Page 99Page 99

8th edition8th edition

Steven P. RobbinsMary Coulter

Steven P. RobbinsMary Coulter

Page 99 Slide 2

What Is Planning?

Planning

A basic managerial function that involves:

Defining the organization’s goals.Establishing an overall strategy for achieving

those goals.Developing a comprehensive set of plans to

integrate and coordinate organizational work.

Page 99 Slide 3

Types of planning

Informal planning:Not written downShort-term goalsDone in small

businesses or in single organizational units (little or no sharing of goals with others).

Formal planning:Written downClearly defined

long-term goalsGoals are shared

with other organizational members.

Page 100 Slide 4

Why Do Managers Plan?

Four Purposes (reasons) of planning are identified:

1. It Provides direction (a focus)

2. It Reduces uncertainty (being unsure)

3. It Minimizes waste, inefficiencies and redundancy (unnecessary actions)

4. It Sets the standards (criteria) for controlling

Page 100 Slide 5

Planning and Performance• Studies of the Relationship Between Planning And

Performance have concluded that:

Formal planning is associated with positive financial resultsHigher profits.Higher returns on assets.

The quality of planning and implementation is more closely linked to high performance than the extent (how wide) of planning.

The external environment (e.g. government regulations) constrains managers’ options (choices) and can reduce the impact (effect) of planning on performance.

Formal planning must be used for several years before it begins to positively affect performance.

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How Do Managers Plan?

• The Role of Goals and Plans in Planning

Goals or Objectives are desired outcomes for individuals, groups, or entire organizations. They provide direction (focus) for plans and

decisions. They form the criteria for evaluating results.

Plans are documents that outline (describe) how goals are going to be met (accomplished). They determine resource allocations (distribution),

timetables and other necessary actions to accomplish the goals

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Types of Goals

• Financial GoalsAre related to the financial performance of the

organization.

• Strategic GoalsAre related to the performance of the firm in

connection with its external environment (e.g. customers, competitors).

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Types of Goals

Knowing that an organization’s stated and real goals are usually different is important to understand what seems to be management inconsistencies (contradictions).

Real GoalsThe goals that an organization actually pursues, as can be seen in the actions of its members

Stated GoalsOfficial statements from the organization, saying what it wants its stakeholders and the public to believe.

Page 102 Slide 9

Stated Objectives from Large U.S. Companies

Financial Objectives

• Faster revenue growth

• Faster earnings growth

• Higher dividends

• Wider profit margins

• Higher returns on invested capital

• Stronger bond and credit ratings

• Bigger cash flows

• A rising stock price

• Recognition as a “blue chip” company

• A more diversified revenue base

• Stable earnings during recessionary periods

Strategic Objectives

• A bigger market share

• A higher more secure industry rank

• Higher product quality

• Lower costs relative to key competitors

• Broader or more attractive product line

• A stronger reputation with customers

• Superior customer service

• Recognition as a leader in technology and/or product innovation

• Increased ability to compete in international markets

• Expanded growth opportunities

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Types of Plans

Strategic Plans

Establish the goals of the entire organization.

Cover long time periods.

Aim to position the organization in relation to its environment.

Operational Plans

Define the ways to achieve the goals by organizational members.

Cover short time periods.

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Types of Plans

Long-Term Plans

Plans with a time frame of more than three years.

Short-Term Plans

Plans with a time frame of one year or less.

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Types of Plans

Specific Plans

Plans that are clearly defined and leave no room for interpretation.

There is no ambiguity and no problem with misunderstanding.

Directional Plans

Flexible plans that set out (indicate) general guidelines, provide focus, yet allow discretion (freedom) in implementation.

They don’t force managers into specific courses of action.

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Specific Versus Directional Plans

Page 104 Slide 14

Types of Plans

Single-Use Plans

One-time plans that are specifically designed to meet the needs of a unique situation.

Standing Plans

Ongoing plans that provide guidance for activities performed repeatedly.

They include policies, rules and procedures.

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Types of Plans

Page 105 Slide 16

Approaches to Establishing Goals

Traditional Goal Setting

Broad (general) goals are set at the organization’s top level and then split into sub goals for each lower level of the organization.

This approach assumes that top managers know what’s best because they can see the “big picture.”

The goals serve to direct, guide, and constrain from above.

Goals lose clarity and focus as lower-level managers apply their own interpretation (understanding) when defining and applying them to their areas of responsibility.

Page 105 Slide 17

Traditional Objective Setting

Page 105 Slide 18

Approaches to Establishing Goals

Means–Ends Chain

Establishing a clearly-defined hierarchy (order of

accomplishment) of organizational goals that results in an integrated (complete) network (system) of goals.

Accomplishment of goals at a lower level is the means (instrument) by which the goals (ends) at the next higher level are achieved.

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Approaches to Establishing Goals

• Management By Objectives (MBO)Specific performance goals are jointly (together)

determined by employees and their managers.Progress toward accomplishing goals is

periodically checked.Rewards are allocated (distributed) on the basis of

progress.Key elements of MBO:

Specific goals; employees motivation by participation in decisions; explicit time period; performance feedback/evaluation.

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Steps in a Typical MBO Program

1. The organization’s overall objectives and strategies are formulated.

2. Major objectives are allocated among divisional and departmental units.

3. Unit managers collaboratively set specific objectives for their units with their managers.

4. Specific objectives are collaboratively set with all department members.

5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.

6. The action plans are implemented.

7. Progress toward objectives is periodically reviewed, and feedback is provided.

8. Successful achievement of objectives is reinforced by performance-based rewards.

Page 107 Slide 21

Characteristics of Well-Designed Goals

• Written in terms of outcomes, not actionsFocuses on the ends, not

the means.

• Measurable and quantifiableSpecifically defines how

the outcome will be measured/evaluated.

• Clear as to time frameSpecify a time frame for

accomplishment.

• Challenging but attainableLow goals do not motivate.High goals motivate if they

can be achieved.

• Written downForces people to focusWritten goals become

visible.

• Communicated to allEnsures that all members

work in ways to secure accomplishment of goals.

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Steps in Goal Setting

1. Review the organization’s mission statement.1.Does the goal reflect the purpose of the organization?

2. Evaluate available resources.1.Are resources sufficient to achieve the goal?

3. Determine goals individually or with others.1.Does it conflict with other organizational goals?

4. Write down the goals and communicate them.1.Is everybody on the same page?

5. Review results and whether goals are being met.1.Are any changes needed?

Page 109 Slide 23

Developing Plans

• Contingency Factors in a Manager’s Planning*The manager’s level in the organization.

Higher levels of management = Strategic planningLower levels of management = Operational planning

The Degree of environmental uncertainty.Stable environment = Specific plans.Dynamic environment = Specific but flexible plans.

The time frame for accomplishment.The time frame should be long enough to allow fulfillment

of all the commitments that are involved.

*Factors that have an effect on a manager’s planning.

Page 109 Slide 24

Planning in the Hierarchy of Organizations

Page 110 Slide 25

Approaches to Planning

• Establishing a formal planning department

A group of planning specialists who help to write organizational plans.

This approach can be effective only if managers are involved. Planning is a function of management, it should not be the sole (the only) responsibility of planners.

• Involving organizational members in the process

Plans are developed by organizational members at various levels and then coordinated with other units across the organization.

Page 111 Slide 26

Contemporary Issues in Planning• Criticisms of Planning

Planning may create rigidity: In achieving specific goals, managers may not be able to cope with the changing environment.

Plans cannot be developed for dynamic environments: These conditions may mean not being tied to formal plans.

Formal plans cannot replace intuition and creativity: They may

reduce intuition to programmed routine.

Planning focuses managers’ attention on today’s competition not tomorrow’s survival: They focus on existing business

opportunities, not creativity.

Formal planning reinforces today’s success, which may lead to tomorrow’s failure: Successful plans provide a false sense of security than is warranted (justified, called for).

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Contemporary Issues in Planning

Criticisms of Planning

How Valid are these criticisms?

They have some merit when plans are rigid and inflexible. However, in today’s management effective planners should understand dynamic, uncertain environments.

Page 113 Slide 28

Contemporary Issues in Planning

• Effective Planning in Dynamic Environments

Develop plans that are specific but flexible.

Understand that planning is an ongoing process.

Make changes as needed if environmental conditions change.

Continue in formal planning even in uncertain environment to see any effect on performance.

Push the responsibility to lower organizational levels by training employees in setting goals and establishing plans.

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C H A P T E R R E V I E W 1/3

What Is Planning? (slides 2, 3)

• Define planning.

• Differentiate between formal and informal planning.

Why Do Managers Plan? (slides 4, 5)

• Describe the purposes of planning.

• Discuss the conclusions from studies of the relationship between planning and performance.

How Do Managers Plan? (slides 6~8)

• Define goals and plans.

• Describe the types of goals organizations might have.

• Explain why it’s important to know an organization’s stated and real goals.

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C H A P T E R R E V I E W 2/3

How Do Managers Plan? (cont’d) (slides 10~12, 14)

• Describe each of the different types of plans.

Establishing Goals and Developing Plans (slides 16, 18, 19, 21, 22, 23, 25)

• Discuss how traditional goal setting works.

• Explain the concept of the means–end chain.

• Describe the management by objective (MBO) approach.

• Describe the characteristics of well-designed goals.

• Explain the steps in setting goals.

• Discuss the contingency factors that affect planning.

• Describe the approaches to planning.

Page 99 Slide 31

C H A P T E R R E V I E W 3/3

Contemporary Issues in Planning (Slides 26~28)

• Explain the criticisms of planning and whether or not they’re valid.

• Describe how managers can effectively plan in today’s dynamic environment.