Chapter 7 Planning - to Set the Direction

1. Chapter 7Planning - to Set the Direction • Planning Ahead • Why is planning an essential management function? • What types of plans are used by managers? • What are the different approaches to planning? • What planning tools and techniques are useful? • How does Management by Objectives facilitate planning? Schermerhorn - Chapter 6

2. Planning as a Management Function • To plan is to decide what to accomplish and how to do it • define objectives • evaluate accomplishments relative to objectives • develop premises regarding future conditions • analyze possible action alternatives • implement plan and evaluate results Schermerhorn - Chapter 6

3. Planning as a Management Function • Benefits of Planning • more focus and flexibility • improved coordination • better control • better time management Schermerhorn - Chapter 6

4. Types of Plans in Organizations • Short-Range and Long-Range Plans • Short-range = 1 year or less • Intermediate-range plans = 1-2 years • Long-range = 3 or more years Schermerhorn - Chapter 6

5. Types of Plans in Organizations • Strategic and Operational Plans • Strategic plans • address long-term needs • set comprehensive action directions for an organization • responsibility of top management Schermerhorn - Chapter 6

6. Types of Plans in Organizations • Strategic and Operational Plans • Operational plans • define what needs to be done in specific areas to implement strategic plans • production • financial • facilities • marketing • human resources Schermerhorn - Chapter 6

7. Types of Plans in Organizations • Policies and Procedures • standing plans • policy is a broad guideline for making decisions and taking action in specific circumstances • procedures are plans that describe exactly what actions are to be taken in specific circumstances Schermerhorn - Chapter 6

8. Budgets and Schedules • Single-use plans • budgets • commit resources to activities, projects or programs • help clarity and reinforce action priorities • facilitate the evaluation and control of results • types are fixed, flexible and zero-based Schermerhorn - Chapter 6

9. Budgets and Schedules • Fixed budget • allocates resources on a single estimate of costs • Flexible budget • allows allocation of resources to vary in proportion with various levels of activity • Zero-based • project is budgeted as if it were brand new Schermerhorn - Chapter 6

10. Budgets and Schedules • Project Schedules • single-use plans that identify the activities required to accomplish a specific major project Schermerhorn - Chapter 6

11. Budgets and Schedules • Business Plan • typically used for new businesses • describes details necessary to set direction and get financing Schermerhorn - Chapter 6

12. Approaches to Planning • Inside-Out Versus Outside-In Planning • inside-out planning • focus future effort on what already doing, but try to improve • outside-in planning • look to external environment for opportunities Schermerhorn - Chapter 6

13. Top-Down Versus Bottom-Up Planning • Top-Down • senior management sets broad objectives • ensures common direction • can fail in implementation due to lack of lower level commitment • Bottom-Up • initiative that begins at lower levels of the organization • potential to generate high commitment • does not define an integrated direction Schermerhorn - Chapter 6

14. Planning Tools and Techniques • Forecasting • making assumptions about what will happen in the future • part of a good plan • ultimately relies on human judgment Schermerhorn - Chapter 6

15. Planning Tools and Techniques • Types of forecasting • qualitative • quantitative • econometric modeling • statistical surveys Schermerhorn - Chapter 6

16. Planning Tools and Techniques • Use of Scenarios • identifying alternative future states of affairs • plans made for each scenario • increases organization’s flexibility Schermerhorn - Chapter 6

17. 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 6

18. Planning Tools and Techniques • Participation and Involvement • Participative planning requires that workers who will be affected should be included in the planning and/or implementation Schermerhorn - Chapter 6

19. Planning Tools and Techniques • Role of Staff Planners • lead and coordinate planning system • help promote planning throughout organization • sometimes used as advisors to line managers Schermerhorn - Chapter 6

20. Management by Objectives (MBO) • MBO • structured process of regular communication • supervisor and worker jointly set performance objectives • jointly review results Schermerhorn - Chapter 6

21. Steps in the MBO Process 1. Supervisor and employee discuss supervisor’s job responsibilities 2. Supervisor and employee discuss employee’s job 5. Supervisor and employee meet at end of period to review performance. 3. Supervisor and employee jointly set employee’s specific measurable objectives for the performance\ period. 4. Supervisor and employee meet periodically to review employee’s progress Schermerhorn - Chapter 6

22. Management by Objectives (MBO) • How to make MBO work • hire best people • work with them to set challenging performance objectives • give best possible support • hole employee accountable Schermerhorn - Chapter 6

23. Management by Objectives (MBO) • Pitfalls to avoid • tying MBO to pay • focusing too much attention on easily quantifiable objectives • requiring excessive paperwork • have managers tell workers objectives Schermerhorn - Chapter 6