Chap 2 MGT 162


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Chap 2 MGT 162

  1. 1. Topic 3 Planning in the Contemporary Organization
  2. 2. Planning Defined The process of outlining the activities that are necessary to achieve the goals of the organization. What is planning? Planning is a particular kind of decision making that addresses the specific future that managers desire for their org.
  3. 3. • Planning is not a single event but an on going process that reflects and adapts to changes in the environment • Planning is a process of setting goals and designing strategies to achieve these goals. Purpose of planning • The purpose of planning is simple - to ensure that the organization is both effective and efficient in its activities. 3
  4. 4. Planning as a Linking Mechanism GoalsGoals ControlControlPlansPlans Relationship among goals, plans, and controls
  5. 5. The link between planning and control • 1.Control cannot takes place unless a plan exists. • 2.A plan has little chance of success unless some efforts are made to monitor its progress • The need for planning exists at all levels and increases at higher levels. 5
  6. 6. The benefits of planning • 1Clearly defines responsibilities • 2.Create a participatory working environment • 3.Better coordination • 4.Better control of activities • 5.Encourage forward thinking • 6.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. 6
  7. 7. Benefits of Planning • 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. • Participatory Work Environment – Successful planning requires the participation of a wide range of organizational members. This creates a more participatory work environment.
  8. 8. Benefits of Planning 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.
  9. 9. Benefits of Planning • 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.
  10. 10. Barriers to effective planning 1.Managers reluctance to establish goals e.g fear of failure,lack of knowledge, lack of confidence 2.Employees resistance to change e.g uncertainty about the cause and effect of change 10
  11. 11. Overcoming barriers to planning • 1.Involve employees in decision making • 2.Tolerate a diversity of view • 3.Encourage strategic thinking • 4.Communicate the importance of planning 11
  12. 12. The cost of planning • A) Managerial time • B) Delay in decision making • Managerial Time – Done properly, the planning process requires a substantial amount of managerial time and energy. • Delay in Decision Making – Planning can result in delays in decision making, which must be weighed against the importance of speed in response time. 12
  13. 13. 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. Contingency planning Require the development of two or more plans, each of which is based on a different set of condition Contingency planning is a rapidly changing environment (hyperchange)
  14. 14. Where Does Planning Start? 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.
  15. 15. Where Does Planning Start? • 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.
  16. 16. Where Does Planning Start? • 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.
  17. 17. Basic steps in Planning • Step 1-Establish the goals • Step 2-Define the present situation • Step 3-Determine aids and barriers • Step 4-Develop a set of action programs 17
  18. 18. Step 1 Establish the goals • The importance of goals: • 1.Provide a sense of direction • 2.Focus effort • 3.Guide plans and decisions • 4.Evaluate progress 18
  19. 19. Step 2. Define the present situation • A) The internal situation e.g products, promotion, distribution, manufacturing, etc • B) The external situation e.g competition,economic,politic, technology, culture,etc 19
  20. 20. Step 3.Identify aids and barriers • Conduct a “SWOT” analysis--Strength, weaknesses, opportunities and threats analysis. Step 4.Developing action programs • Develop a detail program specifying what is to be done, who is responsible ,where, when and how the tasks will be managed and coordinated. 20
  21. 21. 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.
  22. 22. Strategic versus operational plans • Strategic planning is a process of developing a strategic fit between the firm’s objectives, resources and its environment. • Operational plans provide details as to how the strategic plans will be accomplished. 22
  23. 23. Five elements to compare strategic and operational plans • 1.Level of conduct :S.P-Top mgt, O.p-Lower mgt • 2.Time:S.P-Long term, O.P-Short term • 3.Regularity: S.P-Continuous and irregular,O.P-fixed time schedule • 4.Subjective values :S.P-Greater subjective values, O.P-Specific • 5.Nature of the problem :S.P-Unstructured, O.P-Structured 23
  24. 24. Levels of strategy • 1.Corporate level strategy • 2.Business unit strategy • 3.Functional level strategy 24
  25. 25. Strategic Planning • 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.
  26. 26. Strategic Planning The purpose of strategic planning is to move the organization from where it is to where it wants to be. Today Vision for the Future
  27. 27. Strategic Planning Levels of strategic planning and their focus: Corporate Business 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.
  28. 28. Strategic Planning Levels of strategic planning and their participants: Corporate Business Functional Board of directors and top-level executives Top-level executives and managers within the business unit Middle-level managers and lower-level managers
  29. 29. Strategic Planning Levels of strategic planning, the specificity of their strategies, and their time horizons: Corporate Business Functional 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
  30. 30. Strategic Planning • 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.
  31. 31. Strategic Planning • 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.
  32. 32. Strategic Planning as a Process Strategy formulation Strategy formulation Strategy implementation Strategy implementation Strategic analysis Strategic analysis Strategic control Strategic control Feedback
  33. 33. Mission statement • A broad statement specifying the co.lines of business and what it want to achieve in the larger environment. • E.g “To meet the challenges of tomorrow to become a better bank” 33
  34. 34. Characteristics of good mission statement • 1.Market oriented • 2.Realistic • 3.Specific • 4.Distinctive competencies • 5.Motivating • 6.Vision 34
  35. 35. Operational Planning • 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.
  36. 36. Standing Plans • 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.
  37. 37. Single-Use Plans • 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.
  38. 38. Single-Use Plans • Single-Use Plans – Budgets - specify how financial resources should be allocated. Management by Objectives A method for developing individualized plans which guide the activities of individual members of an organization.
  39. 39. Contingency Planning 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. 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.
  40. 40. Barriers to Effective Planning • Demands on the Manager’s Time • Ambiguous and Uncertain Operating Environments • Resistance to Change
  41. 41. 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.
  42. 42. 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.
  43. 43. 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.