Chapter 7- Planning - Lecture notes 7 PDF

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These are the introduction to business management first semester chapter 7 lecture notes, the lecturer is Morogwa Ramasobana...

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CHAPTER 7: PLANNING CHAPTER CONTENT • Introduction • The benefits and costs of planning • Managerial goals and plans • The planning process • The implementation of plans • Summary Introduction • First component of management process • Planning gives direction • Forces managers to be future-oriented • Enables the organization to deal with changes in the business environment • The chapter focuses on two components of planning  Goals  Plans The benefits of planning • Planning provides direction- by creating a blueprint of where the organization is heading (goals) & formulating plans to attain these goals, by producing products that customers want & providing these products at the lowest cost. • Planning reduces the impact of change- process of goal setting & planning is future oriented. Managers scan the environment to anticipate change that may affect the organization in the

future. they plan to exploit opportunities & avoid threats, thereby reducing uncertainty and risks caused by change • Planning promotes coordination- focuses all activities of the organization in one direction: to attain the organization’ goals effectively & efficiently. If all members of the organization are aware of the goals they have to meet, they can coordinate their activities. This will foster cooperation and team work • Planning ensures cohesion- cohesion is a condition in which people are closely united. When employees know that they are all working towards a common goal they tend to be united and work together • Planning facilitates control- control enables management to measure the actual performance against the set goals & plans & to take corrective action if significant deviations occur The costs of planning • Planning may create rigidity- managers may not be inclined to deviate from set plans, even when changes in the environment may require flexibility in terms of planning. • Planning consumes management time- Planning may require a substantial portion of the valuable time & energy of all managers • Formal plans may replace intuition and creativity- the formal planning process can turn into a programmed routine subsequently reduce the important role of creativity & intuition in planning. • Planning could cause delays in decision-making- planning could shift the focus in the organization from performing to evaluating, resulting in a delay in making crucial decisions regarding environmental changes that influence the organization

The nature of goals • Goals are the starting point of the planning process • Goals pertain to different aspects of the organization. ( goals at the top, middle & lower management) • Goals may be short, intermediate or long term • Goals may be publicly stated or not. Official goals are publicly declared in annual reports & media whereas operative goals represent the private goals of an organization.

The importance of goals • Goals provide guidance and agreement on the direction of the organization and steer all employees in the same direction. • Goals facilitate effective planning in terms of resource deployment. • Goals can inspire and motivate employees especially if they can perceive a link between their performance in terms of goal achievement & rewards they receive. • Goals provide a basis for employee & organizational evaluation • Effective goal setting plays an important part in the success of organizations Criteria for effective goals • SMART • Goals should be specific- when a goal is specific it indicates what the goal relates to, the period to which the goal refers & the specific desired results of the goal. • Goals should be measurable- the goal must be expressed in numbers

• Goals should be attainable- must be attainable • Goals should be relevant- they should relate to the organizations’ mission & strategic goals • Goals should be time-bound- should have a specific time limit

A goal-setting technique • Management by objectives- A technique designed to achieve the integration of individual & organizational goals in organizations.  Management and employees define goals for every department, project & person & use them to monitor subsequent performance  Employee establishes performance targets

MBO process • The manager & employee have a discussion that establishes the job description & performance areas for the employee • Employee establishes key performance targets, then both the manager & employee develop goals for the employee • Employee and manager mutually establish checkpoints to measure employee progress • Evaluation of degree of goal-attainment takes place at the end of the pre-determined period. It is based on the achieved results compared with the pre- determined goals

The nature of plans • A plan is a blueprint for goal achievement- it indicates how goals are going to be reached by specifying the resources that will be used • When formulating plans, managers consider alternative plans in order to select the best plan to achieve the pre-determined goals • External factors, strengths and weaknesses, and costs affect the chosen plan. External factors can be economic trends. Managers capitalize on their strengths, plans should not expose the weakness of the organization. The plan should be within the budget

The planning context There are 5 parameters for organizational planning • The purpose of the organization- includes its obligation to society (e.g. providing safe products at reasonable prices) & its stakeholders (e.g. profit) • The mission statement of the organization- sets out the unique purpose that distinguishes the organization from others of its type. Mission statement guides the goal setting & planning • The environment-organizations set long term goals & formulate strategic plans to reconcile their internal strengths and weaknesses with external opportunities & threats • The values of managers- influence organizational culture, strategy, structure & the commitment to CSR • The experience of management- influences the planning performance of managers

Steps in the planning process • Establish goals • Develop alternative plans • Evaluate alternative plans • Select a plan • Implement the plan • Perform reactive planning if necessary

The planning process

Strategic goals and plans • Strategic goals • Strategic plans. • Tactical goals • Tactical plans • Operational goals • Operational plans Strategic goals Top management formulate strategic goals that apply to the whole organization • Strategic goals include a vision, a mission statement and longterm goals:  Vision – managers consider new possibilities to carry organization into the future  Mission statement – spells out the main goal of the organization  Long-term strategic goals – stem from the mission statement, include critical areas such as profitability, productivity, competitive position, human resource development, human relations, technological leadership and social responsibility Strategic plans In order to achieve strategic goals, top management develop strategic plans . • Strategic plans focus on organization as a whole, over a period of five years.

• Has two levels - corporate strategies and business strategies:  Corporate strategies – focus on scope of organization and how resources are used  Business strategies – determine how best to compete in a particular industry or market.

Tactical goals and plans • Also known as functional goals and plans • Focus on tasks required to achieve strategic goals  Tactical goals – are medium-term or short-term goals derived from long-term goals  Tactical plans – more specific focus, deal with human resource commitment, resource allocation & time issues.

Operational goals and plans • Developed by middle-level and lower-level managers • Operational goals – short-term goals, no more than one year, and deal with day-to-day activities • Operational plans – short-term plans, purpose to achieve operational goals.

Two forms of operational plans: • Single-use plans- developed to achieve a set of goals that are not likely to be repeated in future(e.g. project of building a school)

• Standing plans- ongoing plans that provide direction for tasks that are performed repeatedly in the organization (e.g. policies, rules & standard procedures The implementation of plans • Developing a framework for execution • Leadership to set the plan in motion • Control to determine whether the performance is going according to the plan • If there is any deviation from the plan, control will reveal this & reactive planning may be necessary...