1. Chapter 7 FOUNDATIONS OF PLANNING © Prentice Hall, 7-1
prof. Dr. Majed ElFarra
© Prentice Hall,
7-1

2. Learning Objectives Define planning Explain why managers plan
You should learn to:
Define planning
Explain why managers plan
Describe what role goals play in planning
Distinguish among the different types of plans
Tell how goals are established
Describe the characteristics of well-designed goals
prof. Dr. Majed ElFarra
© Prentice Hall,
7-2

3. Learning Objectives (cont.)
18 نيسان، 19
Learning Objectives (cont.)
You should learn to:
Identify three contingency factors in planning
Explain the approaches to developing plans
Discuss the criticisms of planning
Describe what it takes to effectively plan in a dynamic environment
prof. Dr. Majed ElFarra
© Prentice Hall,
7-3

4. What Is Planning? Planning
involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work
informal planning - nothing is written down
little or no sharing of goals
general and lacking in continuity
Exist in small and large businesses.
formal planning – written
defines specific goals
specific action programs exist to achieve goals
prof. Dr. Majed ElFarra
© Prentice Hall,
7-4

5. plan Objective: improve business market share by 20%.
Strategy: method or tool to achieve the gool.
- improve product quality.
Improving skills of staff.
Reduce the price
Promotion
3. Activities which is part of action plan
prof. Dr. Majed ElFarra

6. Why Do Managers Plan? Purposes of Planning
planning is the primary management function that establishes the basis for all other management functions
planning establishes coordinated effort
planning reduces uncertainty
planning reduces overlapping and wasteful activities
planning establishes goals and standards used in controlling
prof. Dr. Majed ElFarra
© Prentice Hall,
7-6

7. Why Do Managers Plan? (cont.)
Planning and Performance
formal planning is associated with:
higher profits
higher return on assets
quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning.
external environment may undermine the effects of formal planning.
planning/performance relationship is influenced by the planning time frame. It takes at least 4 years before performance is impacted.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-7

8. How Do Managers Plan? goals - desired outcomes
Planning is called the primary management function. Why?
The Role of Goals and Plans in Planning
goals - desired outcomes
provide direction for all management decisions
represent the criteria against which actual work accomplishments can be measured
plans - outline how goals are going to be met
Types of Goals
all organizations have multiple objectives
no single measure can evaluate whether an organization is successful
financial goals - relate to financial performance
strategic goals - relate to other areas of performance
prof. Dr. Majed ElFarra
© Prentice Hall,
7-8

9. Stated Objectives From Large US Companies
prof. Dr. Majed ElFarra
© Prentice Hall,
7-9

10. How Do Managers Plan? (cont.)
The Role of Goals and Plans in Planning (cont.)
Types of Goals (cont.)
stated goals - official statements of the organization’s goals. They reflect what society (stakeholders) believes organization should do.
Ex. Growing our customer base, building marker leadership, increasing profitability. These quite irrelevant and vague.
real goals - those goals that an organization actually pursues. Ex. Limiting class size. Increase size of products by 20%.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-10

11. How Do Managers Plan? (cont.)
18 نيسان، 19
How Do Managers Plan? (cont.)
The Role of Goals and Plans in Planning (cont.)
Types of Plans
First: by breadth:
strategic plans - apply to the entire organization
establish organization’s overall goals
seek to position the organization in terms of its environment.
Covers a longer time frame.
2. operational plans - specify the details of how the overall goals are to be achieved
tend to cover short time periods
Short-term 1 year or less.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-11

12. Types Of Plans Frequency of Use Single use Standing Breadth Strategic
Operational
Time Frame
Long term
Short term
Specificity
Directional
Specific
prof. Dr. Majed ElFarra
© Prentice Hall,
7-12

13. How Do Managers Plan? (cont.)
The Role of Goals and Plans in Planning (cont.)
Types of Plans (cont.)
Second: by time frame:
long-term plans - time frame beyond three years. Definition of long term has changed with increasingly uncertain organizational environments.
short-term plans - cover one year or less.
Third: by specificity:
specific plans - clearly defined with little room for interpretation. Required clarity and predictability often do not exist, because of environment dynamic. Ex. (setting a plan with specific objective, procedures, budgets and time frame.
directional plans - flexible plans that set out general guidelines
provide focus without limiting courses of action. It is flexible to respond to unexpected change.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-13

14. Specific Versus Directional Plans
prof. Dr. Majed ElFarra
© Prentice Hall,
7-14

15. How Do Managers Plan? (cont.)
The Role of Goals and Plans in Planning (cont.)
Types of Plans (cont.)
Fourth: by frequency of use:
single-use plans - one-time plans specifically designed to meet the needs of a unique situation. Ex. Setting a plan to introduce a new service.
standing plans - ongoing plans that provide guidance for activities performed repeatedly
include policies, procedures, and rules
prof. Dr. Majed ElFarra
© Prentice Hall,
7-15

16. How Do Managers Plan? (cont.)
Establishing Goals
Approaches to Establishing Goals
traditional goal setting - overall goals established at the top of the organization. overall goals are broken down into sub-goals for each level of the organization.
higher-level goals must be made more specific at lower levels.
network of goals creates a means-ends chain.
Sub-goals constrain subordinates’ behavior.
assumes that top managers know what is best for the organization
Achieving the goals at a low level becomes the means to reach the goals at the next level.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-16

17. Traditional Objective Setting
Individual
Employee’s
Objective
Top
Management’s
Department
Manager’s
Division
“Increase profits, regardless
of the means”
“I want to see a
significant improvement
in this division’s profits”
“We need to improve
the company’s performance”
“Don’t worry about
quality: just work fast”
prof. Dr. Majed ElFarra
© Prentice Hall,
7-17

18. 18 نيسان، 19
Example:
IUG plan
Goal: improve the quality of services and programs delivered to community.
Objective: reducing the time span for student registration not to exceed 5 minutes.
Strategies:
1- recruiting 10 qualified staff
2- providing more access to students to the data base.
Developing a plan
prof. Dr. Majed ElFarra

19. How Do Managers Plan? (cont.)
Approaches to Establishing Goals (cont.)
management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers
progress toward accomplishing these goals is periodically reviewed
rewards are allocated on the basis of this progress
MBO consists of four elements :
goal specificity
participative decision making
explicit time period
performance feedback
prof. Dr. Majed ElFarra
7-19

20. Steps in a Typical MBO Program
prof. Dr. Majed ElFarra
© Prentice Hall,
7-20

21. How Do Managers Plan? (cont.)
Approaches to Establishing Goals (cont.)
management by objectives (cont.)
Benefits:
increases employee performance and organizational productivity
depends on support of top managers for MBO
problems with MBO
can be useless in times of dynamic change
overemphasis on personal rather than organizational goals
may be viewed simply as an annual exercise in paperwork
prof. Dr. Majed ElFarra
© Prentice Hall,
7-21

22. How Do Managers Plan? (cont.)
Establishing Goals (cont.)
Characteristics of Well-Designed Goals
should be written in terms of outcomes
should be measurable and quantifiable
should be clear as to a time frame
should be challenging but attainable
should be written down
should be communicated to all organization members who need to know the goals
SMART: Specific, Measurable, Attainable. Realistic, Timing.
prof. Dr. Majed ElFarra
© Prentice Hall,
7-22

23. How Do Managers Plan? (cont.)
Establishing Goals (cont.)
Steps in Goal Setting
1 - Review the organization’s mission
2 - Evaluate available resources
3 - Determine the goals individually or with input from others. - should be congruent with the organizational mission and goals in other organizational areas
4 - Write down the goals and communicate them to all who need to know them
5 - Review results and whether goals are being met
prof. Dr. Majed ElFarra
7-23

24. How Do Managers Plan? (cont.)
Developing Plans
Contingency Factors in Planning
level in the organization
operational planning dominates managers’ planning efforts at lower levels
strategic planning more characteristic of planning at higher levels
prof. Dr. Majed ElFarra
© Prentice Hall,
7-24

25. Planning In The Hierarchy Of Organizations
Strategic
Planning
Operational
Top
Executives
Middle-Level
Managers
First-Level
Managers
prof. Dr. Majed ElFarra
© Prentice Hall,
7-25

26. How Do Managers Plan? (cont.)
Developing Plans (cont.)
Contingency Factors in Planning (cont.)
degree of environmental uncertainty
when uncertainty is high, plans should be specific, but flexible
length of future commitments
commitment concept - plans should extend far enough to meet those commitments made when the plans were developed
the more that current plans affect future commitments, the longer the time frame for which managers should plan
prof. Dr. Majed ElFarra
© Prentice Hall, 2002
7-26

27. How Do Managers Plan? (cont.)
Developing Plans (cont.)
Approaches to Planning
traditional, top-down approach
planning done by top managers
formal planning department - specialists whose sole responsibility is to help to write organizational plans
plans flowed down to lower levels
tailored to particular needs at each lower level
most effective if plan is a workable document used by organizational members for direction and guidance
prof. Dr. Majed ElFarra
© Prentice Hall,
7-27

28. How Do Managers Plan? (cont.)
Developing Plans (cont.)
Approaches to Planning (cont.)
Inclusive\comprehensive approach
employees at each level develop plans suited to their needs
employees acquire greater sense of the importance of planning when they participate in the process
plans more likely to be used in directing and coordinating work
prof. Dr. Majed ElFarra
© Prentice Hall,
7-28

29. Contemporary Issues In Planning
Criticisms of Planning
1. Planning may create rigidity
unwise to force a course of action when the environment is fluid
2. Plans can’t be developed for a dynamic environment
flexibility required in a dynamic environment
can’t be tied to a formal plan
3. Formal plans can’t replace intuition and creativity
mechanical analysis reduces the vision to some type of programmed routine
prof. Dr. Majed ElFarra
© Prentice Hall,
7-29

30. Contemporary Issues In Planning (cont.)
Criticisms of Planning (cont.)
4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival
plans concentrate on capitalizing on existing business opportunities
hinders managers who consider creating or reinventing an industry
5. Formal planning reinforces success, which may lead to failure
success may breed failure in an uncertain environment
prof. Dr. Majed ElFarra
© Prentice Hall,
7-30

31. Contemporary Issues In Planning (cont.)
Effective Planning in Dynamic Environments
develop plans that are specific, but flexible
recognize that planning is an ongoing process
change directions if environmental conditions warrant\necessitate
stay alert to environmental changes
prof. Dr. Majed ElFarra
© Prentice Hall,
7-31

32. Case study
In 2003 it was announced that British Airways (BA) would install 190 IBM self service kiosks at Heathrow Airport and all British Airways destination airports across Europe. The Kiosks are designed to make check in faster and more convenient, whilst optimizing space at airports. Customers can use the touch sensitive screens to check in, select seats and ask for upgrades without having to queue at desks. The new system was expected to reduce check in queues, providing a major boost to the volume of passengers that BA could handle at peak times. This was part of transportation strategy that BA could handle at peak times. The new strategy will change how customers do business with the Airline. BA expected to achieve 50% self service check in by the new service would improve customer service and high efficiency.
1- Explain the objectives that BA may have had in its transportation strategy?
2- what is the strategy used by BA?
prof. Dr. Majed ElFarra

33. Review
Will planning become more or less important to managers in the future? Why?
Planning will probably become more important to managers in the future because of the uncertainty present in the environment. There are so many changes taking place in both the general and specific environments of organizations, and many of these changes are taking place rapidly. Planning helps managers cope with the uncertainties by forcing managers to look ahead, anticipate change, consider the impact of the change, and develop appropriate responses.
prof. Dr. Majed ElFarra

34. Review
If planning is so crucial, why do some managers choose not to do it? What would you tell these managers?
Managers may choose not to do it because they don’t know how or they claim they don’t have the time to do it. Others may say that it’s a waste of time, that the future is going to happen whether or not they plan. But, all of these reasons do not discount the importance of planning. Every manager should engage in planning.
prof. Dr. Majed ElFarra

35. Review
Explain how planning involves decisions today that will have an impact later.
Decisions that managers make as they plan will influence how activities are organized, how employees are managed, and what controlling is performed. So even as managers look to the future by planning, the decisions they’re making as they plan will have an effect on the other managerial activities.
prof. Dr. Majed ElFarra