1. Chapter 4 ©2001 South-Western College Publishing Pamela S. Lewis Stephen H. Goodman Patricia M. Fandt Slides Prepared by Bruce R. Barringer University of Central Florida Pamela S. Lewis Stephen H. Goodman Patricia M. Fandt Slides Prepared by Bruce R. Barringer University of Central Florida Planning in the Contemporary Organization

2. Transparency 4-2 © 2001 South-Western Publishing Learning Objectives Slide 1 of 3 1.Describe the managerial function of planning and explain why managers should plan. 2.Discuss three approaches for initiating the planning process. 3.Define strategic planning and describe the three levels of strategic planning.

3. Transparency 4-3 © 2001 South-Western Publishing Learning Objectives Slide 2 of 3 4.Define operational planning and distinguish between standing and single-use plans. 5.Describe a management-by-objectives program and discuss the advantages and disadvantages of this system of planning. 6.Define contingency planning and identify the circumstances under which contingency planning would be appropriate.

4. Transparency 4-4 © 2001 South-Western Publishing Learning Objectives Slide 3 of 3 7.Discuss how advances in information technology have affected the planning process. 8.Describe the common barriers to effective planning and explain ways to reduce these barriers. 9.Discuss how tomorrow’s managers can achieve success through planning.

5. Transparency 4-5 © 2001 South-Western Publishing Planning Defined The process of outlining the activities that are necessary to achieve the goals of the organization.

6. Transparency 4-6 © 2001 South-Western Publishing Purpose of Planning The purpose of planning is simple - to ensure that the organization is both effective and efficient in its activities.

7. Transparency 4-7 © 2001 South-Western Publishing Planning as a Linking Mechanism Goals Control Plans Relationship among goals, plans, and controls

8. Transparency 4-8 © 2001 South-Western Publishing Benefits of Planning Slide 1 of 5 Better Coordination –Planning provides a foundation for the coordination of a broad range of organizational activities. –A plan helps to define the responsibilities of individuals and work groups and helps coordinate their activities.

9. Transparency 4-9 © 2001 South-Western Publishing Benefits of Planning Slide 2 of 5 Focus on Forward Thinking –The planning function forces managers to think ahead and consider resource needs and potential opportunities or threats that the organization may face in the future.

10. Transparency 4-10 © 2001 South-Western Publishing Benefits of Planning Slide 3 of 5 Participatory Work Environment –Successful planning requires the participation of a wide range of organizational members. This creates a more participatory work environment.

11. Transparency 4-11 © 2001 South-Western Publishing Benefits of Planning Slide 4 of 5 A participatory work environment is good for two reasons: The organization benefits by having access to a broad base of experience and knowledge in the planning process. The organization benefits by having access to a broad base of experience and knowledge in the planning process. Organizational members are more likely to “buy in” to a plan that they have helped develop. Organizational members are more likely to “buy in” to a plan that they have helped develop.

12. Transparency 4-12 © 2001 South-Western Publishing Benefits of Planning Slide 5 of 5 More Effective Control System –An organization’s plan provides a foundation for control. A plan provides a mechanism for ensuring that the organization is moving in the right direction and making progress toward achieving its goals.

13. Transparency 4-13 © 2001 South-Western Publishing Costs of Planning Slide 1 of 2 Managerial Time –Done properly, the planning process requires a substantial amount of managerial time and energy.

14. Transparency 4-14 © 2001 South-Western Publishing Costs of Planning Slide 2 of 2 Delay in Decision Making –Planning can result in delays in decision making, which must be weighed against the importance of speed in response time.

15. Transparency 4-15 © 2001 South-Western Publishing Weighing the Benefits Against the Costs of Planning In the final analysis, managers plan because planning leads to higher performance. Planning also helps managers cope with the many complex situations they face.

16. Transparency 4-16 © 2001 South-Western Publishing Where Does Planning Start? Slide 1 of 3 Top-Down Vs. Bottom-Up Planning Top-Down Planning Planning efforts begin with the board of directors and top executives of the firm. Bottom-Up Planning Planning is initiated at the lowest level in the organization.

17. Transparency 4-17 © 2001 South-Western Publishing Where Does Planning Start? Slide 2 of 3 Top-Down Planning –The advantage is that the top managers, who are the most knowledgeable about the firm as a whole, drive the development of the plan. Bottom-Up Planning –The primary advantage is that the people closest to the operating system, customers, and suppliers drive the development of the plan.

18. Transparency 4-18 © 2001 South-Western Publishing Which Approach is Better - Top-Down or Bottom-Up? –Top-down planning works best when success is dependent upon the ability to make high-level organizational changes in response to general threats and pressures. –A bottom-up approach works best when success is dependent upon sensitivity to customer needs and demands. Where Does Planning Start? Slide 3 of 3

19. Transparency 4-19 © 2001 South-Western Publishing Strategic Versus Operational Planning In general, most organizations engage in both strategic and operational planning. Although strategic and operational planning differ in a number of ways, they are also interrelated.

20. Transparency 4-20 © 2001 South-Western Publishing Strategic Planning –Is the process by which an organization makes decisions and takes actions that affect its long- run performance. –A strategic plan is the output of the strategic planning process. Strategic plans define both the markets in which the firm competes and the ways in which it competes in those markets. Slide 1 of 7

21. Transparency 4-21 © 2001 South-Western Publishing Strategic Planning Slide 2 of 7 The purpose of strategic planning is to move the organization from where it is to where it wants to be. TodayVision for the Future

22. Transparency 4-22 © 2001 South-Western Publishing Strategic Planning Slide 3 of 7 Levels of strategic planning and their focus: CorporateBusiness Defines how each of the firm’s business units will operate in its market arena. Addresses the question, “What business should we be in?” Functional Specifies the specific activities necessary to implement the firm’s corporate and business strategies.

23. Transparency 4-23 © 2001 South-Western Publishing Strategic Planning Slide 4 of 7 Levels of strategic planning and their participants: CorporateBusinessFunctional Board of directors and top-level executives Top-level executives and managers within the business unit Middle-level managers and lower-level managers

24. Transparency 4-24 © 2001 South-Western Publishing Strategic Planning Slide 5 of 7 Levels of strategic planning, the specificity of their strategies, and their time horizons: CorporateBusinessFunctional Broad strategies 5-10 year time horizon More specific strategies than the corporate level 1-5 year time horizon Very specific strategies 1-2 year time horizon

25. Transparency 4-25 © 2001 South-Western Publishing Strategic Planning Slide 6 of 7 Functional Strategic Planning –Functional strategic planning leads to the development of functional strategy. Functional strategy specifies the operations, R&D, financial, human resource management, and marketing activities necessary to implement the organization’s corporate and business strategies.

26. Transparency 4-26 © 2001 South-Western Publishing Strategic Planning Slide 7 of 7 Customizing the Strategic Planning Process –In general, a successful planning process must fit the organization's focus on creating value for its customers and its shareholders. –In other words, it must be customized for the organization based on its specific and unique needs.

27. Transparency 4-27 © 2001 South-Western Publishing Operational Planning –Focuses on determining the day-to-day activities that are necessary to achieve the long- term goals of the organization. –Operational plans Are more specific than strategic plans, address shorter-term issues, and are formulated by the mid- and lower-level managers who are responsible for the work groups in the organization. Operational plans can be categorized as standing or single-use plans.

28. Transparency 4-28 © 2001 South-Western Publishing Standing Plans –Are designed to deal with organizational issues or problems that recur frequently. –Standing plans include policies, procedures, and rules: Policies - general guidelines that govern how certain organizational situations will be addressed. Procedures - are more specific and are designed to give explicit instructions on how to complete a recurring task. Rules - provide detailed and specific guidelines for action.

29. Transparency 4-29 © 2001 South-Western Publishing Single-Use Plans Slide 1 of 2 Single-Use Plans –Are developed to address a specific organizational situation. –Single-use plans include programs, projects, and budgets: Programs - govern a relatively comprehensive set of activities that are designed to accomplish a particular set of goals. Projects - direct the efforts of individuals or work groups toward the achievement of specific, well- defined objectives.

30. Transparency 4-30 © 2001 South-Western Publishing Single-Use Plans Slide 2 of 2 Single-Use Plans –Budgets - specify how financial resources should be allocated.

31. Transparency 4-31 © 2001 South-Western Publishing Management by Objectives Slide 1 of 4 A method for developing individualized plans which guide the activities of individual members of an organization.

32. Transparency 4-32 © 2001 South-Western Publishing Management by Objectives Slide 2 of 4 Benefits of Management by Objectives: –Provides a foundation for a more integrated and system-oriented approach to planning. –Requires communication between employees and their managers since they must agree on the performance goals outlined in the plan. –Creates a participatory work environment where employees have a voice in how their jobs are designed and what their performance targets should be.

33. Transparency 4-33 © 2001 South-Western Publishing Management by Objectives Slide 3 of 4 Disadvantages of Management by Objectives: –Requires time and commitment of top management. –May require excessive paperwork. –May create a tendency to focus on short-term vs. long-term planning. –Can be difficult to establish and operationalize.

34. Transparency 4-34 © 2001 South-Western Publishing Management by Objectives Slide 4 of 4 Preparation of next period’s objectives by employees Action planning and job performance by employee Mutual setting of objectives by employee and supervisor Mutual agreement on criteria for measuring accomplishment of objectives Intermittent review of ongoing performance as needed End-of-period review by employee and supervisor

35. Transparency 4-35 © 2001 South-Western Publishing Contingency Planning Slide 1 of 2 Contingency planning requires the development of two or more plans, each of which is based on a different set of strategic or operating conditions that could occur.

36. Transparency 4-36 © 2001 South-Western Publishing Contingency Planning Slide 2 of 2 When is Contingency Planning Needed? –Contingency planning is necessary in business environments that change rapidly and in unpredictable ways. –Contingency planning is useful when a firm’s effectiveness is dependent on a particular set of business conditions.

37. Transparency 4-37 © 2001 South-Western Publishing Demands on the Manager’s Time Ambiguous and Uncertain Operating Environments Resistance to Change Barriers to Effective Planning

38. Transparency 4-38 © 2001 South-Western Publishing Overcoming the Barriers to Planning Involve Employees in Decision Making –Input from all levels of a firm is essential for successful planning. Tolerate a Diversity of Views –Diverse views lead to a broader assessment of organizational problems and opportunities. Encourage Strategic Thinking –Effective strategic thinking can be developed through training and practice.

39. Transparency 4-39 © 2001 South-Western Publishing Precursors of Effective Planning Slide 1 of 2 Recognize and communicate the importance of planning in achieving organizational success. Understand and appreciate the relationship between strategic and operational planning. Involve those responsible for implementing the plan in the planning process.

40. Transparency 4-40 © 2001 South-Western Publishing Precursors of Effective Planning Slide 2 of 2 Look to contingency planning as a means of maintaining flexibility in rapidly changing business environments. Utilize technology to enhance the effectiveness and efficiency of the planning process. Remove the barrier to planning at the work group and individual levels. Reward those who think strategically and follow through with operational planning.