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1
Chapter Objectives
 Distinguish among state, effect, and response uncertainty.
 Identify and define three types of planning.
 Write good objectives and discuss the role of objectives in planning.
 Describe the four-step management by objectives (MBO) process and
explain how it can foster individual commitment and motivation.
 Discuss project planning within the context of the project life cycle and
list six roles played by project managers.
 Compare and contrast flow charts and Gantt charts, and discuss the
value of PERT networks.
 Explain how break-even points can be calculated.
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Coping with Uncertainty
 Planning
 Coping with uncertainty by formulating courses of
action to achieve specified results
 Three Types of Uncertainty
•
•
•
State uncertainty: Occurs when the environment, or a portion of
the environment, is considered unstable
Effect uncertainty: Occurs when impacts of environmental change
are unpredictable
Response uncertainty: Arises when the consequences of decisions
are unpredictable
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3
Figure 6.1: Planning: The
Primary Management Function
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Table 6.1: Uncertain Environment
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5
The Essentials of Planning
 A Plan:
 Is a specific documented intention consisting of an
objective (end) and an action statement (means)
 States what, when, and how something is to be done
 Essentials of Sound Planning
 Organizational mission
 Types of planning
 Objectives
 Priorities
 The planning/control cycle
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Organizational Mission
 A clear, formally written, and publicized statement
that guides the organization by:
 Defining the organization for key stakeholders
 Creating an inspiring vision of the organization
 Outlining how the vision will be accomplished
 Establishing key priorities
 Stating a common goal and fostering togetherness
 Creating a philosophical anchor for the organization
 Generating enthusiasm and a “can do” attitude
 Empowering organization members
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Types of Planning
 Strategic planning: Determining how to pursue long-
term goals with available resources
 Intermediate planning: Determining subunits’
contribution with allocated resources
 Operational planning: Determining how to
accomplish specific tasks with available resources
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Planning Horizon
 The elapsed time between the formulation and the
execution of a planned activity
 Planning horizon length corresponds to the type of
plan with which it is associated; lengths shorten as the
planning process evolves from strategic to intermediate
to operational plans.
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Objectives
 An objective is a commitment to achieve a measurable
result within a specified period.
 Writing Good Objectives
 Objectives should be expressed in quantitative,
measurable, and concrete terms.
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What specific result is to be achieved?
When is the result to be achieved?
How is the result to be measured?
Who will be responsible for achieving the result?
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Objectives
(cont’d)
 The Importance of Objectives (Uses of)
 Target: Sets specific goals to achieve
 Measuring stick: Gauges how much was achieved
 Commitment: Encourages pursuit of the objective
 Motivation: Provides a challenge for achievement
 The Means-Ends Chain of Objectives
 Achievement of lower-level objectives creates a means
for achieving higher-level objectives.
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Priorities
 Priorities are a ranking of goals, objectives, or activities
in order of importance to guide the order and timing
of decisions.
 Management looks at its priorities when deciding how
to allocate resources.
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Priorities
(cont’d)
 The A-B-C Priority System
 A: “Must do” objectives are critical to successful
performance.
 B: “Should do” objectives are necessary for improved
performance.
 C: “Nice to do” objectives are desirable for improved
performance but not critical to improved performance.
 The 80/20 Principle (Pareto Analysis)
 A majority of causes, inputs, or effort tends to produce
a majority of results, outputs, or rewards.
 Avoid the “busyness” trap
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Management by
Objectives and Project Planning
 Management by Objectives (Peter Drucker)
 A comprehensive management system based on
measurable, participatively set objectives
 The MBO Cycle
 Step 1: Setting objectives
 Step 2: Developing action plans
 Step 3: Periodic review
 Step 4: Performance appraisal
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Figure
6.6: The
Project
Life Cycle
and
Project
Planning
Activities
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Rights Reserved. May not be
scanned, copied or duplicated,
or posted to a publicly
accessible website, in whole or
in part.
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Graphic
Planning/Scheduling/Control Tools
 Flow Charts
 Gantt Charts
 PERT Networks
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Break-Even Analysis
 Break-Even Point
 The level of sales at which there is no loss or profit
 The point at which the total of fixed and variable costs
is equal to total sales revenues
 Fixed Versus Variable Costs
 Fixed costs: Contractual costs that must be paid
regardless of output or sales
 Variable costs: Costs that vary directly with production
and sales
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Summary
 Planning is the primary management function.
 A properly written plan tells what, when, and how something is to be


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
accomplished.
Objectives are the single most important feature of the planning
process.
Management by objectives (MBO) is based on measurable and
participatively set goals.
Project planning occurs throughout the project life cycle.
Flow charts, Gantt charts, and PERT networks are graphical tolls for
planning, scheduling, and controlling operations.
Break-even analysis gauges the impact of price changes and profit
objectives on sales volume.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Terms to Understand
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Planning
State uncertainty
Effect uncertainty
Response uncertainty
Plan
Strategic planning
Intermediate planning
Operational planning
Planning horizon
Objective
Priorities
80/20 principle
Management by objectives
(MBO)
 Project
 Gantt chart
 Program Evaluation and Review
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Technique (PERT)
PERT event
PERT activity
PERT times
Critical path
Break-even analysis
Fixed costs
Variable costs
Contribution margin
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The Basics of Planning and Project Management Chapter Six