1、Foundations of Planning,Chapter 7,72,What Is Planning?,Planning A primary managerial activity that involves: Defining the organizations goals Establishing an overall strategy for achieving those goals Developing plans for organizational work activities. Types of planning Informal: not written down,
2、short-term focus; specific to an organizational unit. Formal: written, specific, and long-term focus, involves shared goals for the organization.,73,Why Do Managers Plan?,Purposes of Planning Provides direction Reduces uncertainty Minimizes waste and redundancy Sets the standards for controlling,74,
3、Planning and Performance,The Relationship Between Planning And Performance Formal planning is associated with: Higher profits and returns on assets. Positive financial results. The quality of planning and implementation affects performance more than the extent of planning. The external environment c
4、an reduce the impact of planning on performance, Formal planning must be used for several years before planning begins to affect performance.,75,How Do Managers Plan?,Elements of Planning Goals (also Objectives) Desired outcomes for individuals, groups, or entire organizations Provide direction and
5、evaluation performance criteria Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules,76,Types of Goals,Financial Goals Are related to the expected internal financial performance of the organization. Strategic Goals
6、Are related to the performance of the firm relative to factors in its external environment (e.g., competitors). Stated Goals versus Real Goals Broadly-worded official statements of the organization (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in t
7、he organization).,77,Exhibit 71 Stated Goals of Large Global Companies,Execute strategic roadmap“Plan to Win.” Grow the business profitably. Identify and develop diverse talent. Promote balanced, active lifestyles. (McDonalds Corporation),Continue to win market share globally. Focus on higher-value
8、products. Reduce production costs. Lower purchasing costs. Integrate diversity. Gain ISO 14001 certification for all factories. (LOreal),Respect the environment. Respect and support family unity and national traditions. Promote community welfare. Continue implementing quality systems. Continue to be
9、 a strong cash generator. (Grupo Bimbo),Control inventory. Maintain industrys lowest inventory shrinkage rate. Open 2530 new locations in fiscal 2006. Live by the code of ethics every day. (Costco),Expand selection of competitively priced products. Manage inventory carefully. Continue to improve sto
10、re format every few years. Operate 2,000 stores by the end of the decade. Continue gaining market share. (Target),Roll out newly-designed environmentally friendly cup in 2006. Open approximately 1,800 new stores globally in 2006. Attain net revenue growth of approximately 20 percent in 2006. Attain
11、annual EPS growth of between 20 percent to 25 percent for the next 3 to 5 years. (Starbucks),Source: Information from companys Annual Reports, 20042005.,78,Exhibit 72 Types of Plans,79,Types of Plans,Strategic Plans Apply to the entire organization. Establish the organizations overall goals. Seek to
12、 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.,710,Types of Plans (contd),Long-Term Plans Plans with time frames extending beyond three years Short-Ter
13、m Plans Plans with time frames on one year or less Specific Plans Plans that are clearly defined and leave no room for interpretation Directional Plans Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation.,711,Exhibit 73 Specific Versus Directional Pl
14、ans,712,Types of Plans (contd),Single-Use Plan 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.,713,Establishing Goals and Developing Plans,Traditional Goal Setting Broad goals are se
15、t at the top of the organization. Goals are then broken into subgoals for each organizational level. Assumes that top management knows best because they can see the “big picture.” Goals are intended to direct, guide, and constrain from above. Goals lose clarity and focus as lower-level managers atte
16、mpt to interpret and define the goals for their areas of responsibility.,714,Exhibit 74 The Downside of Traditional Goal Setting,715,Establishing Goals and Developing Plans (contd),Maintaining the Hierarchy of Goals MeansEnds Chain The integrated network of goals that results from establishing a cle
17、arly-defined hierarchy of organizational goals. Achievement of lower-level goals is the means by which to reach higher-level goals (ends).,716,Establishing Goals and Developing Plans (contd),Management By Objectives (MBO) Specific performance goals are jointly determined by employees and managers. P
18、rogress toward accomplishing goals is periodically reviewed. Rewards are allocated on the basis of progress towards the goals. Key elements of MBO: Goal specificity, participative decision making, an explicit performance/evaluation period, feedback,717,Exhibit 75 Steps in a Typical MBO Program,The o
19、rganizations overall objectives and strategies are formulated. Major objectives are allocated among divisional and departmental units. Unit managers collaboratively set specific objectives for their units with their managers. Specific objectives are collaboratively set with all department members. A
20、ction plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees. The action plans are implemented. Progress toward objectives is periodically reviewed, and feedback is provided. Successful achievement of objectives is reinforced by performance-based r
21、ewards.,718,Does MBO Work?,Reason for MBO Success Top management commitment and involvement Potential Problems with MBO Programs Not as effective in dynamic environments that require constant resetting of goals. Overemphasis on individual accomplishment may create problems with teamwork. Allowing th
22、e MBO program to become an annual paperwork shuffle.,719,Exhibit 76 Characteristics of Well-Designed Goals,Written in terms of outcomes, not actions Focuses on the ends, not the means. Measurable and quantifiable Specifically defines how the outcome is to be measured and how much is expected. Clear
23、as to time frame How long before measuring accomplishment.,Challenging yet attainable Low goals do not motivate. High goals motivate if they can be achieved. Written down Focuses, defines, and makes goals visible. Communicated to all necessary organizational members Puts everybody “on the same page.
24、”,720,Steps in Goal Setting,Review the organizations mission statement. Do goals reflect the mission? Evaluate available resources. Are resources sufficient to accomplish the mission? Determine goals individually or with others. Are goals specific, measurable, and timely? Write down the goals and co
25、mmunicate them. Is everybody on the same page? Review results and whether goals are being met. What changes are needed in mission, resources, or goals?,721,Developing Plans,Contingency Factors in A Managers Planning Managers level in the organization Strategic plans at higher levels Operational plan
26、s at lower levels Degree of environmental uncertainty Stable environment: specific plans Dynamic environment: specific but flexible plans Length of future commitments Commitment Concept: current plans affecting future commitments must be sufficiently long-term to meet those commitments.,722,Exhibit
27、77 Planning in the Hierarchy of Organizations,723,Approaches to Planning,Establishing a formal planning department A group of planning specialists who help managers write organizational plans. Planning is a function of management; it should never become the sole responsibility of planners. Involving
28、 organizational members in the process Plans are developed by members of organizational units at various levels and then coordinated with other units across the organization.,724,Contemporary Issues in Planning,Criticisms of Planning Planning may create rigidity. Plans cannot be developed for dynami
29、c environments. Formal plans cannot replace intuition and creativity. Planning focuses managers attention on todays competition not tomorrows survival. Formal planning reinforces todays success, which may lead to tomorrows failure.,725,Contemporary Issues in Planning (contd),Effective Planning in Dy
30、namic Environments Develop plans that are specific but flexible. Understand that planning is an ongoing process. Change plans when conditions warrant. Persistence in planning eventually pay off. Flatten the organizational hierarchy to foster the development of planning skills at all organizational l
31、evels.,726,Terms to Know,planning goals plans stated goals real goals framing strategic plans operational plans long-term plans short-term plans specific plans,directional plans single-use plan standing plans traditional goal setting means-ends chain management by objectives (MBO) mission commitment concept formal planning department,
