Foundations of

Planning

7
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 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

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 Why Do Managers Plan?

• Four reasons for planning

– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling

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 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
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 Goals and Plans

• Goals (objectives) - desired

outcomes or targets
• Plans - documents that outline how
goals are going to be met

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 Types of Goals

• Financial Goals - related to the expected

internal financial performance of the
organization.
• Strategic Goals - related to the performance of
the firm relative to factors in its external
environment (e.g., competitors).

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 Types of Goals (cont.)

• Stated goals - official statements of what an

organization says, and what it wants its various
stakeholders to believe, its goals are
• Real goals - goals that an organization actually
pursues, as defined by the actions of its
members

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 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

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 Types of Plans (cont.)

• 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

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2012 Pearson Education,
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 Types of Plans (cont.)

• 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

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2012 Pearson Education,
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 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 subgoals 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

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 Exhibit 8-2
The Downside of Traditional Goal-Setting

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 Steps in Goal-Setting

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

2. Evaluate available resources
3. Determine the goals individually or with input
from others
4. Write down the goals and communicate them to
all who need to know
5. Review results and whether goals are being
met.

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 Steps in Goal-Setting (cont.)

4. Write down the goals and communicate them to

all who need to know
5. Review results and whether goals are being
met.

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 Exhibit 8-4
Well-Written Goals

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 Contingency Factors in Planning

• Length of future commitments

– Commitment Concept: Current plans
affecting future commitments must be
sufficiently long-term in order to meet those
commitments.

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 Exhibit 8-5
Planning and Organizational Level

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Contingency Factors in Planning (cont.)

• 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

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2012 Pearson Education,
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 Approaches to Planning

• In the traditional approach, planning is done

entirely by top-level managers often are assisted
by a formal planning department
• Formal planning department - a group of
planning specialists whose sole responsibility is
helping to write organizational plans

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2012 Pearson Education,
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 Criticism of Planning
• Planning may create rigidity
• Plans Can’t be developed for a dynamic environment
• Formal plans can’t replace intuition and creativity
• Planning focuses manager’s attention on today’s
competition, not on tomorrow’s survival
• Formal planning reinforces success, which may lead
to failure
• Just planning isn’t enough

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 8-20
Inc. Publishing as Prentice Hall