1. Management Thoughts & Practices
MBA & BBA
Lectures 7
The Basics of Planning
By: Farhan Mir

2. What Is Planning? Defining the organization’s goals
Desired outcomes for individuals, groups, or entire organizations
Establishing an overall strategy for achieving those goals
How shall we achieve the goals?
Developing a comprehensive set of plans to integrate and coordinate organizational work
Who is going to do what?
How will resources be allocated?

3. The Relationships Between Goals and Plans

4. A Little History in the U.S.
1930’s federal planning in response to the Great Depression
U.S. strategic planning in World War II
Industrial development after WW II
From 1960’s, Planning-Programming-Budgeting-System (PPBS) with systems approach, strategic planning used in government
Today, wide-spread (universal?) use across all types of organizations

5. Purposes of Planning - Provides direction - Reduces uncertainty
- Minimizes waste and redundancy
- Sets the standards for controlling

6. Types of Plans
Exhibit 7.2

7. Four Types of Planning Strategic Planning Long range, broad goals
Tactical
To implement a strategic plan; shorter term and more specific
Operational
Creating very specific policies and procedures
Contingency
Alternative actions for unusual or crisis situations

8. Strategic vs. Operational Plans
Strategic Plans
Apply to the entire organization.
Establish the organization’s overall goals.
Positions organization in terms of its environment
Cover extended (longer) periods of time.
Operational Plans
Assumes objectives exist
Specifies (for each operation) details of how overall goals will be achieved
Cover short time period

9. Specific vs. Directional Plans
Specific Plans
Clearly defined
No room for interpretation
Directional Plans
Flexible plans
General guidelines
Provide focus yet discretion in implementation.

10. Specific Versus Directional Plans

11. Single-use vs. Standing Plans
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.

12. Stated versus Real Goals
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)!

13. Organizational Goals (cont’d)
Accounting manager ï
Split accounts receivable/payable
functions from other areas within
two years
Computerize payroll system
for each restaurant this year
Pay all invoices within thirty days
Advertising director
Develop regional advertising
campaigns within one year
Negotiate 5 percent lower
advertising rates next year
Implement this year í s
promotional strategy
Restaurant manager
Implement employee incentive
system within one year
Decrease waste by 5 percent this
year
Hire and train new assistant
manager
Vice president ñ
finance
Keep corporate debt to no more
than 20 percent of liquid assets
for next ten years
Revise computerized accounting
system within five years
Earn 9 percent on excess cash this
President and CEO
Provide 14 percent return to
investors for at least ten years
Start or purchase new restaurant
chain within five years
Negotiate new labor contract
this year
Mission: Our mission is to operate
a chain of restaurants that will
prepare and serve high-quality
food on a timely basis and at
reasonable prices.
marketing
Increase per store sales 5 percent
per year for ten years
Target and attract two new market
segments during next five years
Develop new promotional
strategy for next year
operations
Open 150 new restaurants
during next ten years
Decrease food-container costs by
15 percent during next five years
Decrease average customer wait
by thirty seconds this year
Strategic Goals
Tactical Goals
Operational Goals
Kinds of Goals for a Regional Fast-Food Chain say KFC
Figure 7.2

14. Traditional Goal-Setting
Broad goals set at the top of the organization.
Goals broken into sub-goals for each org level
Assumes that top management knows best because they can see the “big picture.”
Goals are intended to direct, guide, and constrain from above.
Common Problem:
Goals often ambiguous, lack clarity
Goals become “reinterpreted” as flow down hierarchy

15. Problems With Traditional Objective Setting
Exhibit 7.4

16. A Means-Ends Chain Illustrated
We need to increase profits by 10%
We need to reduce costs by 15%
We need to reduce WIP by 10%
I need to reduce defects at my work station by 10% and accelerate my assembly line by 10%

17. Management By Objectives (MBO)
A method whereby managers and employees define objectives for every department, project, and person and use them to monitor subsequent performance
Divide problem into manageable, “bite-size” chunks

18. MBO Goes One Step Further…
Establishes means-ends chain, but is also MOTIVATING, not just CONTROLLING!
Four elements:
Goal Specificity
Participative decision-making
Explicit time period
Performance feedback
How it works:
Specific performance goals are jointly determined by employees and managers (increases commitment)
Progress toward accomplishing goals is periodically reviewed.
Rewards are allocated on the basis of progress towards the goals

19. Essential Steps for MBO
Set Goals
The most difficult step
Develop Action Plan
For both workgroups and individuals
Review Progress
Periodic during the year
Appraise Overall Performance.
Review Annual Goals

20. MBO Pitfalls and Benefits
Involves entire workforce in process
Breaks goals into manageable
Track progress
Re-assess and adjust
Loss of big picture
Lose focus of goal
Micromanagement
Who’s in charge?
Decisions?

21. Managerial Issues How to plan in uncertainty
How to plan when rate of change is high?
Should the lower levels be involved in decision making?
Planning about internal factors, specific environment, general environment, corporate social responsibility, ethics……

22. Avoid experiencing surprises.
Planning Should
Enable Managers to
Avoid making mistakes.
Avoid wasting resources.
Avoid experiencing surprises.