Chapter 7 FOUNDATIONS OF PLANNING Prentice Hall 2002

Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 2002 7 -1 7 1

Learning Objectives You should learn to: 1. 2. 3. 4. Define planning Explain why managers plan Describe what role goals play in planning Distinguish among the different types of plans 5. Tell how goals are established 6. Describe the characteristics of well-designed goals © Prentice Hall, 2002 7 -2 7 2

Learning Objectives (cont. ) You should learn to: 1. 2. 3. 4. Identify three contingency factors in planning Explain the approaches to developing plans Discuss the criticisms of planning Describe what it takes to effectively plan in a dynamic environment © Prentice Hall, 2002 7 -3 7 3

Homework Answer the questions on chapters, 2 and 7. Three weeks from today. Research. Write an operational plan to company institute. Try to be practical not theoretical. Go and visit the company you would conduct the plan to. © Prentice Hall, 2002 7 4

Case study In 2003 it was announced that British Airways (BA) would install 190 IBM self service kiosks at Heathrow Airport and all British Airways destination airports across Europe. The Kiosks are designed to make check in faster and more convenient, whilst optimizing space at airports. Customers can use the touch sensitive screens to check in, select seats and ask for upgrades without having to queue at desks. The new system was expected to reduce check in queues, providing a major boost to the volume of passengers that BA could handle at peak times. This was part of transportation strategy that BA could handle at peak times. The new strategy will change how customers do business with the Airline. BA expected to achieve 50% self service check in by 2005. the new service would improve customer service and high efficiency. 1 - Explain the objectives that BA may have had in its transportation strategy? 2 - what is the strategy used by BA? © Prentice Hall, 2002 7 5

What Is Planning? Planning involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work • informal planning - nothing is written down • little or no sharing of goals • general and lacking in continuity • Exist in small and large businesses. • formal planning – written • defines specific goals • specific action programs exist to achieve goals © Prentice Hall, 2002 7 -6 7 6

Why Do Managers Plan? Purposes of Planning 1. planning is the primary management function that establishes the basis for all other management functions 2. planning establishes coordinated effort 3. planning reduces uncertainty 4. planning reduces overlapping and wasteful activities 5. planning establishes goals and standards used in controlling © Prentice Hall, 2002 7 -7 7 7

Why Do Managers Plan? (cont. ) Planning and Performance • formal planning is associated with: 1. higher profits 2. higher return on assets • quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning • external environment may undermine the effects of formal planning • planning/performance relationship is influenced by the planning time frame. It takes at least 4 years before performance is impacted. © Prentice Hall, 2002 7 -8 7 8

How Do Managers Plan? Planning is called the primary management function. Why? The Role of Goals and Plans in Planning • goals - desired outcomes 1. provide direction for all management decisions 2. represent the criteria against which actual work accomplishments can be measured • plans - outline how goals are going to be met • Types of Goals • all organizations have multiple objectives • no single measure can evaluate whether an organization is successful • financial goals - relate to financial performance • strategic goals - relate to other areas of performance © Prentice Hall, 2002 7 -9 7 9

Stated Objectives From Large US Companies © Prentice Hall, 2002 7 -10 7 1

Group work Write down some of the university goals? © Prentice Hall, 2002 7 1

How Do Managers Plan? (cont. ) The Role of Goals and Plans in Planning (cont. ) • Types of Goals (cont. ) 1. stated goals - official statements of the organization’s goals. They reflect what society (stakeholders) believes organization should do. 2. Ex. Growing our customer base, building market leadership, increasing profitability. These quite irrelevant and vague. 3. 2. real goals - those goals that an organization actually pursues. Ex. Limiting class size. © Prentice Hall, 2002 7 -12 7 1

How Do Managers Plan? (cont. ) The Role of Goals and Plans in Planning (cont. ) Types of Plans First: by breadth: 1. strategic plans - apply to the entire organization • establish organization’s overall goals • seek to position the organization in terms of its environment. • Covers a longer time frame. 2. operational plans - specify the details of how the overall goals are to be achieved – tend to cover short time periods – Short-term 1 year or less. © Prentice Hall, 2002 7 -13 7 1

Types Of Plans Breadth Time Frame Specificity Frequency of Use Strategic Operational Long term Short term Directional Specific Single use Standing © Prentice Hall, 2002 7 -14 7 1

How Do Managers Plan? (cont. ) The Role of Goals and Plans in Planning (cont. ) Types of Plans (cont. ) Second: by time frame: long-term plans - time frame beyond three years. Definition of long term has changed with increasingly uncertain organizational environments. short-term plans - cover one year or less. Third: by specificity: specific plans - clearly defined with little room for interpretation. Required clarity and predictability often do not exist, because of environment dynamic. Ex. (setting a plan with specific objective, procedures, budgets and time frame. directional plans - flexible plans that set out general guidelines provide focus without limiting courses of action. It is flexible to respond to unexpected change. © Prentice Hall, 2002 7 -15 7 1

Specific Versus Directional Plans © Prentice Hall, 2002 7 -16 7 1

How Do Managers Plan? (cont. ) The Role of Goals and Plans in Planning (cont. ) Types of Plans (cont. ) Fourth: by frequency of use: single-use plans - one-time plans specifically designed to meet the needs of a unique situation. Ex. Setting a plan to introduce a new service. standing plans - ongoing plans that provide guidance for activities performed repeatedly • include policies, procedures, and rules © Prentice Hall, 2002 7 -17 7 1

How Do Managers Plan? (cont. ) Establishing Goals • Approaches to Establishing Goals • traditional goal setting - overall goals established at the top of the organization. overall goals are broken down into subgoals for each level of the organization. • higher-level goals must be made more specific at lower levels. • network of goals creates a means-ends chain. • Sub-goals constrain subordinates’ behavior. • assumes that top managers know what is best for the organization • Achieving the goals at a low level becomes the means to reach the goals at the next level. © Prentice Hall, 2002 7 -18 7 1

Traditional Objective Setting Top Management’s Objective Division Manager’s Objective Department Manager’s Objective Individual Employee’s Objective © Prentice Hall, 2002 “We need to improve the company’s performance” “I want to see a significant improvement in this division’s profits” “Increase profits, regardless of the means” “Don’t worry about quality: just work fast” 7 -19 7 1

How Do Managers Plan? (cont. ) Approaches to Establishing Goals (cont. ) • management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers • progress toward accomplishing these goals is periodically reviewed • rewards are allocated on the basis of this progress • MBO consists of four elements : 1. goal specificity 2. participative decision making 3. explicit time period 4. performance feedback © Prentice Hall, 2002 7 -20 7 2

Steps in a Typical MBO Program © Prentice Hall, 2002 7 -21 7 2

How Do Managers Plan? (cont. ) Approaches to Establishing Goals (cont. ) management by objectives (cont. ) Benefits: 1. increases employee performance and organizational productivity 2. depends on support of top managers for MBO • problems with MBO 1. can be useless in times of dynamic change 2. overemphasis on personal rather than organizational goals 3. may be viewed simply as an annual exercise in paperwork © Prentice Hall, 2002 7 -22 7 2

Characteristics of Well-Designed Goals 1. 2. 3. 4. 5. 6. • should be written in terms of outcomes should be measurable and quantifiable should be clear as to a time frame should be challenging but attainable should be written down should be communicated to all organization members who need to know the goals SMART: Specific, Measurable, Attainable. Realistic, Timing. © Prentice Hall, 2002 7 -23 7 2

Steps in Goal Setting • 1 - Review the organization’s mission • 2 - Evaluate available resources • 3 - Determine the goals individually or with input from others. -should be congruent with the organizational mission and goals in other organizational areas • 4 - Write down the goals and communicate them to all who need to know them • 5 - Review results and whether goals are being met © Prentice Hall, 2002 7 -24 7 2

Group work Write down some of specific objectives” Ex. Improving company market share. (goal) Increasing company market share by 10% in the year 2006. (objective) © Prentice Hall, 2002 7 2

Developing Plans Three Contingency Factors affect Planning: • 1 - level in the organization – operational planning dominates managers’ planning efforts at lower levels – strategic planning more characteristic of planning at higher levels © Prentice Hall, 2002 7 -26 7 2

Planning In The Hierarchy Of Organizations Strategic Planning Top Executives Middle-Level Managers Operational Planning © Prentice Hall, 2002 First-Level Managers 7 -27 7 2

Developing Plans (cont. ) – Contingency Factors in Planning (cont. ) – 2 - degree of environmental uncertainty – when uncertainty is high, plans should be specific, but flexible. – 3 - length of future commitments – commitment concept - plans should extend far enough to meet those commitments made when the plans were developed – the more that current plans affect future commitments, the longer the time frame for which managers should plan © Prentice Hall, 2002 7 -28 7 2

Approaches to Planning • traditional, top-down approach • planning done by top managers • formal planning department - specialists whose sole responsibility is to help to write organizational plans – plans flowed down to lower levels » tailored to particular needs at each lower level – most effective if plan is a workable document used by organizational members for direction and guidance © Prentice Hall, 2002 7 -29 7 2

Approaches to Planning (cont. ) – inclusive approach: – employees at each level develop plans suited to their needs – employees acquire greater sense of the importance of planning when they participate in the process – plans more likely to be used in directing and coordinating work © Prentice Hall, 2002 7 -30 7 3

Contemporary Issues In Planning Criticisms of Planning 1. Planning may create rigidity • unwise to force a course of action when the environment is fluid • 2. Plans can’t be developed for a dynamic environment • flexibility required in a dynamic environment • can’t be tied to a formal plan – 3. Formal plans can’t replace intuition and creativity • mechanical analysis reduces the vision to some type of programmed routine © Prentice Hall, 2002 7 -31 7 3

Contemporary Issues In Planning (cont. ) Criticisms of Planning (cont. ) – 4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival • plans concentrate on capitalizing on existing business opportunities • hinders managers who consider creating or reinventing an industry – 5. Formal planning reinforces success, which may lead to failure • success may breed failure in an uncertain environment © Prentice Hall, 2002 7 -32 7 3

Contemporary Issues In Planning (cont. ) Effective Planning in Dynamic Environments • develop plans that are specific, but flexible • recognize that planning is an ongoing process • change directions if environmental conditions warrant • stay alert to environmental changes © Prentice Hall, 2002 7 -33 7 3

Operational plan for the faculty of commerce The goal: Promote quality of graduates. Objective: Develop skills and knowledge of staff Strategies activities Who is Date responsible Evaluation cost Strategy: Train staff on different skills Activities: Two Deputy Training courses dean for all staff on teaching skills March. May 2008 Report, Questionnaire results 2000$ Two training courses in English June- July 2008 Report, Questionnaire results 2000$ © Prentice Hall, 2002 Deputy dean 7 3