CHAPTER 8

Fundamentals
of Planning

Ch.2 1
 Takeaway Questions & Learning Objectives
Takeaway 1: Why and how do managers plan?
LO: Identify the importance of planning & steps in the planning
process.
Takeaway 2: What types of plans do managers use?
LO : List and give examples of the types of plans used by Mgrs.
Takeaway 3: What are some useful planning tools and
techniques?
LO : Discuss useful planning tools and techniques.
Takeaway 4: How can plans be well implemented?
LO : Explain how goals and participation influence planning success.

Ch.8 2
 PLANNING
Why do we need to plan?
✓ To stay on course.
✓ Get things done.
✓ Ability to look ahead, sense of direction.
✓ Meet future challenges, uncertainties, needs, …
✓ Stay focused.
✓ Creates solid platform.
✓ Making hard decisions before forced upon us!
✓ …..

Ch.8 3
 The Role of Planning in the Mgt Process

Ch.8 4
 PLANNING
▪ Org’s and Managers need to plan, but planning
environment can be complicated?
▪ World Economic Forum (WEF) in Davos, Switzerland
identified 5 key risks:
1) Extreme weather events
2) Climate change
3) Cyber attacks
4) Rising unemployment and underemployment
5) Growing income disparities /differences.

• What about Pandemics??!!

Ch.8 5
 Why and How Managers Plan?
▪ Planning: The process of setting goals & objectives
and determining how to accomplish them.
▪ Identifying Goals & Objectives:
• Goal: is a desired result or outcome that a person or
a system envisages, plans and commits to achieve. (e.g.,
income growth).
• Objective: the specific results or desired outcomes that
one intends to accomplish to achieve the goals (target).
(e.g., increase income by 20%)
▪ Plan: A statement of action steps to be taken to
accomplish the objectives.

Ch.8 6
 Why and How Managers Plan?

Ch.8 7
 Why and How Managers Plan?
Steps in the planning process:
1. Define your goals & objectives .

2. Determine where you do stand now Vs. objectives.

3. Develop premises / assumptions regarding future

conditions.

4. Analyze alternatives and make a plan.

5. Implement the plan and evaluate results.

https://www.youtube.com/watch?v=b050DLiw1oc

Ch.8 8
 Why and How Managers Plan?
Benefits of planning
✓ Improves focus and flexibility.
✓ Improves action orientation. Priorities, avoid the
complacency trap; ”carried along by the flow of events”
✓ Improves coordination and control
• Strong link between planning & control begins when
objectives and standards are set.
• Measuring results are easier and take any corrective
actions when needed.
✓ Improves time management. Discipline & priorities,
avoid “time wasters”. Things you must do “top priority”,
should do (high priority), would be nice to do (low priority),
and really don’t need to do (no priority).

Ch.8 9
 Types of Plans Used by Managers

Functional plans

Ch.8 10
 Types of Plans Used by Managers

Ch.8 11
 Types of Plans Used by Managers

Types of plans: Term wise

1. Long-term plans look at more than one year

into the future.
• Environment complexity & dynamism challenges!
• Subject to frequent revision, but still needed
(provides sense of direction)
2. Short-term plans typically cover one year or
less. Examples: operational plans, budget, …

Ch.8 12
 Types of Plans Used by Managers
Types of plans: Scope wise
1. Strategic plans — set broad, comprehensive and
longer-term action directions for the entire
organization. Long term and has Top mgt focus.
• Vision – clarifies purpose of the organization and
what it hopes to be in the future.
2. Tactical plan – helps to implement all or parts of the
strategic plan. Provides the “HOW” leading to:
• Functional plans – indicate how different operations
within the org will help accomplish the overall strategy:

Ch.8 13
 Types of Functional Plans
▪ Functional plans – indicate how different operations
within the org will help accomplish the overall strategy:
1) Production plans- dealing with work methods &
technology.
2) Financial plans- dealing with money & capital.
3) Facilities plans- dealing with physical space & work
layouts.
4) Logistics plans- dealing with suppliers & acquiring
resources inputs.
5) Marketing plans- dealing with selling & distributing
goods & svc.
6) HR plans- dealing with building a talented workforce.

Ch.8 14
 Types of Functional Plans
Production plans- dealing with work methods and technology

Ch.8 15
 Types of Functional Plans
Financial plans- dealing with money and capital

Example

Ch.8 16
 Types of Functional Plans
Facilities plans- dealing with physical space and work layouts

Ch.8 17
 Types of Functional Plans
Logistics plans- dealing with suppliers and acquiring resources I/P

Ch.8 18
Simple
Supply
Chain-
Example

Ch.8 19
 Types of Functional Plans
Human Resource plans- dealing with building a talented workforce

Ch.8 20
 Operational Plans
Operational plans — identify short-term activities
to implement strategic plans
1) Policies are standing plans they communicate
guidelines for decisions to achieve operation plans
(annual objectives). Sets a broad Guideline, often
answers the Why!
2) Procedures are rules that describe actions to be taken
in specific situations. Define precise actions to be
taken; What,Who,When,Where! Step by step

Ch.8 21
 Policies - Example

Ch.8 22
 Procedures - Example

Ch.8 23
 Planning Horizons

Ch.8 24
 Single-use Operational Plans
A. Budgets are plans that commit (allocate) resources to
projects or activities within a specific period of time:
1) Financial budget: projects cash flows and expenditures.
2) Operating (sales) budget: anticipates sales/revenues against
expenses.
3) Nonmonetary budget: allocates nonmonetary resources s/a
labor, equipment, land, …
4) Fixed budget: an established number of resources for
specific project
5) Flexible budget: allows resources to vary based on the level
of activity.
B. Zero based budgets allocate resources as if each budget
was brand new. There is no guarantee that any past
funding will be renewed. All proposals “old & new” must
compete for available fund. Avoids rollover budget.

Ch.8 25
 Examples of

Ch.8 26
 Examples of

Ch.8 27
 Planning Tools and Techniques

Ch.8 28
 Planning Tools and Techniques
Forecasting
Purpose: To reduce uncertainty and make better estimates of
what will happen in the future.
▪ Attempts to predict the future
▪ Qualitative forecasting uses expert opinions.
▪ Quantitative forecasting uses mathematical models and
statistical analysis of historical data and surveys; e.g., regression
analysis, moving average, Data Mining, etc.
▪ All forecasts should be treated cautiously.
▪ They are planning aids, not substitutes.
▪ Rely on human judgment.

Ch.8 29
 Planning Tools and Techniques
Contingency planning ~ due to uncertainties
▪ Identifying alternative courses of action to take when
things go wrong (Plan A, Plan B, Plan C, etc.)
▪ Contingency planning is for a sudden, drastic turn of
events.
▪ Contingency plans anticipate changing conditions.
▪ Contingency plans contain trigger/generate points1 to
indicate when we activate preselected alternatives.
▪ Can NOT prevent crisis from happening, but when
things get wrong, they would be great to have!
1Examples: Fire alarm, stock prices, interest rates, # of infected people, capacity utilization limit,…

Ch.8 30
 Planning Tools and Techniques- Why?

Ch.8 31
 Planning Tools and Techniques
Scenario planning
▪ Process of visualizing:
1) What future conditions or events are probable
2) What their consequences or effects would be like
3) How to respond to, or benefits from, them.
▪ A long-term version of contingency planning, but for
gradual change; e.g., loss of revenue over time
▪ Identifying alternative future scenarios
▪ Plans made for each future scenario
▪ Increases Org’s flexibility and preparation for future
shocks. → Wide range of possibilities

Ch.8 32
Ch.8 33
 Planning Tools and Techniques
Benchmarking
▪ Use of external and internal comparisons to plan for
future improvements.
▪ Learn from the success of others.
▪ Adopting best practices: things people and Org’s do that
lead to superior performance
▪ Staff planners assist in all steps of the planning process
Why benchmarking?
➢ Determine what and where improvements called for.
➢ Analyze how other Org’s achieve high performance.
➢ Use the information to improve performance.

Ch.8 34
 SMART Objectives / GREAT Goals

Ch.8 35
 SMART Objectives

Ch.8 36
 SMART Objectives
▪ Verifiable work activities Vs. measurable!
Examples:
• “to improve communications with my team in the next 3
months by holding weekly meetings”
• “to increase sales by 20% during 2020”
▪ Goals can have negative consequences, including
unethical or illegal behavior, when poorly managed and
set unrealistically high

Ch.8 37
 Implementing Plans to Achieve Results
Goal Alignment Between Team Leader and Team Member
to achieve optimal results
1. Jointly plan set objectives, set standards, choose
actions
2. Individually: perform tasks (member), provide support
(leader)
3. Jointly control: review results, discuss implications,
renew cycle

Ch.8 38
 A Sample Hierarchy of Objectives

Ch.8 39
 A Sample Hierarchy of Objectives

Lower

Figure 8.2Lower Management Objective

Ch.8 40
 Implementing Plans to Achieve Results
Participatory Planning
▪ Unlocks the motivational potential of goal setting.
▪ Increase creativity, understanding, acceptance &
commitment.
▪ Management By Objectives (MBO) promotes
participation.
▪ When participation is not possible, workers will
respond positively if supervisory trust and
support exist.

https://participatoryeconomy.org/the-
model/participatory-planning/

Ch.8 41
 How participation and involvement
help build commitment to plans
1

5 2

4 3
Figure 8.3

See Slide #8
Ch.8 42
 End of the Chapter

Ch.8 Copyright ©2015 John Wiley & Sons, Inc.

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