Chapter Seven

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Chapter 7
Basic Elements of
Planning and
Decision Making
Learning Objectives
After studying this chapter, you should be able to:
1.
Summarize the function of decision making and the planning
process.
2.
Discuss the purpose of organizational goals, identify different
kinds of goals, discuss who sets goals, and describe how to
manage multiple goals.
3.
Identify different kinds of organizational plans, note the time
frames for planning, discuss who plans, and describe
contingency planning.
4.
Discuss how tactical plans are developed and executed.
5.
Describe the basic types of operational plans used by
organizations.
7–2
Decision Making and the
Planning Process
• Decision making
– Is the cornerstone of planning.
– Is the catalyst that drives the planning process.
– Underlies every aspect of setting goals and
formulating plans.
• Planning
– All organizations plan, but not in the same fashion.
– All planning occurs within an environmental
context.
– All goals require plans to guide in their
achievement.
– All goals are tied higher goals and plans
7–3
The Planning Process
7–4
The Planning Process
• The planning process takes place within
an environmental context. Managers
must develop a complete and thought
understanding of this context to
determine the organization’s mission
and develop its strategic , tactical and
operational goals and plans.
Organizational Goals
• Purposes of Goals
– Provide guidance and a unified direction
for people in the organization.
– Strongly affect on the quality of other
aspects of planning.
– Serve as a source of motivation for
employees.
– Provide a mechanism for evaluation and
control of the organization.
7–6
Kinds of Goals
• By Level
–
–
–
–
Mission statement
Strategic goals
Tactical goals
Operational goals
• By Area
– Different functional areas of the organization.
• By Time Frame
– Long-term, intermediate-term, or short-term time
frames and explicit time frames or open-ended.
7–7
Kinds of
Organizational
Goals for a
Regional FastFood Chain
7–8
Learning topics
• Goals: responsibilities and optimizing
• Plans
– Timeframe
– Types
• Tactical planning
– Development
– Execution
• Operational Planning
– Types
• Contingency planning
– Definition
– Crisis Management
• Responsibilities for planning
7–9
Responsibilities of Setting Goals
• Who Sets Goals?
–All managers:
managerial
responsibility for
goal setting should
correspond to the
manager’s level in
the organization.
7–10
Responsibilities of Setting Goals
• Managing Multiple Goals
– Optimizing allows
managers to balance and
reconcile conflicting goals
• Managers can choose to
pursue one goal and
exclude all others or to seek
a mid-range goal.
7–11
Time Frames for Planning
• Long-range Plans
– Cover present and future strategic issues
extending beyond five years in the future.
• Intermediate Plans
– Cover from 1 to 5 years and parallel tactical
plans.
– Are the principal focus of organizational
planning efforts.
• Short-range Plans
– Are operational (action) and contingency
(reaction) plans that have a time frame of
one year or less.
7–12
Action Plan
• Operationally any
other kind of plan
Reaction Plan
• A plan designed to
allow the company to
react to unforeseen
circumstance
7–13
Kinds of Organizational Plans
• Strategic Plans
– A general plan set by and for top
management that outlines resource
allocation, priorities, and action
steps to achieve strategic goals.
• Tactical Plans
– A plan aimed at achieving the
tactical goals set by and for middle
management.
• Operational Plans
– Short-term focus plans that are set
by and for lower-level managers.
7–14
Planning in more details ..
• Tactical
Planning
• Operational
Planning
• Contingency
Planning
7–15
Tactical Planning
Developing TP
Executing TP
Copyright © Houghton Mifflin Company. All rights reserved.
7–16
Developing and Executing Tactical Plans
7–17
Developing TP
Plan
Goals
Resources
Commitment
Developing TP
Plan
Goals
Resources
Commitment
• Strategic
• Tactical
• Human, Financial, Physical and
Information
• Human resources
Developing TP
• Strategic
Plan
• Tactical
Goals
• Human,
Financial,
Physical and
Resources
Information
• Human
resources
Commitment
Executing TP
Information
&
Resources
Communicat
ion
Monitor
Evaluate
Developing TP
• Strategic
Plan
• Tactical
Goals
• Human,
Financial,
Physical and
Resources
Information
• Human
resources
Commitment
Executing TP
Information
&
Resources
Communicat
ion
Monitor
Evaluate
• Obtain and distribute
• Horizontally and
vertically
• On-ongoing activities
for goal achievement
• Evaluate actions in
light of goals
Operational Planning - Types
Single Use Plans
Standing plans
• Program
• Policy
• Project
• Standard Operating
Procedure
• Rules and
regulations
Copyright © Houghton MifflinCompany. All rights reserved.
7–22
Types of Operational Plans
Plan
Description
Single-use plan
Developed to carry out a course of action not likely to
be repeated in the future
Program
Project
Standing plan
Single-use plan for a large set of activities
Single-use plan of less scope and complexity than a
program
Developed for activities that recur regularly over a period of time
Policy
Standing plan specifying the organization’s general
response to a designated problem or situation
Standard operating procedure
Standing plan outlining steps to be followed in particular circumstances
Rules and regulations
Standing plans describing exactly how specific activities are to be carried out
Contingency Planning
• Contingency is the
determination of alternative
courses of action to be taken if
an intended plan is
unexpectedly disrupted or
rendered inappropriate. These
plans help managers to cope
with uncertainty and change.
• Crisis Management: managing
crisis (disasters) by following a
set of procedures
7–24
Responsibilities for Planning
7–25
Responsibilities of Planning
1. Identify BOD and explain their role in
planning.
2. Identify CEO and explain what is her/his
role in the planning process.
3. Identify the Executive Committee and
explain what is their planning role.
4. What is the difference between a line and
a staff managers?
5. What is the planning role of the line
managers
General
Manager
for A
General
Managers
for B
6. Explain the planning role of “Planning
Manager”.
7. Are all planning committees permanent
8. Can organization's create a planning
committee for a specific purpose which
will be eliminated when the plans are
executed? If yes, what will it be called?
Line
Manager C
Line
Manager D
Line
Manager E
Line
Manager F
Line
Manager G
Line
Manager H
Responsibilities of Planning
Line Management
Chief Executive
Office
Board of Directors
Planning Staff
Planning Task
Force
Line Managers
The only function of this team is to plan. They are
responsible to gather information, coordinate
planning activities between the different part of the
organization. As they are experts in planning, they
take a broader view of planning than individual
managers
This body is created when the organization wants to
address special circumstances. For example to explore
how to expand to Europe the team will include
representatives from each of the major units within
the company, the corporate planning staff, and the
management team that would run the European
operation. Once the plan for entering the European
market was formulated and implemented, this team
will be eliminated.
This body is responsible to establish corporate mission
and strategy and to govern the overall corporation.
Nowadays, this body is more active in the planning
process.
Plays a major role in the complete planning process
and is responsible for the implementation of the
strategy.
This body is usually composed of the top executives
in the organization working together as a group. The
members usually provide input to the CEO on the
proposals that effect their own unit and to review the
various strategic plans that develop from this input.
This body plays an important role in an
organization’s planning process for two reasons. First,
they are a valuable source of inside information for
other managers as plans are formulated and
implemented. Second, they must executed plans
formulated by higher level managers.
Responsibilities of Planning
Executive Committee
Chief Executive Office
Board of Directors
Planning Staff
Planning Task Force
Executive Committee
Planning staff
The only function of this team is to plan. They are responsible to gather information, coordinate
planning activities between the different part of the organization. As they are experts in planning,
they take a broader view of planning than individual managers
Planning Task
Force
This body is created when the organization wants to address special circumstances. For example to
explore how to expand to Europe the team will include representatives from each of the major
units within the company, the corporate planning staff, and the management team that would run
the European operation. Once the plan for entering the European market was formulated and
implemented, this team will be eliminated.
BOD
This body is responsible to establish corporate mission and strategy and to govern the overall
corporation. Nowadays, this body is more active in the planning process.
CEO
Plays a major role in the complete planning process and is responsible for the implementation of
the strategy.
Executive
Committee
This body is usually composed of the top executives in the organization working together as a
group. The members usually provide input to the CEO on the proposals that effect their own unit
and to review the various strategic plans that develop from this input.
Line
Management
This body plays an important role in an organization’s planning process for two reasons. First,
they are a valuable source of inside information for other managers as plans are formulated and
implemented. Second, they must executed plans formulated by higher level managers.
Board of Directors
• Establishes
corporate mission
and strategy.
• May engage in
strategic planning.
CEO
Has a major role
in planning and
implementing
the strategy.
Executive Committee
• Top executives
within the
organization
• Frequent input to
the CEO
• Review strategic
plans
Planning Staff
• Planning staff
personnel gather
information,
coordinate planning
activities, and take a
broader view than
individual managers.
Line Managers
• Providers of
Information
• Responsible for
executing the plans
developed by top
management.
7–34
Planning Task Force
• Created when the
organization
wants a special
circumstance
addressed.
7–35
Key Terms
•
•
•
•
•
•
•
•
•
•
•
mission
strategic goal
tactical goal
operational goal
optimizing
strategic plan
tactical plan
operational plan
reaction plan
long-range plan
intermediate plan
•
•
•
•
•
•
•
•
short-range plan
crisis management
single-use plan
program
project
standing plan
policy
rules and regulations
7–36
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