Management, 7e Schermerhorn Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc

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Schermerhorn - Chapter 73 Chapter 7 Planning and Controlling  Planning ahead—study questions –How do managers plan? –What types of plans do managers use? –What are the useful planning tools and techniques? –What is the control process? –What control systems are used in organizations?

Schermerhorn - Chapter 74 How do managers plan?  Planning – The process of setting objectives and determining how to best accomplish them.  Objectives – Identify the specific results or desired outcomes that one intends to achieve.  Plan – A statement of action steps to be taken in order to accomplish the objectives.

Schermerhorn - Chapter 75 How do managers plan?  Steps in the planning process –Define your objectives –Determine where you stand vis-à-vis objectives –Develop premises regarding future conditions –Analyze and choose among action alternatives –Implement the plan and evaluate results

Schermerhorn - Chapter 76 How do managers plan?  Benefits of planning –Improves focus and flexibility –Improves action orientation –Improves coordination –Improves time management –Improves control

Schermerhorn - Chapter 77 What types of plans do managers use?  Short-range and long-range plans –Short-range plans = 1 year or less –Intermediate-range plans = 1 to 2 years –Long-range plans = 3 or more years  People vary in their capability to deal effectively with different time horizons.  Higher management levels focus on longer time horizons.

Schermerhorn - Chapter 78 What types of plans do managers use?  Strategic and operational plans –Strategic plans—address long-term needs and set comprehensive action directions for an organization or subunit. –Operational plans—define what needs to be done in specific areas to implement strategic plans and achieve strategic objectives. Production plans Financial plans Facilities plans Marketing plans Human resources plans

Schermerhorn - Chapter 79 What types of plans do managers use?  Policies and procedures –Standing plans Policies and procedures that are designed for repeated use. –Policy A broad guideline for making decisions and taking action in specific circumstances –Rules or procedures Plans that describe exactly what actions are to be taken in specific circumstances.

Schermerhorn - Chapter 710 What types of plans do managers use?  Budgets and project schedules – Single-use plans Only used once to meet the needs of a well-defined situation in a timely manner. –Budgets Single-use plans that commit resources to activities, projects, or programs. Fixed, flexible and zero-based budgets. –Project schedules Single-use plans that identify the activities required to accomplish a specific major project.

Schermerhorn - Chapter 711 What are the useful planning tools and techniques?  Forecasting –Making assumptions about what will happen in the future –A forecast is a vision of the future –Qualitative forecasting –Quantitative forecasting –All forecasts rely on human judgment

Schermerhorn - Chapter 712 What are the useful planning tools and techniques?  Contingency planning –Identifying alternative courses of action that can be used if and when original plan proves inadequate. –Early identification of possible shifts in future events. –Forward thinking … Using devil’s advocate method Developing worst case scenarios

Schermerhorn - Chapter 713 What are the useful planning tools and techniques?  Scenario planning –A long-term version of contingency planning –Identifying alternative future scenarios –Plans made for each future scenario –Increases organization’s flexibility and preparation for future shocks

Schermerhorn - Chapter 714 What are the useful planning tools and techniques?  Benchmarking –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 715 What are the useful planning tools and techniques?  Use of staff planners –Lead and coordinate the planning function –Responsibilities include: Assisting line managers in preparing plans. Developing special plans. Gathering and maintaining planning information. Assisting in communicating plans. Monitoring plans in progress and suggesting changes.

Schermerhorn - Chapter 716 What are the useful planning tools and techniques?  Participation and involvement –Participatory planning requires that the planning process include people who will be affected by the plans and/or will help implement them. –Benefits of participation and involvement: Promotes creativity in planning. Increases available information. Fosters understanding, acceptance, and commitment to the final plan.

Schermerhorn - Chapter 717 What is the control process?  Controlling – The process of measuring performance and taking action to ensure desired results. – Has a positive and necessary role in the management process. – Ensures that the right things happen, in the right way, at the right time.

Schermerhorn - Chapter 718 What is the control process?  Steps in the control process –Step 1—establish objectives and standards –Step 2—measure actual performance –Step 3—compare results with objectives and standards –Step 4—take corrective action as needed

Schermerhorn - Chapter 719 What is the control process?  Step 1—establishing objectives and standards –Output standards Measure performance results in terms of quantity, quality, cost, or time. –Input standards Measure effort in terms of amount of work expended in task performance.

Schermerhorn - Chapter 720 What is the control process?  Step 2—measuring actual performance –Goal is accurate measurement of actual results on output and/or input standards. –Effective control requires measurement.

Schermerhorn - Chapter 721 What is the control process?  Step 3—comparing results with objectives and standards – Control equation – Need for action reflects the difference between desired performance and actual performance

Schermerhorn - Chapter 722 What is the control process?  Step 3—comparing results with objectives and standards – Methods of comparing desired and actual performance Historical comparison Relative comparison Engineering comparison – Benchmarking using different comparison methods

Schermerhorn - Chapter 723 What is the control process?  Step 4—taking corrective action – Taking action when a discrepancy exists between desired and actual performance. –Management by exception Giving priority attention to situations showing the greatest need for action. Types of exceptions –Problem situation –Opportunity situation

Schermerhorn - Chapter 724 What is the control process?  Feedforward controls … – Employed before a work activity begins. –Ensures that: Objectives are clear. Proper directions are established. Right resources are available. –Focuses on quality of resources.

Schermerhorn - Chapter 725 What is the control process?  Concurrent controls … –Focus on what happens during work process. –Monitor ongoing operations to make sure they are being done according to plan. –Can reduce waste in unacceptable finished products or services.

Schermerhorn - Chapter 726 What is the control process?  Feedback controls … –Take place after work is completed. –Focus on quality of end results. –Provide useful information for improving future operations.

Schermerhorn - Chapter 727 What is the control process?  Internal and external control –Internal control Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations. –External control Occurs through personal supervision and the use of formal administrative systems.

Schermerhorn - Chapter 728 What control systems are used in organizations?  Compensation and benefits –Attractive and competitive base compensation results in … Attracting and keeping a qualified workforce Having capable, motivated workers who exercise self-control. –Unattractive and uncompetitive base compensation results in … Attracting a less qualified workforce. Greater need for external controls.

Schermerhorn - Chapter 729 What control systems are used in organizations?  Attracting and keeping qualified employees who exercise self-control can be helped or hindered by … –Merit pay incentives –Pay-for-performance incentives –Fringe benefits

Schermerhorn - Chapter 730 What control systems are used in organizations?  Employee discipline systems – Discipline is the act of influencing behavior through reprimand. –Progressive discipline ties reprimands to the severity and frequency of the employee’s infractions.

Schermerhorn - Chapter 731 What control systems are used in organizations?  To be effective, reprimands should … –Be immediate. –Be directed toward actions, not personality. –Be consistently applied. –Be informative. –Occur in a supportive setting. –Support realistic rules.

Schermerhorn - Chapter 732 What control systems are used in organizations?  Important financial aspects of organizational performance … –Liquidity The ability to generate cash to pay bills. –Leverage The ability to earn more in returns than the cost of debt. –Asset management The ability to use resources efficiently and operate at minimum cost. –Profitability The ability to earn revenues greater than costs.

Schermerhorn - Chapter 733 What control systems are used in organizations?  Purchasing control … –A productivity tool –Trends in purchasing control: Leveraging buying power Committing to a small number of suppliers Working together in supplier-purchaser partnerships

Schermerhorn - Chapter 734 What control systems are used in organizations?  Inventory control –Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost. –Methods of inventory control: Economic order quantity Just-in-time scheduling

Schermerhorn - Chapter 735 What control systems are used in organizations?  Statistical quality control –Quality control involves checking processes, materials, products, and services to ensure that they meet high standards. –Statistical quality control involves: Taking samples of work. Measuring quality in the samples. Determining the acceptability of results.

Schermerhorn - Chapter 736 What control systems are used in organizations?  Management by objectives (MBO) –A structured process of regular communication. –Supervisor/team leader and worker jointly set worker’s performance objectives. –Supervisor/team leader and worker jointly review results.

Schermerhorn - Chapter 737 What control systems are used in organizations?  MBO involves a formal agreement specifying … –Worker’s performance objectives for a specific time period. –Plans through which they will be accomplished. –Standards for measuring results. –Procedures for reviewing results.

Schermerhorn - Chapter 738 What control systems are used in organizations?  Types of MBO performance objectives –Improvement –Personal development –Maintenance  Criteria for effective performance objectives –Specific –Time defined –Challenging –Measurable

Schermerhorn - Chapter 739 What control systems are used in organizations?  Pitfalls to avoid in using MBO … –Tying MBO to pay. –Focusing too much attention on easily. quantifiable objectives. –Requiring excessive paperwork. –Having managers tell workers their objectives.

Schermerhorn - Chapter 740 What control systems are used in organizations?  Advantages of MBO –Focuses worker’s efforts on most important tasks and objectives. –Focuses supervisor’s efforts on important areas of support. –Contributes to relationship building. –Gives worker structured opportunity to participate in decision making.