Foundation in Business MGT1210: Fundamental of Management

TOPIC 2: PLANNING

Planning involves defining the organization’s goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities. It is concerned with both ends (what) and means (how).

In formal planning specific goals covering a specific time period are defined. These goals are written and shared with organizational members to reduce ambiguity and create a common understanding about what needs to be done. Finally, specific plans exist for achieving these goals.

Goals (objectives) are desired outcomes or targets. They guide management decisions and form the criteria against which work results are measured. That’s why they are called the foundation of planning. You have to know the desired target or outcome before you can establish plans for reaching it. Plans are documents that outline how goals are going to be met. They usually include resource allocations, schedules, and other necessary actions to accomplish the goals. As managers plan, they develop both goals and plans.

Types of goals:i. Stated goals – official statements of what an organization says, and what it wants

its stakeholders to believe its goals are.ii. Real goals – goals an organization actually pursues, as defined by the actions of

its members.

Mission StatementMission is a statement of the purpose of an organization. Every organization needs a mission statement. Defining mission forces managers to identify what the organization is in business to do. For instance, the mission of L’Oreal is “The right to be beautiful day after day”. The mission of Facebook is “a social utility that connects you with the people around you”. These statements provide clues to what these organizations see as their purpose. What should a mission statement include?

Components of a Mission Statement: Customers: Who are the firm’s customers? Markets: Where does the firm compete geographically? Concern for survival, growth, and profitability: Is the firm committed to growth and

financial stability? Philosophy: What are the firm’s basic beliefs, values, and ethical priorities? Concern for public image: How responsive is the firm to societal and environmental

concerns? Products or services: What are the firm’s major products or services?

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Foundation in Business MGT1210: Fundamental of Management

Technology: Is the firm technologically current? Self-concept: What are the firm’s major competitive advantage and core

competencies? Concern for employees: Are employees a valuable asset of the firm?

Types of Plans

1. Strategic plans – are plans that apply to an entire organization and establish the organization’s overall goals.

Strategic planning is the responsibility of top management. Only they have the authority to mobilize the resources required to implement these plans. In strategic planning, management seeks answers to some basic questions, e.g.

- What business are we in? What business should we be in?- Who are our customers? Who should our customers be?- What should we do to achieve the organization’s goals?

Strategic plans are therefore long term plans. They chart the direction in which the organization should move. Strategic plans are broad and are usually for single used. Single used plan is a one-time plan specifically designed to meet the needs of a unique situation.

2. Tactical plan - Support strategic plan and translate tactical plan into specific plan. Developed by middle management, has more details, shorter time and narrower scopes.

3. Operational plans -plans that encompass a particular operational area of the organization. Operational plans are narrow and are usually short term plans. Operational plans are standing plans. Standing plans are ongoing plans that provide guidance for activities performed repeatedly. Standing plans include policies, rules and procedures.

Planning process:

Step 2: Analyzing and Evaluating the Environments- Analyzing the present position, the internal and external environments, and resources available

Step 3: Identifying the Alternatives- Constructing a list of possible courses of action that will lead to goal achievement

Step 4: Evaluating the Alternatives-Listing and considering the advantages and disadvantages of each possible course of action

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Foundation in Business MGT1210: Fundamental of Management

Step 5: Selecting the Best Solution-Selecting the course of action that possesses the most advantages and the fewest serious disadvantages

Step 6: Implementing the PlanDetermining who will be involved, what resources will be assigned, how the plan will be evaluated, and how reporting will be handled

Step 7: Controlling and Evaluating the ResultsEnsuring that the plan is proceeding according to expectations and making necessary adjustments. Once goals have been established, written down, and communicated, a manager is ready to develop plans for pursuing the goals.

Why do Managers Plan?

Planning provides direction to managers and non-managers. When employees know what their organization or work unit is trying to accomplish and what they must contribute in order to reach goals, they can coordinate their activities, cooperate with each other, and do what it takes to accomplish those goals. Without planning, departments and individuals might work at cross-purpose and prevent the organization from efficiently achieving its goals.

Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate response. Although planning won’t eliminate uncertainty, managers plan so they can respond effectively.

Planning minimizes waste and redundancy. When work activities are coordinated around plans, inefficiencies become obvious and can be corrected or eliminated.

Planning establishes the goals or standards used in controlling. When managers plan, they develop goals and plans. When they control, they see whether the plans have been carried out and the goals met. Without planning, there would be no goals against which to measure or evaluate work effort.

Criticism of formal planning:

1. Planning may create rigidity. Formal plans can lock an organization into specific goals to be achieved within specific time frames. When these goals were set, the assumption may have been that the environment wouldn’t change. If that assumption is faulty, managers who follow a plan may face trouble. Rather than remain flexible, maybe even discard the plan, managers who continue to pursue the original goals may not be able to cope with the change environment. Staying on course when the environment is changing can be a recipe for disaster.

2. Plans can’t be developed for a dynamic environment. If a basic assumption of planning that the environment won’t change is faulty, then how can you plan?

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Foundation in Business MGT1210: Fundamental of Management

Today’s business environment is often random and unpredictable. Managing under those conditions requires flexibility, and that may mean not being tied to formal plans.

3. Formal plans can’t replace intuition and creativity. Organizations often succeed because of someone’s innovative vision, and routine planning efforts may impede such a vision.

4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival. Formal planning has a tendency to focus on how to capitalize on existing business opportunities within an industry but may not allow managers to consider creating or reinventing an industry. Consequently, formal plans may result in costly blunders when other competitors take the lead.

5. Just planning isn’t enough. It’s not enough for managers just to plan. They have to start doing! Managers need to plan, and they also need to see that the plan is carried out.

6. Reluctant to establish goals and objectives. Some managers are reluctant to set goals and objectives because they do not know enough about their organizations or the environment.

7. Fear of failure. To set goals and to work towards achieving them involves a certain amount of risk taking. Managers fear that failure will lower their self-esteem, rob them of the respect that others have for them and even threaten their job security. Hence, they are unwilling to set goals to achieve.

8. Resistance to change is the most universal barrier to planning. There appear to be no simple reason why managers and staff should fear new plans. Perhaps it is the fear of the unknown and what it brings. Many people want the security of familiar things and resist having to face new situations and responsibilities. They do not want to be made to change because other people want them to do so. Thus if managers can get their staff fully involved in planning new activities, this will help overcome the resistance to change. Sometimes members of an organization resent change because it conflicts with their interests. For example, workers may resent changes in compensation that result in their having to do more for the same salary. Managers may object to changes which involve a reduction in the size of their staff.

Factors of effective planning:

1. Plans made should be based upon clearly defined organizational goals and objectives and should make use of all available information.

2. Information obtained and used must be current and up to date.3. Plans should consider the factors in the environment which pose threats or create

opportunities for the organization in attaining its goals.4. Plans should take into account the current resources of the organization including its

managerial talent.

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Foundation in Business MGT1210: Fundamental of Management

5. Plans should provide for controls so that performance can be measured against established standards.

6. Plans should be stated in a way that is precise, simple to understand and practicable.7. Plans should be flexible so that necessary changes can be made without undue

disruption of the overall plan.

Tutorial questions:1. Define planning.2. Describe the purpose of planning.3. Explain what studies have shown about the relationship between planning and

performance.4. Define goals, and describe the types of goals organizations might have.5. Describe each of the different types of plans.6. Describe the well-written goals and explain how to set them.7. Discuss the contingency factors that affect planning.8. Describe the approaches to planning.9. Explain the criticisms of planning.10. Describe how managers can effectively plan in today’s dynamic environment.11. Will planning become more or less important to managers in the future? Why?

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