Foundations

of
Planning
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Learning Objectives
• Define planning
• Explain the benefits of planning
• Compare strategic and operational plans
• Discuss directional and specific plans
• Compare single-use and strategic plans
• Identify contingency factors in planning
• Explain the commitment concept
• Examine the criticisms of formal planning
• Explain how objectives relate to planning
• Compare stated with real objectives
• Contrast the traditional approach to setting objectives and MBO

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INTRODUCTION:
Does success just happen?
Are successful companies (G.E., Coca cola, Microsoft, etc.) just lucky?

When managers plan, they attempt to establish the ends (WHAT is to be

accomplished), as well as the means (HOW it is to be accomplished).

Research has shown that we cannot assume organizations with formal

planning processes always outperform those that don’t have formal
planning processes.

Generally speaking, however, formal planning is associated with positive

financial results!

The quality of the planning process and appropriate implementation

probably contribute more to high performance

When formal planning has been shown not to lead to higher performance,
the environment is usually the reason.

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 PURPOSES OF PLANNING

PROVIDE CONTROL EFFECTS

DIRECTION OF CHANGE

SET OBJECTIVES OR MINIMIZE WASTE AND

CONTROL STANDARDS REDUNDANCY

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 The Definition of Planning

Define objectives or goals

Establish an overall strategy

Develop a hierarchy of plans

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THE OVERALL PLANNING PROCESS

GOAL
ATTAINMENT
MISSION GOALS PLANS (organizational
efficiency and
effectiveness)

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MAJOR COMPONENTS OF PLANNING
GOAL is a future target or end result that an organization wishes to
achieve.
Goal = Objective : interchangeable
Differences:
i. GOAL to be a broader term, encompassing a longer time horizon.
ii. OBJECTIVE refer to more narrow targets and shorter time frames.

Whereas GOAL is a future end result that an organization wants to achieve;

PLAN: is the means devised for attempting to reach a goal.
Benefits of goals:
1. Clarify expectations.
2. Facilitate the controlling function (by providing benchmark).
3. Increase motivation (sense of accomplishment)

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A MISSION STATEMENT:

Essentially, the planning process builds on the MISSION of the

organization, the organization’s purpose or fundamental reason for
existence.
MISSION STATEMENT is a broad declaration of the basic, unique
purpose and scope of operations that distinguish the organization from
others of its type.
serves several purposes:
1. For managers, it can be a benchmark against which to evaluate success.
2. For employees, a mission statement defines a common purpose, nurtures
organizational loyalty, and fosters a sense of community among workers.
3. For external parties (e.g. investors, governmental agencies, public) the
statement helps provide unique insight into the organization’s value and
future directions.
4. In some organizations, the mission statement is explicitly presented as a
formal written document.

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Mission statements: tend to be made up of some or all of the following:
1. Customers.
‘the purpose of Motorola is to honorably serve the needs of the community
by providing product and service of superior quality at a fair price to our
customer’

2. Product or services
‘we provide our customers with retail banking, real estate finance, and
corporate banking products which will meet their credit, investment,
security, and liquidity needs’.

3. Location
‘supreme Corporation’s mission is to be a leading consumer marketing
company in Malaysia and internationally’.

4. Technology
‘Du Pont is a diversified chemical, energy, and specialty products company
with a strong tradition of discovery’.

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5. Concern for survival
‘to serve the worldwide need for knowledge at a fair profit by gathering,
evaluating, producing, and distributing valuable information in a way
that benefits our customer, employees, authors, investors, and our
society’.

6. Philosophy
‘it’s all part of the Mitsumi philosophy: a philosophy based on the golden
rule. A spirit of sharing and caring where people give cheerfully of their
time, knowledge, and experience’.

7. Self concept
‘Capital Corp. is committed to leapfrogging competition within 1000 days by
unleashing the constructive and creative abilities and energies of each
of its employees.

8. Concern for public image

‘the company feels an obligation to be good corporate citizen wherever it
operates’.
9. Concern for employees

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 LEVEL OF GOALS
1. Strategic goals.
Targets or future end results set by top management.
Strategic goal sometimes called official goals because they are formally
stated by top management.

2. Tactical goals:
Are target or future end results usually set by middle management for
specific departments or units. Goal at this level spell out what must be
done by various department to achieve the results outlined in the
strategic goals.

3. Operational goals:
Are targets or future end results set by lower management that address
specific measurable outcomes required from the lower level.

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 Job Knowledge and
ability

Goal content:
• Challenging Work Behavior:
• Attainable • Direction
• Specific and • Effort
measurable PERFORMANCE
• Persistence
• Time limit
• Planning
• Relevant

Goal Commitment:
Situational Constraints:
• Supervisory authority
• Tools
• Peer and group pressure
• Materials and Equipment
• Public display
• Political
• Expectations of success
• Economic
• Incentives
• Participation
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 Types of
Planning

Informal Formal
Plans Plans

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 Myths
About Planning

Wastes Eliminates Reduces

Time Change Flexibility

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 Planning
and Performance
Profits and Return on Investment

Quality and Implementation

Environmental Constraints

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 Time
Breadth
Strategic Vs. Operational
Frame
Short term Vs. long term

How Plans
Differ
Frequency
Specificity
of Use
Directional vs. specific Single use plan vs.
standing

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 Strategic Versus
Operational Plans

Time
Scope
Frame

Organizational
Objectives
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 Short-Term Versus
Long-Term Plans

One Year Three Years

or Less or More

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 Specific Versus
Directional Plans

Defined General
Objectives Guidelines

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 Single-Use Versus
Standing Plans

Response Guidance
to Unique for Routine
Situations Activities
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 Contingency
Factors in Planning
Level Degree of
in the Environmental
Organization Uncertainty

Length
of Future
Commitments
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 Criticisms of Planning

Can Create Rigidity

May Fail in a Dynamic Environment

Can’t Replace Intuition and Creativity

Focuses on Short-run Competition

Creates a False Sense of Security

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 Objectives: The
Foundation of Planning

Objectives Are Goals

Stated
Multiple
Versus Real
Objectives
Objectives
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 Top Management
“Improve the company’s performance.”

Top-Down Information Flow

Traditional Objective Setting

Divisional Managers
“Improve the division’s profits.”

Departmental Managers
“Increase profits by any means.”

Individual Employees
“Don’t worry about quality; work fast!”

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 Management
by Objectives

• Set Organizational Goals

• Set Departmental Goals
• Discuss Departmental Goals
• Set Individual Goals
• Provide Feedback
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