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Elements of Planning
Chapter 5
Copyright Atomic Dog Publishing, 2003
Planning—First Step in Management
Process

Planning is one tool management needs to
adapt to change

Every manager plans

Formal planning vs. informal planning

Planning attempts to define the organization

Planning includes all activities that lead to the
definition of objectives and to the
determination of appropriate courses of action
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Benefits of Planning

Forces managers to think ahead

Leads to the development of performance
standards

Forces management to articulate clear
objectives

Enables an organization to be better prepared
for sudden developments
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Factors in Understanding the Need
for Planning

Increasing time spans between present
decisions and future results

Increasing organization complexity

Increasing external change
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Types of Planning

Planning activity differs in scope, time frame,
and level of detail

Research has shown that organizational
effectiveness declines for companies that
don’t integrate (to some extent) the various
types of planning

3 types of planning are:
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Strategic Planning
Operational Planning
Tactical Planning
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Strategic Planning

Comprehensive, long term, and relatively
general

Focuses on the broad, enduring issues for
ensuring a firm’s effectiveness over a long
period of time

Necessary in order to create the
organization’s mission and a set of goals
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Operational Planning

Focused, short term, and specific

Translates the broad concepts of the strategic
plan into clear numbers, specific steps, and
measurable objectives for the short term

Requires efficient, cost-effective application of
resources to solving problems and meeting
objectives
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Tactical Planning

Falls on the continuum between the strategic
and operational planning processes

Is more specific than strategic planning

Deals more with issues of efficiency than with
long-term effectiveness
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Deciding on What Plan to Use

Type of planning managers engage in is
determined by the type of goals and/or
objectives to be achieved by the plan

Higher management levels deal with plans
with longer time frames, greater scope, and
less detail than lower-level managers

Participation usually doesn’t work in reverse;
however, it would be highly unusual for a
company executive to be involved in shortrange tactical planning
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What Plan to Use (cont.)

Single Use Plans

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Have clear time frame for their usefulness
Include detailed goals and objectives concerning
quality, primary markets, roll out schedule, etc.
Standing Plans

Ongoing meaning and applications for an
organization
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Copyright Atomic Dog Publishing, 2003
The Elements of Planning

Objectives

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Actions

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Means to achieve the objectives
Resources

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Conditions of the future that the planner deems
satisfactory
Constraints on the courses of actions
Implementation

Assignments and direction of personnel to achieve
the plan
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Objectives
Copyright Atomic Dog Publishing, 2003
Establishing Objectives

Establishing objectives begins with the determination
of future objectives, which must satisfy expectations
of the organization’s environment

Corporate management has turned more and more to
formal planning techniques

Organizations that use formal approaches to planning
are more profitable than those that do not

Establishing objectives means to determine the
priority and timing of objectives, resolve conflict
between objectives, and provide measurement of
objectives so results can be evaluated
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Priority of Objectives

At a given time, accomplishing one objective
is more important than accomplishing any of
the others

Prioritization reflects the relative importance of
certain objectives, regardless of time

Balanced scorecard approach provides a
balanced picture of current operating
performance as well as drivers of future
performance
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Time Frame of Objectives

Develop different plans for different periods
of time

Definitions of long-run and short-run plans
vary widely
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Examples of long-run plans:
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Aircraft or automobile business—5+ years
Women’s fashion business—1 or 2 years
Children’s toy business—1 selling season
The organization’s product, technology, and
market will dictate what long-term and shortterm plans are
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Conflicts Among Objectives

Include and integrate all groups’ interests into
corporate plans, e.g., stockholders (owners),
employees (including unions), customers, suppliers,
creditors, and governmental agencies
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Most common planning trade-offs faced by managers:
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Short-term profits vs. long-term growth
Profit margin vs. competitive position
Direct sales effort vs. development effort
Greater penetration of present markets vs. developing new
markets
Achieving long-term growth through related businesses vs.
unrelated businesses
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Conflicts Among Objectives (cont.)

Present and potential customers hold ultimate power
over the firm

Suppliers hold power over firms, too. They can
disrupt the flow of materials to express disagreement
with the firm’s activities

Government agencies have the power to enforce the
firm’s compliance with regulations

More successful firms consistently emphasize profitseeking activities that maximize the stockholders’
wealth
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Measurement of Objectives
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Well-managed business organizations have at
least five categories of objectives:
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Profitability
Competitiveness
Efficiency
Flexibility
Quality
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Profitability
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The most important objective
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Return on investment—net profit divided by
the capital invested in the organization or
some similar measure

Earnings provide the return on investment—
the reason that shareholders are willing to
supply capital
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Competitiveness

It focuses on prospects for long-term
profitability
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It measures the competitive strength of the
organization
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Competitiveness depends on a number of
factors, including:
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Customer values
Shareholder values
The ability to act and react within a competitive
environment
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Efficiency

Organization must maintain certain types of
short-run efficiencies to bring about the
prospect of long-run profitability

Measures of efficiency reflect how well the
organization’s resources are employed

Efficiency directly influences performance and
involves both the human and nonhuman
resources of the organization
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Efficiency (cont.)
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Factors of efficiency:
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Quality of management
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Employee turnover

Succession of
management
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Age and condition of the
plant and equipment
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Depth of critical
personnel

Teamwork
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Flexibility

Continually develop new strategies, adapt to
new market realities, and then shift all aspects
of the organization so that they are congruent
with the new strategies

Flexible organizations use their structure as a
source of competitive advantage
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Quality
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Experts have specified fundamental principles
or guides for quality management
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Deming prepared the list of 14 Points of
Quality
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Drucker, Deming, Crosby, Juran, and others
offer a mix of goals and procedures that
provide managers with guidance for planning

Dimensions of corporate objectives are profit,
market share, and return on assets
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Quality (cont.)

Proactive, quality-based planning involves
setting objectives that add value by exceeding
mandated standards or even setting
standards of quality where none had
previously existed
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Objectives need to emphasize quality over
quantity
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Quality (cont.)
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Garvin identified 6 planning values that are
the basis of a quality-based system:
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Performance
Features
Reliability
Conformance
Aesthetics
Perceived quality (customer perception)
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Quality (cont.)
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Establish planning values that are responsive
to both the internal and external environments
of the organization
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Internal—people, processes, and practices
External—customer satisfaction
Drucker developed a set of 8 planning
objectives that managers must keep in mind
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Actions
Copyright Atomic Dog Publishing, 2003
Actions are . . .

Specific, prescribed means to achieve
objectives
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Determinates of the success or failure in
meeting objectives
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Directed toward changing a future
condition—that is, achieving an objective

Causally related to objectives, i.e., the
objectives are caused to occur by the
courses of action
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Copyright Atomic Dog Publishing, 2003
Forecasting
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Forecasting is the process of using past and
current information to predict future events
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Forecasting models range from the subjective
to the sophisticated:
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Hunches
Market surveys
Time-series analysis
Econometric forecasting
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Resources
Copyright Atomic Dog Publishing, 2003
Resources are . . .
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Defined as the financial, physical, human,
time or other assets of an organization
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Usually controlled by use of a budget—a
predetermined amount of resources linked to
an activity

Compared with the budgeted (planned)
results, which may lead to corrective action,
as is the management function of controlling
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Implementation
Copyright Atomic Dog Publishing, 2003
Implementation of Plans

Planning won’t help an organization realize
objectives if plans cannot be implemented
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Manager must implement plans through other
people, motivating them to accept and carry
out the plan
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Means of implementing plans:
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Authority
Persuasion
Policy
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Authority is . . .

A legitimate form of power, in the sense that it
accompanies the position not the person

The right to make decisions and to expect
compliance to the implications of these
decisions
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Persuasion is . . .

A process of selling a plan to those who must
implement it, i.e., communicating relevant
information so individuals understand all
implications

Convincing others to base acceptance of the
plan upon its merits rather than upon the
authority of the managers
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Policy

Policy encompasses written statements that
reflect the basic objectives of the plan and
provide guidelines for selecting actions to
achieve the objectives
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Effective policies have these characteristics:
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Flexible
Comprehensive
Coordination
Ethics
Clarity
Ultimate test of the effectiveness of a policy is
whether the objective is attained
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Policy (cont.)
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If the policy does not lead to the objective, the
policy should be revised

Managers must provide information that
reports actual performance and permits
comparison of the performance against
standards
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Copyright Atomic Dog Publishing, 2003
Time-Based Planning

Speed can often determine the success or
failure of a plan’s implementation

Important period between the time a product
is first considered and the time it is sold to the
customer is called concept to customer

Speed in planning and delivering a product or
service can be a strategic competitive
advantage

Paying attention to time usually forces the firm
to look at other issues affecting products’ and
services’ quality, e.g., designing, staffing, and
inspecting
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Time-Based Planning (cont.)
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Paying attention to production speed can lead
to reductions in idle periods
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Pace of innovation varies by industry
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Important variations exist in the pace of
innovation within industries

By eliminating the time when a product or
process lies idle, speed is added to the
planning process. Much improvement stems
from simply not wasting time
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Final Thoughts on Planning
Copyright Atomic Dog Publishing, 2003
In Summary

Planning, a fundamental activity of managers, can
cover any time span from the short run to the long run

Planning is the essence of management; all other
managerial functions stem from planning

Managers begin the planning process by asking the
appropriate questions

Fundamental questions are appropriate regardless of
the type and size of the organization
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Copyright Atomic Dog Publishing, 2003
End of Chapter 5
Copyright Atomic Dog Publishing, 2003