Copyright 2004 by South-Western, a division of Thomson Learning.

All rights reserved.

CHAPTER 4

Planning in the
Contemporary
Organization

Pamela S. Lewis
Stephen H. Goodman
Patricia M. Fandt
Slides Prepared by
Zulema Seguel

Learning Objectives

Slide 1 of 3

1. Describe the managerial function of

planning and why planning is critical for
effective leadership.
2. Discuss three approaches for initiating the
planning process.
3. Define strategic planning and describe the
three levels of strategic planning.
4. Define operational planning and
distinguish between standing and singleuse plans.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Learning Objectives

Slide 2 of 3

5. Describe individual planning systems such

as Management-by-Objectives programs
and the Balanced Scorecard.
6. Define contingency planning and identify
the circumstances under which contingency
planning would be appropriate.
7. Discuss how advances in information
technology have affected the planning
process.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Learning Objectives

Slide 3 of 3

8. Describe the common barriers to

effective planning and explain ways to
reduce these barriers.
9. Discuss how tomorrows leaders can
achieve success through planning.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Planning Defined

Planning
The process of outlining the activities
that are necessary to achieve the goals
of the organization.

A Plan
A blueprint for action: it prescribes the
activities necessary for an organization
to realize their goals.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Purpose of Planning
The purpose of planning is simple - to
ensure that the organization is both
effective and efficient in its activities.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Planning as a Linking Mechanism

Goals

Provide a clear,
engaging sense
of direction and
specify what is to
be accomplished.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Planning as a Linking Mechanism

Goals

Provide a clear,
engaging sense
of direction and
specify what is to
be accomplished.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Control

Monitor the extent

to which goals have
been achieved and
ensure the organization is moving in
the right direction
8

44

Planning as a Linking Mechanism

Goals

Plans

Control

Relationship among goals,

plans, and controls.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44

Benefits of Planning
Better Coordination
Focus on Forward Thinking
Participatory Work Environment
More Effective Control System

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

10 44

Better Coordination
Planning provides a foundation for the
coordination of a broad range of
organizational activities.
A plan helps to define the responsibilities
of individuals and work groups and helps
coordinate their activities.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

11 44

Focus on Forward Thinking

The planning function
forces managers to think
ahead and consider
resource needs and
potential opportunities or
threats that the organization
may face in the future.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

12 44

Participatory Work Environment

Successful planning requires
the participation of a wide
range of organizational
members.
The organization benefits by having access to
a broad base of experience and knowledge in
the planning process.
Organizational members are more likely to
buy in to a plan that they have helped
develop.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

13 44

Most Effective Control System

An organizations plan provides a foundation
for control of the processes and progress of the
company.
The implementation of the plan can be
evaluated and progress toward the achievement
of performance objectives can be monitored
Controls provide mechanism for ensuring that
the organization is moving in the right direction
and making progress toward achieve its goals.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

14 44

Costs of Planning
Managerial Time
Done properly, the planning process requires
a substantial amount of managerial time and
energy.

Delay in Decision Making

Planning can result in delays in decision
making, which must be weighed against the
importance of speed in response time.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

15 44

Planning: Benefits Vs. Costs

In the final analysis, managers
plan because planning leads
to higher performance.
Planning also helps managers cope with
the challenges they face and ensures the
long-term success of their companies.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

16 44

Where Should Planning Begin

slide 1 of 3

Top-Down Planning
Planning efforts begin
with the board of
directors and
top executives
of the firm.

Planning is
initiated at the
lowest level in the
organization.

Bottom-Up Planning
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

17 44

Advantages of Each Approach

Top-Down Planning
The advantage is that the top managers, who
are the most knowledgeable about the firm as
a whole, drive the development of the plan.

Bottom-Up Planning
The primary advantage is that the people
closest to the operating system, customers,
and suppliers drive the development of the
plan.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

18 44

Levels of Planning
In general, most organizations engage
in both:
Strategic Planning
Operational Planning

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

19 44

Strategic Planning
Strategic planning is the process by which an
organization makes decisions and takes
actions that affect its long-run performance.
A strategic plan is the output of the strategic
planning process.
Strategic plans define both the markets in
which the firm competes and the ways in
which it competes in those markets.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

20 44

The Purpose of Strategic Planning

To move the organization from where it is
to where it wants to be.

Vision for the

Today
Future

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

21 44

Levels of Strategic Planning

slide 1 of 3

PLANNING FOCUS
Corporate What business should we be in?

Business

How do we compete in our

existing lines of business?

Functional

How do we implement our

corporate and business
strategies?

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

22 44

Levels of Strategic Planning

slide 2 of 3

PARTICIPANTS
Corporate

Board of directors and top-level

executives

Business

Top-level executives and

managers within the business unit

Functional

Mid-level managers and lowerlevel managers

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

23 44

Levels of Strategic Planning

slide 3 of 3

SCOPE & TIME HORIZONS

Corporate

Broad strategies
5 to 10 year time horizon

Business

More specific strategies

1 to 5 year time horizon

Functional

Very specific strategies

1 to 2 year time horizon

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

24 44

Functional Strategic Planning

Functional strategy specifies activities
necessary to implement the organization's
corporate and business strategies.
Operations
R&D
Financial
Human resource management
Marketing

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

25 44

Customizing the
Strategic Planning Process
In general, a successful planning process
must fit the organization's focus on creating
value for its customers and its shareholders.
In other words, it must be customized for the
organization based on its specific and unique
needs.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

26 44

Levels of Planning
In general, most organizations engage
in both:
Strategic Planning
Operational Planning

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

27 44

Operational Planning
Operational planning focuses on the day-to-day
activities that are necessary to achieve the longterm goals of the organization.
Operational plans are more specific, address
shorter-term issues, and are formulated by midand lower-level managers who are responsible
for the work groups in the organization.
Operational plans can be categorized as:
Standing, or
Single-use plans
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

28 44

Standing Plans
Standing Plans are designed to deal with
organizational issues or problems that
recur frequently. They include:
Policies: general guidelines that govern how
certain organizational situations will be
addressed.
Procedures: more specific and are designed
to give explicit instructions on how to
complete a recurring task.
Rules: provide detailed and specific
guidelines for action.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

29 44

Single-Use Plans
Single-use plans are developed to address a
specific organizational situation. They
include:
Programs: govern a relatively comprehensive
set of activities that are designed to
accomplish a particular set of goals.
Projects: direct the efforts of individuals or
work groups toward the achievement of
specific, well-defined objectives.
Budgets: specify how financial resources
should be allocated.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

30 44

Individual Plans
Increasingly, organizations are looking
for ways to translate boarder
organizational plans to the level of
individual employees.
Two approaches for doing so include:
Management by Objectives
The Balanced Scorecard

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

31 44

Management by Objectives (MBO)

A method for developing individualized
plans which guide the activities of
individual members of an organization.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

32 44

MBO Benefits
Provides a foundation for a more integrated
and system-oriented approach to planning.
Requires communication between
employees and their managers since they
must agree on the performance goals
outlined in the plan.
Creates a participatory work environment
where employees have a voice in how their
jobs are designed and what their
performance targets should be.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

33 44

MBO Disadvantages
Requires time and commitment of top
management.
May require excessive paperwork.
May create a tendency to focus on shortterm vs. long-term planning.
Can be difficult to establish and
operationalize.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

34 44

MBO
Program
Steps

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

35 44

The Balanced Scorecard (BSC)

A system-wide performance measurement
process that aligns individual goals with
the strategic goals of the organization.
Allows an organization to translate
strategy into operational actions at every
level.
Ensures employees that their individual
action plans and goals are consistent with
the overall strategic direction of the
organization.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

36 44

Measuring Performance with the BSC

Key Principles
Align to the
strategy

Measurement
Criteria
Customers

Implications for
Leaders
Understand the big
picture

Translate strategy
Internal
to operational terms Processes

BSC measures
performance at all levels

View strategy as a
continual process

Innovation

Execute strategy into

action

Make strategy
everyones job

Growth

Empower frontline
employees

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

37 44

Contingency Planning
Contingency planning requires the
development of two or more plans, each
of which is based on a different set of
strategic or operating conditions that
could occur.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

38 44

When Is Contingency Planning Needed?

Contingency planning is necessary in
business environments that change
rapidly and in unpredictable ways.
Contingency planning is useful when a
firms effectiveness is dependent on a
particular set of business conditions.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

39 44

Information Technology and Planning

Advances in information technology have
improved both the effectiveness and
efficiency of the planning function.
Information technology can be used to
establish and implement the strategic and
operational plans of an organization.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

40 44

Barriers to Effective Planning

Demands on the leaders time
Ambiguous and uncertain operating
environments
Resistance to change

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

41 44

Overcoming the Barriers to Planning

Involve Employees in Decision Making
Input from all levels of a firm is essential for
successful planning.

Tolerate a Diversity of Views

Diverse views lead to a broader assessment
of organizational problems and opportunities.

Encourage Strategic Thinking

Effective strategic thinking can be developed
through training and practice.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

42 44

Precursors of Effective Planning

Slide 1 of 2

Recognize and communicate the

importance of planning in achieving
organizational success.
Understand and appreciate the
relationship between strategic and
operational planning.
Involve those responsible for
implementing the plan in the planning
process.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

43 44

Precursors of Effective Planning

Slide 2 of 2

Look to contingency planning as a means

of maintaining flexibility in rapidly
changing business environments.
Utilize technology to enhance the
effectiveness and efficiency of the
planning process.
Remove the barrier to planning at the
work group and individual levels.
Reward those who think strategically and
follow through with operational planning.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

44 44