Chapter 3: Foundation of Planning

• What Is Planning?
• Why Do Managers Plan?
• How Do Managers Plan?
• Types and Level of Planning
• Current Issues In Planning
What Is Planning?

• Planning – Defining the organization’s goals,

establishing strategies for achieving those goals, and
developing plans to integrate and coordinate work
activities.

• Formal Planning
• Specific goals covering a specific time period
• Written and shared with organizational members
Why Do Managers Plan?

• Four reasons for planning

• Provides direction
• Reduces uncertainty
• Minimizes waste and redundancy(idleness)
• Sets the standards for controlling
 Planning and Performance

Formal planning is associated with:

• Positive financial results – Higher profits, higher return on assets, and so forth.

• The quality of planning and implementation affects performance more than the
extent of planning.

• The external environment can reduce the impact of planning on performance.

• The planning-performance relationship seems to be influenced by the planning

time frame.
Goals (objectives) – Desired outcomes or targets.
Plans – Documents that outline how goals are going to be
met.

Types of Goals
• Financial Goals – Related to the expected internal financial performance of
the organization. For example anticipating Sales growth rate, revenue growth
rate
• Strategic Goals – Overall(Comprehensive) organizational goals. Here’s an
example of a strategic goal from Bloomberg L.P.: “We want to be the world’s most
influential news organization.
• Stated Goals – Official statements of what an organization says, and what it
wants its various stakeholders to believe its goals are. For instance, Nike’s goal is
“delivering inspiration and innovation to every athlete.”
• Real Goals* – Goals that an organization actually pursues, as defined by the
actions of its members.
Types of Plans
• Strategic Plans – Plans that apply to the entire organization and establish the organization’s
overall goals.
• Operational Plans – Plans that encompass a particular operational area of the organization.

• Long-term Plans – Plans with a time frame beyond three years.

• Short-term Plans – Plans covering one year or less.

• Specific Plans – Plans that are clearly defined and leave no room for interpretation.
• Directional Plans – Plans that are flexible and set out general guidelines

• Single-use Plan – A one-time plan specifically designed to meet the needs of a unique
situation.
• Standing Plans – Ongoing plans that provide guidance for activities performed repeatedly.
Types of Plans
Approaches to Setting Goals
• Traditional Goal-Setting – An approach to setting goals in which top managers
set goals that then flow down through the organization and become sub goals for
each organizational area.

• Means-Ends Chain – An integrated network of goals in which the

accomplishment of goals at one level serves as the means for achieving the goals,
or ends, at the next level.

• Management by Objectives (MBO)* – A process of setting mutually agreed

upon goals and using those goals to evaluate employee performance.
The Downside of Traditional Goal-
Setting
Source: slideplayer.com
Steps in MBO

Step 1: The organization’s overall objectives and strategies are formulated.

Step 2: Major objectives are allocated among divisional and departmental units.
Step 3: Unit managers collaboratively set specific objectives for their units with their
managers.
Step 4: Specific objectives are collaboratively set with all department members.
Step 5: Action plans, defining how objectives are to be achieved, are specified and agreed
upon by managers and employees.
Step 6: The action plans are implemented.
Step 7: Progress toward objectives is periodically reviewed, and feedback is provided.
Step 8: Successful achievement of objectives is reinforced by performance-based
rewards.
Steps in Goal-Setting

1. Review the organization’s mission, or purpose.

2. Evaluate available resources.
• Determine the goals individually or with input from others: The goals reflect
desired outcomes and should be congruent with the organizational mission and goals in
other organizational areas. These goals should be measurable, specific, and include a
time frame for accomplishment.
1. Write down the goals and communicate them to all who need to know.
2. Review results and whether goals are being met.
Well-Written Goals (Effective characteristics of a Goals)
Goal should be ‘SMART’*

• Written in terms of outcomes rather than actions (Specific)

• Measurable and quantifiable
• Clear as to a time frame
• Challenging yet attainable
• Written down
• Communicated to all necessary organizational members
Contingency factors in planning

• Organizational Level

• Degree of environmental uncertainty

• Length of future commitment

Planning and Organizational Level
Contingency Factors in Planning

• Environmental Uncertainty
• When uncertainty is high, plans should be specific, but flexible.
• Managers must be prepared to change or amend plans as they’re implemented.
• At times, they may even have to abandon the plans.

• Length of future commitments:

• The commitment concept says that plans should extend far enough to meet
those commitments made when the plans were developed.
• Planning for too long or too short a time period is inefficient and ineffective.
Approaches to Planning 1 of 2
1. Traditional approach: planning is done entirely by
top-level managers, often assisted by a formal
planning department. Under this approach, plans
developed by top-level managers flow down through other
organizational levels, much like the traditional approach to
goal-setting.
Formal planning department – A group of
planning specialists whose sole responsibility is
helping to write organizational plans.
Approaches to Planning 2 of 2

2. Another approach to planning is to involve more organizational members

in the process.
• In this approach, plans aren’t handed down from one level to the next, but
instead are developed by organizational members at the various levels and in
the various work units to meet their specific needs.
• For instance, at Dell, employees from production, supply management, and
channel management meet weekly to make plans based on current product
demand and supply. In addition, work teams set their own daily schedules
and track their progress against those schedules. If a team falls behind, team
members develop “recovery” plans to try to get back on schedule.
• When organizational members are more actively involved in planning, they
see that the plans are more than just something written down on paper. They
can actually see that the plans are used in directing and coordinating work.
Contemporary Issues in Planning

• How Can Managers Plan Effectively in Dynamic Environments?

• In an uncertain environment, managers should develop plans that are specific, but
flexible.
• Managers need to recognize that planning is an ongoing process.

• How Can Managers Use Environmental Scanning?

• Environmental Scanning – Screening information to detect emerging trends.
• Competitor Intelligence – Gathering information about competitors that allows
managers to anticipate competitors’ actions rather than merely reacting to them.
Define the nature and purposes of planning.

• Planning involves defining the organization’s goals, establishing an overall

strategy for achieving those goals, and developing plans for organizational
work activities.

• The four purposes of planning include providing direction, reducing

uncertainty, minimizing waste and redundancy, and establishing the goals or
standards used in controlling.
Classify the types of goals organizations might have and the plans
they use.

• Goals are desired outcomes.

• Plans are documents that outline how goals are going to be met.
• Strategic plans apply to the entire organization while operational plans
encompass a particular functional area.
• Long-term plans are those with a time frame beyond three years. Short-term
plans cover one year or less.
• Specific plans are clearly defined and leave no room for interpretation.
• Directional plans are flexible and set out general guidelines.
• A single-use plan is a one-time plan designed to meet the needs of a unique
situation.
• Standing plans are ongoing plans that provide guidance for activities
performed repeatedly.
Compare and contrast approaches to goal-setting and
planning.
• In traditional goal-setting, goals are set at the top of the organization and then
become sub goals for each organizational area.
• MBO (management by objectives) is a process of setting mutually agreed-
upon goals and using those goals to evaluate employee performance.
• Well-written goals have six characteristics:
1. Written in terms of outcomes.
2. Measurable and quantifiable.
3. Clear as to time frame.
4. Challenging but attainable.
5. Written down.
6. Communicated to all organizational members who need to know them.
Compare and contrast approaches to goal-setting and planning.

• Goal-setting involves these steps:

• Review the organization’s mission
• Evaluate available resources
• Determine the goals individually or with input from others
• Write down the goals and communicate them to all who need to know them
• Review results and change goals as needed
• The two main approaches to planning include:
• The traditional approach, which has plans developed by top managers that flow
down through other organizational levels and which may use a formal planning
department.
• The other approach is to involve more organizational members in the planning
process.
Discuss contemporary issues in planning.

• Dynamic environments – Usually means developing plans that are specific

but flexible.
• Contemporary planning issue involves using environmental scanning to help
do a better analysis of the external environment.
• One form of environmental scanning, competitive intelligence, can be
especially helpful in finding out what competitors are doing.