1 Chapter (7) Foundations of Planning 2 Define the nature and purposes of planning 3 What Is Planning? Planning - defining the organization’s goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities. Formal planning Specific goals covering a specific time period These goals are: Written and shared with organizational members. Specific plans exist for achieving these goals. Planning involves defining the organization’s goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities. It’s concerned with both ends (what) and means (how). When we use the term planning, we mean formal planning. 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. 4 Why Do Managers Plan? Four reasons for planning Provides direction 5 Planning and Performance 6 Goals (objectives) - desired outcomes or targets 7 Types of Goals Financial Goals - related to the expected internal financial performance of the organization. Strategic Goals - related to the performance of the firm relative to factors in its external environment (e.g., competitors). We can classify most company’s goals as either strategic or financial. Financial goals are related to the financial performance of the organization, while strategic goals are related to all other areas of an organization’s performance. For instance, McDonald’s states that its financial targets are 3 to 5 percent average annual sales and revenue growth, 6 to 7 percent average annual operating income growth, and returns on invested capital in the high teens. Here’s an example of a strategic goal from Bloomberg L.P.: “We want to be the world’s most influential news organization.” 8 Types of Goals (cont.) Stated goals - official statements of what an organization says, and what it wants its various stakeholders to believe, its goals are Real goals - goals that an organization actually pursues, as defined by the actions of its members Stated goals are official statements of what an organization says, and what it wants its stakeholders to believe, its goals are. However, stated goals—which can be found in an organization’s charter, annual report, public relations announcements, or in public statements made by managers—are often conflicting and influenced by what various stakeholders think organizations should do. If you want to know an organization’s real goals—those goals an organization actually pursues—observe what organizational members are doing. Actions define priorities. 9 Types of Plans The most popular ways to describe organizational plans are breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single use versus standing). As Exhibit 7-1 shows page 163 10 Exhibit 7-1 Types of Plans 11 Types of Plans Strategic plans - plans that apply to the entire organization and establish the organization’s overall goals Operational plans - plans that encompass a particular operational area of the organization The most popular ways to describe organizational plans are breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single use versus standing). Strategic plans are plans that apply to the entire organization and establish the organization’s overall goals. Plans that encompass a particular operational area of the organization are called operational plans. These two types of plans differ because strategic plans are broad while operational plans are narrow. 12 Types of Plans (cont.) Long-term plans - plans with a time frame beyond three years Short-term plans - plans covering one year or less Specific plans – plans that are clearly defined and leave no room for interpretation Directional plans - plans that are flexible and set out general guidelines We define long-term plans as those with a time frame beyond three years. Short-term plans cover one year or less. Any time period in between would be an intermediate plan. Although these time classifications are fairly common, an organization can use any planning time frame it wants. Specific plans are clearly defined and leave no room for interpretation. A specific plan states its objectives in a way that eliminates ambiguity and problems with misunderstanding. Directional plans are flexible plans that set out general guidelines. They provide focus but don’t lock managers into specific goals or courses of action. 13 Types of Plans (cont.) Single-use plan - a one-time plan specifically designed to meet the needs of a unique situation Standing plans ongoing plans that provide guidance for activities performed repeatedly Some plans that managers develop are ongoing while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. In contrast, standing plans are ongoing plans that provide guidance for activities performed repeatedly. Standing plans include policies, rules, and procedures. 14 Approaches to Setting Goals and developing plans: 15 A problem with traditional goal-setting is that when top managers define the organization’s goals in broad terms—such as achieving “sufficient” profits or increasing “market leadership”—these ambiguous goals have to be made more specific as they flow down through the organization. Managers at each level define the goals and apply their own interpretations and biases as they make them more specific. However, what often happens is that clarity is lost as the goals make their way down from the top of the organization to lower levels. Exhibit 7-2 page 165 illustrates what can happen. 16 Exhibit 7-2 The Downside of Traditional Goal-Setting 17 Approaches to Setting Goals (cont.) 18 MBO programs have four elements: goal specificity, participative decision making, an explicit time period, and performance feedback. Instead of using goals to make sure employees are doing what they’re supposed to be doing, MBO uses goals to motivate them as well. The appeal is that it focuses on employees working to accomplish goals they’ve had a hand in setting. Exhibit 7-3 page 166 lists the steps in MBO program. 19 Exhibit 7-3 Steps in MBO Exhibit 7-3 lists the steps in a typical MBO program. 20 Steps in Goal-Setting Review the organization’s mission, or purpose. 21 1) Review the organization’s mission, or purpose 22 3) Determine the goals individually or with input from others 23 5) Review results and whether goals are being met 24 Exhibit 7-4 Well-Written Goals 25 Developing Plans The process to developing plans is influenced by Three contingency factors: organizational level, degree of environmental uncertainty, and length of future commitments 1) Organizational Level: see exhibit 7-5 page 167, show the relationship between a manager’s level in the org. and the type of planning done. Three contingency factors affect the choice of plans: organizational level, degree of environmental uncertainty, and length of future commitments. 26 Exhibit 7-5 Planning and Organizational Level 27 Contingency Factors in Planning (cont.) 28 Contingency Factors in Planning 29 Approaches to Planning 30 Contemporary Issues in Planning: 31 Contemporary Issues in Planning 32 Review Learning Outcome 8.1 33 Review Learning Outcome 8.2 34 Review Learning Outcome 8.2 (cont.) 35 Review Learning Outcome 8.2 (cont.) 36 Review Learning Outcome 8.3 37 Review Learning Outcome 8.3 (cont.) 38 Review Learning Outcome 8.3 (cont.) 39 Review Learning Outcome 8.3 (cont.) 40 Review Learning Outcome 8.4 41 |