Principles of Management 1

Foundations of Planning

Lecturer: Dr. Mazen Rohmi

Department: Business Administration
 Learning Objectives
 Define the nature and purpose of planning.
 Classify the types of goals organizations might have

and the plans they use.

 Compare and contrast approaches to goal-setting and

planning.
 Discuss contemporary issues in planning.
 ?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.
 It’s concerned with both ends (what) and means (how).
 Formal Planning
 When we use the term planning, we mean formal
planning.

 In formal planning, specific goals covering a specific

time period are defined.

 These goals are written and shared with organizational

members to reduce ambiguity and create a common
understanding about what needs to be done.
 ?Why Do Managers Plan

Planning seems to take a lot of effort. So why should

managers plan? We can give you at least four reasons.

1. Planning provides direction to managers and nonmanagers

alike.

When employees know what their organization or work unit

is trying to accomplish they coordinate their activities,
cooperate with each other to accomplish those goals.
2. Planning reduces uncertainty by forcing managers to
look ahead, anticipate change, consider the impact of
change, and develop appropriate responses.
 ?Why Do Managers Plan
3. Planning minimizes waste and redundancy (Repetition of an act
needlessly).

4. Planning establishes the goals or standards used in controlling.

When managers plan, they develop goals and plans. When they control,
they see whether the plans have been carried out and the goals met.

Without planning, there would be no goals against which to measure

work effort.
 Planning and Performance
 Is planning worthwhile?
1. Formal planning is associated with positive financial
results—higher profits, higher return on assets, and so
forth.
2. Doing a good job planning and implementing those plans
play a bigger part in high performance than does how
much planning is done.
3. the planning-performance relationship seems to be
influenced by the planning time frame. It seems that at
least four years of formal planning is required before it
begins affect performance.
 Goals and Plans

 Planning is often called the primary management

function because it establishes the basis for all the other
things managers do as they organize, lead, and control.

 Planning involves two important aspects:

goals and plans.
 Goals
 Goals (objectives) are desired outcomes or targets.
They guide management decisions and form the
criterion against which work results are measured.
 That’s why they’re often described as the essential

elements of planning.

 Managers have to know the desired target or outcome

before you can establish plans for reaching it.
 Plans
 Plans are documents that outline how goals are going
to be met.

 They usually include resource allocations, schedules,

and other necessary actions to accomplish the goals.

 As managers plan, they develop both goals and plans.

 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

 Most company’s goals as either strategic or financial.

• Financial Goals - Financial goals are related to the financial
performance of the organization.

• Strategic Goals - related to the performance of the firm

relative to factors in its external environment (e.g.,
competitors). strategic goals are related to all other areas of
an organization’s performance.


 Types of Plans

 The most popular ways to describe organizational plans are

breadth (strategic versus operational), time frame (short
term versus long term), specificity (directional versus
specific), and frequency of use (single use versus standing).

 Strategic plans are usually long term, directional, and

single use whereas operational plans are usually short term,
specific, and standing

 As Exhibit 8-1 shows, these types of plans aren’t

independent.
Types of Plans
 Types of Plans
• Strategic plans are plans that apply to the entire organization and
establish the organization’s overall goals.
• Plans that encompass a particular operational area of the organization
are called operational plans. These two types of plans differ because
strategic plans are broad while operational plans are narrow.
• Strategic Plans
– 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 a short time period.
 Types of Plans

• Long-Term Plans
– Time frames extending beyond three years.
• Short-Term Plans
– Time frames of one year or less.

 Any time period in between would be an intermediate

plan. Although these time classifications are fairly
common, an organization can use any planning time
frame it wants.
 Types of Plans

• Specific Plans
– Plans that are clearly defined and leave no room for
interpretation.

• Directional Plans
– are flexible plans that set out general guidelines. They
provide focus but don’t lock managers into specific
goals or courses of action, allow discretion(Freedom to act or
judge on one's own) in implementation.
 Types of Plans

• Single-Use Plan
– A one-time plan specifically designed to meet the
need of a unique situation.

• Standing Plans
– Ongoing plans that provide guidance for activities
performed repeatedly.
 Traditional Goal Setting
• Broad goals are set at the top of the organization.
• Goals are then broken into sub-goals for each
organizational level.
• Goals are intended to direct, guide, and constrain
from above.
• Goals lose clarity and focus as lower-level
managers attempt to interpret and define the
goals for their areas of responsibility.
 Steps in Goal Setting
1. Review the organization’s mission statement.
?Do goals reflect the mission
2. Evaluate available resources.
?Are resources sufficient to accomplish the mission
3. Determine goals individually or with others.
?Are goals specific, measurable, and timely
4. Write down the goals and communicate them.
?Is everybody on the same page
5. Review results and whether goals are being met.
?What changes are needed in mission, resources, or goals
Well-Written Goals
Management By Objectives (MBO)
 Instead of using traditional goal setting, many
organizations use management by objectives (MBO), a
process of setting mutually agreed-upon goals and
using those goals to evaluate employee performance.
• Specific performance goals are jointly determined by
employees and managers.
• Progress toward accomplishing goals is periodically
reviewed.
• Rewards are allocated on the basis of progress towards
the goals.
 Key Elements Of MBO
– goal specificity
– participative decision making
– an explicit performance/evaluation period
– Feedback

Instead of using goals to make sure employees are doing what they’re
supposed to be doing, MBO uses goals to motivate them as well.

The appeal is that it focuses on employees working to accomplish

goals they’ve had a hand in setting.
 ?Does MBO Work
 Studies have shown that it can increase employee
performance and organizational productivity.

Potential Problems with MBO Programs:

 Are less effective in dynamic environments that require

constant resetting of goals.

 Overemphasis on individual accomplishment may

create problems with teamwork.
.contemporary issues in planning
 One contemporary planning issue is planning in dynamic environments,
which usually means developing plans that are specific but flexible.

 Also, it’s important to continue planning even when the environment is

highly uncertain.

 Finally, because there’s little time in a dynamic environment for goals and
plans to flow down from the top, lower organizational levels should be
allowed to set goals and develop plans.