Principles of

Planning and
Planning Tools

Chapter 5

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 CHAPTER LEARNING OBJECTIVES

• An understanding of the general

characteristics of planning

• Knowledge regarding different types of plans

• Insights about the major steps of the planning

process

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 CHAPTER LEARNING OBJECTIVES

• An understanding of the relationship between

planning and organizational objectives

• An appreciation for the potential of a

management by objectives (MBO) program

• Knowledge about different types of planning

tools

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 GENERAL CHARACTERISTICS OF
PLANNING
• Defining Planning
– Process of determining how an organization can
get where it wants to go and what it will do to
accomplish its objectives
– Through planning, the firm identifies:
• Where it is going
• How it will get there

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 GENERAL CHARACTERISTICS OF
PLANNING
• Purposes of Planning
– Minimize risk by reducing uncertainties
– Increase degree of organizational success
– Establish a coordinated effort within the
organization
– Facilitate the accomplishment of the organization
and its objectives

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 GENERAL CHARACTERISTICS OF
PLANNING
• Advantages of Planning
– Helps managers become future-oriented
– Enhances decision coordination
– Emphasizes organizational objectives
– Helps ensure sustainability of the firm
– Helps managers identify and deal with problems
that arise as the firm conducts its business

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 GENERAL CHARACTERISTICS OF
PLANNING
• Disadvantages of Planning
– Managerial time involvement
– Rigidity and lack of adaptability
– Balance of time spent on organizing, influencing,
and controlling

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 GENERAL CHARACTERISTICS OF
PLANNING
• Primacy of Planning
– Planning is the primary management function
– Planning serves as the basis for the other
management functions

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 TYPES OF PLANS

• Standing
– Exist for routine guidelines & actions that occur
repeatedly
• Single-Use
– Exist for single purpose only

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STEPS IN THE PLANNING PROCESS

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STEPS IN THE PLANNING PROCESS

• Step 1 – State Organizational Objectives

– Managers begin the planning process with a clear
statement and understanding of the organization’s
objectives
• Step 2 – List Alternative Ways of Reaching
Objectives
– Managers need to list as many alternatives as
possible for reaching the firm’s objectives

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STEPS IN THE PLANNING PROCESS

• Step 3 – Develop Premises on Which to Base

Each Alternative
– Managers need to identify the premises and
assumptions upon which the alternatives are
based
• Step 4 – Choose the Best Alternative for
Reaching Objectives
– Managers determine which alternative best
accomplishes an organizational objective

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STEPS IN THE PLANNING PROCESS

• Step 5 – Develop Plans to Pursue the Chosen

Alternative
– Managers begin their strategic/long-range and
tactical/short-range plans based on the chosen
alternative
• Step 6 – Put the Plans into Action
– Managers implement the plan and evaluate the
results of the planning process

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 ORGANIZATIONAL OBJECTIVES

• The target toward which the organization’s

open management system is directed
• Reflect the purpose (mission) of the
organization
• Identify what the organization exists to do,
given a particular group of customers and
customer needs

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ORGANIZATIONAL OBJECTIVES

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 ORGANIZATIONAL OBJECTIVES

• In an open management system, the

organization’s targets/objectives are reached
from many sources

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 ORGANIZATIONAL OBJECTIVES
AREAS OF FOCUS
• Market Standing
• Innovation
• Productivity
• Physical & Financial Resources
• Profitability
• Managerial Performance & Development
• Worker Performance & Attitudes
• Public Responsibility
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 ORGANIZATIONAL OBJECTIVES

• Three Types of Objectives

– Short-Term
• Targets to be reached in one year or less
– Intermediate-Term
• Targets to be achieved in one to five years
– Long-Term
• Targets to be achieved in five to seven years

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 ORGANIZATIONAL OBJECTIVES

• Guidelines for Establishing Quality Objectives

– Let the individuals responsible for attaining the
objectives have a voice in setting them
– State objectives as specifically as possible
– Relate objectives to specific actions whenever
necessary
– Pinpoint expected results

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 ORGANIZATIONAL OBJECTIVES

• Guidelines for Establishing Quality Objectives

– Set goals high enough that employees will have to
strive to meet them but not so high employees
will give up trying to meet them
– Specify when goals are expected to be achieved
– Set objectives only in relation to other
organizational objectives
– State objectives clearly and simply

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 MANAGEMENT BY OBJECTIVES
(MBO)
• Management approach based exclusively on
objectives
• Includes three basic parts:
– Mutually set and agreed upon objectives
– Performance reviews conducted periodically
– Employees rewarded upon reaching goals

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 MANAGEMENT BY OBJECTIVES
(MBO)
• The MBO Process

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 MANAGEMENT BY OBJECTIVES
(MBO)
• Factors Necessary for a Successful MBO
Program
– Top management commitment
– Managers and employees develop goals together
– Employee performance conscientiously evaluated
against established objectives
– Management follow-through on employee
performance and reward accordingly

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 MANAGEMENT BY OBJECTIVES
(MBO)
• Advantages:
– Emphasize what should be done in an organization
to achieve organizational goals
– Secures employee commitment to attaining
organizational goals
• Disadvantages:
– Time-consuming
– Increased paperwork

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 PLANNING TOOLS

• FORECASTING
– Process of predicting future environmental
happenings that will influence the operations of
the organization
– Ability to help managers understand future
makeup of the organizational/managerial
environment helps managers formulate more
effective plans

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 Planning Tools - Forecasting

• Sales Forecasts
– Qualitative
• Jury of Executive Opinion Method
• Delphi Method
• Sales Force Estimation Method
– Quantitative
• Moving Average
• Regression
• Product Stages

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 Planning Tools - Forecasting

• Regression Analysis Method

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 Planning Tools - Forecasting

• Product Stages Method

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 PLANNING TOOLS

• SCHEDULING Process:
– Formulating detailed listings of activities that
must be accomplished to attain an objective
– Allocating resources necessary to attain the
objective
– Setting up and following time tables for
completing the objective

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 Planning Tools - Scheduling

• Gantt Charts

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 Planning Tools - Scheduling

• PERT – Program Evaluation & Review

Technique

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 WHY PLANS FAIL

• Understanding why plans fail helps eliminate

factors that cause failures and increases
probability plans will succeed…
– Planning not integrated
– Lack of understanding
– Managers across all levels are not engaged
– Responsibility is wrongly vested
– Expectation plans are realized effortlessly

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 WHY PLANS FAIL

• Understanding why plans fail helps eliminate

factors that cause failures and increases
probability plans will succeed…
– Too much attempted at once
– Management fails to implement the plan
– Financial projections confused with planning
– Inadequate inputs used in planning
– Failure to grasp overall planning process

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