Planning Ch. 5 Management A Practical Introduction Angelo Kinicki & Brian K. Williams

Learning objectives 1 Explain how planning can help managers deal with uncertainty Argue the advantages and disadvantages of planning Describe the three types of uncertainty Describe the Miles and Snow model and its implications

Learning objectives 2 Define mission and vision statement Explain the three different kinds of planning and how they are related to three levels of management Define goals, objectives and means-end chain Explain the three types of goal

Learning objectives 3 Define various kinds of plan and explain how they are being used Define SMART Describe the planning/control cycle Define MBO and explain how it can be applied

5.1 Planning & Uncertainty HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY? Planning can be defined as setting goals and deciding how to achieve them Planning also involves coping with uncertainty by formulating future courses of action to achieve specified results Planning is used together with strategic management and evolves from the company’s mission and vision Planning covers strategic planning (done by top managers, tactical planning (done by middle managers), and operational planning (done by first-line managers) Lecture Note: it can be worthwhile to think of planning from the perspective of different type of organizations. For example, how might planning in a start-up differ from planning in a large, well-established multinational company? Are there any similarities?

5.1 Planning & Uncertainty Figure 5.1: Planning and Strategic Management

5.1 Planning & Uncertainty WHY NOT PLAN? Managers need to be cautious when planning for two reasons: 1. Planning requires managers to set aside their regular responsibilities to develop plans 2. Managers need to be flexible enough to react to new events because there may not always be enough time to plan

5.1 Planning & Uncertainty HOW DOES PLANNING HELP? There are four main benefits of planning: 1. Organizations can use plans to check their progress toward their goals 2. Plans define the responsibilities of a firm’s departments and coordinates their activities 3. Planning requires managers to consider what may happen in the future 4. Planning for unpleasant contingencies helps managers deal with uncertainty

5.1 Planning & Uncertainty There are three types of uncertainty: 1. When the environment is considered unpredictable there is state uncertainty 2. When the effects of environmental changes are unpredictable there is effect uncertainty 3. When the consequences of a decision are uncertain there is response uncertainty

5.1 Planning & Uncertainty Raymond E. Miles and Charles C. Snow suggested that firms will adopt one of four strategies to respond to uncertainty: 1. defenders are expert at producing and selling narrowly defined products or services 2. prospectors focus on developing new products or services and in seeking out new markets, rather than waiting for things to happen 3. analyzers let other organizations take the risk of product development and marketing and then imitate what seems to work best 4. reactors make adjustments only when finally forced to by environmental pressures

5.1 Planning & Uncertainty Miles and Snow also argued that firms continuously make decisions about three kinds of business problems: 1. entrepreneurial - selecting and making adjustments of products and markets 2. engineering - producing and delivering the products 3. administrative - establishing roles, relationships, and organizational processes

5.2 Fundamentals Of Planning WHAT IS INVOLVED WITH PLANNING? Planning translates an organization’s mission (purpose or reason for being) into objectives The mission statement answers the question “what is our reason for being?” The vision statement answers the question “what do we want to become?” Planning begins with the mission statement

5.2 Fundamentals Of Planning Figure 5.2: Making Plans

5.2 Fundamentals Of Planning Having clearly defined mission and vision statements allows three things to happen: 1. strategic planning by top management where long-term goals are determined and available resources are identified 2. tactical planning by middle management where contributions their departments or similar work units can make are determined 3. operational planning by first-line managers where how specific tasks will be accomplished using available resources is determined

5.2 Fundamentals Of Planning Figure 5.3: Three Levels of Management, Three Types of Planning

5.2 Fundamentals Of Planning The purpose of planning is to set goals and then formulate action plans Specific commitments to achieve a measurable result within a stated period of time are known as goals or objectives Goals are put in a means-end chain where the achievement of low-level goals is the means to achieve high-level goals or ends Lecture Note: It can be useful to ask students to think about goal setting in terms of their own studies---what are their goals, when should they be accomplished, how should they be accomplished, etc.

5.2 Fundamentals Of Planning Strategic goals, set by and for top managers, focus on objectives for the organization as a whole Tactical goals, set by and for mid-level managers, focus on the actions needed to achieve strategic goals Operational goals, set by and for first-line managers, are concerned with short-term matters associated with realizing tactical goals

5.2 Fundamentals Of Planning Once goals are set, the firm makes an action plan which defines the course of action needed to achieve stated goals An operating plan defines how the firm will conduct business based on the action plan - it identifies clear targets such as revenues, cash flow, and market share Plans developed for activities that occur repeatedly over a period of time are called standing plans Standing plans consist of policies (a standing plan that outlines the general response to a designated problem or situation), procedures (a standing plan that outlines the response to a particular problem or circumstance), and rules (a standing plan that designates specific required action)

5.2 Fundamentals Of Planning Plans developed for activities that are not likely to be repeated in the future are called single-use plans Single-use plans can be either programs (encompass a range of projects or activities) or projects (have less scope and complexity than a program)

5.2 Fundamentals Of Planning WHAT ARE SMART GOALS? Good goals are SMART: they should be stated in specific terms they should be measurable or quantifiable they should be challenging but attainable they should be results-oriented and support the organization’s vision they should specify target dates by which they should be accomplished

5.3 The Planning/Control Cycle WHY HAVE PLANNING AND CONTROL? Once an organization has a plan, it needs to make sure it stays on track The planning/control cycle has two planning steps, and two control steps: planning steps: make the plan, and carry out the plan control steps: control the direction by comparing results with the plan, and control the direction by taking corrective actions

Figure 5.5: The Planning/Control Cycle Chapter 5: Planning Figure 5.5: The Planning/Control Cycle

5.4 Promoting Goal Setting: Management By Objectives HOW CAN MANAGERS PROMOTE GOAL SETTING? Peter Drucker developed a system called Management by Objectives (MBO) designed to motivate employees to achieve goals MBO has four steps: 1. Managers and employees jointly set objectives for the employee Goals should include improvement objectives, personal development objectives, and maintenance objectives

5.4 Promoting Goal Setting: Management By Objectives 2. Managers develop action plans Action plans should be developed at each level describing how goals will be attained 3. Managers and employees periodically review the employee’s performance Formal and informal meetings are used to review progress and provide feedback 4. The manager makes a performance appraisal and rewards the employee according to the results Performance that meets objectives should be rewarded, and poor performance should be addressed

5.4 Promoting Goal Setting: Management By Objectives If MBO is to be successful, three things must occur: 1. Top management must be committed Commitment translates to productivity gains 2. It must be applied organization-wide To be successful, MBO must be applied in all divisions and departments 3. Objectives must cascade MBO works by cascading objectives down through the organization

Key Terms 1 Analyzers Cascading Defenders Effect Uncertainty Feedback Goals MBO Mean-end chain Mission Statement Objectives Operating Plan Operational Planning/Goals Planning Planning/Control Cycle Policy Program Procedure Prospectors Reactors Response Uncertainty Results-oriented

Key terms 2 Rules Single-use Plans SMART goal Standing Plan State Uncertainty Strategic Planning/Goals Tactical Planning/Goals Uncertainty Vision Statement