Chap05

© 2007 Thomson/South-Western. All rights reserved.© 2007 Thomson/South-Western. All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Planning in thePlanning in theContemporary Contemporary OrganizationOrganization

ChapterChapter

55

Part 2 Planning Challenges in the 21st CenturyPart 2 Planning Challenges in the 21st Century

© 2007 Thomson/South-Western. All rights reserved. 5–2

1.1. Describe the managerial function of planning and Describe the managerial function of planning and explain why planning is critical for effective explain why planning is critical for effective leadership.leadership.

2.2. Explain the benefits and costs of planning.Explain the benefits and costs of planning.

3.3. Discuss the potential advantages and Discuss the potential advantages and disadvantages of top-down and bottom-up planning.disadvantages of top-down and bottom-up planning.

4.4. Define strategic planning and describe the three Define strategic planning and describe the three levels of strategic planning.levels of strategic planning.

5.5. Define operational planning and distinguish between Define operational planning and distinguish between standing and single-use plans.standing and single-use plans.

LEARNING OBJECTIVESLEARNING OBJECTIVESWhen you have finished studying this chapter, When you have finished studying this chapter, you should be able to:you should be able to:


6.6. Describe individual planning systems such as Describe individual planning systems such as management by objectives and the Balanced management by objectives and the Balanced Scorecard.Scorecard.

7.7. Define contingency planning and identify the Define contingency planning and identify the circumstances under which contingency planning circumstances under which contingency planning would be appropriate.would be appropriate.

8.8. Discuss how advances in information technology Discuss how advances in information technology have affected operational planning.have affected operational planning.

9.9. Describe common barriers to effective planning and Describe common barriers to effective planning and explain ways to reduce these barriers.explain ways to reduce these barriers.

LEARNING OBJECTIVES LEARNING OBJECTIVES (cont’d)(cont’d)When you have finished studying this chapter, When you have finished studying this chapter, you should be able to:you should be able to:


Managerial PlanningManagerial Planning• Planning DefinedPlanning Defined

The process of outlining the activities that are The process of outlining the activities that are necessary to achieve the goals of the organization.necessary to achieve the goals of the organization.

• A PlanA Plan A blueprint for action that prescribes the activities A blueprint for action that prescribes the activities

necessary for an organization to realize their goals.necessary for an organization to realize their goals.• Purpose of PlanningPurpose of Planning

The purpose of planning is simpleThe purpose of planning is simple——to ensure that the to ensure that the organization is both effective and efficient in its organization is both effective and efficient in its activities.activities.


Goals and ControlsGoals and Controls• GoalsGoals

Provide a clear, engaging sense of direction and Provide a clear, engaging sense of direction and specify what is to be accomplished.specify what is to be accomplished.

• ControlControl Monitor the extent to which goals have been achieved Monitor the extent to which goals have been achieved

and ensure the organization is moving in the right and ensure the organization is moving in the right direction.direction.


Figure 5.1Figure 5.1 Planning as a Linking MechanismPlanning as a Linking Mechanism


Why Plan?Why Plan?• Better CoordinationBetter Coordination• Focus on Forward ThinkingFocus on Forward Thinking• Participatory Work EnvironmentParticipatory Work Environment• More Effective Control SystemMore Effective Control System


The Benefits of PlanningThe Benefits of Planning• Better CoordinationBetter Coordination

Planning provides a foundation for the coordination of Planning provides a foundation for the coordination of a broad range of organizational activities.a broad range of organizational activities.

A plan helps to define the responsibilities of A plan helps to define the responsibilities of individuals and work groups and helps coordinate individuals and work groups and helps coordinate their activities.their activities.

• Focus on Forward ThinkingFocus on Forward Thinking The planning function forces managers to think ahead The planning function forces managers to think ahead

and consider resource needs and potential and consider resource needs and potential opportunities or threats that the organization may face opportunities or threats that the organization may face in the future.in the future.


The Benefits of Planning The Benefits of Planning (cont’d)(cont’d)

• Participatory Work EnvironmentParticipatory Work Environment Successful planning requires the participation of a Successful planning requires the participation of a

wide range of organizational members.wide range of organizational members.More accessMore access to a broad base of experience and to a broad base of experience and

knowledge in the planning process.knowledge in the planning process.

More “buy in”More “buy in”——organizational members are more organizational members are more likely to accept a plan that they have helped likely to accept a plan that they have helped develop.develop.


The Benefits of Planning The Benefits of Planning (cont’d)(cont’d)

• More Effective Control SystemsMore Effective Control Systems An organization’s plan provides a foundation for An organization’s plan provides a foundation for

control of the processes and progress of the control of the processes and progress of the company.company.

The implementation of the plan can be evaluated and The implementation of the plan can be evaluated and progress toward the achievement of performance progress toward the achievement of performance objectives can be monitored.objectives can be monitored.

Controls provide mechanism for ensuring that the Controls provide mechanism for ensuring that the organization is moving in the right direction and organization is moving in the right direction and making progress toward achieve its goals.making progress toward achieve its goals.


The Costs of PlanningThe Costs of Planning• Management TimeManagement Time

Done properly, the planning process requires a Done properly, the planning process requires a substantial amount of managerial time and energy.substantial amount of managerial time and energy.

• Delay in Decision MakingDelay in Decision Making Planning can result in delays in decision making, Planning can result in delays in decision making,

which must be weighed against the importance of which must be weighed against the importance of speed in response time.speed in response time.


Planning: Benefits Versus Costs Planning: Benefits Versus Costs • In the final analysis, managers plan because In the final analysis, managers plan because

planning leads to higher performance. planning leads to higher performance.

• Planning also helps managers cope with the Planning also helps managers cope with the challenges they face and ensures the long-term challenges they face and ensures the long-term success of their companies.success of their companies.


Where Should Planning Begin?Where Should Planning Begin?

↓↓Top-Down PlanningTop-Down Planning↓↓ Planning efforts begin with the board Planning efforts begin with the board of directors and top executives of the of directors and top executives of the

firmfirm

↑↑Bottom-Up PlanningBottom-Up Planning↑↑Planning is initiated at the lowest level Planning is initiated at the lowest level

in the organizationin the organization


Advantages of Each Planning Advantages of Each Planning ApproachApproach• Top-Down PlanningTop-Down Planning

Top managers, who are the most knowledgeable Top managers, who are the most knowledgeable about the firm as a whole, drive the development of about the firm as a whole, drive the development of the plan.the plan.

• Bottom-Up PlanningBottom-Up Planning The people closest to the operating system, The people closest to the operating system,

customers, and suppliers drive the development of customers, and suppliers drive the development of the plan.the plan.


Table 5.Table 5.1 1 Top-Down and Bottom-Up PlanningTop-Down and Bottom-Up Planning

Top-Down Bottom-Up

Organizational CEO, Board of Directors People/department closest to product,level service, customer.

Role of As the plan moves down the Units develop goals and plans. As plansorganizational hierarchy, units determine actions move up the hierarchy, they are evaluatedunit needed to support the plan. and adjusted for accuracy and feasibility.

Specificity Begins broad, becomes more Begins specific and probably fragmented;of plan specific as it moves down the becomes cohesive and integrated as it

hierarchy. moves up the hierarchy.

Potential Plans are driven by top-level Those closest to customers, suppliers, andadvantages managers who are most operating systems provide focus of plans.

knowledgeable about all factorsaffecting the organization.

Potential Top-level managers may be Lower-level managers may lack under- disadvantages removed from the front line. standing of all factors affecting the

organization.


Levels of PlanningLevels of Planning• In general, most organizations engage in both In general, most organizations engage in both

strategic planning and operational planning.strategic planning and operational planning. Customizing the strategic planning processCustomizing the strategic planning process

A successful planning process must fit the A successful planning process must fit the organization's focus on creating value for its organization's focus on creating value for its customers and its shareholders.customers and its shareholders.

It must be customized for the organization based It must be customized for the organization based on its specific and unique needs.on its specific and unique needs.


Corporate StrategyCorporate Strategy• DiversificationDiversification

An organization adding new products, services, or An organization adding new products, services, or businesses. businesses.

• Unrelated diversificationUnrelated diversification Adding products, services, or businesses that are Adding products, services, or businesses that are

different from the ones an organization currently has.different from the ones an organization currently has.

• Related diversificationRelated diversification Adding products, services, or businesses that have Adding products, services, or businesses that have

some relationship to the ones an organization some relationship to the ones an organization currently has or share a core competency.currently has or share a core competency.


Business Strategic PlanningBusiness Strategic Planning• Strategic PlanningStrategic Planning

The process by which an organization makes The process by which an organization makes decisions and takes actions that affect its long-run decisions and takes actions that affect its long-run performance.performance.

The purpose of strategic planning is to move the The purpose of strategic planning is to move the organization from where it is to where it wants to be.organization from where it is to where it wants to be.

A A strategic planstrategic plan is the output of the strategic planning is the output of the strategic planning process that defines both the markets in which the process that defines both the markets in which the firm competes and the ways in which it competes in firm competes and the ways in which it competes in those markets.those markets.


Table 5.Table 5.2 2 Levels of Strategic PlanningLevels of Strategic Planning

TimeFocus Specificity Participants Horizon

Corporate To develop a mix of Broad Board of directors 5–10 yearsstrategy business units that meets Top-level executives

the company’s long-term growth and profitability goals

Business To develop and maintain More specific Top-level executives 1–5 yearsstrategy a distinctive competitive than the Managers within the

advantage that will ensure corporate business unitlong-term profitability strategy

Functional To develop action plans Very specific Middle-level managers 1–2 yearsstrategy that ensure that corporate Lower-level managers

and business strategiesare implemented


Functional Strategic PlanningFunctional Strategic Planning• Functional strategy specifies activities necessary Functional strategy specifies activities necessary

to implement the organization's corporate and to implement the organization's corporate and business strategies.business strategies. OperationsOperations Research and Development (R&D)Research and Development (R&D) FinancialFinancial Human resource managementHuman resource management MarketingMarketing


Table 5.Table 5.33 Examples of Functional StrategiesExamples of Functional Strategies


Operational PlanningOperational Planning• Operational PlanningOperational Planning

Focuses on the day-to-day activities that are Focuses on the day-to-day activities that are necessary to achieve the long-term goals of the necessary to achieve the long-term goals of the organization.organization.

• Operational PlansOperational Plans Are more specific, address shorter-term issues, and Are more specific, address shorter-term issues, and

are formulated by mid- and lower-level managers who are formulated by mid- and lower-level managers who are responsible for the work groups in the are responsible for the work groups in the organization.organization.

Can be categorized as either standing or single-use Can be categorized as either standing or single-use plans.plans.


Standing PlansStanding Plans• Standing PlansStanding Plans

Designed to deal with organizational issues or Designed to deal with organizational issues or problems that recur frequently. They include:problems that recur frequently. They include:Policies:Policies: general guidelines that govern how certain general guidelines that govern how certain

organizational situations will be addressed.organizational situations will be addressed.Procedures:Procedures: more specific and are designed to give more specific and are designed to give

explicit instructions on how to complete a recurring explicit instructions on how to complete a recurring task.task.

Rules:Rules: provide detailed and specific guidelines and provide detailed and specific guidelines and limits for action.limits for action.


Single-Use PlansSingle-Use Plans• Single-Use PlansSingle-Use Plans

Are developed to address a specific organizational Are developed to address a specific organizational situation. They include: situation. They include: Programs:Programs: govern a relatively comprehensive set of govern a relatively comprehensive set of

activities that are designed to accomplish a activities that are designed to accomplish a particular set of goals.particular set of goals.

Projects:Projects: direct the efforts of individuals or work direct the efforts of individuals or work groups toward the achievement of specific, well-groups toward the achievement of specific, well-defined objectives.defined objectives.

Budgets:Budgets: specify how financial resources should be specify how financial resources should be allocated.allocated.


Individual PlansIndividual Plans• Increasingly, organizations are looking for ways Increasingly, organizations are looking for ways

to translate boarder organizational plans to the to translate boarder organizational plans to the level of individual employees.level of individual employees. Two approaches for doing so include:Two approaches for doing so include:

Management by ObjectivesManagement by Objectives

The Balanced ScorecardThe Balanced Scorecard


Figure 5.Figure 5.2 2 Management by Objectives: The CycleManagement by Objectives: The Cycle

Source: K. Davis and J. Newstrom, Behavior at Work: Organizational Behavior (New York: McGraw-Hill, 1989), 209. Reproduced with permission of the McGraw-Hill Companies.


Management by Objectives (MBO)Management by Objectives (MBO)• A method for developing individualized plans A method for developing individualized plans

which guide the activities of individuals.which guide the activities of individuals. MBO benefits:MBO benefits:

Provides a foundation for a more integrated and Provides a foundation for a more integrated and system-oriented approach to planning.system-oriented approach to planning.

Requires communication between employees and Requires communication between employees and their managers since they must agree on the their managers since they must agree on the performance goals outlined in the plan.performance goals outlined in the plan.

Creates a participatory work environment where Creates a participatory work environment where employees have a voice in the design of their jobs employees have a voice in the design of their jobs and setting their performance targets.and setting their performance targets.


MBO DisadvantagesMBO Disadvantages• Requires time and commitment of top Requires time and commitment of top

management.management.

• May require excessive paperwork.May require excessive paperwork.

• May create a tendency to focus on short-term May create a tendency to focus on short-term planning rather than long-term planning.planning rather than long-term planning.

• Can be difficult to establish and operationalize.Can be difficult to establish and operationalize.


Table 5.Table 5.4 4 Potential Advantages and Disadvantages of MBOPotential Advantages and Disadvantages of MBO

Source: Adapted from J. Gordon et al., Management and Organizational Behavior (Boston: Allyn and Bacon, 1990).

• Potential Advantages• Can result in better achievement of goals.

• Forces managers to establish priorities and measurable goals or standards of performance.

• Encourages participation of employees and managers in establishing goals.

• Facilitates control.• Lets individuals know what is expected.

• Can help improve communication.

• Increases motivation and commitment of employees.

• Potential Disadvantages• Requires time and commitment of top-level managers.

• May require excessive paperwork.

• May create tendency to focus on short-term goals.

• Can be difficult to establish and put into operation.

• Goals of individuals may not be coordinated with higher-level goals.


The Balanced Scorecard (BSC)The Balanced Scorecard (BSC)• A system-wide performance measurement A system-wide performance measurement

process that aligns individual goals with the process that aligns individual goals with the strategic goals of the organization.strategic goals of the organization. Allows an organization to translate strategy into Allows an organization to translate strategy into

operational actions at every level.operational actions at every level. Ensures employees that their individual action plans Ensures employees that their individual action plans

and goals are consistent with the overall strategic and goals are consistent with the overall strategic direction of the organization.direction of the organization.


Table 5.Table 5.5 5 Measuring Performance with the Balanced ScorecardMeasuring Performance with the Balanced Scorecard

Source: J. Steele, “Transforming the Balanced Scorecard into Your Strategy Execution System,” Manage 53 (September/October 2001): 22–23.

Key Principles Measurement Criteria Implications for Leaders Align organization Customers Understand the “bigto the strategy picture.”

Translate the strategy Internal processes BSC measures performanceto operational terms. at all levels. View strategy as a Innovation Execute strategy into action. continual process. Make strategy Growth Empower frontlineeveryone’s job. employees.


Contingency PlanningContingency Planning• Contingency PlanningContingency Planning

Requires the development of two or more plans, each Requires the development of two or more plans, each of which is based on a different set of strategic or of which is based on a different set of strategic or operating conditions that could occur.operating conditions that could occur.

• When Is Contingency Planning Needed?When Is Contingency Planning Needed? Necessary in business environments that change Necessary in business environments that change

rapidly and in unpredictable ways.rapidly and in unpredictable ways. Useful when a firm’s effectiveness is dependent on a Useful when a firm’s effectiveness is dependent on a

particular set of business conditions.particular set of business conditions.


The Impact of Information Technology The Impact of Information Technology on Planningon Planning• Advances in information technology have Advances in information technology have

improved both the effectiveness and efficiency improved both the effectiveness and efficiency of the planning function.of the planning function.

• Information technology can be used to establish Information technology can be used to establish and implement the strategic and operational and implement the strategic and operational plans of an organization.plans of an organization.


Barriers to Barriers to Effective Effective PlanningPlanning

• Demands on the manager’s timeDemands on the manager’s time• Ambiguous and uncertain operating Ambiguous and uncertain operating

environmentsenvironments• Resistance to changeResistance to change


Overcoming the Barriers to PlanningOvercoming the Barriers to Planning• Involve Employees in Decision MakingInvolve Employees in Decision Making

Input from all levels of a firm is essential for Input from all levels of a firm is essential for successful planning.successful planning.

• Take Advantage of a Diversity of ViewsTake Advantage of a Diversity of Views Diverse views lead to a broader assessment of Diverse views lead to a broader assessment of

organizational problems and opportunities.organizational problems and opportunities.

• Encourage Strategic ThinkingEncourage Strategic Thinking Effective strategic thinking can be developed through Effective strategic thinking can be developed through

training and practice.training and practice.


Precursors of Effective PlanningPrecursors of Effective Planning• Recognize and communicate the importance of Recognize and communicate the importance of

planning in achieving organizational success.planning in achieving organizational success.

• Understand and appreciate the relationship Understand and appreciate the relationship between strategic and operational planning.between strategic and operational planning.

• Involve those responsible for implementing the Involve those responsible for implementing the plan in the planning process.plan in the planning process.

• Use contingency planning as a means of Use contingency planning as a means of maintaining flexibility in rapidly changing maintaining flexibility in rapidly changing business environments.business environments.


Precursors of Effective PlanningPrecursors of Effective Planning• Utilize technology to enhance the effectiveness Utilize technology to enhance the effectiveness

and efficiency of the planning process.and efficiency of the planning process.

• Remove the barrier to planning at the work Remove the barrier to planning at the work group and individual levels.group and individual levels.

• Reward those who think strategically and follow Reward those who think strategically and follow through with operational planning.through with operational planning.

Chap05

Business

Transcript of Chap05