CHAPTER 3: PLANNING

PLANNING
Planning is a process that involves the
setting of the organization’s goals,
establishing strategies for
accomplishing those goals and
developing plans of actions that
managers intend to use to achieve
said organizational goals.
 PLANNING
PLANNING is important because: it
provides direction to all of the
organization’s human resource’
managers and employees, reduced
uncertainty and minimizes wastes of
time, effort and resources.
 PLANNING
GOALS are the targets that
management desires to reach while
PLANS are the means or actions which
management intends to use to
achieve the said goals/targets.
 PLANNING
Plans are best described in terms of
their:
• Comprehensiveness
• Time frame
• Specificity
• Frequency of use
 PLANNING

PLANS

Comprehen Frequency
Time frame Specificity
siveness of use
 PLANNING
Planning steps include:
• Defining of goals/objectives
determining where you stand in
relation to set goals/objectives
• Developing premise regarding
future conditions
 PLANNING
Planning steps include:
• Analyzing and choosing action
alternatives
• Implementing the plan
• Evaluating results and taking
corrective action
 PLANNING Defining of
goals/objectives
determining
where you stand
in relation to set
goals/objectives

Evaluating results Developing

and taking premise
corrective regarding future
action conditions

How does a
MANAGER
plan? Implementing
Analyzing and
choosing action
the plan
alternatives
 PLANNING
Planning types includes:
1. Strategic 6. Directional
2. Tactical 7. Specific
3. Operational 8. Single use
4. Long term 9. Standing plans
5. Short term
 TYPES OF PLANNING
STRATEGIC PLANNING
• Strategic planning sets the long-
term direction of the organization in
which it wants to proceed in future.
 STRATEGIC PLANNING
• It focuses on the broad future of the
organization. Incorporating both external
information gathered by analyzing the
company’s competitive environment and
the firms internal resources, managers
determine the scope of the business to
achieve the org long-term objectives.
 STRATEGIC PLANNING
• Strategic planning involves the
analysis of various environmental
factors and the competition.
• Most strategic plans focus on how
to achieve goals three to five years into
the future.
 STRATEGIC PLANNING
• It has the potential to impact
dramatically, both positively and
negatively, on the survival and success
of the organization.
• Typically 3-5 years of horizon
• Top management is involved in
framing the strategic plans.
 TACTICAL PLANNING

Tactical plans translate the strategic

plans into specific goals for specific
parts of the organizations.
They are for shorter time frame and
usually focused for 1-2 years
 TACTICAL PLANNING
 Instead of focusing on the entire
corporation, tactical plans typically affect
a single business within an organization.
 Although tactical plans should
complement the organizations overall
strategic plan, they are often somewhat
independent of other tactical plans.
 TACTICAL PLANNING
Tactical plans are concerned with
implementation of strategic plans by
coordinating the work of different
departments in the organization.
They try to integrate various
organization units and ensure the
commitment to strategic plans.
 OPERATIONAL PLANNING
Operational plans translate the
tactical plans into specific goals and
actions for small units of the
organization.
They typically focus on the short term
usually 12 months or less.
 OPERATIONAL PLANNING
These plans are least complex than
strategic and tactical plans, and
rarely have a direct effect on other
plans outside of the department or
unit for which the plan was
developed.
 LONG-TERM PLANNING
 Long term planning is of strategic
nature and involves long period say 3-5
yrs. The long term plans usually
encompass all the functional areas of
the business and are affected within the
existing and long-term framework of
economic, social and technological
factors.
 SHORT-TERM PLANNING
 Short term planning is usually a plan
made for one year. These are aimed at
sustaining organization in its production
and distribution of current products or
services to the existing markets. These
plans directly affect functional groups(
production, marketing, finance)
 STANDING PLANS
 Standing plans are put to use again
and again over a long period of time.
Once established they continue to
apply until they are modified or
abandoned. Standing plan help
managers in dealing with routine
matters in a pre-determined and
consistent manner.
 STANDING PLANS
 Examples of standing plans are:
organizational mission and long term
objectives, strategies, policies,
procedures and rules.
 SINGLE USE PLANS
 Single use plans are relevant for a
specified time and after the lapse of that
time, these plans are formulated again
for the next period.
 Single use plans are non-recurring in
nature and deal with problems that
probably will not be repeated in the
same form in future.
 SINGLE USE PLANS

 Generally these plans are derived from

the standing plans
Examples: projects, budgets, targets.
STANDING vs. SINGLE USE
PLANS

STANDING
SINGLE-USE PLAN
PLANS

1) OBJECTIVES
2) POLICIES &
STRATEGIES 1)PROGRAMMES
3) PROCEDURES 2) PROJECTS
4) METHODS 3) BUDGETS
5) RULES
 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.
DIRECTIONAL vs. SPECIFIC
PLANNING at DIFFERENT LEVELS
CORPORATE LEVEL
 Most corporation of even moderate size have a
corporate headquarters. The heads of these
groups are typically part of the group of senior
executives at the corporate headquarters.
Executives at the corporate level in large firms
include both those in the headquarters and those
heading up the large corporate groups such as
finance, human resources, marketing etc.
PLANNING at DIFFERENT LEVELS
CORPORATE LEVEL
 These corporate-level executives primarily focus on
the questions such as
 What industries should we get into?

 What markets should the firm be in?

 In which business should the corporation invest

money?
 What resources should be allocated to each
business?
PLANNING at DIFFERENT LEVELS
BUSINESS LEVEL
 At this level managers focus on determining how
they are going to compete effectively in market.
 At this level, managers attempt to address
questions such as:
 Who are our direct competitors?
 What are their strengths and weaknesses?

 What are our strengths and weaknesses?

 What advantages do we have over competitors?

PLANNING at DIFFERENT LEVELS
FUNCTIONAL LEVEL
 At this level managers focus on how they can facilitate
the achievement of the competitive plan of the
business. These managers are often the heads of
departments such as finance, marketing, human
resources or product development.
 Depending on the business structure this can include
managers responsible for business within a specific
geographic region or managers responsible for specific
retail stores.
PLANNING at DIFFERENT LEVELS
FUNCTIONAL LEVEL
 Functional managers attempt to address questions such
as:
 What activities does my unit need to perform well in
order to meet customer expectations?
 What information about competitors does my unit
need in order to help the business compete
effectively?
INTERRELATIONSHIP BETWEEN PLAN
TYPES AND LEVELS

Types of plans Organizational levels

Strategic plans Corporate level

Tactical plans Business level

Operational plans Functional plans

DECISION MAKING
RATIONAL
A type of decision making in which choices are
logical and consistent and maximize value.
 Assumptions of rationality: a rational decision
maker would be fully objective and logical. He will
have a clear and specific goal and know all the
possible alternatives and consequences.
 FORECASTING
 CONTINGENCY PLANS
 SCENARIO PLANNING
 BENCHMARKING
 PARTICIPATORY PLANNING
DECISION MAKING
RATIONAL
 Making decisions rationally would consistently lead
to selecting the alternative that maximizes the
likelihood of achieving that goal.
 Decisions are made in the best interest of the
organization.
DECISION MAKING
BOUNDED RATIONALITY
 It is more realistic approach
 Managers make decisions rationally but are bounded
by their ability to process information. Because they
cant possibly analyze all information on all
alternatives, manager satisfice rather than maximize.
i.e. they accept the solutions that are good enough.
 They are being rational within the limits of their ability
to process information.
DECISION MAKING
INTUITION BASED
 Making decisions on the basis of experience,
feelings and judgment.
 It can be cognitive-based , experience-based,
value or ethics based, or subconscious mental
processing
DECISION MAKING STYLES

LINEAR THINKING STYLE is characterized

by a person’s preference for using
external data and facts and processing
this information through rational, logical
thinking to guide decisions and actions.
DECISION MAKING STYLES
NON-LINEAR THINKING STYLE is
characterized by a person’s preference
for using the internal sources of
information ( feeling and intuitions) and
processing this information with the
internal insights, feelings and hunches to
guide decisions and actions.
DECISION MAKING ERRORS and BIASES
1. Immediate gratification: it describes
the decision makers who tend to want
immediate rewards and to avoid
immediate costs. For this individuals,
decision choices that provides quick
payoffs are more appealing than those
that may provide payoffs in the future.
DECISION MAKING ERRORS and BIASES
2. ANCHORING EFFECT: it describes the
situation when decision makers fixate on
initial information as a starting point and
once then set, fail to adequately adjust
for subsequent information. First
impressions, ideas, prices and estimates
carry unwanted weight relative to the
information received later.
DECISION MAKING ERRORS and BIASES
3. SELECTIVE PERCEPTION BIAS: when
decision makers selectively organize and
interpret events based on their biased
perception, they are using selective
perception bias. This influences the
information they pay attention to , the
problems they identify and the
alternatives they develop.
DECISION MAKING ERRORS and BIASES
4. CONFIRMATION BIAS: decision makers
that seek out the information that
reaffirms their past choices and discount
information that contradict the past
judgments is the confirmation bias. This
people ignore the critical information
that challenges their preconceived
ideas.
DECISION MAKING ERRORS and BIASES
6. AVAILABILITY BIAS: it causes decision
makers to tend to remember events that
are the most recent and vivid in their
memory. The bias distorts their ability to
recall events in an objective manner and
results in distorted judgments and
probability estimates.
DECISION MAKING ERRORS and BIASES
7. REPRESENTATION BIAS: when decision
maker assess the likelihood of an event
based on how closely it resembles other
events. Managers see identical situation
where they don’t exist.
8. RANDOMNESS: it occurs when decision
makers try to create meaning out of
random events.
DECISION MAKING ERRORS and BIASES
9. SUNK COST ERRORS: decision makers
forget that current choices cant correct
the past. They incorrectly fixate on past
expenditures of time, money or effort in
assessing their choice.
DECISION MAKING ERRORS and BIASES
10. SELF-SERVING BIAS: decision makers
who are quick to take credit for their
success and to blame failure on outside
factors exhibit this bias.
DECISION MAKING ERRORS and BIASES
11. HINDSIGHT BIAS: it is the tendency for
decision makers to falsely believe, after
that outcome is actually know, that they
could have accurately predicted the
outcome of the event.
 STEPS in DECISION MAKING
STEP 1: IDENTIFICATION OF THE PROBLEM
STEP 2: IDENTIFICATION OF THE DECISION
CRITERIA
STEP 3: ALLOCATION OF WEIGHTS TO THE
CRITERIA
STEP 4: THE DEVELOPMENT OF ALTERNATIVES
 STEPS in DECISION MAKING
STEP 5: THE ANALYSIS OF ALTERNATIVES
STEP 6: SELECTION OF AN ALTERNATIVE
STEP 7: IMPLEMENTATION OF THE
ALTERNATIVE CHOSEN
STEP 8: EVALUATION THE DECISION
EFFECTIVENESS
DECISION MAKING CONDITIONS
1. CERTAINTY: it is the ideal situation to
make decision. The outcome of every
alternative is known.

2. RISK: a situation in which the decision

maker is able to estimate the likelihood
of certain outcomes.
DECISION MAKING CONDITIONS

3. UNCERTAINTY: A situation in which a

decision maker has neither certainty nor
reasonable probability estimates
available.
DECISION MAKING CONDITIONS

3. UNCERTAINTY: A situation in which a

decision maker has neither certainty nor
reasonable probability estimates
available.
TASK 1
State at least one long term plan for a
business firm with corresponding tactical
and operational plans to achieve them.
EXAMPLE
HOTEL SERVICE To expand Hotel Service to different
STRATEGIC PLAN parts of the Philippines in 7 years
OPERATIONAL PLAN FINANCIAL DEPARTMENT
To allocate 30% of annual hotel income
for planned expansion of hotel service
TACTICAL PLAN FRONTLINE MANAGERS FOR
TRAINING DEVELOPMENT
To have continuing training development
programs for Hotel Personnel to ensure
excellent Hotel services which will
ensure good hotel income.
TASK 2
Arrange the steps of the Decision Making
Process according to its chronological
order. Number the first step 1 and the last
step 8.
TASK 2
___ Development of alternatives
___ Evaluation of Decision Effectiveness
___ Identification of Decision Criteria
___ Identification of a Problem
___ Analysis of alternatives
___ Implementation of alternative Chosen
___ Allocation of Weights to the Criteria
___ Selection of alternative