Copyright © Houghton Mifflin Company. All rights reserved. 6-1 Chapter 6 The Basics of Planning and Project Planning

Copyright © Houghton Mifflin Company. All rights reserved. 6-2 Chapter Outline Coping with Uncertainty u Three Types of Uncertainty u Organizational Responses to Uncertainty u Balancing Planned Action and Spontaneity in the 21st Century

Copyright © Houghton Mifflin Company. All rights reserved. 6-3 Chapter Outline (continued) The Essentials of Planning u Organizational Mission u Types of Planning u Objectives u Priorities u The Planning / Control Cycle

Copyright © Houghton Mifflin Company. All rights reserved. 6-4 Chapter Outline (continued) Management by Objectives and Project Planning u Management by Objectives u Project Planning

Copyright © Houghton Mifflin Company. All rights reserved. 6-5 Chapter Outline (continued) Graphic Planning / Scheduling / Control Tools u Sequencing with Flow Charts u Scheduling with Gantt Charts u PERT Networks

Copyright © Houghton Mifflin Company. All rights reserved. 6-6 Chapter Outline (continued) Break-even Analysis u Fixed Versus Variable Costs u The Algebraic Method u The Graphic Method u Break-even Analysis: Strengths and Limitations

Copyright © Houghton Mifflin Company. All rights reserved. 6-7 COPING WITH UNCERTAINTY Three Types of Uncertainty State uncertainty: the environment, or a portion of it, is unpredictable. (e.g., “Will it rain the day of our wedding?”)

Copyright © Houghton Mifflin Company. All rights reserved. 6-8 COPING WITH UNCERTAINTY (continued) Effect uncertainty: inability to predict the effects of specific environmental changes or events. (e.g., “Will our outdoor reception guests get disgusted and leave early if it rains?”)

Copyright © Houghton Mifflin Company. All rights reserved. 6-9 COPING WITH UNCERTAINTY (continued) Response uncertainty: being unable to predict the consequences of a particular decision or organizational response. (e.g., “Will our outdoor wedding reception still be fun if we decide to have it inside rented tents and it doesn’t rain?”)

Copyright © Houghton Mifflin Company. All rights reserved ORGANIZATIONAL RESPONSES TO UNCERTAINTY 1.Defenders: “Be very good at doing a few things.” 2.Prospectors: “Stay a step ahead of the competition.” 3.Analyzers: “Follow the leader.” 4.Reactors: “If it isn’t broken, don’t fix it.”

Copyright © Houghton Mifflin Company. All rights reserved ORGANIZATIONAL MISSION STATEMENTS A well-written mission statement should do these things: 1.Define your organization for key stakeholders. 2.Create an inspiring vision of what the organization can be and can do. 3.Outline how the vision is to be accomplished. 4.Establish key priorities.

Copyright © Houghton Mifflin Company. All rights reserved ORGANIZATIONAL MISSION STATEMENTS (continued) 5.State a common goal and foster a sense of togetherness. 6.Create a philosophical anchor point for all organizational activities. 7.Generate enthusiasm and a “can do” attitude. 8.Empower present and future organization members to believe every individual is a key to success.

Copyright © Houghton Mifflin Company. All rights reserved ORGANIZATIONAL MISSION STATEMENTS (continued) Individual or Team Exercise: Select an organization and write a mission statement for it.

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.1 Planning: The Primary Management Function

Copyright © Houghton Mifflin Company. All rights reserved TYPES OF PLANNING AND PLANNING HORIZONS Strategic Planning: process or determining how to pursue long-term goals with available resources. Intermediate planning: process of determining the contribution subunits can make with allocated resources. Operational planning: process of determining how specific tasks can best be accomplished on time with available resources.

Copyright © Houghton Mifflin Company. All rights reserved TYPES OF PLANNING AND PLANNING HORIZONS (continued) Planning horizon: the time that elapses between the formulation and the execution of a planned activity. u Strategic planning horizon = One to ten years u Intermediate planning horizon = Six months to two years u Operational planning horizon = One week to one year

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.2 Types of Planning

Copyright © Houghton Mifflin Company. All rights reserved EXERCISE: CAN YOU WRITE GOOD OBJECTIVES? A well-written objective satisfies these three criteria: 1.It tells exactly what the intended result is. 2.It specifies when the intended result is to be accomplished. 3.It tells how the intended result will be measured.

Copyright © Houghton Mifflin Company. All rights reserved EXERCISE: CAN YOU WRITE GOOD OBJECTIVES? (continued) Individual Exercise: Write three personal objectives that satisfy the three criteria. Team Exercise: Write three organizational objectives that satisfy the three criteria.

Copyright © Houghton Mifflin Company. All rights reserved WHY OBJECTIVES ARE IMPORTANT 1.They serve as targets. 2.They provide handy measuring sticks. 3.They generate individual commitment to collective results. 4.Challenging objectives motivate employees.

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.3 A Typical Means-Ends Chain of Objectives

Copyright © Houghton Mifflin Company. All rights reserved PRIORITIES Priorities: Ranking goals, objectives, or activities in order of importance. A priorities: “Must do” objectives critical to successful performance. B priorities: “Should do” objectives necessary for improved performance. C priorities: “Nice to do” objectives desirable for improved performance.

Copyright © Houghton Mifflin Company. All rights reserved PRIORITIES (continued) Exercise: Make a personal “To Do” list for the next week. Next, assign each item on your list an A, B, or C priority rating.

Copyright © Houghton Mifflin Company. All rights reserved THE MBO CYCLE Step 1: Setting objectives Step 2: Developing action plans Step 3: Periodic review Step 4: Performance appraisal

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.5 MBO’s Strengths and Limitations

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING Stages in the Project Life Cycle: u Conceptualization u Planning u Execution u Termination

Copyright © Houghton Mifflin Company. All rights reserved Source: Adapted in part from Figure 1.2 and discussion in Jeffrey K. Pinto and O.P. Kharbanda, Successful Project Managers: Leading Your Team to Success (New York: Van Nostrand Reinhold, 1995), pp Figure 6.6 The Project Life Cycle and Project Planning Activities

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING AND CONTROL Project Planning Activities: Conceptualization stage: u Develop overall project goals, budget, and schedule

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING AND CONTROL (continued) Planning Stage: u Acquire needed facilities and equipment u Acquire needed personnel and assign duties (goal setting) u Schedule and coordinate individual and team efforts

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING AND CONTROL (continued) Termination stage: u Turn project over to client u Identify new project opportunities

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING AND CONTROL (continued) Project Control Activities: Monitor progress and take corrective action. Project Success Criteria: 1.Satisfy client’s expectations 2.Complete project on time and under budget

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.4 The Basic Planning/Control Cycle

Copyright © Houghton Mifflin Company. All rights reserved PROJECT PLANNING GUIDELINES u Projects are schedule-driven and results- oriented u The big picture and the little details are of equal importance u Project planning is a necessity, not a luxury u Project managers know the motivational power of a deadline

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.7 A Sample Flow Chart

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.8 A Sample Gantt Chart

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.9 A Sample PERT Network

Copyright © Houghton Mifflin Company. All rights reserved BREAK-EVEN ANALYSIS (continued) The Algebraic Method: Relying on the following labels, FC = total fixed costs P = price (per unit) VC = variable costs (per unit) BEP = break-even point

Copyright © Houghton Mifflin Company. All rights reserved BREAK-EVEN ANALYSIS Break-even point: level of sales at which there is no loss or profit. Fixed costs: contractual costs that must be paid regardless of output or sales (e.g., rent, utilities, insurance). Variable costs: costs that vary directly with production and sales (e.g., labor, material, supplies).

Copyright © Houghton Mifflin Company. All rights reserved BREAK-EVEN ANALYSIS (continued) The formula for calculating break-even point (in units) is: BEP (in units) = FC P - VC

Copyright © Houghton Mifflin Company. All rights reserved Figure 6.10 Graphic Break-Even Analysis