Part 2 Planning Challenges in the 21st Century

Chapter
2
Planning in the
Contemporary
Organization

PowerPoint Presentation by Charlie Cook

The University of West Alabama
© 2007 Thomson/South-Western. All rights reserved.
 Managerial Planning
• Planning Defined
 The process of outlining the activities that are
necessary to achieve the goals of the organization.
• A Plan
 A blueprint for action that prescribes the activities
necessary for an organization to realize their goals.
• Purpose of Planning
 The purpose of planning is simple—to ensure that the
organization is both effective and efficient in its
activities.

© 2007 Thomson/South-Western. All rights reserved. 5–2

 • Planning is not a single event but an on going
process that reflects and adapts to changes in
the environment
• Planning is a process of setting goals and
designing strategies to achieve these goals.

© 2007 Thomson/South-Western. All rights reserved. 5–3

 Figure 5.1 Planning as a Linking Mechanism

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 The Benefits of Planning
• Better Coordination
 Planning provides a foundation for the coordination of
a broad range of organizational activities.
 A plan helps to define the responsibilities of
individuals and work groups and helps coordinate
their activities.
• Focus on Forward Thinking
 The planning function forces managers to think ahead
and consider resource needs and potential
opportunities or threats that the organization may face
in the future.

© 2007 Thomson/South-Western. All rights reserved. 5–5

 The Benefits of Planning (cont’d)
• Participatory Work Environment
 Successful planning requires the participation of a
wide range of organizational members.
 More access to a broad base of experience and
knowledge in the planning process.
 More “buy in”—organizational members are more
likely to accept a plan that they have helped
develop.

© 2007 Thomson/South-Western. All rights reserved. 5–6

 The Benefits of Planning (cont’d)
• More Effective Control Systems
 An organization’s plan provides a foundation for
control of the processes and progress of the
company.
 The implementation of the plan can be evaluated and
progress toward the achievement of performance
objectives can be monitored.
 Controls provide mechanism for ensuring that the
organization is moving in the right direction and
making progress toward achieve its goals.

© 2007 Thomson/South-Western. All rights reserved. 5–7

 The link between planning and
control
1. Control cannot takes place unless a plan
exists.
2. A plan has little chance of success unless
some efforts are made to monitor its progress
3. The need for planning exists at all levels and
increases at higher levels

© 2007 Thomson/South-Western. All rights reserved. 5–8

 The Costs of Planning
• Management Time
 Done properly, the planning process requires a
substantial amount of managerial time and energy.
• Delay in Decision Making
 Planning can result in delays in decision making,
which must be weighed against the importance of
speed in response time.

© 2007 Thomson/South-Western. All rights reserved. 5–9

 Weighing the Benefits Against the Costs of
Planning

In the final analysis, managers plan because

planning leads to higher performance.
Planning also helps managers cope with the
many complex situations they face.
 Where Should Planning Begin?

↓Top-Down Planning↓
Planning efforts begin with the board of
directors and top executives of the firm

↑Bottom-Up Planning↑
Planning is initiated at the lowest level
in the organization

© 2007 Thomson/South-Western. All rights reserved. 5–11

Where Does Planning Start?

• Which Approach is Better - Top-Down or

Bottom-Up?
 Top-down planning works best when success is
dependent upon the ability to make high-level
organizational changes in response to general threats
and pressures.
 A bottom-up approach works best when success is
dependent upon sensitivity to customer needs and
demands.
 Advantages of Each Planning Approach
• Top-Down Planning
 Top managers, who are the most knowledgeable
about the firm as a whole, drive the development of
the plan.
• Bottom-Up Planning
 The people closest to the operating system,
customers, and suppliers drive the development of
the plan.

© 2007 Thomson/South-Western. All rights reserved. 5–13

 Levels of Planning
• In general, most organizations engage in both
strategic planning and operational planning.
 Customizing the strategic planning process

A successful planning process must fit the

organization's focus on creating value for its
customers and its shareholders.
 It must be customized for the organization based
on its specific and unique needs.

© 2007 Thomson/South-Western. All rights reserved. 5–14

 Corporate Strategy
• Diversification
 An organization adding new products, services, or
businesses.
• Unrelated diversification
 Adding products, services, or businesses that are
different from the ones an organization currently has.
• Related diversification
 Adding products, services, or businesses that have
some relationship to the ones an organization
currently has or share a core competency.

© 2007 Thomson/South-Western. All rights reserved. 5–15

 Business Strategic Planning
• Strategic Planning
 The process by which an organization makes
decisions and takes actions that affect its long-run
performance.
 The purpose of strategic planning is to move the
organization from where it is to where it wants to be.
 A strategic plan is the output of the strategic planning
process that defines both the markets in which the
firm competes and the ways in which it competes in
those markets.

© 2007 Thomson/South-Western. All rights reserved. 5–16

 Functional Strategic Planning
• Functional strategy specifies activities necessary
to implement the organization's corporate and
business strategies.
 Operations
 Research and Development (R&D)
 Financial
 Human resource management
 Marketing

© 2007 Thomson/South-Western. All rights reserved. 5–17

 Table 5.3 Examples of Functional Strategies

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 Operational Planning
• Operational Planning
 Focuses on the day-to-day activities that are
necessary to achieve the long-term goals of the
organization.
• Operational Plans
 Are more specific, address shorter-term issues, and
are formulated by mid- and lower-level managers who
are responsible for the work groups in the
organization.
 Can be categorized as either standing or single-use
plans.

© 2007 Thomson/South-Western. All rights reserved. 5–19

 Standing Plans
• Standing Plans
 Designed to deal with organizational issues or
problems that recur frequently. They include:
 Policies: general guidelines that govern how
certain organizational situations will be addressed.
 Procedures: more specific and are designed to
give explicit instructions on how to complete a
recurring task.
 Rules: provide detailed and specific guidelines and
limits for action.

© 2007 Thomson/South-Western. All rights reserved. 5–20

 Single-Use Plans
• Single-Use Plans
 Are developed to address a specific organizational
situation. They include:
 Programs: govern a relatively comprehensive set
of activities that are designed to accomplish a
particular set of goals.
 Projects: direct the efforts of individuals or work
groups toward the achievement of specific, well-
defined objectives.
 Budgets: specify how financial resources should be
allocated.

© 2007 Thomson/South-Western. All rights reserved. 5–21

 Individual Plans
• Increasingly, organizations are looking for ways
to translate boarder organizational plans to the
level of individual employees.
 Two approaches for doing so include:
 Management by Objectives
 The Balanced Scorecard

© 2007 Thomson/South-Western. All rights reserved. 5–22

 Figure 5.2 Management by Objectives: The Cycle

Source: K. Davis and J. Newstrom, Behavior at Work: Organizational Behavior (New York:
McGraw-Hill, 1989), 209. Reproduced with permission of the McGraw-Hill Companies.
© 2007 Thomson/South-Western. All rights reserved. 5–23
 The Balanced Scorecard (BSC)
• A system-wide performance measurement
process that aligns individual goals with the
strategic goals of the organization.
 Allows an organization to translate strategy into
operational actions at every level.
 Ensures employees that their individual action plans
and goals are consistent with the overall strategic
direction of the organization.

© 2007 Thomson/South-Western. All rights reserved. 5–24

 Measuring Performance with the Balanced Scorecard

Key Principles Measurement Criteria Implications for Leaders

Align organization Customers Understand the “big

to the strategy picture.”

Translate the strategy Internal processes BSC measures performance

to operational terms. at all levels.

View strategy as a Innovation Execute strategy into action.

continual process.

Make strategy Growth Empower frontline

everyone’s job. employees.

Source: J. Steele, “Transforming the Balanced Scorecard into Your Strategy Execution System,” Manage 53 (September/October 2001): 22–23.
© 2007 Thomson/South-Western. All rights reserved. 5–25
 Contingency Planning
• Contingency Planning
 Requires the development of two or more plans, each
of which is based on a different set of strategic or
operating conditions that could occur.

• When Is Contingency Planning Needed?

 Necessary in business environments that change
rapidly and in unpredictable ways.
 Useful when a firm’s effectiveness is dependent on a
particular set of business conditions.

© 2007 Thomson/South-Western. All rights reserved. 5–26

 The Impact of Information Technology on
Planning
• Advances in information technology have
improved both the effectiveness and efficiency
of the planning function.
• Information technology can be used to establish
and implement the strategic and operational
plans of an organization.

© 2007 Thomson/South-Western. All rights reserved. 5–27

Mission statement

•A broad statement specifying the

co.lines of business and what it
want to achieve in the larger
environment.
•E.g “To meet the challenges of
tomorrow to become a better
bank”

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Characteristics of good mission
statement
•1.Market oriented
•2.Realistic
•3.Specific
•4.Distinctive competencies
•5.Motivating
•6.Vision
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 Barriers to
Effective
Planning

• Demands on the manager’s time

• Ambiguous and uncertain operating
environments
• Resistance to change

© 2007 Thomson/South-Western. All rights reserved. 5–30

 Barriers to effective
planning

1.Managers reluctance to establish

goals e.g. fear of failure, lack of
knowledge, lack of confidence
2.Employees resistance to change
e.g. uncertainty about the cause
and effect of change

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Overcoming barriers to planning

•1.Involve employees in decision

making
•2.Tolerate a diversity of view
•3.Encourage strategic thinking
•4.Communicate the importance
of planning

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