Chapter 7 - Foundations of Planning

FOUNDATIONS OF
PLANNING
CHAPTER 7
PLANNING
• Planning
• involves defining the organization’s goals,
establishing an overall strategy for achieving these
goals, and developing plans for organizational work
activities. The term planning as used in this chapter
refers to formal planning.
PURPOSES OF PLANNING
• Planning serves a number of significant purposes.
• 1. Planning gives direction to managers and nonmanagers of an
organization.
• 2. Planning reduces uncertainty.
• 3. Planning minimizes waste and uncertainty.
• 4. Planning establishes goals or standards used in controlling
PLANNING AND PERFORMANCE
• Effective planning and implementation play a greater part in high performance than does the
amount of planning done.
• Studies have shown that when formal planning has not led to higher performance, the
external environment is often the reason.
THE ROLE OF GOALS AND PLANS
IN PLANNING
• Planning is often called the primary management
function because it establishes the basis for all other
functions.
• Planning involves two important elements:
• Goals
• Plans
GOALS
•(often called objectives) are desired

outcomes for individuals, groups, or
entire organizations.
TYPES OF GOALS
• A. Financial goals versus strategic goals

• Financial goals
• related to the financial performance of the organization
• Strategic goals
• are related to other areas of an organizations
performance.
TYPES OF GOALS
• B. Stated goals versus real goals
• Stated goals
• are official statements of what an organization says and what it wants its
various stakeholders to believe its goals are.
• Real goals
• are those that an organization actually pursues, as defined by the actions of
its members.
TYPES OF PLANS
•Plans
•can be described by their
breadth, time frame, specificity,
and frequency of use
TYPES OF PLANS - BREADTH
• Strategic or operational plans
• Strategic plans (long-term plans)

• are plans that apply to the entire organization, establish the organization’s
overall goals, and seek to position the organization in terms of its
environment.
• Operational plans (short-term plans)

• are plans that specify the details of how the overall goals are to be achieved.
TYPES OF PLAN – TIME FRAME
• Time frame plans
• Short-term or Long-term plans.
• Short-term plans
• are plans that cover one year or less.
• Long-term plans
• are plans with a time frame beyond three years.
TYPES OF PLAN - SPECIFICITY
• Specificity plans
• Specific or directional plans.
• Specific plans
• are plans that are clearly defined and leave no room for interpretation.
• Directional plans
• are flexible plans that set out general guidelines.
TYPES OF PLANS - FREQUENCY
OF USE PLANS
• Frequency of use plans
• Single-use or standing plans.
• Single-use plan
• is a one-time plan specifically designed to meet the needs of a unique
situation.
• Standing plans
• are ongoing plans that provide guidance for activities performed repeatedly
APPROACHES TO ESTABLISHING
GOALS
• Goals can be established through the process
of traditional goal setting or through MBO
(management by objectives).
TRADITIONAL GOAL SETTING
• is an approach to setting goals in which goals are set at the top level of
the organization and then broken into subgoals for each level of the
organization.
• assumes that top managers know what is best because of their ability to
see the “big picture.” Employees are to work to meet the goals for their
particular area of responsibility.
• requires that goals must be made more specific as they flow down to
lower levels in the organization.
MANAGEMENT BY OBJECTIVES
(MBO)
• A process of setting mutually agreed-upon goals and using those goals to
evaluate employee performance.
• Studies of actual MBO programs confirm that MBO can increase

employee performance and organizational productivity.
• Top management commitment and involvement are important

contributions to the success of an MBO program.
MBO PROGRAM
Major objectives are allocated

among divisional and Action plans, defining how
The organizations overall Specific objectives are
departmental units. Unit objectives are to be achieved, are
objectives and strategies are collaboratively set with all
managers collaboratively set specified and agreed upon by
formulated department members
specific objectives for their units managers and employee
with their managers
Progress toward objectives is Successful achievement of

The action plans are
periodically reviewed, and objectives is reinforced by
implemented
feedback is provided performance-based rewards
CHARACTERISTICS OF WELL-
DESIGNED GOALS
Written in terms of Measurable and Clear as to a time Challenging, but Written down Communicated to all
outcomes quantifiable frame attainable organizational
members
FIVE STEPS IN GOALS SETTING
• Review the organization’s mission (the purpose
of the organization).
• Evaluate available resources.
• Determine the goals individually or with input
from others
• Write down the goals and communicate them to
all who need to know.
• Review results and whether goals are being
met. Make changes as needed.
DEVELOPING PLANS
• Developing Plans
• The process of developing plans is influenced by three contingency factors and by the particular
planning approach used by the organization.
CONTINGENCY FACTORS IN
PLANNING
• Manager’s level in the organization:
• Operational planning usually dominates the planning activities of lower-level managers. As
managers move up through the levels of the organization, their planning becomes more strategy
oriented.
• Degree of environmental uncertainty:
• The greater the environmental uncertainty, the more directional plans should be, with emphasis
placed on the short term. When uncertainty is high, plans should be specific, but flexible.
Managers must be prepared to rework and amend plans, or even to abandon their plans if
necessary.
• Length of future commitments:
• According to the commitment concept, plans should extend far enough to meet those commitments
made today. Planning for too long or for too short a time period is inefficient and ineffective.
APPROACHES TO PLANNING
• In the traditional approach, planning was done entirely by top-level managers who
were often assisted by a formal planning department.
• to involve more members of the organization in the planning process. In this

approach, plans are not handed down from one level to the next, but are developed
by organizational members at various levels to meet their specific needs.
CRITICISMS OF PLANNING
Five major arguments have been directed against planning:
• Planning may create rigidity.

• Plans can’t be developed for a dynamic environment.
• Formal plans can’t replace intuition and creativity.
• Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival.
• Formal planning reinforces success, which may lead to failure.

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FOUNDATIONS OF

•(often called objectives) are desired

• A. Financial goals versus strategic goals

• Strategic plans (long-term plans)

• Operational plans (short-term plans)

• Studies of actual MBO programs confirm that MBO can increase

• Top management commitment and involvement are important

Major objectives are allocated

Progress toward objectives is Successful achievement of

• to involve more members of the organization in the planning process. In this

• Planning may create rigidity.

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