THE IMPORTANCE OF PLANNING Unit 5: Planning and Controlling THE IMPORTANCE OF PLANNING

Agenda Learning goals Vocabulary Difference between planning, objective and plan Planning process and steps Benefits of planning Two approaches to planning Types of plans Planning tools and strategies 1973 OPEC Oil Crisis and Shell Corporation example Time Management Matrix

Learning Goals Understand what planning it, process of planning and types of plans Be able to describe the planning process and its benefits to the organization such as flexibility coordination and time management Be able to describe tools and strategies used in the planning process (participatory planning, benchmarking, scenario planning and contingency) explain the use of effective short-term and long- term planning tools and strategies Be able to demonstrate the ability to use time management techniques

Vocabulary Benchmarking Incrementalism planning Budget Objective Collectivism approach Participatory planning Comprehensive planning Plan Contingency planning Planning Coordination Scenario planning Flexibility Strategic plan Forecasting Time management

A PLAN Map See how you progress See how far from your goal

Difference between planning, objective and plan Planning: 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: Statement of action steps to be taken in order to accomplish objectives

PLANNING PROCESS (BASIC STEPS) (1) Define your objectives. (2) Evaluate your current position relative to the desired results. (3) Brainstorm alternative scenarios and courses of action. (4) Analyse and choose among alternative courses of action. (5) Create plan, policies, and procedures. (6) Implement the plan and evaluate the results.

BENEFITS OF PLANNING Flexibility Coordination Time Management Allows flexibility to adapt change and deal with difficult situations Coordination Helps people to work together better Time Management Prioritizes- what is most important finish first

Two theoretical approaches to planning: Rational comprehensive planning (RCP): focuses on a logical decision-making approach. Logical and deliberate process that uses mathematical models and statistical analysis. Disadvantage: Unrealistic and can only be applied to relatively simple problems Incrementalism: Looks at decision-making as it naturally occurs – quickly and with imperfect information (just “muddle through”). Disadvantage: Making decisions on outdated or irrelevant information might lead to incorrect action

Two theoretical approaches to planning: In practice, planners usually take a collectivist approach: take advantage of the strengths of both. Initially examine a problem using an incremental planning approach and then switch over to a more comprehensive, or vice-versa

Types of Plans Used By Managers Short-range plans = 1 year or less Intermediate-range plans = 1 to 2 years Long-range plans = 3 or more years Higher management more likely to focus on longer time horizons while lower management levels focus more on short-run plans

TYPES OF PLANS Strategic Plans set the broad, long-term directions for a business. Strategic planning is examined in depth in the next activity.  Budgets are financial plans that allocate resources to specific projects, departments, or activities. Operational plans identify specific activities that are needed to implement strategic plans. e.g., production plans, financial plans, facilities plans, marketing plans, and human resources plans. 

PLANNING TOOLS AND STRATEGIES Managers use one or more of the following tools or strategies to create plans: Participatory planning Forecasting Benchmarking Contingency planning Scenario planning

PARTICIPATORY PLANNING Managers are ultimately responsible for planning Team members are involved in the planning process Includes the people who will be affected by the plans and/or the people who will be implementing the plan This planning strategy recognizes diversity and respects differences.

FORECASTING Attempts to predict the future Qualitative Forecasting: Uses the knowledge and opinions of experts Quantitative Forecasting: Mathematical models are used based on past results Forecasts are useful planning aids, but they must be used with caution since they can be wrong.

BENCHMARKING Comparing the performance and plans to an industry standard or best practice Allows to develop/improve/adopt plans and practices Incorporating successful ideas of other organizations into ones own operations

CONTINGENCY PLANNING Identifies alternative courses of action that can be followed if circumstances change. You cannot always predict what will go wrong, but you can usually anticipate that something will. Whenever possible, it is best to be prepared with alternate plans. Good to deal with crisis

SCENARIO PLANNING Long-term version of contingency planning identifies alternative future scenarios and makes plans to deal with each should they occur Used largely by businesses that have to make expensive long term decisions in uncertain situations Not about predicting the future; but describing what is possible.

1973 OIL CRISIS The 1973 Oil Crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC (consisting of the Arab members of OPEC, plus Egypt, Syria and Tunisia) proclaimed an oil embargo. Saudi Arabia (1968)  Algeria (1970)  Bahrain (1970)  Egypt (1973)  United Arab Emirates (1970)  Iraq (1972)  Kuwait (1968)  Libya (1968)  Qatar (1970)  Syria (1972)

1973 OIL CRISIS That year, Egypt and Syria, with the support of other Arab nations, launched a surprise attack on Israel on the holiest day of the Jewish calendar, Yom Kippur. As Israel was vastly outnumbered, it went on full nuclear alert, loading warheads into planes and long-range missiles. Based on this, the United States chose to re-supply Israel with arms and in response, OAPEC decided to "punish" the United States On October 16, 1973, OPEC announced a decision to raise the posted price of oil by 70%. It lasted until March 1974.

PIERRE WACK – ROYAL DUTCH-SHELL

Still, there are exceptions, like Royal Dutch/Shell Still, there are exceptions, like Royal Dutch/Shell. Beginning in the late 1960s and early 1970s, Shell developed a technique known as “scenario planning.” By listening to planners’ analysis of the global business environment, Shell’s management was prepared for the eventuality—if not the timing—of the 1973 oil crisis. And again in 1981, when other oil companies stockpiled reserves in the aftermath of the outbreak of the Iran-Iraq war, Shell sold off its excess before the glut became a reality and prices collapsed.

TIME MANAGEMENT MATRIX

TIME MANAGEMENT MATRIX List the activities that you do in a typical week in the appropriate quadrant of the Time- Management Matrix. Beside each activity, list the number of hours you spend on that activity. Where do you spend most of your time? Do you get time to complete all of the things you want to complete in a week? Do other people dictate how you spend much of your time? Are there changes you should make? What have you learned about time management?