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PLANNING

PLANNING

A particular kind of decision making that addresses the specific future that managers desire for the organizations.

“ By failing to prepare, you are prepring to fail”

- Benjamin Franklin

WHY ARE GOALS IMPORTANT?

1 • Goals provide a sense of direction

2 • Goals focus our efforts..

3 • Goals guide our plans and decision.

4 • Goals help us evaluate our progress

PLANNING: AN OVERVIEW

THE HIERARCHY OF ORGANIZATION PLANS

IMPORTANCE OF PLANNING AT ORGANIZATIONS

A BROAD GOAL ON MANAGERS’ ASSUMPTIONS ABOUT THE ORG’S PURPOSE, COMPETENCIES, AND PLACE IN THE WORLD

CONTAIN DETAILS FOR CARRYING OUT, OR IMPLEMENTING, THOSE STRATEGIC PLANS IN DAY-TO-DAY ACTIVITIES.

DESIGNED BY HIGH-RANKING MANAGERS AND DEFINE THE BROAD GOALS FOR THE ORG.

MISSION STATEMENT

STRATEGIC PLANS

OPERATIONAL PLANS

HOW STRATEGIC AND OPERATIONAL PLANS DIFFER?

WAYS

STRATEGICPLANS

OPERATIONAL PLANS

TIME HORIZONS Tend to look ahead several years or even decades

A year is often a relevant period

SCOPE Affects a wide range of organizational

activities

Narrow and more limited scope

DEGREE OF DETAIL Simplistic and generic

Finer detail.

3 MAJOR WAYS

EVOLUTION OF THE CONCEPT OF STRATEGY

GREEK• Strategia- art or science of being a general• BASIS FOR THE “GRAND” STRATEGY PLAN was

taken together from the concept of strategy had both planning component and a decision making/ action component.

STRATEGY AS THE GRAND PLAN

STRATEGIC MANAGEMENT- • Management process that involves, an

organization’s engaging in strategic planning and then acting on those plans.

1962- ALFRED CHANDLER• Defined strategy as “ the determination of the basic

long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

THE RISE OF STRATEGIC MANAGEMENT

4 KEY ASPECTS( HOFER & SCHENDEL)• 1. GOAL SETTING• 2. STRATEGY FORMULATION• 3. ADMINISTRATION• STRATEGIC CONTROL

STRATEGIC MANAGEMENT APPROACH

2 PHASES 1. STRATEGIC PLANNING

-is the name we customarily give to the sense making activity2. STRATEGY IMPLEMENTATION

- is the name we customarily give to actions based on the kind of planning.

STRATEGIC MANAGEMENT PROCESS

LEVELS OF STRATEGY: SOME KEY DISTINCTIONS

CORPORATE- LEVEL STRATEGY

Strategy formulated by top management to oversee the interests and operations of more than one line business

BUSINESS- UNIT STATEGY

Strategy formulated to meet the goals of a particular business, also called “ line-of-business” strategy.

FUNCTIONAL-LEVEL STRATEGY

Strategies create framework for managers in each function such as marketing or production to carry out business-units strategy and corporate strategies.

The content of Corporate Strategy

Corporate Strategy- the idea about how people at an organization will interact with people at other organization over time.

The Corporate Portfolio Approach In this approach, top management

evaluates each of the corporation’s various business units with respect to the market place and the corporation’s internal make-up.

One of the best-known examples of the corporate portfolio approach is the Portfolio framework advocated by the Boston Consulting group is also known as “BCG Matrix”

STARModest+ or –

Cash flow

QUESTION MARKLarge

Negative cash flow

CASH COWLarge

Positive cash flow

DOGModest+ or –

Cash flow

HIGH

LOW

HIGH LOW

MARKET GROWTH

RATE

RELATIVE MARKET SHARE

“FIVE FORCES” CORPORATE STRATEGY

Another approach to corporate strategy is Michael Porter’s “five forces” model.

In Porter’s view an organization’s ability to compete in a given market is determined by the organization’s technical and economic resources, as well as by five environmental “forces” each of which threatens the organization’s venture into market.

Threat of New Entrants Bargaining power of buyers

(customers)Bargaining power of suppliersThreat of Substitute ProductsRivalry among competitors

CORPORATE ENTERPRISE STRATEGY

Enterprise strategy ( E- Strategy) – a statement of values and principles that explains why an organization does what it does.

7 Different Enterprise StrategyStockholder E-Strategy – the

corporation should maximize the interests of stockholder

Managerial Prerogative E-Strategy – the corporation should maximize the interest of management.

Restricted Stakeholder E- Strategy- the corporation should maximize the interest of a narrow set of stakeholders, such as customers, employees, and stockholders.

Unrestricted Stakeholder E-Strategy – the corporation should maximize the interest of all stakeholders.

Social Harmony E-Strategy – the corporation should maximize social harmony

Rawlsian E-Strategy – the corporation should promote inequality among stakeholders only if inequality results in raising the level of the worst-off stakeholder.

Personal Project E- Strategy – the corporation should maximize its ability to enable corporate members to carry out their personal projects.

Collective Strategy

Occurs when people at different organizations with common concerns collaborate to determine how they will approach certain issues.

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STRATEGY IMPLEMENTATIO

N

Operationalizing Strategy

O p e r a t i o n a l S t r a t e g yPlan of action implemented by a firm that

describes how they will employ their resources in the production of a product or service.

“The conversion of strategic goals into

execution”Tw o G e n e r a l C l a s s e s :

S i n g l e - U s e P l a n s

S t a n d i n g P l a n s

PROGRAM

Single-Use Plans

PROJECT

BUDGET

A s i n g l e - u s e p l a n t h a t c o v e r s a r e l a t i v e l y l a r g e

s e t o f a c t i v i t i e s .

S m a l l e r a n d s e p a r a t e p o r t i o n s o f p r o g r a m s ;

t h e y a r e l i m i t e d i n s c o p e a n d c o n t a i n d i s t i n c t d i r e c t i v e

c o n c e r n i n g a s s i g n m e n t s a n d t i m e .

S t a t e m e n t s o f fi n a n c i a l r e s o u r c e s s e t a s i d e f o r s p e c i fi c a c t i v i t i e s i n a g i v e n p e r i o d o f t i m e .

A d e t a i l e d c o u r s e s o f a c t i o n t h a t p r o b a b l y w i l l n o t b e r e p e a t e d i n t h e s a m e f o r m i n t h e f u t u r e .

Standing PlansA pre-established single decision or set of decisions. It consist of

policies, rules and more detailed procedures.

Policies

Rules

Procedures

A g e n e r a l g u i d e l i n e f o r d e c i s i o n m a k i n g , I t s e t s u p b o u n d a r i e s

a r o u n d d e c i s i o n s , t e l l i n g m a n a g e r s w h i c h d e c i s i o n s c a n b e

m a d e a n d w h i c h c a n n o t .

S t a t e m e n t s o f s p e c i fi c a c t i o n s t o b e t a ke n i n a

g i v e n s i t u a t i o n .

D e t a i l e d s e t o f i n s t r u c t i o n s f o r

p e r f o r m i n g a s e q u e n c e o f a c t i o n s t h a t o c c u r s

o f t e n o r r e g u l a r l y.

Using Procedures to Faci l i tate Implementation

T h e y i d e n t i f y p r e c i s e l y w h a t m u s t b e a c c o m p l i s h e d e a c h

y e a r t o a c h i e v e a n o r g a n i z a t i o n ’ s s t r a t e g i c

g o a l s .

A f o r m a l s e t o f p r o c e d u r e s t h a t b e g i n s w i t h g o a l s e t t i n g a n d

c o n t i n u e s t h r o u g h p e r f o r m a n c e r e v i e w.

C o n t r i b u t e s t o s t r a t e g y i m p l e m e n t a t i o n b y s h a p i n g i n d i v i d u a l

a n d g r o u p b e h a v i o r. I t m o t i v a t e s e m p l o y e e s t o d i r e c t t h e i r p e r f o r m a n c e t o w a r d s t h e

o r g a n i z a t i o n a l g o a l s .

ANNUAL OBJECTIVES

MANAGEMENT BY OBJECTIVES

REWARD SYSTEMS

Annual ObjectivesExampl

es:

To e n h a n c e o r i m p ro v e t h e t r a i n i n g e ff o r t .

To i m p ro v e t h e b u s i n e s s ’ s i m a g e .

D e fi c i e n t A n n u a l O b j e c t i v e s

A n n u a l O b j e c t i v e s w i t h m e a s u r a b l e c r i t e r i a f o r p e r f o r m a n c e

To i n c re a s e t h e n u m b e r o f i n d i v i d u a l s c a p a b l e o f p e r f o rm i n g X o p e r a t i o n i n m a n u f a c t u r i n g b y 2 0 % b y A p r i l 1 5 , 2 0 X X

To p ro v i d e s a l e s t r a i n i n g t o X n u m b e r o f i n d i v i d u a l s , re s u l t i n g i n a n a v e r a g e i n c re a s e i n s a l e s o f 4 % w i t h i n s i x m o n t h s a f t e r t h e t r a i n i n g s e s s i o n .

Management by Objectives

Elements of the MBO System

C o m m i t m e n t t o t h e p ro g r a m .

To p - l e v e l g o a l s e t t i n g .

I n d i v i d u a l g o a l s .

Pa r t i c i p a t i o n .

A u t o n o m y i n i m p l e m e n t a t i o n o f p l a n s .

Pe r f o rm a n c e re v i e w.

Reward Systems

Elements of Reward System Fi n a n c i a l Re w a rd s

B a s e S a l a r y Pa y I n c e n t i v e s E m p l o y e e B e n e fi t s

N o n - Fi n a n c i a l Re w a rd s I n t r i n s i c re w a rd s Pr a i s e , Re c o g n i t i o n

Pol icy Issues in Reward System J o b - b a s e d v s . I n d i v i d u a l - b a s e d Pa y

D e s i g n S e n i o r i t y Fi xe d v s . Va r i a b l e Pa y Pe r f o rm a n c e v s . M e m b e r s h i p a s

B a s i s Fo r Re w a rd s

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