Copyright 2009 Pearson Education Inc Publishing as Prentice

Objectives 1. A definition of planning and an understanding of the purposes of planning 2. Insights into how the major steps of the planning process are related 3. An understanding of the relationship between planning and organizational objectives 4. A knowledge of the areas in which managers should set organizational objectives 5. An appreciation for the potential of a management-byobjectives (MBO) program 6. An understanding of the qualifications and duties of planners and how planners can be evaluated Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -2

General Characteristics of Planning l This part is an Introducing to Planning and includes: l Defining Planning l Purposes of Planning l Planning: Advantages and Potential Disadvantages l Primacy of Planning Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -3

Defining Planning l Planning: l is the process of determining how the organization can get where it wants to go, and what it will do to accomplish its objectives. l is the systematic development of action programs aimed at reaching agreed-upon business objectives by the process of analyzing, evaluating, and selecting among the opportunities which are foreseen. l Planning is a critical management activity regardless of the organization type. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -4

Purposes of Planning l The fundamental purpose of planning: is to help the organization reach its objectives. l Organizational planning has two purposes: 1. Protective purpose: is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management actions. 2. Affirmative purpose: is to increase the degree of organizational success. l Another purpose of planning: is to establish a Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -5

Planning: Advantages and Potential Disadvantages l Advantages 1. (Benefits): Helps managers to be future-oriented (emphasis on the future). 2. Enhances decision coordination. 3. Clear focus objectives. (emphasizes) on organizational l 65% of all newly started businesses may not be there after 5 years-They may fail because of not enough planning. l Successful businesses have an established Plan: a Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -6

Planning: Advantages and Potential Disadvantages l Planning does not eliminate risk. But it helps managers identify and deal with organizational problems before they cause disorder in a business. l Disadvantages (if planning is done incorrectly or excessively): l E. g. overemphasized planning program can take up too much managerial time. l That’s why managers must balance between time spent on planning and time spent on organizing, influencing, and controlling, to avoid neglecting extremely important activities to the success of the organization. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -7

Primacy of Planning l Planning is the primary/first/foundation management function that precedes and is the basis for the other management function (organizing, influencing, controlling), as they are all based on the result of the planning Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -8

Primacy of Planning Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7

Steps in the Planning Process Copyright © 2009 Pearson Education, Inc. Publishing as Prentice

Steps in the Planning Process l The planning process is dynamic, where effective planners should continuously revisit the planning process. 1. 2. 3. 4. 5. 6. State organizational objectives List alternative ways of reaching objectives Develop premises (assumptions) on which to base each alternative Choose the best alternative for reaching objectives (by evaluating the assumptions) Develop (strategic “long” & tactical “short”) plans to pursue the chosen alternative Put the plans into action Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -11

ORGANIZATIONAL OBJECTIVES: PLANNING’S FOUNDATION Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Organizational Objectives: Planning’s Foundation l Having a clear view of organizational objectives is the foundation for carrying out the steps of the planning process Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -13

Defining Organizational Objectives l Organizational Objectives: are the targets toward which the open management system is directed l Organizational Purpose: is what the organization exist to do, given a particular group of customers and customer needs. It flows from the organization mission. l Properly developed org objectives reflect the org purpose. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -14

Defining Organizational Objectives Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7

Defining Organizational Objectives l Profit cannot be the goal. It must be a by-product… l Summary of organizational objectives for businesses: 1. Profit is the motivating force for managers 2. Service to customers justifies the existence of the business 3. Managers have social responsibilities Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -17

Areas for Organizational Objectives l If managers focus on profit only (single-objective), they will take actions that will make money today with little regard for how profit will be made tomorrow. This endangers the management system. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -18

Areas for Organizational Objectives l Key areas to set management system objectives: 1. Market standing (compared to competitors) 2. Innovation 3. Productivity 4. Physical and financial resources 5. Profitability 6. Managerial performance and development 7. Worker performance and attitude 8. Public Responsibility l An Organization should have objectives in all eight areas to maximize its probability of success. 7 -19 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Working with Organizational Objectives An organization should set three types of objectives: 1. Short-term (for how long? ) 2. Intermediate-term 3. Long-term l The Principle of the Objective: states that before managers initiate any action, they should clearly determine, understand, and state organizational objectives Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -20

Working with Organizational Objectives Developing a Hierarchy of Objectives: l Organizational objectives must be broken down into subobjectives, so that individuals at different levels and sections of the organization know what they must do to help reach the overall org objective. l Hierarchy of Objectives: the overall organizational objective and subobjectives assigned to various people or units of the organization. l Suboptimization: is a condition where subojectives are conflicting or not directly aimed at accomplishing the overall org objectives. l Managers should avoid it by understanding how different Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -21

Developing a Hierarchy of Objectives Copyright © 2009 Pearson Education, Inc. Publishing as Prentice

Working with Organizational Objectives l Guidelines for Establishing Quality Objectives 1. Let those responsible for attaining objectives have voice in setting them (Why? ) 2. State objectives as specifically as possible (why? ) 3. Relate objectives to specific actions whenever necessary 4. Pinpoint expected results 5. Set goals high enough that employees have to strive to meet them, but not so high that employees give up trying to meet them (why? ) 6. Specify when goals are expected to be achieved (how? ) 7. Set objectives only in relation to other organizational objectives (why? ) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -23

Management by Objectives (MBO) l. A valuable management tool for profit-oriented as well as nonprofit organizations l The MBO strategy: 1. All individuals are assigned a specialized set of objectives to be reached within a specific period of time (how they are set? ) 2. Performance reviews are conducted periodically (why? ) 3. Rewards are given to individuals depending on how close they are to the goal Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -24

Management by Objectives (MBO) The MBO process (steps): 1. Review organizational objectives 2. Set worker objectives (how? ) 3. Monitor progress (When? & how? ) 4. Evaluate performance (When? ) 5. Give rewards Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -25

Management by Objectives (MBO) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Management by Objectives (MBO) l Factors Necessary for a Successful MBO Program 1) Top management must be committed and set appropriate objectives 2) Managers and subordinates must develop and agree on individual’s goals 3) Employee performance should be evaluated against established objectives 4) Management must follow through on employee performance evaluations Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -27

Management by Objectives (MBO) l MBO Programs: Advantages and Disadvantages Advantages: 1) Continually emphasize how to achieve organizational goals 2) Secures employee commitment to attaining goals Disadvantages: 1) Development of objectives can be time consuming 2) Increase the volume of paperwork in an organization l MBO advantages outweigh its disadvantages l Most managers find MBO programs beneficial Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -28

The Planner l The planner is probably the most important input in the planning subsystem. l They l l are responsible for: Developing plans Advising management on actions to be done to implement those plans Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -29

The Planner l Qualifications of Planners Primary qualifications: n 1) Considerable practical experience within organization n 2) Know how all parts of the organization function and interrelate n 3) Define trends and determine how organization reacts to trends n 4) Ability to work well with others Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -30

The Planner l Evaluation l Objective of Planners Indicators Guidelines for evaluating the planners’ performance: 1. Organizational plan is in writing 2. Plan is the result of all elements of management team working together 3. Plan defines present and possible future business of the organization 4. Plan specifically mentions organizational objectives 5. Plan identifies future opportunities and suggests how to take advantage of them 6. Plan emphasizes both internal and external environments 7. Plan describes the attainment of objectives in operational Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 -31