Planning is one of the four functions of management. Fundamental information about managerial planning is presented in this chapter; the text discusses the nature and purposes of planning, strategies for effective planning, and contemporary planning issues.
THE WHAT AND WHY OF PLANNING
Planning involves defining the organization’s goals, establishing an overall strategy for achieving these goals, and developing plans for organizational work activities. The term planning as used in this chapter refers to formal planning.
GOALS AND PLANS
Planning involves two important elements: goals and plans.
Types of Goals
Goals (often called objectives) are desired outcomes for individuals, groups, or entire organizations.
Financial goals versus strategic goals
Financial goals are related to the financial performance of the organization.
Strategic goals are related to all other areas of an organization’s performance.
Stated goals versus real goals
Stated goals are official statements of what an organization says and what it wants its various stakeholders to believe its goals are.
Real goals are those that an organization actually pursues, as defined by the actions of its members.
Types of Plans
1. Plans are documents that outline how goals are going to be met.
2. Plans can be described by their breadth, time frame, specificity, and frequency of use
a. Breadth: Strategic versus operational plans. Strategic plans (long-term plans) are plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment. Operational plans (short-term plans) are plans that specify the details of how the overall goals are to be achieved.
b. Time frame: Short-term versus long-term plans. Short-term plans are plans that cover one year or less. Long-term plans are plans with a time frame beyond three years.
c. Specificity: Specific versus directional plans. Specific plans are plans that are clearly defined and leave no room for interpretation. Directional plans are flexible plans that set out general guidelines.
d. Frequency of use: Single-use versus standing plans. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.
SETTING GOALS AND DEVELOPING PLANS
A. Approaches to Setting Goals.
Goals can be established through the process of traditional goal setting or through MBO (management by objectives).
1. Traditional goal setting is an approach to setting goals in which goals are set at the top level of the organization and then broken into subgoals for each level of the organization.
Traditional goal setting assumes that top managers know what is best because of their ability to see the “big picture.” Employees are to work to meet the goals for their particular area of responsibility.
This traditional approach requires that goals must be made more specific as they flow down to lower levels in the organization. In striving to achieve specificity, however, objectives sometimes lose clarity and unity with goals set at a higher level in the organization
When the hierarchy of organizational goals is clearly defined, it forms an integrated means-end chain—an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level.
2. Management by objectives (MBO) is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance.
Studies of actual MBO programs confirm that MBO can increase employee performance and organizational productivity. However, top management commitment and involvement are important contributions to the success of an MBO program.
Characteristics of Well-Written Goals
1 Written in terms of outcomes
2. Measurable and quantifiable
3. Clear as to a time frame
4. Challenging yet attainable
5. Written down
6. Communicated to all organizational members
Steps in Goals Setting
1. Review the organization’s mission (the purpose of the organization).
2. Evaluate available resources.
3. Determine the goals individually or with input from others
4. Write down the goals and communicate them to all who need to know.
5. Review results and whether goals are being met. Make changes as needed.
B. Developing Plans
The process of developing plans is influenced by three contingency factors and by the particular planning approach used by the organization.
Contingency Factors in Planning:
Manager’s level in the organization. Operational planning usually dominates the planning activities of lower-level managers. As managers move up through the levels of the organization, their planning becomes more strategy oriented
Degree of environmental uncertainty. The greater the environmental uncertainty, the more directional plans should be, with emphasis placed on the short term.When uncertainty is high, plans should be specific, but flexible.
Length of future commitments. According to the commitment concept, plans should extend far enough to meet those commitments made today.Planning for too long or for too short a time period is inefficient and ineffective.
Approaches to Planning
1. In the traditional approach, planning was done entirely by top-level managers who were often assisted by a formal planning department.
2. Another approach to planning is to involve more members of the organization in the planning process. In this approach, plans are not handed down from one level to the next, but are developed by organizational members at various levels to meet their specific needs.