower level goals and objectives support
accomplishment of higher-level goals and objectives.
2. Conversations between team leaders and team members or between supervisors and
subordinates at each step in the hierarchy are essential to achieving goal alignment.
3. The conversations should result in agreement on:
a. Performance objectives for a given time period.
b. Plans through which objectives will be accomplished.
c. Standards for measuring whether objectives have been accomplished.
d. Procedures for reviewing performance results.
This process is sometimes called management by objectives (MBO).

- Goal Alignment Between Team Leader and Team Member:

- Participation and Involvement:
1. Participatory planning: includes the persons who will be affected by plans and/or those
who will implement them.

- How participation and involvement help build commitment to plans:

 Chapter 9 Control Processes and Systems

Why and How Managers Control

- Importance of controlling:
1. Controlling: the process of measuring performance and taking action to ensure desired
results.
2. After-action review: Systematic assessment of lessons learned and results accomplished
in a completed project.

- The role of controlling in the management process:

- Types of Control:
 1. Self-control: internal control that occurs through self-management and self-discipline in
fulfiling work and personal responsibilities.
2. Bureaucratic control: influences behavior through authority, policies, procedures, job
descriptions, budgets, and day-to-day supervision.
3. Clan control: influences behavior through norms and expectations set by the
organizational culture.
4. Market control: essentially the influence of market competition On the behavior of
organizations and their members.

The Control Process

- The Control Process involves four steps:

- Step 1 - Establish Objectives and Standards:

1. Pareto principle: States that 80% Of consequences come from 20% of causes.
2. Output standards: measure performance result in terms of quantity, quality, cost, or
time.
3. Input standards: measure work efforts that go into a performance task.

- Step 2 - Measure Actual Performance: output standards & input standards are used to
carefully document results.
 - Step 3 - Compare Results with Objectives and Standards:
1. Control equation: Need for Action = Desired Performance - Actual Performance.
2. Historical comparisons: past experience becomes the baseline for evaluating current
performance.
3. Relative comparisons: benchmark performance against that being achieved by other
people, work units, or organizations.

- Step 4- Take Corrective Action:

1. Management by exception: the practice of giving attention to situations that show the
greatest need for action.
2. Two types of exceptions:
a. Problem situation: must be understood so that corrective action can restore performance
to the desired level.
b. Opportunity situation: must be understood with the goal of continuing or increasing the
high level of accomplishment in the future.

Control Tools and Techniques

- Project Management & Control:

1. Projects: one-time activities with many component tasks that must be completed in
proper order and according to budget.
2. Project management: responsibility for overall planning , supervision , and control of
projects.
3. Gantt chart: graphically displays the scheduling of tasks required to complete a project.

4. CPM/Pert: combination of the critical path method and the program evaluation and
review technique.
5. Critical path: the longest pathway in a CPM /PERT network.

- Inventory Control: Ensures that inventory is only big enough to meet immediate needs.
1. Economic order quantity: places new orders when inventory levels fall to
predetermined points.
2. Just in time scheduling ( JIT): routes materials to workstations just in time for use.
- Breakeven Analysis:
1. Breakeven point occurs where revenues just equal costs.
↳ Breakeven point : Fixed costs ÷ (price - Variable costs)
2. Breakeven analysis: performs what-if calculations under different revenue and cost
conditions.

- Financial Controls:
1. Balance sheet: shows asset and liabilities at one point in time. (Assets = liabilities)
2. Income statement: shows profits or losses at one point in time. (Sales -Expenses = Net
income)
3. Financial ratio:
- Profitability: measures ability to earn revenues greater than cost.
a. Net margin = Net income / sales
b. Return on assets (ROA) = Net income / Total Assets
c. Return on Equity ( ROE) = Net income / Owner 's Equity
Higher is better. You want higher net income relative to sales, assets, and equity.
- Liquidity: measures ability to meet short-term obligations.
a. Current Ratio = Current Assets / current Liabilities
b. Quick Ratio or Acid test = Current Assets - Inventories /current Liabilities
 Higher is better. You want higher net income relative to sales, assets, and equity.
- Leverage: measure use of debt.
a. Debt ratio = Total Debts / Total Assets
Lower is better. You want fewer debts and more assets.
- Asset Management: measures asset and inventory efficiency.
a. Asset Turnover = Sales / Total Assets .
b. Inventory Turnover = Sales / Average Inventory
Higher is better. You want higher net income relative to sales, assets, and equity.

- Balanced Scorecards:
1. Balanced scorecards: tallies organizational performance in financial, customer service,
internal process, and innovation and learning areas.
2. Questions to develop specific scorecard goals and measures:
a. Financial performance
b. Customer Satisfaction
c. Internal Process Improvement
d. Innovation and learning