Chapter 4 ©2001 South-Western College Publishing Pamela S. Lewis Stephen H. Goodman Patricia M....

Chapter 4Chapter 4

©2001 South-Western College Publishing©2001 South-Western College Publishing©2001 South-Western College Publishing©2001 South-Western College Publishing

Pamela S. LewisPamela S. LewisStephen H. GoodmanStephen H. Goodman

Patricia M. FandtPatricia M. Fandt

Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer

University of Central FloridaUniversity of Central Florida

Pamela S. LewisPamela S. LewisStephen H. GoodmanStephen H. Goodman

Patricia M. FandtPatricia M. Fandt

Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer

University of Central FloridaUniversity of Central Florida

Planning in the Contemporary Organization

Planning in the Contemporary Organization

Transparency 4-2Transparency 4-2© 2001 South-Western Publishing© 2001 South-Western Publishing

Learning ObjectivesSlide 1 of 3


1.Describe the managerial function of planning and explain why managers should plan.

2.Discuss three approaches for initiating the planning process.

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




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

5.Describe a management-by-objectives program and discuss the advantages and disadvantages of this system of planning.

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




7.Discuss how advances in information technology have affected the planning process.

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

9.Discuss how tomorrow’s managers can achieve success through planning.


Planning DefinedPlanning Defined

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

organization.


Purpose of PlanningPurpose of Planning

The purpose of planning is simple - to ensure that the organization is both effective and

efficient in its activities.


Planning as a Linking MechanismPlanning as a Linking Mechanism

GoalsGoals ControlControlPlansPlans

Relationship among goals, plans, and controls


Benefits of Planning Slide 1 of 5


• Better Coordination– Planning provides a foundation for the

coordination of a broad range of organizational activities.

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




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

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




• Participatory Work Environment– Successful planning requires the participation

of a wide range of organizational members. This creates a more participatory work environment.




A participatory work environment is good for two reasons:

The organization benefits by having access to a broad

base of experienceand knowledge in

the planning process.

The organization benefits by having access to a broad

base of experienceand knowledge in

the planning process.

Organizationalmembers are more

likely to “buy in” to aplan that they have

helped develop.

Organizationalmembers are more

likely to “buy in” to aplan that they have

helped develop.




• More Effective Control System– An organization’s plan provides a foundation

for control. A plan provides a mechanism for ensuring that the organization is moving in the right direction and making progress toward achieving its goals.


Costs of Planning Slide 1 of 2


• Managerial Time– Done properly, the planning process requires a

substantial amount of managerial time and energy.




• Delay in Decision Making– Planning can result in delays in decision

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


Weighing the Benefits Against the Costs of Planning

Weighing the Benefits Against the Costs of Planning

In the final analysis, managers plan because planning leads to higher performance.

Planning also helps managers cope with the many complex situations they face.


Where Does Planning Start? Slide 1 of 3


Top-Down Vs. Bottom-Up Planning

Top-Down Planning

Planning efforts begin with the board of directors and top

executives of the firm.

Bottom-Up Planning

Planning is initiated at the lowest level in the

organization.




• Top-Down Planning– The advantage is that the top managers, who

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

• Bottom-Up Planning– The primary advantage is that the people

closest to the operating system, customers, and suppliers drive the development of the plan.


• Which Approach is Better - Top-Down or Bottom-Up?– Top-down planning works best when success is

dependent upon the ability to make high-level organizational changes in response to general threats and pressures.

– A bottom-up approach works best when success is dependent upon sensitivity to customer needs and demands.




Strategic Versus Operational Planning

Strategic Versus Operational Planning

In general, most organizations engage in both strategic and operational planning.

Although strategic and operational planning differ in a number of ways, they

are also interrelated.


Strategic PlanningStrategic Planning

• Strategic Planning– Is the process by which an organization makes

decisions and takes actions that affect its long-run performance.

– A strategic plan is the output of the strategic planning process. Strategic plans define both the markets in which the firm competes and the ways in which it competes in those markets.

Slide 1 of 7


Strategic PlanningStrategic PlanningSlide 2 of 7

The purpose of strategic planning is to move the organization from where

it is to where it wants to be.

Today Vision for the Future


Strategic Planning Slide 3 of 7


Levels of strategic planning and their focus:

Corporate Business

Defines how each of the

firm’s business units will

operate in its market arena.

Addresses the question, “What business should

we be in?”

Functional

Specifies the specific activities

necessary to implement the

firm’s corporate and business

strategies.




Levels of strategic planning and their participants:

Corporate Business Functional

Board of directors and

top-level executives

Top-level executives and

managers within the business unit

Middle-level managers and

lower-level managers




Levels of strategic planning, the specificity of their strategies, and their time horizons:

Corporate Business Functional

Broad strategies

5-10 year time horizon

More specific strategies than the corporate

level


Very specific strategies





• Functional Strategic Planning– Functional strategic planning leads to the

development of functional strategy.• Functional strategy specifies the operations, R&D,

financial, human resource management, and marketing activities necessary to implement the organization’s corporate and business strategies.




• Customizing the Strategic Planning Process– In general, a successful planning process must

fit the organization's focus on creating value for its customers and its shareholders.

– In other words, it must be customized for the organization based on its specific and unique needs.


Operational PlanningOperational Planning

• Operational Planning– Focuses on determining the day-to-day

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

– Operational plans• Are more specific than strategic plans, address

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

• Operational plans can be categorized as standing or single-use plans.


Standing PlansStanding Plans

• Standing Plans– Are designed to deal with organizational issues

or problems that recur frequently.– Standing plans include policies, procedures, and

rules:• Policies - general guidelines that govern how certain

organizational situations will be addressed.

• Procedures - are more specific and are designed to give explicit instructions on how to complete a recurring task.

• Rules - provide detailed and specific guidelines for action.


Single-Use Plans Slide 1 of 2


• Single-Use Plans– Are developed to address a specific

organizational situation. – Single-use plans include programs, projects,

and budgets:• Programs - govern a relatively comprehensive set of

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

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




• Single-Use Plans– Budgets - specify how financial resources

should be allocated.


Management by Objectives Slide 1 of 4


A method for developing individualized plans which guide the activities of individual

members of an organization.




• Benefits of Management by Objectives: – Provides a foundation for a more integrated and

system-oriented approach to planning.– Requires communication between employees

and their managers since they must agree on the performance goals outlined in the plan.

– Creates a participatory work environment where employees have a voice in how their jobs are designed and what their performance targets should be.




• Disadvantages of Management by Objectives:– Requires time and commitment of top

management.– May require excessive paperwork.– May create a tendency to focus on short-term

vs. long-term planning.– Can be difficult to establish and operationalize.


Management by ObjectivesSlide 4 of 4

Management by ObjectivesSlide 4 of 4

Preparation of next period’s objectives by

employees

Action planning and job performance by

employee

Mutual setting of objectives by employee and

supervisor

Mutual agreement on criteria for measuring

accomplishment of objectives

Intermittent review of ongoing performance as

needed

End-of-period review by

employee and supervisor


Contingency Planning Slide 1 of 2


Contingency planning requires the development of two or more plans, each of

which is based on a different set of strategic or operating conditions that could occur.




• When is Contingency Planning Needed?– Contingency planning is necessary in business

environments that change rapidly and in unpredictable ways.

– Contingency planning is useful when a firm’s effectiveness is dependent on a particular set of business conditions.


• Demands on the Manager’s Time

• Ambiguous and Uncertain Operating Environments

• Resistance to Change

Barriers to Effective PlanningBarriers to Effective Planning


Overcoming the Barriers to Planning

Overcoming the Barriers to Planning

• Involve Employees in Decision Making– Input from all levels of a firm is essential for

successful planning.

• Tolerate a Diversity of Views– Diverse views lead to a broader assessment of

organizational problems and opportunities.

• Encourage Strategic Thinking– Effective strategic thinking can be developed

through training and practice.


Precursors of Effective Planning Slide 1 of 2


• Recognize and communicate the importance of planning in achieving organizational success.

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

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




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

• Utilize technology to enhance the effectiveness and efficiency of the planning process.

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

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

Chapter 4 ©2001 South-Western College Publishing Pamela S. Lewis Stephen H. Goodman Patricia M....

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