Management: Arab World Edition Robbins, Coulter, Sidani, Jamali Chapter 7: Foundations of Planning Lecturer: [Qais A. Marji]

Learning Outcomes Follow this Learning Outline as you read and study this chapter. 7.1 Define the nature and purpose of planning Define planning. Describe the purposes of planning. Explain what studies have shown about the relationship between planning and performance. Understand the dynamics of planning in Arab culture. 7.2 Goals And Plans Define goals and plans. Describe the types of goals organizations might have. Describe each of the different types of plans.

Learning Outcomes 7.3 Setting Goals and Developing Plans Discuss how traditional goal setting and MBO work. Describe well-written goals and explain how to set them. Discuss the contingency factors that affect planning. Describe the approaches to planning. 7.4 Contemporary Issues in Planning Explain the criticisms of planning. Describe how managers can effectively plan in today’s dynamic environment.

Define the nature and purpose of planning 1. Define planning. 2. Describe the purposes of planning. 3. Explain what studies have shown about the relationship between planning and performance. 4. Understand the dynamics of planning in Arab culture.

What Is Planning? Planning A primary managerial activity “process ” that involves: Defining the organization’s goals Establishing an overall strategy for achieving those goals Developing plans for organizational work activities

What Is Planning? Planning can either be formal or informal Formal planning Specific goals covering a specific time period Written and shared with organizational members Informal planning nothing is written down, little or no sharing of goals with others in the organization.

Why Do Managers Plan? Purposes of Planning Provides direction Reduces uncertainty Minimizes waste and redundancy Sets the standards for controlling

Planning gives direction Planning establishes coordinated effort. It gives direction to mangers and nonmanagers. Know where to go. What to contribute to reach goals. What takes to accomplish goals. Without planning, departments and individuals might be working at cross purposes. Preventing the org. from moving efficiently toward its goals.

reduces the impact of change It reduce uncertainty by: forcing managers to look ahead. Anticipate change. Consider the impact of change. Develop appropriate responses. Clarifies the consequences of actions manger might take.

minimizes waste and redundancy. When work activities are coordinated around established plans. Wasted time and resources and redundancy can be minimized. When means and ends are made clear through planning, inefficiencies become obvious and can be corrected or eliminated.

sets the standards used in controlling. we compare actual performance against the goals. identify and significant deviations. Take any necessary corrective action. Without planning, there would be no way to control.

Planning and Performance Formal planning is associated with: Higher profits and returns on assets. Positive financial results. The quality of planning and implementation affects performance more than the extent of planning. The external environment can reduce the impact of planning on performance. Formal planning must be used for several years “at least four years” before planning begins to affect performance.

Planning in Arab Culture Planning is underdeveloped in Arab societies some attribute this to an Arab culture that is supposedly fixated on the past and resists planning for the future. Fatalism the belief in predestination, in the sense that a person has no control over things that happen to him as things have already been predestined from God. This is a mistaken understanding of Qadar. Belief in Qadar does not mean that people should not plan. Predestination: قضاء وقدر

Planning in Arab Culture (cont’d) Early Arabs planned, which explains their successes. Later, however, fatalism – as a historic practice, not a religious doctrine – has displayed itself in their societies. What is needed is a gradual development in value systems, leading to the notion that planning is required to succeed and this is – in fact – in harmony with religious teachings.

Planning in Arab Culture (cont’d) Emergence of many successful Arab entrepreneurs and managers. They built their businesses on proper planning and adequate organization. This demonstrates that they have been progressively adopting modern managerial standards.

Goals And Plans 1. Define goals and plans. 2. Describe the types of goals organizations might have. 3. Describe each of the different types of plans.

How Do Managers Plan? Elements of Planning Goals (also Objectives) Desired outcomes for individuals, groups, or entire organizations Provide direction and evaluation performance criteria Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules As mangers plan, they’re developing both goals and plans.

Types of Goals All organization’s . have multiple objectives Financial Goals are related to the expected internal financial performance of the organization. Strategic Goals are related to the performance of the firm relative to factors in its external environment (e.g., competitors). If managers emphasize only one goal, other goals necessary for long-term success are ignored.

S S M M A A R R T T SMART Objectives Specific Measurable Attainable Relevant R Time bound T

Types of Goals (cont’d) Stated goals can be found in an organization’s charter, annual report, or public relations announcements, or in public statements made by managers. These broadly-worded official statements of the organization (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in the organization).

Exhibit 7–1 Types of Plans

Types of Plans: Breadth The most ways to describe organizational plans are by breadth (strategic vs. operational) time frame (short term vs. long term), specificity (directional vs. specific) .

Types of Plans: Breadth Strategic Plans Apply to the entire organization. Establish the organization’s overall goals. Seek to position the organization in terms of its environment. Cover extended periods of time. Operational Plans Specify the details of how the overall goals are to be achieved. Cover a short time period.

Types of Plans Long-Term Plans Plans with time frames extending beyond three years Med-term plans: plans with a time frame between 1-3 years. Short-Term Plans Plans with time frames of one year or less

Types of Plans (cont’d) Directional Plans Flexible plans that set out general guidelines and provide focus, yet allow discretion in implementation Specific Plans Plans that are clearly defined and leave no room for interpretation.

Types of Plans (cont’d) Single-Use Plan A one-time plan specifically designed to meet the need of a unique situation Standing Plans Ongoing plans that provide guidance for activities performed repeatedly

Setting Goals and Developing Plans 1. Discuss how traditional goal setting and MBO work. 2. Describe well-written goals and explain how to set them. 3. Discuss the contingency factors that affect planning. 4. Describe the approaches to planning

Establishing goals Everything organizational members do should be oriented toward helping their work units and the organization achieve its goals. goals can be established through a process of traditional goal setting management by objectives.

Setting Goals and Developing Plans 1. Approaches to Setting Goals Traditional goal setting MBO Characteristics of well-written goals 2. Developing Plans Contingency factors in planning Approaches to Planning

Traditional Goal Setting Broad goals are set at the top of the organization. Goals are then broken into sub-goals for each organizational level. Assumes that top management knows best because they can see the “big picture”. Goals are intended to direct, guide, and constrain from above. Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility.

Exhibit 7–2 The Downside of Traditional Goal Setting

On of the problems with this approach is that if top mangers define the organization in broad terms, these ambiguous goals have to be made more specific as they flow down through the organization. At each level, mangers define the goals, applying their own interpretations and biases as they make them more specific. Goals lose clarity and unity as the make their way down from the top of the organization to lower level.

Maintaining the Hierarchy of Goals Means–Ends Chain The integrated network of goals that results from establishing a clearly-defined hierarchy of organizational goals. Achievement of lower-level goals is the means by which to reach higher-level goals (ends).

Management By Objectives (MBO) Specific performance goals are jointly determined by employees and managers. Progress toward accomplishing goals is periodically reviewed. Rewards are allocated on the basis of progress towards the goals. Key elements of MBO: Goal specificity, participative decision making, an explicit performance/evaluation period, feedback

MBO consists of four elements: 1- goals specificity. 2- participative decision making. 3- an explicitly time period. 4- performance feedback . MBO increases employee performance and organizational productivity.

Exhibit 7–3 Steps in a Typical MBO Program 1. The organization’s overall objectives and strategies are formulated. 2. Major objectives are allocated among divisional and departmental units. 3. Unit managers collaboratively set specific objectives for their units with their managers. 4. Specific objectives are collaboratively set with all department members. 5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees. 6. The action plans are implemented. 7. Progress toward objectives is periodically reviewed, and feedback is provided. 8. Successful achievement of objectives is reinforced by performance- based rewards.

Does MBO Work? Reason for MBO Success Top management commitment and involvement Potential Problems with MBO Programs Not as effective in dynamic environments that require constant resetting of goals. Overemphasis on individual accomplishment may create problems with teamwork. Allowing the MBO program to become an annual paperwork shuffle.

Exhibit 7–4 Well-Written Goals Written in terms of outcomes, not actions Focuses on the ends, not the means. Measurable and quantifiable Specifically defines how the outcome is to be measured and how much is expected. Clear as to time frame How long before measuring accomplishment. Challenging yet attainable Low goals do not motivate. High goals motivate if they can be achieved. Written down Focuses, defines, and makes goals visible. Communicated to all necessary organizational members Puts everybody “on the same page”.

Steps in Goal Setting 1. Review the organization’s mission statement. Do goals reflect the mission? 2. Evaluate available resources. Are resources sufficient to accomplish the mission? 3. Determine goals individually or with others. Are goals specific, measurable, and timely? 4. Write down the goals and communicate them. Is everybody on the same page? 5. Review results and whether goals are being met. What changes are needed in mission, resources, or goals? Once the goals have been established, written down, and communicated, a manger is ready to develop plans for pursuing the goals.

Developing Plans: Contingency Factors in Planning 1. Manager’s level in the organization Strategic plans at higher levels Operational plans at lower levels 2. Degree of environmental uncertainty Stable environment: specific plans Dynamic environment: specific but flexible plans 3. Length of future commitments Commitment Concept: current plans affecting future commitments must be sufficiently long-term to meet those commitments.

Exhibit 7–5 Planning in the Hierarchy of Organizations

Developing Plans: Approaches to Planning 1. Establishing a formal planning department A group of planning specialists who help managers write organizational plans. Planning is a function of management; it should never become the sole responsibility of planners. 2. Involving organizational members in the process Plans are developed by members of organizational units at various levels and then coordinated with other units across the organization.

Contemporary Issues in Planning 1. Explain the criticisms of planning. 2. Describe how managers can effectively plan in today’s dynamic environment.

Criticisms of Planning Planning may create rigidity. Plans cannot be developed for dynamic environments. Formal plans cannot replace intuition and creativity. Planning focuses managers’ attention on today’s competition not tomorrow’s survival. Formal planning reinforces today’s success, which may lead to tomorrow’s failure. Just planning isn’t enough.

Effective Planning in Dynamic Environments Develop plans that are specific but flexible. Understand that planning is an ongoing process. Change plans when conditions warrant. Persistence in planning eventually pay off. Flatten the organizational hierarchy to foster the development of planning skills at all organizational levels.

Terms to Know planning goals plans stated goals real goals framing strategic plans operational plans long-term plans short-term plans specific plans directional plans single-use plan standing plans traditional goal setting means-ends chain management by objectives (MBO) mission commitment concept formal planning department

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