Download - Ch 11.1 org plan
ORGANIZATIONAL PLAN
Planning Foundation
What Is Planning?
• Define planning, goals and plans and t their importance
• Differentiate between formal and informal planning
• Describe the purposes of planning
• Describe the types of goals organizations might have
• Relationship between planning and performance
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.
Why Do Managers Plan?
Purposes of Planning– Provides direction– Reduces uncertainty– Minimizes waste and redundancy– Sets the standards for controlling
2008 REI Supplementary PPT Presentation on Management for Doing Business
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 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.
2008 REI Supplementary PPT Presentation on Management for Doing Business
How Do Managers Plan?
Elements of 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
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).
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).
Types of Plans
Types of Plans
Strategic Plans– Apply to the entire organization.
– Establish the organization’s overall goals.
– Seek to position the organization in terms of its environment.
– Cover extended periods of time.
Operational Plans– Specify the details of how the overall goals are to be
achieved.
– Cover short time period.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Classification of Plans
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.
Exhibit 7–4 The Downside of Traditional Goal Setting
Steps in Goal Setting
1. Review the organization’s mission statement.
Do goals reflect the mission?
1. Evaluate available resources.
Are resources sufficient to accomplish the mission?
1. Determine goals individually or with others.
Are goals specific, measurable, and timely?
1. Write down the goals and communicate them.
Is everybody on the same page?
1. Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?
Planning in the Hierarchy of Organizations
Tools and Techniques in 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.
Assessing the Environment (cont’d)
Forecasting
– The part of organizational planning that involves creating predictions of outcomes based on information gathered by environmental scanning.
Facilitates managerial decision making.
Is most accurate in stable environments.
Assessing the Environment (cont’d)
Forecasting Techniques– Quantitative forecasting
Applying a set of mathematical rules to a series of hard data to predict outcomes (e.g., units to be produced).
– Qualitative forecasting Using expert judgments and opinions to predict less than
precise outcomes (e.g., direction of the economy).
Collaborative Planning, Forecasting, and Replenishment (CPFR) Software– A standardized way for organizations
to use the Internet to exchange data.
• Quantitative
• Time series analysis
• Regression models
• Econometric models
• Economic indicators
• Substitution effect
• Qualitative
• Jury of opinion
• Sales force composition
• Customer evaluation
Making Forecasting More Effective
1. Use simple forecasting methods.
2. Compare each forecast with its corresponding “no change” forecast.
3. Don’t rely on a single forecasting method.
4. Don’t assume that the turning points in a trend can be accurately identified.
5. Shorten the time period covered by a forecast.
6. Remember that forecasting is a developed managerial skill that supports decision making.
Benchmarking
The search for the best practices among competitors and non-competitors that lead to their superior performance.
By analyzing and copying these practices, firms can improve their performance.
Benchmarking
Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.
Allocating Resources: Budgeting
Types of Resources
– The assets of the organization
Financial: debt, equity, and retained earnings
Physical: buildings, equipment, and raw materials
Human: experiences, skills, knowledge, and competencies
Intangible: brand names, patents, reputation, trademarks, copyrights, and databases
Budgets
– Are numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures).
– Are used to improve time, space, and use of material resources.
– Are the most commonly used and most widely applicable planning technique for organizations.
Exhibit 9–3 Types of Budgets
Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.
Allocating Resources: Charting
Gantt Chart
– A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis.
– Shows the expected and actual progress of various tasks.
Load Chart
– A modified Gantt chart that lists entire departments or specific resources on the vertical axis.
– Allows managers to plan and control capacity utilization.
Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
– A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity.
Events: endpoints for completion.
Activities: time required for each activity.
Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start.
Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time.
Developing a PERT Network
1. Identify every significant activity that must be achieved for a project to be completed.
2. Determine the order in which these events must be completed.
3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.
4. Compute a time estimate for completing each activity.
5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project.
Allocating Resources: Analysis (cont’d)
Breakeven Analysis– Is used to determine the point at which all fixed costs
have been recovered and profitability begins.
Fixed cost (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
Price (P)
The Break-even Formula:
Costs Variable Unit-Price Unit
Costs Fixed TotalBreakeven :
Allocating Resources: Analysis
Linear Programming– A technique that seeks to solve resource allocation
problems using the proportional relationships between two variables.
Contemporary Planning Techniques
Project
– A one-time-only set of activities that has a definite beginning and ending point time.
Project Management
– The task of getting a project’s activities done on time, within budget, and according to specifications.
Define project goals
Identify all required activities, materials, and labor
Determine the sequence of completion
Contemporary Planning Techniques (cont’d)
Scenario
– A consistent view of what the future is likely to be. Scenario Planning
– An attempt not try to predict the future but to reduce uncertainty by playing out potential situations under different specified conditions.
Contingency Planning Developing scenarios that allow managers determine in advance what their actions
should be should a considered event actually occur. Identify potential unexpected events. Determine if any of these events would have early indicators. Set up an information gathering system to identify early indicators. Have appropriate responses (plans) in place if these unexpected events occur.
Entrepreneurial ventures and small businesses.
What Is Entrepreneurship?– Entrepreneurship is the process of starting new
businesses, generally in response to opportunities.
Entrepreneurial Ventures– Organizations that pursue opportunities, are
characterized by innovative practices, and have growth and profitability as their main goals.
Small Business – A firm that is independently owned, operated, and
financed; has fewer than 100 employees; doesn’t necessarily engage in new or innovative practices, and has relatively little impact on its industry.
Why Is Entrepreneurship Important?
Innovation– Engage in the creative destruction process– Act as agents of change
Number of New Startups– Increasing numbers of new firms
Job Creation– New ventures create 60-80% of net new jobs
The Entrepreneurial Process
Exploring the Entrepreneurial ContextExploring the Entrepreneurial ContextExploring the Entrepreneurial ContextExploring the Entrepreneurial Context
Identifying Opportunities and Identifying Opportunities and Possible Competitive AdvantagesPossible Competitive Advantages
Identifying Opportunities and Identifying Opportunities and Possible Competitive AdvantagesPossible Competitive Advantages
Starting the VentureStarting the VentureStarting the VentureStarting the Venture
Managing the VentureManaging the VentureManaging the VentureManaging the Venture
Potential Sources of Opportunity
Environmental Environmental ContextContext
Environmental Environmental ContextContext
The IncongruousThe IncongruousThe IncongruousThe Incongruous
The Process NeedThe Process NeedThe Process NeedThe Process Need
Industry and Industry and Market StructuresMarket Structures
Industry and Industry and Market StructuresMarket StructuresDemographicsDemographicsDemographicsDemographics
Changes in Changes in PerceptionPerception
Changes in Changes in PerceptionPerception
New KnowledgeNew KnowledgeNew KnowledgeNew Knowledge
The UnexpectedThe UnexpectedThe UnexpectedThe Unexpected
Researching Competitors
Competitor Intelligence:
– What types of products or services are competitors offering?
– What are the major characteristics of these products or services?
– What are their products’ strengths and weaknesses?
– How do they handle marketing, pricing, and distributing?
– What do they attempt to do differently from other competitors?
– Do they appear to be successful at it? Why or why not?
– What are they good at?
– What competitive advantage(s) do they appear to have?
– What are they not so good at?
– What competitive disadvantage(s) do they appear to have?
– How large and profitable are these competitors?
Investing in Entrepreneurial Ventures
Venture Capitalists– External equity financing provided by professionally-
managed pools of investor money.
Angel Investors– A private investor (or group of private investors) who
offers financial backing to an entrepreneurial venture in return for equity in the venture.
Initial public offering (IPO)– The first public registration and sale of a company’s
stock.
Developing a Business Plan
Business Plan– A written document that summarizes a business
opportunity and defines and articulates how the identified opportunity is to be seized and exploited.
Elements of a Business Plan– Executive summary– Analysis of opportunity– Analysis of context– Description of the business– Financial data and projections– Supporting documentation
Human Resource Management Issues inEntrepreneurial Ventures
Employee Recruitment Concerns– Locating high potential employees who:
can perform multiple roles are willing to “buy-in” (commitment)
– Filling critical skill gaps
Employee Retention Issues– Potential for damage to client/customer relationships
due to loss of employees– Need to offer desirable benefits– Compensation: base pay and incentives
Controlling Issues
Managing GrowthManaging GrowthManaging GrowthManaging Growth
Managing DownturnsManaging DownturnsManaging DownturnsManaging Downturns
Exiting the VentureExiting the VentureExiting the VentureExiting the Venture
Managing personal life Managing personal life choices and challengeschoices and challenges
Managing personal life Managing personal life choices and challengeschoices and challenges
Managing Personal Life Choices and Challenges
Balancing Work and Personal Life
– Become a good time manager
– Seek professional business advice when needed
– Deal with conflicts as they arise
– Developing a network of trusted friends and peers
– Recognize when personal stress levels are too high