Management A Practical Introduction Third Edition Angelo Kinicki & Brian K. Williams

The Foundation of Successful Management Chapter 5: Planning The Foundation of Successful Management Planning & Uncertainty Fundamentals of Planning The Planning/Control Cycle Management by Objectives Project Planning The Manager’s Toolbox: How Do Exceptional Managers Make Their Own Luck? Summary: Planning ahead can help managers minimize risk. Managers can improve their chances of success by making lists and considering motives—this can help the manager avoid making impulsive, and perhaps costly decisions. Managers can also cultivate optimism and confidence—they shouldn’t expect the worst in every situation. Finally, managers need to ask for help—if the manager can’t figure out why bad things always happen, it is time to talk to a counselor. For Discussion: Do you have any patterns of bad luck? Why do you think they occurred? Can you think of way that you could have avoided them?

5.1 Planning & Uncertainty HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY? Planning: defined as setting goals and deciding how to achieve them Another definition: Planning is coping with uncertainty by formulating future courses of action to achieve specified results. Lecture Note: it can be worthwhile to think of planning from the perspective of different type of organizations. For example, how might planning in a start-up differ from planning in a large, well-established multinational company? Are there any similarities?

5.1 Planning & Uncertainty HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY? Planning is used together with strategic management and evolves from the company’s mission and vision Planning covers strategic planning (done by top managers, tactical planning (done by middle managers), and operational planning (done by first-line managers) Lecture Note: it can be worthwhile to think of planning from the perspective of different type of organizations. For example, how might planning in a start-up differ from planning in a large, well-established multinational company? Are there any similarities?

5.1 Planning & Uncertainty Figure 5.1: Planning and Strategic Management

5.1 Planning & Uncertainty WHY NOT PLAN? Managers need to be cautious when planning for two reasons: 1. Planning requires managers to set aside their regular responsibilities to develop plans 2. Managers need to be flexible enough to react to new events because there may not always be enough time to plan

5.1 Planning & Uncertainty HOW DOES PLANNING HELP? There are four main benefits of planning: 1. Organizations can use plans to check their progress toward their goals 2. Plans define the responsibilities of a firm’s departments and coordinates their activities 3. Planning requires managers to consider what may happen in the future 4. Planning for unpleasant contingencies helps managers deal with uncertainty

Why not plan? Planning requires you to set aside time to do it Most managers are time-starved Hard to set aside time to plan You may have to make some decisions without a lot of time to plan Even in today’s computer age, you may not have time to plan a decision Plan need not be perfect to be executable McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Benefits of Planning Planning helps you check on your progress Planning helps you coordinate activities Planning helps you think ahead Above all, planning helps you cope with uncertainty McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5.1 Planning & Uncertainty There are three types of uncertainty: 1. State Uncertainty 2. Effect Uncertainty 3. Response Uncertainty

“What possible harmful event could occur?” Three Types of Uncertainty “What possible harmful event could occur?” State Uncertainty: when the environment is considered unpredictable. Example: the uncertainty regarding the weather McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Three Types of Uncertainty “What possible harmful impact might an environmental change have?” Effect Uncertainty: when the effects of environmental changes are unpredictable. Example: losing the trail in a snowstorm and risking hypothermia. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Three Types of Uncertainty “What possible harmful consequence might a decision have?” Response Uncertainty: when the consequences of a decision are uncertain. Example: you might have a cell phone in a snowstorm, but someone has to receive the call. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM A firm that is analyzing what possible harmful event could occur is looking at A) response uncertainty B) effect uncertainty C) defense uncertainty D) state uncertainty The answer is D.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM A firm that is analyzing what possible harmful event could occur is looking at A) response uncertainty B) effect uncertainty C) defense uncertainty D) state uncertainty The answer is D.

5.1 Planning & Uncertainty Raymond E. Miles and Charles C. Snow suggested that firms will adopt one of four strategies to respond to uncertainty: Defenders Prospectors Analyzers Reactors

Responding to Uncertainty Defenders: are expert at producing and selling narrowly defined products and services. Analyzers: let the other organizations take the risks of product development and marketing and then imitate what seems to work best. Prospectors: focus on developing new markets or services and in seeking out new markets rather than waiting for things to happen. Reactors: make adjustments only when finally forced to by environmental pressures. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5.1 Planning & Uncertainty Miles and Snow also argued that firms continuously make decisions about three kinds of business problems: 1. entrepreneurial - selecting and making adjustments of products and markets 2. engineering - producing and delivering the products 3. administrative - establishing roles, relationships, and organizational processes

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM Organizations that devote most of their time to refining their existing operations are A) defenders B) prospectors C) analyzers D) reactors The answer is A.

5.2 Fundamentals Of Planning WHAT IS INVOLVED WITH PLANNING? Planning translates an organization’s mission (purpose or reason for being) into objectives The mission statement answers the question “what is our reason for being?” The vision statement answers the questions “what do we want to become where do we want to go strategically?” Planning begins with the mission statement

Mission Statement Outline of the fundamental purposes of the organization Should address: Organization’s self-concept Company philosophy and goals Long-term survival Customer needs Social responsibility Nature of company’s product or service McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The World Bank’s Mission In the last chapter, we learned about the World Bank. Go to http://web.worldbank.org Explore the “about us” section What is the World Bank’s mission? Does this mission statement meet the criterion laid out in this chapter? McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5.2 Fundamentals Of Planning Figure 5.2: Making Plans

5.2 Fundamentals Of Planning Having clearly defined mission and vision statements allows three things to happen: 1. strategic planning by top management where long-term goals are determined and available resources are identified 2. tactical planning by middle management where contributions their departments or similar work units can make are determined 3. operational planning by first-line managers where how specific tasks will be accomplished using available resources is determined

Types of Planning Strategic planning: top managers decide what the organization’s long-term goals should be for the next 1-5 years with the resources they expect to have available. Tactical planning: middle managers decide what contributions their departments or similar work units can make with their given resources during the next 6-24 months. Operational planning: first-line managers determine how to accomplish specific tasks with available resources within the next 1-52 weeks. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5.2 Fundamentals Of Planning Figure 5.3: Three Levels of Management, Three Types of Planning

5.2 Fundamentals Of Planning The purpose of planning is to set goals and then formulate action plans Specific commitments to achieve a measurable result within a stated period of time are known as goals or objectives Goals are put in a means-end chain where the achievement of objectives is the means to achieve goals or ends Lecture Note: It can be useful to ask students to think about goal setting in terms of their own studies---what are their goals, when should they be accomplished, how should they be accomplished, etc.

Types of Goals Strategic Goals: are set by and for top management and focus on objectives for the organization as a whole. Tactical Goals: are set by and for middle managers and focus on the actions needed to achieve strategic goals. Operational Goals: are set by and for first-line managers and are concerned with short-tem matters associated with realizing tactical goals. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM Goals set by top management that focus on objectives for the organization as a whole are A) tactical goals B) operational goals C) strategic goals D) organizational goals The answer is C.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM Goals set by top management that focus on objectives for the organization as a whole are A) tactical goals B) operational goals C) strategic goals D) organizational goals The answer is C.

5.2 Fundamentals Of Planning Once goals are set, the firm makes an action plan which defines the course of action needed to achieve stated goals An operating plan defines how the firm will conduct business based on the action plan - it identifies clear targets such as revenues, cash flow, and market share Plans developed for activities that occur repeatedly over a period of time are called standing plans Standing plans consist of policies (a standing plan that outlines the general response to a designated problem or situation), procedures (a standing plan that outlines the response to a particular problem or circumstance), and rules (a standing plan that designates specific required action)

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM “No smoking anywhere in the building” is an example of a A) policy B) procedure C) rule D) request The answer is c.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM “No smoking anywhere in the building” is an example of a A) policy B) procedure C) rule D) request The answer is c.

5.2 Fundamentals Of Planning Plans developed for activities that are not likely to be repeated in the future are called single-use plans Single-use plans can be either programs (encompass a range of projects or activities) or projects (have less scope and complexity than a program)

5.2 Fundamentals Of Planning WHAT ARE SMART GOALS? Good goals are SMART: they should be stated in specific terms they should be measurable or quantifiable they should be challenging but attainable they should be results-oriented and support the organization’s vision they should specify target dates by which they should be accomplished

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM Good goals should have all of the following characteristics except A) results-oriented B) target date C) supportive D) attainable The answer is C.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM Good goals should have all of the following characteristics except A) results-oriented B) target date C) supportive D) attainable The answer is C.

5.3 The Planning/Control Cycle WHY HAVE PLANNING AND CONTROL? Once an organization has a plan, it needs to make sure it stays on track The planning/control cycle has two planning steps, and two control steps: planning steps: make the plan, and carry out the plan control steps: control the direction by comparing results with the plan, and control the direction by taking corrective actions

Figure 5.5: The Planning/Control Cycle Chapter 5: Planning Figure 5.5: The Planning/Control Cycle

5.4 Promoting Goal Setting: Management By Objectives HOW CAN MANAGERS PROMOTE GOAL SETTING? Peter Drucker developed a system called Management by Objectives (MBO) designed to motivate employees to achieve goals MBO has four steps: 1. Managers and employees jointly set objectives for the employee Goals should include improvement objectives, personal development objectives, and maintenance objectives

5.4 Promoting Goal Setting: Management By Objectives 2. Managers develop action plans Action plans should be developed at each level describing how goals will be attained 3. Managers and employees periodically review the employee’s performance Formal and informal meetings are used to review progress and provide feedback 4. The manager makes a performance appraisal and rewards the employee according to the results Performance that meets objectives should be rewarded, and poor performance should be addressed

5.4 Promoting Goal Setting: Management By Objectives If MBO is to be successful, three things must occur: 1. Top management must be committed Commitment translates to productivity gains 2. It must be applied organization-wide To be successful, MBO must be applied in all divisions and departments 3. Objectives must cascade MBO works by cascading objectives down through the organization

Three Types of Objectives Used in MBO Improvement objectives: Increase sport utility sales by 10% Personal development objectives: attend five days of leadership training Maintenance objectives: continue to meet the increased sales goals specified last quarter McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5.5 Project Planning WHAT IS PROJECT PLANNING? The preparation of single-use plans or projects is called project planning Project management involves achieving a set of goals through planning, scheduling, and maintaining progress of the activities that comprise the project Project planning reduces the risk of uncertainty and speeds up the process of getting things done Practical Action: Detail Thinkers versus Strategic Thinkers: Are You One or the Other? This Practical Action explores how managers can see things very differently. Some managers are big picture people, while others focus more on the details. When the two management types work together, it is important to try to strike a balance between the two perspectives by using visuals to focus discussion, considering implementation issues, and having mutual respect.

Why Project Planning Is Important Today Preparation of single-use plans or projects, followed by… Project Management Achieving a set of goals through planning, scheduling, and maintaining progress of the activities that comprise the project Fastest way of getting things done Works outside usual chain of command Brings people with different skills together on a temporary basis McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Figure 5.6: The Project Life Cycle 5.5 Project Planning Figure 5.6: The Project Life Cycle

5.5 Project Planning All projects go through a life cycle: 1. In the definition stage, the problem is stated, assumptions and risks are identified, goals and objectives are determined, and the budget and schedule are set 2. In the planning stage, facilities and equipment are identified, people and their duties are selected, and the schedule is considered 3. During the execution stage, the management style and control tools are established 4. Closing occurs when the client accepts the project

The Project Life Cycle: The Predictable Evolution of a Project Definition State the problem and identify goals and objectives Planning Identify resources needed and schedule of activities required Execution Actual work stage On time and under budget Closing Client accepts project McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5: Planning CLASSROOM PERFORMANCE SYSTEM At what stage in the project life cycle is the budget determined? A) definition B) planning C) execution D) closing The answer is A.

5.5 Project Planning WHY IS PROJECT PLANNING IMPORTANT? Deadlines are an essential component in the project planning process Deadlines help keep managers on track and provide feedback