ninth edition

STEPHEN P. ROBBINS MARY COULTER

Chapter
Foundations
7 of Planning

© 2007 Prentice Hall, Inc. PowerPoint Presentation by Charlie Cook

All rights reserved. The University of West Alabama
• Planning is one of the four functions of
management. Fundamental information about
managerial planning is presented in this chapter;
the text discusses the nature and purposes of
planning, strategies for effective planning, and
contemporary planning issues.

7–2
What Is Planning?
• Planning
 A primary managerial activity that involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing plans for organizational work activities.

 Types of planning
 Informal: not written down, short-term focus; specific to an
organizational unit.
 Formal: written, specific, and long-term focus, involves
shared goals for the organization.

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Why Do Managers Plan?
• Purposes of Planning
 Provides direction to people within the organisation
and their units ..
 Reduces uncertainty…anticipate change and consider
the impact of change
 Minimizes waste and redundancy…. coordinations
among activities around the goal.
 Sets the standards for controlling…when we control we
try to see whether the plans have been carried out and
the goal meet.

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Planning and Performance
• The Relationship Between 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 and amount of
planning.
 The external environment can reduce the impact of
planning on performance,
 Formal planning must be used for several years
before planning begins to affect performance.
7–5
 How Do Managers Plan?
 Planning is often called the primary management function because
it establishes the basis for all other functions. Planning involves two
important elements: goals and plans.
• The Role of Goals and Plans in 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.

7–6
• An organization has multiple goals ..profit, market
share, enthused employees….
• Using a single goal such as profit can resulted in
unethical practices because mangers and
employees will ignore other important parts of their
parts of their jobs in order to look on that one
measure.

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Types of Goals

• 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).

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• Stated Goals 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).
 Stated goals are official statements of what an
organization says and what it wants its various
stakeholders to believe its goals are.

7–9
Exhibit 7–1 Stated Goals of Large Global Companies

Execute strategic roadmap—―Plan to Win.‖ Control inventory.

Grow the business profitably. Maintain industry’s lowest inventory shrinkage rate.
Identify and develop diverse talent. Open 25–30 new locations in fiscal 2006.
Promote balanced, active lifestyles. Live by the code of ethics every day.
(McDonald’s Corporation) (Costco)

Continue to win market share globally. Expand selection of competitively priced products.
Focus on higher-value products. Manage inventory carefully.
Reduce production costs. Continue to improve store format every few years.
Lower purchasing costs. Operate 2,000 stores by the end of the decade.
Integrate diversity. Continue gaining market share.
Gain ISO 14001 certification for all factories. (Target)
(L’Oreal)

Respect the environment. Roll out newly-designed environmentally friendly

Respect and support family unity and national cup in 2006.
traditions. Open approximately 1,800 new stores globally in
Promote community welfare. 2006.
Continue implementing quality systems. Attain net revenue growth of approximately 20
Continue to be a strong cash generator. percent in 2006.
(Grupo Bimbo) Attain annual EPS growth of between 20 percent to
25 percent for the next 3 to 5 years.
(Starbucks)

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Exhibit 7–2 Types of Plans

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Types of Plans
• Breadth: Strategic versus 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.

7–12
• Time frame: Short-term versus 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.
• Specificity: Specific versus 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.

7–13
• Frequency of use: Single-use versus standing
plans. A 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.

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Types of Plans (summary)
• Long-Term Plans
 Plans with time frames extending beyond three years
• Short-Term Plans
 Plans with time frames on one year or less
• Specific Plans
 Plans that are clearly defined and leave no room for
interpretation
• Directional Plans
 Flexible plans that set out general guidelines, provide
focus, yet allow discretion in implementation.

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Exhibit 7–3 Specific Versus Directional Plans

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 Establishing Goals and
Developing Plans
• 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.
• Traditional goal setting 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.

7–17
• This traditional approach requires that goals
must be made more specific as they flow down
to lower levels in the organization. In striving to
achieve specificity, however, objectives
sometimes lose clarity and unity with goals set
at a higher level in the organization.
• When the hierarchy of organizational goals is
clearly defined, it forms an integrated means-
end chain—an integrated network of goals in
which the accomplishment of goals at one level
serves as the means for achieving the goals, or
ends, at the next level.

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Summary for Traditional goal setting
 Broad goals are set at the top of the organization.
 Goals are then broken into subgoals 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.

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• Maintaining the Hierarchy of Goals
 When the hierarchy of organizational goals is clearly
defined, it forms an integrated of network of goals, or as
means-ends chain.
 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).

7–20
• Management by Objectives (MBO)
 Its appeal is its emphasis on converting overall objectives
into specific objectives.
 MBO makes objectives operational by flowing them down
through the organization.
 A system in which specific performance objectives are
jointly determined by subordinates and their supervisors,
progress toward objectives is periodically reviewed, and
rewards are allocated on the basis of that progress.
 Links individual and unit performance objectives at all
levels with overall organizational objectives
 Motivates rather than controls.

3–21
 Elements of MBO
• The objectives in MBO should be concise
statements of expected accomplishments (Goal
specificity).
• The manager and employee jointly choose the
goals and how they will be achieved (Participative
decision making)
• Each objective has a concise time period in which
it is to be completed (e.g., three months, six
months, or a year).
• MBO seeks to give continuous feedback on
progress toward goals both through ongoing
feedback to individuals and periodic formal
appraisal meetings.

3–22
• Whether an organization uses a more traditional
approach to establishing objectives, uses some
form of MBO, or has its own approach,
managers must define objectives before they
can effectively and efficiently complete other
planning activities.

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Exhibit 7–4 The Downside of Traditional Goal Setting

7–24
 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.

7–25
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.

7–26
• Characteristics of Well-Designed Goals :
1. Written in terms of outcomes
2. Measurable and quantifiable
3. Clear as to a time frame
4. Challenging, but attainable
5. Written down
6. Communicated to all organizational members

7–27
 Characteristics of Well-Designed Goals

• Written in terms of • Challenging yet attainable

outcomes, not actions  Low goals do not motivate.
 Focuses on the ends, not  High goals motivate if they
the means. can be achieved.
• Measurable and • Written down
quantifiable  Focuses, defines, and
 Specifically defines how the makes goals visible.
outcome is to be measured • Communicated to all
and how much is expected. necessary organizational
• Clear as to time frame members
 How long before measuring  Puts everybody ―on the
accomplishment. same page.‖

7–28
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?
Challenging / realistic.
3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
4. Write down the goals and communicate them to all
who need to know.
5. Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?

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• The process of developing plans is influenced
by three contingency factors and by the
particular planning approach used by the
organization.

7–30
 Developing Plans
• Contingency Factors in A Manager’s Planning
Manager’s level in the organization
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.

7–31
Exhibit 7–7 Planning in the Hierarchy of Organizations

7–32
 Degree of environmental uncertainty
• The greater the environmental uncertainty, the
more directional plans should be, with emphasis
placed on the short term.
1) When uncertainty is high, plans should be
specific, but flexible.
2) Managers must be prepared to rework and amend
plans, or even to abandon their plans if necessary.

7–33
 Length of future commitments
1) According to the commitment concept, plans
should extend far enough to meet those
commitments made today.
2)Planning for too long or for too short a time
period is inefficient and ineffective.

7–34
Approaches to Planning
• 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.

• 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.

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Contemporary Issues in Planning
• Criticisms of Planning
1) Planning may create rigidity.
 Formal planning may ―lock‖ an organization into
specific goals and specific timetables that were
established under certain environmental conditions. If
the environment changes, managers may believe
they are locked into the current plans.

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 2) Plans cannot be developed for dynamic
environments.
• Managing under chaotic environmental conditions
requires flexibility, and this may mean not being tied to
formal plans.

7–37
3) Formal plans cannot replace intuition and creativity
• The formal planning process may emphasize the
mechanics and routines of planning, sometimes
inhibiting creativity and innovation.

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 4) Planning focuses managers’ attention on today’s
competition not tomorrow’s survival.
• An organization that uses formal planning has a
tendency to focus on existing opportunities rather than
on creating or reinventing an industry, and competitors
may take the lead.

7–39
 5) Formal planning reinforces today’s success, which may
lead to tomorrow’s failure.
• Because the existing plans have led to success,
managers may be reluctant to change or discard
previously successful plans. The mentality may be, ―If it’s
not broken, why fix it?‖

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Contemporary Issues in Planning
(cont’d)
• 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.

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