© farhan mir 2007 ims management thoughts & practices mba & bba lectures 7 the basics of...

© Farhan Mir© Farhan Mir

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Management Management Thoughts & PracticesThoughts & Practices

MBA & BBAMBA & BBALectures 7Lectures 7The Basics of PlanningThe Basics of Planning

By: Farhan MirBy: Farhan Mir


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What Is Planning?What Is Planning?Defining the organization’s goals

Desired outcomes for individuals, Desired outcomes for individuals, groups, or entire organizationsgroups, or entire organizations

Establishing an overall strategy for achieving those goals

How shall we achieve the 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?Who is going to do what?

How will resources be allocated?How will resources be allocated?


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The Relationships Between Goals and Plans


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A Little History in the U.S.A Little History in the U.S.

1930’s federal planning in response to the Great DepressionU.S. strategic planning in World War IIIndustrial development after WW IIFrom 1960’s, Planning-Programming-Budgeting-System (PPBS) with systems approach, strategic planning used in governmentToday, wide-spread (universal?) use across all types of organizations


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Purposes of PlanningPurposes of Planning

- Provides direction

- Reduces uncertainty

- Minimizes waste and redundancy

- Sets the standards for controlling


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Exhibit 7.2Exhibit 7.2

Types of PlansTypes of Plans


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Four Types of PlanningFour Types of Planning

1. Strategic Planning

Long range, broad goals

2. Tactical Planning

To implement a strategic plan; shorter term and more specific

3. Operational Planning

Creating very specific policies and procedures

4. Contingency Planning

Alternative actions for unusual or crisis situations


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Strategic vs. Operational Strategic vs. Operational PlansPlans

Strategic PlansApply to the entire organization.Apply to the entire organization.

Establish the organization’s overall goals.Establish the organization’s overall goals.

Positions organization in terms of its Positions organization in terms of its environmentenvironment

Cover extended (longer) periods of time.Cover extended (longer) periods of time.

Operational PlansAssumes objectives existAssumes objectives exist

Specifies (for each operation) details of how Specifies (for each operation) details of how overall goals will be achievedoverall goals will be achieved

Cover short time periodCover short time period


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Specific vs. Directional Specific vs. Directional PlansPlans

Specific PlansClearly definedClearly defined

No room for interpretationNo room for interpretation

Directional PlansFlexible plansFlexible plans

General guidelinesGeneral guidelines

Provide focus yet discretion in implementation.Provide focus yet discretion in implementation.


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Specific Versus Directional Specific Versus Directional PlansPlans


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Single-use vs. Standing Single-use vs. Standing PlansPlans

Single-Use PlanA one-time plan specifically designed to A one-time plan specifically designed to meet the need of a unique situation.meet the need of a unique situation.

Standing PlansOngoing plans that provide guidance for Ongoing plans that provide guidance for activities performed repeatedly.activities performed repeatedly.


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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 versus Real GoalsStated versus Real Goals


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Organizational Organizational GoalsGoals(cont’d)(cont’d)

Kinds of Goals for a Regional Fast-Food Chain say KFC

Accounting manager

ï Split accounts receivable/payable functions from other areas within two yearsï Computerize payroll system for each restaurant this yearï Pay all invoices within thirty days

Advertising director

ï Develop regional advertising campaigns within one yearï Negotiate 5 percent lower advertising rates next yearï Implement this year ís promotional strategy

Restaurant manager

ï Implement employee incentive system within one yearï Decrease waste by 5 percent this yearï Hire and train new assistant manager

Vice president ñ finance

ï Keep corporate debt to no more than 20 percent of liquid assets for next ten yearsï Revise computerized accounting system within five yearsï Earn 9 percent on excess cash this year

President and CEO

ï Provide 14 percent return to

investors for at least ten years

ï Start or purchase new restaurant

chain within five years

ï 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.

Vice president ñ marketing

ï Increase per store sales 5 percent per year for ten yearsï Target and attract two new market segments during next five yearsï Develop new promotional strategy for next year

Vice president ñ operations

ï Open 150 new restaurants during next ten yearsï Decrease food-container costs by 15 percent during next five yearsï Decrease average customer wait by thirty seconds this year

Strategic Goals

Tactical Goals

Operational Goals

Figure 7.2


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Traditional Goal-SettingTraditional Goal-Setting

Broad goals set at the top of the organization.Goals broken into sub-goals for each org levelAssumes 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 clarityGoals often ambiguous, lack clarity

Goals become “reinterpreted” as flow down Goals become “reinterpreted” as flow down hierarchyhierarchy


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Exhibit 7.4Exhibit 7.4

Problems With Traditional Problems With Traditional Objective SettingObjective Setting


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A Means-Ends Chain A Means-Ends Chain IllustratedIllustrated

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%


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Management By Objectives Management By Objectives (MBO)(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


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MBO Goes One Step MBO Goes One Step Further…Further…

Establishes means-ends chain, but is also MOTIVATING, not just CONTROLLING!Four elements:

Goal SpecificityGoal Specificity

Participative decision-makingParticipative decision-making

Explicit time periodExplicit time period

Performance feedbackPerformance feedback

How it works:Specific performance goals are jointly determined by Specific performance goals are jointly determined by employees and managers (increases commitment)employees and managers (increases commitment)

Progress toward accomplishing goals is periodically Progress toward accomplishing goals is periodically reviewed.reviewed.

Rewards are allocated on the basis of progress towards Rewards are allocated on the basis of progress towards the goalsthe goals


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Essential Steps for MBOEssential Steps for MBO

Set GoalsThe most difficult stepThe most difficult step

Develop Action PlanFor both workgroups and individualsFor both workgroups and individuals

Review ProgressPeriodic during the yearPeriodic during the year

Appraise Overall Performance.Review Annual GoalsReview Annual Goals


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MBOMBOPitfalls and BenefitsPitfalls and BenefitsLoss of big pictureLose focus of goalMicromanagementWho’s in charge?Decisions?

Involves entire workforce in processBreaks goals into manageableTrack progressRe-assess and adjust


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Managerial IssuesManagerial 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……


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Planning Should Enable Managers to

Avoid making mistakes.

Avoid wasting resources.

Avoid experiencing surprises.

© farhan mir 2007 ims management thoughts & practices mba & bba lectures 7 the basics of...

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