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BOH4M Unit 2: Planning, Controll ing, and Strategizing Ms. Schirk
CHAPTER 8: PLANNING AND CONTROLLING
COURSE PROGRESS
Ø Unit 1: Management Fundamentals Ø Unit 2: Planning, Controlling, and Strategizing
Ø Chapter 8: Planning and Controlling Ø Chapter 9: Strategic Management
Ø Unit 3: Leading Ø Unit 4: Management Challenges Ø Unit 5: Organizing
PLANNING AHEAD — CHAPTER 8 STUDY QUESTIONS
Ø How do managers plan? Ø What types of plans do managers use? Ø What are the useful planning tools and
techniques? Ø What is the control process? Ø What are the common organizational controls?
STUDY QUESTION 1: HOW DO MANAGERS PLAN?
§ Key terms to know: § Planning § The process of setting objectives and determining
how to best accomplish them. § Objectives § Identify the specific results or desired outcomes
that one intends to achieve. § Plan § A statement of action steps to be taken in order to
accomplish the objectives.
STUDY Q.1: HOW DO MANAGERS PLAN?
¡ Planning: § Is the proactive process of setting objectives and
determining how to accomplish them. § Helps anticipate problems before they happen § Bridges the gap between where the business is
now and where it wants to be
STUDY Q.1: HOW DO MANAGERS PLAN?
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¡ Steps in the planning process: 1. Define your objectives. § Identify desired outcomes or results in very
specific ways 2. Determine where you stand vis-à-vis objectives. § Evaluate current accomplishments relative to
the desired results. 3. Develop premises regarding future conditions. § Generate alternative scenarios for what may
happen in the future, and identify things that may help or hinder progress toward your objectives.
STUDY Q.1: HOW DO MANAGERS PLAN?
¡ Steps in the planning process: 4. Analyze and choose among action alternatives. § Evaluate plans, policies, and procedures, and
decide what must be done to follow the course of action.
5. Implement the plan and evaluate results. § Carefully measure progress toward objectives,
taking corrective actions and revising plans as needed.
STUDY Q.1: HOW DO MANAGERS PLAN?
¡ Figure 8.1 The roles of planning and controlling in the management process.
STUDY Q.1: HOW DO MANAGERS PLAN?
§ Benefits of planning:
§ Improves focus and flexibility.
§ Improves action orientation.
§ Improves coordination.
§ Improves time management.
§ Improves control.
STUDY Q.1: HOW DO MANAGERS PLAN?
§ Figure 8.2 A sample means-ends chain for total quality management.
STUDY Q.1: HOW DO MANAGERS PLAN? STUDY Q.1: HOW DO MANAGERS PLAN?
Explaination Link
Time Management Matrix
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Consider the following: ¡ What kind of a planner are you? ¡ When you are assigned a major project, do you map
out a plan for completing it? ¡ Do you manage your time well? ¡ Do you prioritize important tasks to make sure they
are completed first? ¡ What is the biggest “time waster” that prevents you
from completing essential tasks on time? ¡ Have you created a plan for what you will do after
completing high school?
STUDY Q.1: HOW DO MANAGERS PLAN?
STUDY QUESTION : WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Short-range plans = 1 year or less § Action plan: used to operationalize any other
type of plan § Reaction plan: developed to react to an
unforeseen circumstance ¡ Intermediate-range plans = 1 – 4 years § Central focus of planning activities for many
organizations ¡ Long-range plans = more than 5 years § Difficult for managers in complex, volatile
environments
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Lower management levels focus on short-range plans
¡ Intermediate plans are important for middle and first-line managers
¡ Top or higher management levels focus on setting long-range plans and directions for the organization
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
STUDY Q.1: WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Strategic plans: § Set by board of directors or top management to
establish broad, comprehensive, and longer-term action directions for the entire organization
§ General plan outlining decisions of resource allocation, priorities, and action steps
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
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¡ Tactical plans: § Used by upper and middle management to
achieve tactical goals and implement parts of a strategic plan
§ Specify relevant resource and time issues and identify human resources commitments
§ Monitor horizontal and vertical communication and integration of activities
§ Have a shorter time horizon and a more specific and concrete focus
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Operational plans: § Developed by middle and lower-level managers
to define what needs to be done in specific areas to implement strategic plans
§ Focus on carrying out tactical plans to achieve operational goals
§ E.g. Production plans, financial plans, marketing plans
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Operational plans continued: § Single-use plans: Only used once to meet the
objectives of a well-defined situation in a timely manner § Program: A single-use plan for a large set of
activities § Projects: One-time activities with clear
beginning and end (less scope & complexity than a program)
§ Budgets: Commit resources to activities, projects, or programs
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
¡ Standing plans: § Policies and procedures that are designed for
repeated use § Policies: broad guidelines for making decisions
and taking action in specific circumstances. § Rules/standard operating procedures: plans
that describe exactly what actions are to be taken in specific situations
STUDY Q.2: WHAT TYPES OF PLANS DO MANAGERS USE?
STUDY QUESTION 3: WHAT ARE THE USEFUL PLANNING TOOLS AND
TECHNIQUES?
¡ Forecas-ng § Process of predic-ng what will happen in the future
§ Qualita-ve forecas-ng uses expert opinion § Quan-ta-ve forecas-ng uses mathema-cal and sta-s-cal analysis.
§ All forecasts rely on human judgment.
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
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¡ Con-ngency planning § Iden-fies alterna-ve courses of ac-on that can be implemented to meet the needs of changing circumstances
§ Helps managers cope with uncertainty and an-cipate changing condi-ons
§ Contain trigger points
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
¡ Scenario planning § A long-‐term version of con-ngency planning § Involves iden-fying alterna-ve future scenarios and making plans for each
§ Increases organiza-on’s flexibility and prepara-on for future shocks
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
¡ In early 1973, Pierre Wack, head of Corporate Planning for Royal Dutch/Shell , was frustrated because he felt that Shell (and indeed the en-re world) was opera-ng on the basis of two ques-onable assump-ons: that the supply of oi l would remain plen-ful and that the price of oi l would remain low.
¡ Wack developed an approach now referred to as Scenario Planning where he presented a series of short stories about possible futures to senior management at Shell .
¡ In one scenario, an accident in Saudi Arabia led to the severing of an oil pipeline, which in turn decreased produc-on and supply, thus crea-ng a market reac-on that increased oil prices (al lowing OPEC na-ons to pump less oi l but make more money).
¡ Senior management, when confronted with the scenario, re-‐examined its assump-ons about oi l price and supply. Inves-ga-ng further, they concluded that OPEC was preparing to increase oi l prices.
¡ When the oil price shocks of 1973 hit, Shell was the only major western company (or na-on for that ma[er) that was prepared. Within two years, Shell moved from the eighth biggest oi l company to the second.
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
¡ Benchmarking § Use of external comparisons to be[er evaluate current performance and iden-fy possible ac-ons for the future
§ Adop-ng best prac-ces of other organiza-ons that achieve superior performance
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
¡ Participation and involvement § Participatory planning requires that the planning
process include people who will be affected by the plans and/or will help implement them.
§ Management by objectives (MBO): process of collaborative goal setting by manager and subordinate
§ Benefits of participation and involvement: § Promotes creativity in planning § Increases available information § Fosters understanding, acceptance, and
commitment to the final plan
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
STUDY Q.3: WHAT ARE THE USEFUL PLANNING TOOLS AND TECHNIQUES?
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STUDY QUESTION 4: WHAT IS THE CONTROL PROCESS?
¡ Controlling § The process of measuring performance and taking
action to ensure desired results. § Has a positive and necessary role in the
management process. § Ensures that the right things happen, in the right
way, at the right time. § Organizational learning and after-action review.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Steps in the control process:
§ Step 1 — establish objectives and standards.
§ Step 2 — measure actual performance.
§ Step 3 — compare results with objectives and
standards.
§ Step 4 — take corrective action as needed.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Figure 8.4 Four steps in the control process.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Step 1 — establishing objectives and standards § Output standards § Measure performance results in terms of
quantity, quality, cost, or time. § Input standards § Measure effort in terms of amount of work
expended in task performance.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Step 2 — measuring actual performance
§ Goal is accurate measurement of actual
performance results and/or performance efforts.
§ Must identify significant differences between
actual results and original plan.
§ Effective control requires measurement.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
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¡ Step 3 — comparing results with objectives and standards § Need for action reflects the difference between
desired performance and actual performance § Comparison methods: § Historical comparison § Relative comparison § Engineering comparison
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Step 4 — taking corrective action § Taking action when a discrepancy exists between
desired and actual performance. § Management by exception § Giving attention to situations showing the
greatest need for action. § Types of exceptions § Problem situation § Opportunity situation
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Feedforward controls:
§ Employed before a work activity begins.
§ Ensure that:
§ Objectives are clear.
§ Proper directions are established.
§ Right resources are available.
§ Focuses on quality of resources.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Concurrent controls:
§ Focus on what happens during work process.
§ Monitor ongoing operations to make sure they are being done according to plan.
§ Can reduce waste in unacceptable finished products or services.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Feedback controls:
§ Take place after work is completed.
§ Focus on quality of end results.
§ Provide useful information for improving future
operations.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
¡ Figure 8.5 The role of feedforward, concurrent, and feedback controls in organizations.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
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¡ Internal and external control
§ Internal control
§ Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations.
§ External control
§ Occurs through personal supervision and the use of formal administrative systems.
STUDY Q.4: WHAT IS THE CONTROL PROCESS?
STUDY QUESTION 5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Management by Objectives (MBO)
§ A structured process of regular communication.
§ Supervisor/team leader and workers jointly set
performance objectives.
§ Supervisor/team leader and workers jointly review
results.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Figure 8.6 Management by objectives as an integrated planning and control framework.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ MBO involves a formal agreement specifying: § Workers’ performance objectives for a specific
time period.
§ Plans through which performance objectives will be accomplished.
§ Standards for measuring accomplishment of performance objectives .
§ Procedures for reviewing performance results.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ The MBO process: § Supervisor and workers jointly set objectives,
establish standards, and choose actions. § Workers act individually to perform tasks;
supervisors act individually to provide necessary support.
§ Supervisor and workers jointly review results, discuss implications, and renew the MBO cycle.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
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¡ Types of MBO performance objectives § Improvement § Personal development § Maintenance
¡ Criteria for effective performance objectives § Specific § Time defined § Challenging § Measurable
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Pitfalls to avoid in using MBO
§ Tying MBO to pay.
§ Focusing too much attention on easily quantifiable objectives.
§ Requiring excessive paperwork.
§ Having managers tell workers their objectives.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Advantages of MBO § Focuses workers on most important tasks and
objectives. § Focuses supervisor’s efforts on important areas
of support. § Contributes to relationship building. § Gives workers a structured opportunity to
participate in decision making.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Employee discipline systems § Discipline is the act of influencing behavior
through reprimand. § Discipline that is applied fairly, consistently, and
systematically provides useful control.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ To be effective, reprimands should: § Be immediate. § Be directed toward actions, not personality. § Be consistently applied. § Be informative. § Occur in a supportive setting. § Support realistic rules.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Employee discipline systems § Progressive discipline ties reprimands to the
severity and frequency of the employee’s infractions.
§ Progressive discipline seeks to achieve compliance with the least extreme reprimand possible.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
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¡ Important financial aspects of organizational performance § Liquidity: The ability to generate cash to pay bills. § Leverage: The ability to earn more in returns than
the cost of debt. § Asset management: The ability to use resources
efficiently and operate at minimum cost. § Profitability: The ability to earn revenues greater
than costs.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Break-even analysis: § Determination of the point at which sales
revenues are sufficient to cover costs. § Break-Even Point = Fixed Costs / (Price – Variable
Costs) § Used in evaluating: § New products § New program initiatives
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Figure 8.7 Graphical approach to break-even analysis.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Purchasing control: § A productivity tool § Trends in purchasing control: § Leveraging buying power § Committing to a small number of suppliers § Working together in supplier-purchaser
partnerships
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Inventory control
§ Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost.
§ Methods of inventory control:
§ Economic order quantity
§ Just-in-time scheduling
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
¡ Statistical quality control § Quality control involves checking processes,
materials, products, and services to ensure that they meet high standards.
§ Statistical quality control involves: § Taking samples of work. § Measuring quality in the samples. § Determining the acceptability of results.
STUDY Q.5: WHAT ARE THE COMMON ORGANIZATIONAL CONTROLS?
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