Fundamentals of Planning

Learning Outcomes

To help build my planning skill, when studying this chapter, I will attempt to acquire:

a) A definition of planning and an understanding of the purposes of planning

b) Classify the types of goals organizations might have and the plans they use
c) Insights into how the major steps of the planning process are related
d) Define the characteristics of effective goals
e) An appreciation for the potential of a management-by-objectives (MBO) program
f) A knowledge of how the chief executive relates to the planning process
g) Identify innovative planning approaches that managers use in a fast-changing
environment. 2
Planning skill: the ability to take action to determine the
objectives of the organization as well as what is necessary
to accomplish these objectives

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Planning: The Primary Management Function

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 Defining Planning
◉ Planning involves defining the organization’s goals, establishing strategies for
achieving those goals, and developing plans to integrate and coordinate work
activities
◉ A plan is a blueprint for goal achievement and specifies the necessary
resource allocations, schedules, tasks, and other actions.
◉ Goals specify future ends; plans specify today’s means
◉ In formal planning, specific goals covering a specific time period are defined.
◉ These goals are written and shared with organizational members to reduce
ambiguity and create a common understanding about what needs to be done.

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 Purposes of Planning
◉ C.W. Roney indicates that organizational planning has two
purposes: protective and affirmative.
◉ The protective purpose of planning is to minimize risk by
reducing the uncertainties surrounding business conditions and
clarifying the consequences of related management actions.
◉ The affirmative purpose is to increase the degree of
organizational success

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 Planning: Advantages and Potential Disadvantages

Advantages
◉ It helps managers be future-oriented
◉ A sound planning program enhances decision coordination
◉ Planning emphasizes organizational objectives
Disadvantages
Overemphasized planning program can take up too much
managerial time
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Why Do Managers Plan?

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 Planning provides direction to managers
 It reduces uncertainty
 It minimizes waste and redundancy
 It establishes the goals or standards used in
controlling

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Levels of Goals and Plans

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 Levels of Goals and Plans

◉ Top managers are typically responsible for establishing strategic goals and
plans that reflect a commitment to both organizational efficiency and
effectiveness
◉ A division manager will formulate tactical plans that focus on the major
actions that the division must take to fulfill its part in the strategic plan set by
top management
◉ Operational plans identify the specific procedures or processes needed at
lower levels of the organization, such as individual departments and
employees
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 Improves
the lives
of
families
by
providing
consumer
preferred
products
for
Kitchen
use
Improves company profit by 5
percent next year

Increase sales by 10 percent next year

Calling on 10 percent more customers

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Types of Plans

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STEPS IN THE PLANNING PROCESS

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 STEPS IN THE PLANNING PROCESS

1. State organizational objectives----objectives stipulate those areas in which

organizational planning must occur
For Example: Increase in sales by 10 percent

2.List alternative ways of reaching objectives---a manager should list as many

available alternatives as possible for reaching those objectives
For example: To capture either a new market or increase share in existing
market

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 STEPS IN THE PLANNING PROCESS
3.Develop assumptions on which to base each alternative----the feasibility of using
any one alternative to reach organizational objectives is determined by the premises,
or assumptions
For Example: Manager will take certain assumptions about the potential in existing
market and potential of new market
4.Choose the best alternative for reaching objectives
5. Develop plans to pursue the chosen alternative----develop strategic (long-range)
and tactical (short-range) plans
Top managers communicate the selected plans to middle level management to make
departmental planning
6. Put the plans into action
7. Follow up 16
 ORGANIZATIONAL OBJECTIVES:
PLANNING’S FOUNDATION
◉ Organizational objectives are identifiable goals towards which all
organizational activities are directed.
◉ The organizational purpose is what the organization exists to do

In general, an organization should set three types of objectives:

Short-term objectives—targets to be achieved in one year or less

Intermediate-term objectives—targets to be achieved in one to five years
Long-term objectives—targets to be achieved in five to seven years
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Characteristics of Effective Goals

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 MANAGEMENT BY OBJECTIVES (MBO)
Management by objectives (MBO) is a system whereby managers and employees define
goals for every department, project, and person and use them to monitor subsequent
performance

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 MBO Process

◉ The MBO process consists of five steps

◉ 1. Review organizational objectives—The manager gains a clear understanding of the
organization’s overall objectives.
◉ 2. Set worker objectives—The manager and worker meet to agree on worker objectives to be
reached by the end of the normal operating period.
◉ 3. Monitor progress—At intervals during the normal operating period, the manager and
worker check to see whether the objectives are being reached.
◉ 4. Evaluate performance—At the end of the normal operating period, the worker’s
performance is judged by the extent to which the worker reached the objectives.
◉ 5. Give rewards—Rewards given to the worker are based on the extent to which the
objectives were reached.

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MBO Process

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MBO Benefits

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 PLANNING AND THE CHIEF EXECUTIVE

Final Responsibility
1.In what direction should the organization be going?
2. In what direction is the organization going now?
3. Should something be done to change this direction?
4. Is the organization continuing in an appropriate direction

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 Objective Criteria for Appropriate
Planning
1. Organizational plan is in writing.
2. Plan is the result of all elements of the management team working together.
3. Plan defines present and possible future business of the organization.
4. Plan specifically mentions organizational objectives.
5. Plan identifies future opportunities and suggests how to take advantage of
them.
6. Plan emphasizes both internal and external environments.
7. Plan describes the attainment of objectives in operational terms whenever
possible.
8. Plan includes both long- and short-term recommendations.
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How Can Managers Plan effectively in Dynamic environments?

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