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Lecture 5

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Premashis Palit
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© © All Rights Reserved
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MGT 201: Principles of Management

Chapter 8

Foundations of Planning
What is Planning?
Planning
– A primary functional managerial activity 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
– Concerned with both ends (what is to be done) and means (how’s it to
be done)
– Types of Planning
• Informal: not written down, short-term focus, specific to an
organizational unit
• Formal: written, specific, and long-term focus, involves shared goals for
the organization
Why do Managers Plan?
Purposes of Planning
– Planning provides direction to managers: planning is the primary
management function that establishes the basis for all other
management functions. Without planning, departments and
individuals might work at cross purposes, preventing the organization
from moving efficiently towards its goals
– Planning reduces uncertainty by forcing managers to look ahead,
anticipate change, consider the impact of change, and develop
appropriate responses
– Planning minimizes waste and redundancy: when work activities
are coordinated around established plans, it reduces overlapping and
wasteful activities
– Planning establishes the standard for controlling: in planning we
develop the goals and the plans. Then through controlling, we
compare actual performance against the goal and identify significant
deviations and take necessary corrective actions. Without planning,
there would be no way to control
How do Managers Plan?
Elements of Planning
Planning involves two important elements

1. Goals (also objectives)


– Desired outcomes for individuals, groups, or entire organizations
– Provide direction and evaluation performance criteria
– Represent the criteria against which actual work accomplishments can
be measured

2. Plans
– Documents that outline how goals are to be accomplished
– Describe how resources are to be allocated and establish activity
schedules
How do Managers Plan?
Types of Goals
– All organizations have multiple objectives
– No single measure can evaluate whether an organization is successful

Financial goals
Are related to the expected internal financial performance of the organization

Strategic goals
Are related to the performance of the firm relative to factors in its external
environment (e.g., competitors).

- Survival not specifically mentioned as a goal, however, it is extremely important.


Organizations must survive if other goals are to be achieved
How do Managers Plan?
Types of Goals
– Another way of describing goal is in terms of whether they are Real or Stated

Stated goals
Official statements of what an organization says, and what it wants its various
stakeholders to believe, its goals are
– Can be found in an organization’s charter, annual report, public relations
announcements or in public statements made by managers

Real goals
Those goals that an organization actually pursues, as defined by the actions of
its members
– Actions define priorities
How do Managers Plan?
Types of Plans
Strategic Plans
• Apply to the entire organization.
• Establish the organization’s overall goals.
• Seek to position the organization in terms of its environment.
• Cover extended periods of time.

Operational Plans
• Specify the details of how the overall goals are to be achieved.
• Cover short time period

Long term Plans


• Plans with time frames extending beyond 3 years
• Definition of long term has changed with increasingly uncertain organizational
environments
How do Managers Plan?
Types of Plans
Short Term Plans
• Plans with time frames of one year or less

Specific Plans
• Plans that are clearly defined and leave no room for interpretation
• Required clarity and predictability

Directional Plans
• Flexible plans that set out general guidelines, provide focus, yet allow discretion
in implementation (does not limit course of action)

Single Use Plans


• A one-time plan specifically designed to meet the need of a unique situation

Standing Plans
• Ongoing plans that provide guidance for activities performed repeatedly
• Include policies, procedures and rules
Establishing Goals and Developing Plans
Approaches to establishing goals
Management by Objective (MBO): A management system in which
– Specific performance goals are jointly determined by employees and
managers.
– Progress toward accomplishing goals is periodically reviewed.
– Rewards are allocated on the basis of progress towards the goals.

Does MBO Work?


Reason for MBO Success:
Top management Commitment and employee involvement

Problems with MBO


– Not as effective in dynamic environments that require constant resetting of goals
– Overemphasis on individual accomplishment may create problems with
teamwork
Establishing Goals and Developing Plans
Approaches to Planning
• Traditional, top-down approach
– Planning done by top manager
– Formal planning department – specialists whose sole responsibility is to
help to write organizational plans
– Plans float down to lower levels
• Tailored to particular needs at each lower level
– Most effective if plan is a workable document used by organizational
members for direction and guidance
• Inclusive approach
– Employees at each level develop plans suited to their needs
– Employees acquire greater sense of the importance of planning when they
participate in the process
– Plans more likely to be used in directing and coordinating work
Contemporary Issues in Planning
 Criticisms of Planning
 1. Planning may create rigidity
 unwise to force a course of action when the environment is fluid
 2. Plans can’t be developed for a dynamic environment
 flexibility required in a dynamic environment
 can’t be tied to a formal plan
 3. Formal plans can’t replace intuition and creativity
 mechanical analysis reduces the vision to some type of programmed
routine
– 4. Planning focuses managers’ attention on today’s competition,
not on tomorrow’s survival
• plans concentrate on capitalizing on existing business opportunities
• hinders managers who consider creating or reinventing an industry
– 5. Formal planning reinforces success, which may lead to failure
• success may breed failure in an uncertain environment

© Prentice Hall, 2002 7-11


Contemporary Issues in Planning
 Effective Planning in Dynamic Environments
 Develop plans that are specific but flexible.
 Understand that planning is an ongoing process.
 Change plans when conditions warrant.
 Flatten the organizational hierarchy to foster the
development of planning skills at all organizational levels.

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