Planning Basics

Overview What planning is Planning in uncertain environments Types of plans Management by objectives Chapter 4 Lesson 1

Quick Write You read all the time about “change” in the business world—including in this book. Do you think it makes sense for businesses to do formal planning in an environment of constant change? Chapter 4 Lesson 1 Courtesy of Goodshoot Images

What Planning Is Chapter 4 Lesson 1 Courtesy of Clipart.com

What Is Planning? Planning is defining goals and deciding on a strategy to meet them Planning involves ends—what is to be done means—how it is to be done Chapter 4 Lesson 1

Planning in Uncertain Environments Chapter 4 Lesson 1 Courtesy of Clipart.com

Why Managers Should Make Formal Plans Gives Direction Reduces the Impact of Change Helps Eliminate Waste and Redundancy Sets Standards and Objectives Chapter 4 Lesson 1

Criticisms of Formal Planning May create rigidity and inflexibility Chaotic business environment makes planning useless due to changes Plans cannot replace intuition and creativity Focuses attention on today’s competition, not tomorrow’s survival Reinforces success, which may lead to failure because you end up stuck in your ‘successful’ ways when you need to explore new options Chapter 4 Lesson 1

Research Findings on Planning Effectiveness Formal planning generally means higher profits, higher return on assets, and other good marks on a corporation’s financial report card Chapter 4 Lesson 1 Courtesy of Clipart.com

Research Findings on Planning Effectiveness How good the planning is matters more than how much of it there is Chapter 4 Lesson 1 Courtesy of Clipart.com

Research Findings on Planning Effectiveness Where formal planning doesn’t lead to higher profits, something outside the company is often to blame Chapter 4 Lesson 1 Courtesy of Comstock Images

Role Play (Exercise) Your sales team has been given the goal of improving iPod sales to high school students. As a manager, explain to the team the benefit of planning together. As team members, what kind of objections will you raise? Chapter 4 Lesson 1

Types of Plans Plan Time Frame Specificity Frequency Of Use Strategic Long Term Directional Single Use Tactical Short Term Specific Standing Adapted from Fundamentals of Management, 5th Ed. By Robbins/DeCenzo, p. 92 Pearson Prentice Hall, 2005 Chapter 4 Lesson 1

Strategic and Tactical Plans Strategic plans are plans that establish an organization’s overall objectives, and position it in term of its environment Tactical plans are plans that specify the details of how an organization’s overall objectives will be achieved and are sometimes called operational plans Chapter 4 Lesson 1

Short-Term and Long-Term Plans Short-term plans are plans that cover less than one year Long-term plans are plans that extend beyond five years Chapter 4 Lesson 1 Courtesy of Clipart.com

Specific and Directional Plans Specific plans are plans that have clearly defined objectives and leave no room for misinterpretation Directional plans are flexible plans that set out general guidelines Chapter 4 Lesson 1

Single-Use and Standing Plans A single-use plan is a plan used to meet the needs of a particular or unique situation, such as a corporate acquisition A standing plan, on the other hand, is a plan that is ongoing and provides guidance for repeatedly performed actions in an organization Chapter 4 Lesson 1

Management by Objectives Chapter 4 Lesson 1 Courtesy of Clipart.com

What is MBO? Management by objectives (MBO) is a system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress Chapter 4 Lesson 1

Cascading Objectives Overall Organizational 0bjectives Divisional Departmental objectives Individual Adapted from Fundamentals of Management, 5th Ed. By Robbins/DeCenzo, p. 95 Pearson Prentice Hall, 2005 Chapter 4 Lesson 1

Locke on Goal-Setting Setting specific employee goals increases performance Difficult goals get even higher levels of performance from employees—as long as the employees accept the goals Employees do better when they receive performance than when they don’t Chapter 4 Lesson 1

Common Elements in an MBO Program Goals are specific Many people have a voice in decisions Goals have an explicit time period Individuals receive feedback on their performance in meeting their goals Chapter 4 Lesson 1 Courtesy of Clipart.com

Setting Employee Objectives Identify key tasks Establish specific and challenging goals for each key task Allow the employee to take part in the goal-setting Set priorities Build in ways to measure success Link rewards to goals Chapter 4 Lesson 1

Role Play (Exercise) Your team is about to engage in a community support project to provide household and lawn care for senior citizens in the community. As the leader of the project team, conduct a meeting with one of your subordinates to develop a set of objectives prior to working on this project. Chapter 4 Lesson 1

Downside of Setting Objectives People may focus on quantity of output, not quality Setting individual goals for employees may undercut teamwork Employees may tend to reach the goal, then relax and miss the opportunity for continuous improvement Chapter 4 Lesson 1

Review Planning is defining goals and deciding on a strategy to meet them Planning involves ends—what is to be done—as well as means: how it is to be done Managers benefit from formal plans because they give direction, reduce the impact of change, help eliminate waste and redundancy, and set standards or objectives Chapter 4 Lesson 1

Review Too much planning can be bad because it may create rigidity, the environment is so chaotic that no one can plan meaningfully, planning cannot replace intuition or creativity, it focuses attention on today’s competition, not tomorrow’s survival, and it reinforces success in a way that may lead to failure because we become stuck in our ways when we need to change Chapter 4 Lesson 1

Review Generally speaking, planning improves performance There are four popular ways to describe different types of plans – strategic and tactical plans; short-term and long-term plans; specific plans and directional plans and single-use and standing plans Chapter 4 Lesson 1

Review Management by objectives (MBO) is a system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress Chapter 4 Lesson 1

Review Edwin Locke’s research on goal-setting showed that setting specific employee goals increases performance, setting difficult goals results in even higher levels of performance – as long as the employees accept the goals, and that employees do better when they receive performance feedback than when they do not Chapter 4 Lesson 1

Review W. Edwards Deming thought setting objectives did more harm than good because employees may focus on quantity of output, not quality, setting individual goals for employees may undercut teamwork, and when employees reach their goal, they may then relax and miss the opportunity for continuous improvement Chapter 4 Lesson 1

Summary What planning is Planning in uncertain environments Types of plans Management by objectives Chapter 4 Lesson 1

What’s Next… Establishing Goals and Developing Plans Chapter 4 Lesson 1 Courtesy of Goodshoot Images