2. Planning
– A primary functional managerial activity that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing a comprehensive set of plans to integrate and
coordinate organizational work
– Concerned with both ends (what is to be done) and means (how’s it to
be done)
– Types of Planning
• Informal: not written down, short-term focus, specific to an
organizational unit
• Formal: written, specific, and long-term focus, involves shared goals for
the organization
What is Planning?
3. Purposes of Planning
– Planning provides direction to managers: planning is the primary
management function that establishes the basis for all other
management functions. Without planning, departments and
individuals might work at cross purposes, preventing the organization
from moving efficiently towards its goals
– Planning reduces uncertainty by forcing managers to look ahead,
anticipate change, consider the impact of change, and develop
appropriate responses
– Planning minimizes waste and redundancy: when work activities
are coordinated around established plans, it reduces overlapping and
wasteful activities
– Planning establishes the standard for controlling: in planning we
develop the goals and the plans. Then through controlling, we
compare actual performance against the goal and identify significant
deviations and take necessary corrective actions. Without planning,
there would be no way to control
Why do Managers Plan?
4. Elements of Planning
Planning involves two important elements
1. Goals (also objectives)
– Desired outcomes for individuals, groups, or entire organizations
– Provide direction and evaluation performance criteria
– Represent the criteria against which actual work accomplishments can
be measured
2. Plans
– Documents that outline how goals are to be accomplished
– Describe how resources are to be allocated and establish activity
schedules
How do Managers Plan?
5. Types of Goals
– All organizations have multiple objectives
– No single measure can evaluate whether an organization is successful
Financial goals
Are related to the expected internal financial performance of the organization
Strategic goals
Are related to the performance of the firm relative to factors in its external
environment (e.g., competitors).
- Survival not specifically mentioned as a goal, however, it is extremely important.
Organizations must survive if other goals are to be achieved
How do Managers Plan?
6. Types of Plans
Strategic Plans
• Apply to the entire organization.
• Establish the organization’s overall goals.
• Seek to position the organization in terms of its environment.
• Cover extended periods of time.
How do Managers Plan?
Operational Plans
• Specify the details of how the overall goals are to be achieved.
• Cover short time period
Long term Plans
• Plans with time frames extending beyond 3 years
• Definition of long term has changed with increasingly uncertain organizational
environments
Short Term Plans
• Plans with time frames of one year or less
7. Establishing Goals and Developing Plans
Management by Objective (MBO): A management system in which
– Specific performance goals are jointly determined by employees and
managers.
– Progress toward accomplishing goals is periodically reviewed.
– Rewards are allocated on the basis of progress towards the goals.
Does MBO Work?
Reason for MBO Success:
Top management Commitment and employee involvement
Approaches to establishing goals
Problems with MBO
– Not as effective in dynamic environments that require constant resetting of goals
– Overemphasis on individual accomplishment may create problems with
teamwork
8. Establishing Goals and Developing Plans
Approaches to Planning
• Traditional, top-down approach
– Planning done by top manager
– Formal planning department – specialists whose sole responsibility is to
help to write organizational plans
– Plans float down to lower levels
• Tailored to particular needs at each lower level
– Most effective if plan is a workable document used by organizational
members for direction and guidance
• Inclusive approach
– Employees at each level develop plans suited to their needs
– Employees acquire greater sense of the importance of planning when they
participate in the process
– Plans more likely to be used in directing and coordinating work
10. Effective Planning in Dynamic Environments
Develop plans that are specific but flexible.
Understand that planning is an ongoing process.
Change plans when conditions warrant.
Flatten the organizational hierarchy to foster the development
of planning skills at all organizational levels.
Contemporary Issues in Planning
