Chap07 PP

Management, 7e
Schermerhorn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc

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Chapter 7
Planning and Controlling
 Planning ahead—study questions
– How do managers plan?
– What types of plans do managers use?
– What are the useful planning tools and
techniques?
– What is the control process?
– What control systems are used in
organizations?
Schermerhorn - Chapter 7 3
How do managers plan?
 Planning
– The process of setting objectives and determining how
to best accomplish them.
 Objectives
– Identify the specific results or desired outcomes that
one intends to achieve.
 Plan
– A statement of action steps to be taken in order to
accomplish the objectives.
 Steps in the planning process

– Define your objectives
– Determine where you stand vis-à-vis objectives
– Develop premises regarding future conditions
– Analyze and choose among action alternatives
– Implement the plan and evaluate results
 Benefits of planning
– Improves focus and flexibility
– Improves action orientation
– Improves coordination
– Improves time management
– Improves control
What types of plans do managers use?
 Short-range and long-range plans

– Short-range plans = 1 year or less
– Intermediate-range plans = 1 to 2 years
– Long-range plans = 3 or more years
 People vary in their capability to deal
effectively with different time horizons.
 Higher management levels focus on longer
time horizons.
 Strategic and operational plans
– Strategic plans—address long-term needs and set
comprehensive action directions for an organization or
subunit.
– Operational plans—define what needs to be done in
specific areas to implement strategic plans and achieve
strategic objectives.
• Production plans
• Financial plans
• Facilities plans
• Marketing plans
• Human resources plans
 Policies and procedures

– Standing plans
• Policies and procedures that are designed for
repeated use.
– Policy
• A broad guideline for making decisions and taking
action in specific circumstances
– Rules or procedures
• Plans that describe exactly what actions are to be
taken in specific circumstances.
 Budgets and project schedules

– Single-use plans
• Only used once to meet the needs of a well-defined situation in
a timely manner.
– Budgets
• Single-use plans that commit resources to activities, projects,
or programs.
• Fixed, flexible and zero-based budgets.
– Project schedules
• Single-use plans that identify the activities required to
accomplish a specific major project.
What are the useful planning tools and
techniques?
 Forecasting
– Making assumptions about what will happen in
the future
– A forecast is a vision of the future
– Qualitative forecasting
– Quantitative forecasting
– All forecasts rely on human judgment
techniques?
 Contingency planning
– Identifying alternative courses of action that
can be used if and when original plan proves
inadequate.
– Early identification of possible shifts in future
events.
– Forward thinking …
• Using devil’s advocate method
• Developing worst case scenarios
techniques?
 Scenario planning
– A long-term version of contingency planning
– Identifying alternative future scenarios
– Plans made for each future scenario
– Increases organization’s flexibility and
preparation for future shocks
techniques?
 Benchmarking
– Use of external comparisons to better evaluate
one’s current performance
– Identify possible actions for the future
– Incorporate successful ideas into one’s own
organization
techniques?
 Use of staff planners
– Lead and coordinate the planning function
– Responsibilities include:
• Assisting line managers in preparing plans.
• Developing special plans.
• Gathering and maintaining planning information.
• Assisting in communicating plans.
• Monitoring plans in progress and suggesting
changes.
techniques?
 Participation and involvement
– Participatory planning requires that the planning
process include people who will be affected by the
plans and/or will help implement them.
– Benefits of participation and involvement:
• Promotes creativity in planning.
• Increases available information.
• Fosters understanding, acceptance, and commitment to the
final plan.
What is the control process?
 Controlling
– The process of measuring performance and
taking action to ensure desired results.
– Has a positive and necessary role in the
management process.
– Ensures that the right things happen, in the right
way, at the right time.
 Steps in the control process
– Step 1—establish objectives and standards
– Step 2—measure actual performance
– Step 3—compare results with objectives and standards
– Step 4—take corrective action as needed
 Step 1—establishing objectives and

standards
– Output standards
• Measure performance results in terms of quantity,
quality, cost, or time.
– Input standards
• Measure effort in terms of amount of work
expended in task performance.
 Step 2—measuring actual performance
– Goal is accurate measurement of actual results
on output and/or input standards.
– Effective control requires measurement.
 Step 3—comparing results with objectives

and standards
– Control equation
– Need for action reflects the difference between

desired performance and actual performance
 Step 3—comparing results with objectives

and standards
– Methods of comparing desired and actual
performance
• Historical comparison
• Relative comparison
• Engineering comparison
– Benchmarking using different comparison
methods
 Step 4—taking corrective action

– Taking action when a discrepancy exists
between desired and actual performance.
– Management by exception
• Giving priority attention to situations showing the
greatest need for action.
• Types of exceptions
– Problem situation
– Opportunity situation
 Feedforward controls …
– Employed before a work activity begins.
– Ensures that:
• Objectives are clear.
• Proper directions are established.
• Right resources are available.
– Focuses on quality of resources.
 Concurrent controls …
– Focus on what happens during work process.
– Monitor ongoing operations to make sure they
are being done according to plan.
– Can reduce waste in unacceptable finished
products or services.
 Feedback controls …
– Take place after work is completed.
– Focus on quality of end results.
– Provide useful information for improving future

operations.
 Internal and external control

– Internal control
• Allows motivated individuals and groups to exercise
self-discipline in fulfilling job expectations.
– External control
• Occurs through personal supervision and the use of
formal administrative systems.
What control systems are used in
organizations?
 Compensation and benefits
– Attractive and competitive base compensation results
in …
• Attracting and keeping a qualified workforce
• Having capable, motivated workers who exercise self-control.
– Unattractive and uncompetitive base compensation
results in …
• Attracting a less qualified workforce.
• Greater need for external controls.
organizations?
 Attracting and keeping qualified employees
who exercise self-control can be helped or
hindered by …
– Merit pay incentives
– Pay-for-performance incentives
– Fringe benefits
organizations?
 Employee discipline systems

– Discipline is the act of influencing behavior
through reprimand.
– Progressive discipline ties reprimands to the
severity and frequency of the employee’s
infractions.
organizations?
 To be effective, reprimands should …
– Be immediate.
– Be directed toward actions, not personality.
– Be consistently applied.
– Be informative.
– Occur in a supportive setting.
– Support realistic rules.
organizations?
 Important financial aspects of organizational
performance …
– Liquidity
• The ability to generate cash to pay bills.
– Leverage
• The ability to earn more in returns than the cost of debt.
– Asset management
• The ability to use resources efficiently and operate at minimum
cost.
– Profitability
• The ability to earn revenues greater than costs.
organizations?
 Purchasing control …
– A productivity tool
– Trends in purchasing control:
• Leveraging buying power
• Committing to a small number of suppliers
• Working together in supplier-purchaser partnerships
organizations?
 Inventory control
– Goal is to ensure that inventory is just the right
size to meet performance needs, thus
minimizing the cost.
– Methods of inventory control:
• Economic order quantity
• Just-in-time scheduling
organizations?
 Statistical quality control
– Quality control involves checking processes,
materials, products, and services to ensure that
they meet high standards.
– Statistical quality control involves:
• Taking samples of work.
• Measuring quality in the samples.
• Determining the acceptability of results.
organizations?
 Management by objectives (MBO)

– A structured process of regular communication.
– Supervisor/team leader and worker jointly set
worker’s performance objectives.
– Supervisor/team leader and worker jointly
review results.
organizations?
 MBO involves a formal agreement
specifying …
– Worker’s performance objectives for a specific
time period.
– Plans through which they will be accomplished.
– Standards for measuring results.
– Procedures for reviewing results.
organizations?
 Types of MBO performance objectives
– Improvement
– Personal development
– Maintenance
 Criteria for effective performance objectives
– Specific
– Time defined
– Challenging
– Measurable
organizations?
 Pitfalls to avoid in using MBO …
– Tying MBO to pay.
– Focusing too much attention on easily.
quantifiable objectives.
– Requiring excessive paperwork.
– Having managers tell workers their objectives.
organizations?
 Advantages of MBO
– Focuses worker’s efforts on most important
tasks and objectives.
– Focuses supervisor’s efforts on important areas
of support.
– Contributes to relationship building.
– Gives worker structured opportunity to
participate in decision making.

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Management, 7e

John Wiley & Sons, Inc

 Steps in the planning process

 Short-range and long-range plans

 Policies and procedures

 Budgets and project schedules

 Steps in the control process

– Step 1—establish objectives and standards

– Step 2—measure actual performance

– Step 3—compare results with objectives and standards

– Step 4—take corrective action as needed

 Step 1—establishing objectives and

 Step 2—measuring actual performance

– Goal is accurate measurement of actual results

on output and/or input standards.

– Effective control requires measurement.

 Step 3—comparing results with objectives

– Need for action reflects the difference between

 Step 3—comparing results with objectives

 Step 4—taking corrective action

– Take place after work is completed.

– Focus on quality of end results.

– Provide useful information for improving future

 Internal and external control

 Employee discipline systems

 Management by objectives (MBO)

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