Learning Objectives 6.1 Explain the importance of mission, vision, and value statement and how they set the foundation for the planning process. 6.2 Describe how objectives, goals, policies, and procedures relate to planning. 6.3 Compare and contrast the different types of plans– formal, functional, business level, standing, operational, and contingency. 6.4 Identify some of the tools available to managers to facilitate planning. 6.5 Understand how budgets are created and where they fit into the planning process.

What is Planning All about?

Planning includes anticipating trends and determining the best strategies and tactics to achieve goals and objectives.

Who is Responsible for Planning? First Level Managers – primarily responsible for short-term or tactical planning at the department or unit level. Mid-level Managers – responsible for business planning at the divisional level. Senior Level Managers – responsible for long-term or strategic planning at the organizational level.

Mission, Vision, and Value Statements

Vision - a statement of an organization’s ideal future, possibly 5 to 10 years out. Values - what an organization believes in and uses to guide its operational practices. Mission - a statement that clarifies the nature and purpose of a business.

Strategic Plan An organization’s strategic plan and corresponding strategy are developed utilizing internal input and external input. A strategic plan sets the foundation for how the company’s vision will be achieved and the mission fulfilled. It is important that tactical plans developed at the department or unit level support the strategic plan. When all plans are in alignment, and organization is more likely to fulfill its mission and achieve its goals.

How do goals, objectives, and policies relate to planning?

Goals - broad results which an organization strives to achieve Goals - broad results which an organization strives to achieve. Objectives - specific results ties to goals, which an organization strives to achieve. Policies - broad, general guides to action that constrain or direct the attainment of objectives.

Objectives Objectives outline what an organization wants to achieve; they provide managers with both direction and purpose. Multiple objectives should be used to reflect the desired performance of a given organizational unit or person. Objectives should be dynamic, as they should be reevaluated as the environment and opportunities change. Objectives fall into four general categories: Profit-oriented Service to customers Employee needs and well-being Social responsibility

Objectives – continued The following list outlines areas for establishing objectives in most organizations: Profitability – Measures the degree to which the firm is attaining an acceptable level of profits. Markets – Reflects the firm’s position in its marketplace. Productivity – Measures the efficiency of internal operations. Products – Describes the introduction or elimination of products or services. Financial Resources – Reflects goals related to the funding needs of the firm.

Objectives – continued Physical Facilities – Describes the physical facilities of the firm. Research and Innovation – Reflects the research, development, or innovation aspirations of the firm. Organization Structure – Describes objectives related to changes in the organizational structure and related activities. Human Resources – Describes the human resource assets of the organization. Social Responsibility – Refers to the commitments of the firm regarding society and the environment; expressed in terms of types of activities, number of days of service, of financial contributions.

Procedures and Standards Procedure – a series of related steps or tasks expressed in chronological order for a specific purpose. Standard – the measure, criterion, or basis for judging performance of a product or service, machine, individual or organizational unit.

Goals Goals managers set– or that are set for them, focus on performance, as defined by departmental output, quality of workmanship, and allowable expenditures. Goals may be stated in terms of a day, a week, a month, or a year. Short-range plans are based on one year or less, while long-range plans are based on three years or more. Effective goals and the objectives that define them should possess the five attributes characterized by the acronym SMART.

What are SMART Goals?

SMART Goals Specific – Goals should be clearly stated in terms or numbers that make their achievement concrete and detailed. Measurable – Goals should focus clearly on measurable outcomes with quantifiable ways to assess them. Attainable – It makes no sense to set impossible goals; they should be attainable. Relevant – The best goals are directly connected to the organization’s mission and strategy. Time-oriented – The outcome should always be related to a specific target date or time period.

Benefits of Goal-Setting Stimulates employees to take a greater interest in their job assignments. Heightens an employees feeling of effectiveness. Diverts energies away from less relevant activities. Motivates employees Significant goal achievement by employees can result in job promotions and higher pay.

Pitfalls of Goal-Setting The following pitfalls in goal-setting exist: Framing a goal as a threat. Discouraging risk-taking and creative efforts. Inadvertently stimulating competitive conflict between employees. Increasing the stress on employees to dangerous levels. Telling employees to downplay or ignore job domains for which goals have not been set. Not requiring a plan of action for how a goal is to be achieved. Imposing too many goals or preparing them in areas over which employees have little or no control.

The Planning Process

The Benefits of Planning Systematic planning benefits an organization by: Anticipating environmental uncertainty and preparing for it. Focusing on the most important things to accomplish. Creating a performance oriented culture that gets results. Allocating human and material resources wisely. Responding to new opportunities as they arise. Coordinating activities across departments and people. Setting the stage for the key process of control.

Planning Constraints All plans are subject to constraints or limitations. The most common constraints include: Scope – considers the size or breadth of a plan by defining the specific work that must be done. Resources – includes time, money, personnel, and services, as well as physical resources such as buildings, equipment, and materials. Organizational Policies – considers policies that the organization, equipment manufacturers, and the government have in place to protect employees and equipment.

Types of Plans Formal Plans – a written documented plan developed through an identifiable process. Functional Plans – plans that originate from the functional areas of an organization, such as production, marketing, finance, and personnel. Business Level Plans – plans made by mid-level managers that involve goal setting at the divisional level. Standing Plans – plans used for activities that do not change appreciably from year to year. Single-use Plans – plans that are used only once before they must be revised. Operational plans – plans that facilitate the achievement of tactical objectives through the use of work standards and schedules. Contingency Plans – alternative plans that can be implemented if a primary plan does not meets its objectives.

Steps to the Planning Process Develop a master plan – This should focus on the main objective. Draw up supporting plans – This requires that managers think about how each activity in a department can contribute to the master plan. Put numbers and dates on everything – Plans work best when employees know how much or how many are required of them. Pin down assignments – Responsibility for carrying out each part of a plan or procedure should be assigned to a particular individual or team. Explain the plan to all concerned – Plans should be shared. Review plans regularly – Plans should be examined periodically to see whether they should be revised.

Steps to Evaluating a Plan By using a six-point planning checklist to evaluate a plan, a manager can verify that they have addressed all facets that comprise a comprehensive plan. What is to be done? Why is to be done? Where is the activity to be performed? How is the activity to be performed? Who is to perform the work?

Planning Tools

There are a number of tools available to facilitate various phases of the planning process, which include: Analytical Tools Organizational Tools Communication Tools Resource Management Tools

Analytical Tools These tools facilitate the gathering of data critical to planning, decision making and goal setting. Needs Assessment – a systematic process for analyzing and determining needs or gaps between current and desired conditions. SWOT Analysis – an acronym for strengths, weaknesses, opportunities, and threats. Business managers evaluate the performance of their department or the entire company using a SWOT analysis. Pest Analysis – an analysis that focuses solely on external, macro environment factors that should be taken into account when developing a strategic plan and strategy. Porter’s Five Forces Model – a model for analyzing the competitive forces within the environment in which a company operates to assess the risk of competition and potential for profitability.

Organizational Tools These tools help managers to organize people, tasks, and contact information, while tracking the progress of a plan. Project Plan – a formal, written, and approved document that manages and controls the execution of a project. PERT Chart – a graphical network model that depicts a project’s tasks and the relationships between those tasks. Gantt Chart – a simple bar chart that depicts project tasks against a calendar.

Communication Tools Regular meetings with stakeholders of a plan are essential to ensure participants are clear about their roles and responsibilities, and kept up-to-date on a plan in progress. Regular meetings should be held live, with follow-up reports put in writing and delivered on a timely basis. Each meeting should have an agenda and a start and end time which is strictly observed. Meetings provide the opportunity to set standards for performance and reiterate due dates and deliverables. Meetings help to build camaraderie amongst a team and instill a commitment to keeping a plan on-time and on-budget.

Resource Management Tools Budget Possibly the most important resource management tools used in planning. It is a quantitative projection of an organization’s activities for a specific period of time. Budgets are used for two distinct purposes: Planning – in planning a budget is prepared to allocate resources toward achieving a specific goal. Controlling – in controlling a budget provides a method for measuring performance and making comparisons to other departments or previous years results.

Budgeting

Manager’s Role in Budgeting First level managers are traditionally assigned responsibility for creating operating budgets. Operating Budgets – include sales and costs budgets which forecast sales and distribute costs over the organizational activities that a manager is accountable for. Manager are evaluated on their ability to stay within budget and to make the best use of resources. Bonuses are often awarded to managers who meet or exceed budget projections.

How are Budgets Created?

Two popular approaches to creating budgets include: Zero based Budgeting – budgeting that starts from zero in projecting resource needs for a budget period. Incremental Budgeting – budgeting that relies on results from a prior periods as a reference and increases or decreases them based on internal and external conditions.

What is a Master Budget?

Master Budget – a number of separate but interdependent budgets that formally lay out the company’s sales, products, and financial goals. Two key parts of the master budget are: Sales Budget – A detailed schedule showing the expected sales for a budget period. Cash Budget – A detailed plan showing how cash resources will be acquired and used.