Management, 6e Schermerhorn: Prepared by Cheryl Wyrick California State Polytechnic University Pomona

Management, 6e
Schermerhorn
Prepared by
Cheryl Wyrick
California State Polytechnic University Pomona
John Wiley & Sons, Inc

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Chapter 7
Planning - to Set the Direction
 Planning Ahead
– Why is planning an essential management
function?
– What types of plans are used by managers?
– What are the different approaches to planning?
– What planning tools and techniques are useful?
– How does Management by Objectives facilitate
planning?
Schermerhorn - Chapter 7 3
Planning as a Management
Function
 To plan is to decide what to accomplish and
how to do it
– define objectives
– evaluate accomplishments relative to objectives
– develop premises regarding future conditions
– analyze possible action alternatives
– implement plan and evaluate results
Planning as a Management
Function
 Benefits of Planning
– more focus and flexibility
– improved coordination
– better control
– better time management
Types of Plans in Organizations
 Short-Range and Long-Range Plans
– Short-range = 1 year or less
– Intermediate-range plans = 1-2 years
– Long-range = 3 or more years
 Strategic and Operational Plans
– Strategic plans
• address long-term needs
• set comprehensive action directions for an
organization
• responsibility of top management
 Strategic and Operational Plans
– Operational plans
• define what needs to be done in specific areas to
implement strategic plans
– production
– financial
– facilities
– marketing
– human resources
 Policies and Procedures
– standing plans
• policy is a broad guideline for making decisions and
taking action in specific circumstances
• procedures are plans that describe exactly what
actions are to be taken in specific circumstances
Budgets and Schedules
 Single-use plans
– budgets
• commit resources to activities, projects, or programs
• help clarify and reinforce action priorities
• facilitate the evaluation and control of results
• types are fixed, flexible, and zero-based
 Fixed budget
– allocates resources on a single estimate of costs
 Flexible budget
– allows allocation of resources to vary in
proportion with various levels of activity
 Zero-based
– project is budgeted as if it were brand new
 Project Schedules
– single-use plans that identify the
activities required to accomplish a
specific major project
 Business Plan
– typically used for new businesses
– describes details necessary to set direction and
get financing
Approaches to Planning
 Inside-Out Versus Outside-In Planning
– inside-out planning
• focus future effort on what one is already doing, but
try to improve
– outside-in planning
• look to external environment for opportunities
Top-Down Versus Bottom-Up
Planning
 Top-Down
– senior management sets broad objectives
– ensures common direction
– can fail in implementation due to lack of lower
level commitment
Planning
 Bottom-Up
– initiative that begins at lower levels of the
organization
– potential to generate high commitment
– does not define an integrated direction
Planning
 Best Planning
Approach
– begin at top
– proceed in a
participatory way
Planning
 Contingency Planning
– identifying alternative
courses of action if and
when original plan is
inadequate
Planning Tools and Techniques
 Forecasting
– making assumptions about what will happen in
the future
– part of a good plan
– ultimately relies on human judgment
 Types of forecasting
• qualitative
• quantitative
• econometric modeling
• statistical surveys
 Use of Scenarios
– identifying alternative future states of affairs
– plans made for each scenario
– increases organization’s flexibility
 Benchmarking
– use of external comparisons to better evaluate
one’s current performance
– identify possible actions for the future
– incorporate successful ideas into one’s own
organization
 Participation and Involvement
– Participative planning requires that workers
who will be affected be included in the
planning and/or implementation
 Role of Staff Planners
– lead and coordinate planning system
– help promote planning throughout organization
– sometimes used as advisors to hire managers
Management by Objectives
(MBO)
 MBO
– structured process of regular communication
– supervisor and worker jointly set performance
objectives
– jointly review results
(MBO)
 Formal agreement
– worker’s performance objectives for a specific
time period
– plans by which they will be accomplished
– standards for measuring results
– procedures for reviewing results
(MBO)
 Advantages
– clearly focuses employee work efforts
– clearly focuses manager’s work efforts
regarding areas of support
– relationship building between manager and
employee
– employee participates in decisions that affect
work
(MBO)
 Performance objectives
– improvement
– personal development
– maintenance
(MBO)
 Performance objective criteria
– specific
– time defined
– challenging
– measurable
(MBO)
 How to make MBO work
– hire best people
– work with them to set challenging performance
objectives
– give best possible support
– hold employee accountable
(MBO)
 Pitfalls to avoid
– tying MBO to pay
– focusing too much attention on easily
quantifiable objectives
– requiring excessive paperwork
– have managers tell workers their objectives

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