Chapter 5 Planning - To Set Direction Planning Ahead What is business planning? What types of plans are used by managers? How does planning utilize general decision making model? What planning tools and techniques are available? Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 Planning as a Management Function Organizing, Leading and Controlling are other business functions. To plan is to decide what to accomplish and how to do it define objectives for plan evaluate accomplishments relative to objectives develop premises regarding future conditions analyze possible action alternatives implement plan and evaluate results Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 An organization’s Mission, Goals and Objectives are types of plans which help to define the whole organization. Goals is a term to use if you are talking about individuals attaining outcomes. Objectives is a term to use if you are talking about organizations attaining outcomes. Schermerhorn - Chapter 5

Each of the terms below are types of plans. Mission: Tells us what purpose of organization is. Objectives: Tells us what outcomes or results we have and when we intend to accomplish outcomes. Budget: Tells us what resources we are committing to project/programs (time, $’s, people) Program or Project plan: A single use plan for accomplishing group of tasks. (e.g. marketing or financial plan) Policy: Communicates a type of plan that gives us a broad guideline for decision making. Schermerhorn - Chapter 5

Planning as a Management Function Benefits of Planning more focus (career goals focus students on their careers and they are more likely to attain them) and flexibility Contingency planning: based on possible changes in environ. action orientation (ready, fire, aim) improved coordination better control (e.g. an objective of 10% ROI Is easily use as a control number) better time management (schedule and prioritize actions. Schermerhorn - Chapter 5

Types of Plans in Organizations Short-Range and Long-Range Plans Short-range = 1 year or less Intermediate-range plans = 1-2 years Long-range = 3 or more years Schermerhorn - Chapter 5

Types of Plans in Organizations Strategic and Operational Plans Strategic plans address long-term needs set comprehensive action directions for an organization responsibility of top management Schermerhorn - Chapter 5

Types of Plans in Organizations Program Plans are intermediate plans doing the same things as operational plans. Intermediate Program plans are set by mid-level managers for 1-2 years. Financial program Facilities program Marketing program Human resources program Operational Plans are usually set by lower management levels for one year or less Operational plans will be specific plans set to support the Program plans above ( Financial, Facilities, Marketing, HRM, etc) Schermerhorn - Chapter 5

Types of Plans in Organizations Policies and Procedures standing plans policy is a broad guideline for making decisions and taking action in specific circumstances procedures are plans that describe exactly what actions are to be taken in very specific circumstances. –It’s the detail! Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 Budgets and Schedules Single-use plans budgets commit resources to activities, projects or programs help clarity and reinforce action priorities facilitate the evaluation and control of results types are fixed, flexible and zero-based Schedules put dates to a budget in time. Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 Budgets and Schedules Fixed budget allocates resources on a single estimate of costs Flexible budget allows allocation of resources to vary in proportion with various levels of activity Example is as air fares go up the budget has to be increase a like amount. Zero-based project is budgeted as if it were brand new Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 PRIORITIES . Zero base budgeting In zero base budgeting, instead of getting a 10% increase in budget over last period, all items are prioritized and budgeted. You set high, medium, and low priority items in your budget. Mainly the first two priorities are funded unless there is plenty of extra (slack) resources. Schermerhorn - Chapter 5 20

Schermerhorn - Chapter 5 PRIORITIES Priorities: Ranking goals, objectives, or activities in order of importance. A priorities: “Must do” objectives are critical to successful performance. B priorities: “Should do” objectives are necessary for improved performance. C priorities: “Nice to do” objectives are desirable for improved performance. Schermerhorn - Chapter 5 19

Planning As Problem Solving difference between actual and desired situation performance deficiency performance opportunity Problem solving process of identifying a discrepancy and taking action Schermerhorn - Chapter 5

Schermerhorn - Chapter 5 Question: How do You make a decision for which jobs you will apply after next year? Come up with a general model for making decisions. Schermerhorn - Chapter 5

Planning as Problem Solving Types of Managerial Problems (structured, unstructured and crises) Structured familiar, straightforward programmed decisions can be developed solutions readily available Raising retail price the same amount as a new wholesale cost automatically solves problem – what should we charge for this product. Schermerhorn - Chapter 5

Planning as Problem Solving Types of Managerial Problems unstructured involve ambiguity and information deficiencies Unanticipated Almost all strategic plans are unstructured and not programmable Non-programmed, programmed decisions can’t be made. specially tailored to particular situation Schermerhorn - Chapter 5

Planning as Problem Solving Types of Managerial Problems crisis unexpected problem that can lead to disaster Schermerhorn - Chapter 5

Planning as Problem Solving Problem Environments certainty risk uncertainty Schermerhorn - Chapter 5

The Decision-Making Process Typical Approach - Get Facts, be aware of past, present and possible futures identify and define problem generating and evaluating possible solutions choosing a solution and conduct ethics double check implement solution evaluate results Schermerhorn - Chapter 5

The Decision-Making Process Step 1: Identify and Define Problem avoid the following defining problem too broadly or narrowly focus on symptoms choose wrong problem Schermerhorn - Chapter 5

The Decision-Making Process Step 2: Generate and Evaluate Possible Solutions (use a decision tree or an evaluation matrix.) Criteria benefits costs timeliness acceptability ethical soundness Schermerhorn - Chapter 5

The Decision-Making Process Step 3: Choose Solution and Conduct Ethics Double Check Use evaluation matrix. Schermerhorn - Chapter 5

The Decision-Making Process Step 3: Choose Solution and Conduct Ethics Double Check Escalating commitment increase effort and resources to a course of action that is not working Satisficing (this is spelled correctly) Because of limited time you pick the first solution that seems to satisfy your needs. You don’t have time to look at every possible solution!) Schermerhorn - Chapter 5

The Decision-Making Process Step 4: Implement the Solution Establish appropriate action plans Implement with Programs, Operational, Budgets, and Schedules Plans For example: An Advertising Operational plan Budgeted at $1M , Scheduled to be complete in next six months Avoid lack-of-participation error (those affected by a plan (workers, customers, suppliers can be participants in plan. Schermerhorn - Chapter 5

Planning Tools and Techniques Participation and Involvement Participative planning requires that workers who will be affected should be included in the planning and/or implementation Schermerhorn - Chapter 5

Planning Tools and Techniques Use Benchmarking when you make plan and use benchmarks when you are controlling plans. Benchmarking is: use of external comparisons to better evaluate one’s current performance identify possible actions for the future incorporate successful ideas into one’s own organization Schermerhorn - Chapter 5

The Decision-Making Process Step 5: Evaluate Results Form of managerial control Easier if solution has measurable targets and timetables Examine positive and negative consequences Schermerhorn - Chapter 5

Planning Tools and Techniques Forecasting making assumptions about what will happen in the future ultimately relies on human judgment (your going to have to use experience and intuition and most useful quantitative methods as possible. Types of Forecasting qualitative quantitative Schermerhorn - Chapter 5

Planning Tools and Techniques Contingency Planning identifying alternative courses of action if and when original plan is inadequate Schermerhorn - Chapter 5

Planning Tools and Techniques Use of Scenarios identifying alternative future states of affairs plans made for each scenario increases organization’s flexibility Schermerhorn - Chapter 5