MANAGEMENTFUNDAMENTALS

Lesson 3

Strategic and Operational Planning

What is Planning

Planning is the process of setting organisation’s goals and

deciding how best to achieve them.

Also known as the process of establishing goals and suitable

course of action for achieving those goals.

Levels of Goals/Plans and their Importance

Benefits of Goals and Plans

Legitimacy

Source of motivation and commitment

Resource allocation

Guides to action

Rationale for decisions

Standards of performance

Organisational Mission

The mission statement is the reason the organisation exists

Top of the goal hierarchy

Describes the values, aspirations and reason for being

A well-defined mission is the basis for all other goals

Mission statements outline the stated purpose and values to

stakeholders

Areas to be addressed in an effective mission statement

Product and business priorities

Market and specific requirement of its customers

Technology and operational capabilities

Core values of an organisation

Interest of key stakeholders

Core purpose of existence

Types of Goals and Plans

Strategic Goals and plans

Tactical Goals and plans

Operational Goals and plans

Strategic Goals and plans

Strategic Goals

Official goals, broad statements about the organisation

Strategic Plans

Define the action steps the company intends to attain

The blueprint that defines activities and resource allocation

Tactical Goals and plans

Tactical Goals

The results that major divisions and department within the

organisation intend to achieve

Tactical plans

Tactical plans are designed to help execute major strategic

plans and to accomplish specific part of the company’s

strategy

Plans of the divisions and departments

Operational Goals and plans

Operational Goals

Results expected from departments, work groups, and

individuals

Operational Plans

Develop at the lower levels of the organisation to specify

action steps towards achieving operational goals

Criteria for Effective Goal Setting

Specific and measurable

Cover key result areas

Challenging but realistic

Defined time period

Linked to rewards

Planning Approaches

Management by objective

Single-use plans

Standing plans

Contingency Plans

Management By Objective (MBO)

The term was first outlined by management guru Peter Drucker in 1954 in his

book "The Practice of Management."

MBO is a method whereby managers and employees define goals for every

department, project and person and use them to monitor subsequent

performances

A management model that aims to improve performance of an organisation by

clearly defining objectives that are agreed by both management and employees

Goal setting and action plans should ensure better participation and commitment

among employees, as well as alignment of objectives across the organisation

Model of the MBO Process

MBO Benefits and Problems

Benefits of MBO

Manager and employee efforts are focused

on activities that will lead

to goal attainment.

Performance can be improved at all

company levels

Employees are motivated

Departmental and individual goals are

aligned with company goals

Problems with MBO Constant change prevents MBO from taking

hold.

Poor employer-employee relations

reduces MBO effectiveness.

Strategic goals may be displaced by

operational goals.

Mechanistic organisational values that

discourage participation can harm the MBO

process.

Too much paper work saps MBO energy.

Single Use plan

A single use plan is developed to achieve goals not

likely to be repeated in future

Help to carryout a course of action that is not likely to

be repeated in the future

A programme is a complex set of objectives and plans to

achieve an important, one-time organisational goal

A project is similar to a programme, but generally smaller in

scope and complexity

Standing Plan

Ongoing plans that provide guidance for tasks performed repeatedly

within the organisation

Developed to carry out the activities that recur regularly over the

period of time

A policy is a general guide to action and provides direction for people

within the organisation

Procedures define a precise series of steps to be used in achieving a

specific job

Rules describe how a specific action is to be performed

Contingency Plans

Contingency plan is plan that determine the

alternative course of action to be taken if an

intended plan is unexpectedly disrupted or

rendered inappropriate

Plans for emergencies, setbacks or

unexpected conditions

Strategic Planning

Is a formal process designed to help an

organisation identify and maintain an optimal

alignment with the most important elements of the

environment within which the organisation resides.

Is a complex and ongoing process of organisational

change.

Levels of Strategy

Corporate-Level Strategy

The level of strategy concerned with the question, “What business are we in?” Pertains to

the organisation as a whole and the combination of business units and product lines that

make it up.

Business-Level Strategy

The level of strategy concerned with the question, “How do we compete?” Pertains to each

business unit or product line within the organisation.

Functional-Level Strategy

The level of strategy concerned with the question, “How do we support the business-level

strategy?”. Pertains to all of the organisation’s major departments.

Benefits and Limitations of Planning

Goals and plans provide a source of motivation and commitment

Goals and plans guide resource allocation

Goals and plans are a guide to action

Goals and plans set a standard of performance

Goals and plans can create a false sense of certainty

Goals and plans may cause rigidity in a turbulent environment

Goals and plans can get in the way of intuition and creativity

Fundamentals of Organising

What is Organising

Organising is the deployment of organisational resources to achieve

strategic goals.

Organising is deciding how best to group organisational activities

and resources so that the organisation will achieve its goals.

Organising structure defines:

The set of formal tasks assigned to individuals and departments

The design of the systems to ensure effective coordination

Formal reporting relationships

The Process of Organising

Identification of Work

Dividing the workload in to jobs

Grouping jobs in to departments

Deciding Spans of Management

Creation of Hierarchy

Delegating authority

Determining systems of working

Allocation of resources

Establishing coordinating mechanisms

Organisation structure

The set of formal tasks assigned to individuals and departments

Formal reporting relationships, including lines of authority,

decision responsibility, number of levels and span of control

The design of systems to ensure effective coordination

of employees across departments

Organising Chart for a Water Bottling Plant

Organising Concepts

Work Specialization is the degree to whichorganisational tasks are subdivided into

individual jobs; also called division of labor

Chain of Command is an unbroken line of authoritythat links all individuals in the organisation and

specifies who reports to whom

Authority

Authority is the formal and legitimate right to make decisions and issues

orders

Power that has been legitimized by an organisation

Authority is vested in organisational positions, not in people

Authority is received from mainly legal sources but managers can develop authority

by acceptance as well.

Authority is accepted by subordinates

Authority flows down the vertical hierarchy

Authority can be transferred from one to another

Responsibility

Responsibility is the duty to perform the task or activity assigned

Requirements of assigned task to be done

It should be match with the responsibility

Ultimate responsibility cannot be transferred

Responsibility is highly connected to accountability

Accountability

The obligation to demonstrate and take responsibility

for performance in light of agreed expectations.

There is a difference between responsibility and

accountability:

responsibility is the obligation to act

accountability is the obligation to answer for an action

Delegation of Authority

The act of assigning formal authority and responsibility for

completion of specific activities to a subordinate

Also known as passing authority to a lower level

Benefits of delegation

More effective use of your time

Motivation of staff

Training

Self development

More effective working team

Barriers to delegation

Lack of abilities to carry out the delegated tasks

Fear of subordinates

Fear of losing control

Fear that subordinates might do a better job

Some employees do not accept the delegated tasks

Concern about what to do with extra time

Feeling of indispensability

Span of Management

The number of employees reporting to a supervisor is span of management

Factors associated with less supervisor involvement and larger span of control

Work is stable and routine

Subordinates perform similar work

Subordinates in single location

Highly trained and need little direction

Rules and procedures are defined

Support systems and personnel are available to manager

Little supervision is required

Reorganisation and Span of Management

Tall vs flat organisations

Many layers of mgt between

lowest and highest levels

Small span of control

Close supervision, better

communication and reduce

delegation.

E.g. banking organisation

Fewer levels in hierarchy

Wider span of control

Subordinates grater decision

making authority, few mgt cost ,

grater employee motivation but

less control

Characteristics of tall structure Characteristics of flat structure

Centralization and Decentralization

Centralization means thatdecision authorityis located near the

top of the organisation

Decentralization meansdecision authority is

pushed downward to lowerorganisational levels

Change and uncertainty are usually associated with decentralization

The amount of centralization or decentralization should fit the firm’s strategy

During crisis or risk of company failure, authority may be centralized

Departmentalization

Basis for grouping positions into departments

Choices regarding chain of command

Traditional approaches:

Vertical Functional

Divisional

Matrix

Innovative approaches:

Teams

Virtual Networks

Functional and Divisional

Vertical Functional Approach

Grouping of positions into departments based on skills,

expertise, work activities, and resource use

Divisional Approach

Grouping based on organisational output

Product, Program, Business (self-contained unit)

Geographic or Customer-Based Divisions

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Functional versus Divisional Structures

Geographic-Based Global Organisation Structure

Matrix and Team Approach

Matrix approach combines functional and divisional

approaches

Improve coordination and information

Dual lines of authority

Team approach is a very widespread trend

Allows managers to delegate authority

Flexible, responsive

Dual-Authority Structure in a Matrix Organisation

Global Matrix Structure

Virtual Network Approach

Extends idea of horizontal coordination andcollaboration Partnerships Alliances

Could be a loose interconnected group i.e., outsourcing

Virtual network structure means that the firmsubcontracts most of its major functions to separatecompanies

Network Approach

Structural Advantages and Disadvantages

Questions?