Management, 6e
Schermerhorn
Prepared by
Cheryl Wyrick
California State Polytechnic University Pomona
John Wiley & Sons, Inc
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Chapter 7
Planning - to Set the Direction
Planning Ahead
– Why is planning an essential management
function?
– What types of plans are used by managers?
– What are the different approaches to planning?
– What planning tools and techniques are useful?
– How does Management by Objectives facilitate
planning?
Schermerhorn - Chapter 7
3
Planning as a Management
Function
To plan is to decide what to accomplish and
how to do it
–
–
–
–
–
define objectives
evaluate accomplishments relative to objectives
develop premises regarding future conditions
analyze possible action alternatives
implement plan and evaluate results
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Planning as a Management
Function
Benefits of Planning
–
–
–
–
more focus and flexibility
improved coordination
better control
better time management
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Types of Plans in Organizations
Short-Range and Long-Range Plans
– Short-range = 1 year or less
– Intermediate-range plans = 1-2 years
– Long-range = 3 or more years
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6
Types of Plans in Organizations
Strategic and Operational Plans
– Strategic plans
• address long-term needs
• set comprehensive action directions for an
organization
• responsibility of top management
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7
Types of Plans in Organizations
Strategic and Operational Plans
– Operational plans
• define what needs to be done in specific areas to
implement strategic plans
–
–
–
–
–
production
financial
facilities
marketing
human resources
Schermerhorn - Chapter 7
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Types of Plans in Organizations
Policies and Procedures
– standing plans
• policy is a broad guideline for making decisions and
taking action in specific circumstances
• procedures are plans that describe exactly what
actions are to be taken in specific circumstances
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9
Budgets and Schedules
Single-use plans
– budgets
•
•
•
•
commit resources to activities, projects, or programs
help clarify and reinforce action priorities
facilitate the evaluation and control of results
types are fixed, flexible, and zero-based
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Budgets and Schedules
Fixed budget
– allocates resources on a single estimate of costs
Flexible budget
– allows allocation of resources to vary in
proportion with various levels of activity
Zero-based
– project is budgeted as if it were brand new
Schermerhorn - Chapter 7
11
Budgets and Schedules
Project Schedules
– single-use plans that identify the
activities required to accomplish a
specific major project
Schermerhorn - Chapter 7
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Budgets and Schedules
Business Plan
– typically used for new businesses
– describes details necessary to set direction and
get financing
Schermerhorn - Chapter 7
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Approaches to Planning
Inside-Out Versus Outside-In Planning
– inside-out planning
• focus future effort on what one is already doing, but
try to improve
– outside-in planning
• look to external environment for opportunities
Schermerhorn - Chapter 7
14
Top-Down Versus Bottom-Up
Planning
Top-Down
– senior management sets broad objectives
– ensures common direction
– can fail in implementation due to lack of lower
level commitment
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15
Top-Down Versus Bottom-Up
Planning
Bottom-Up
– initiative that begins at lower levels of the
organization
– potential to generate high commitment
– does not define an integrated direction
Schermerhorn - Chapter 7
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Top-Down Versus Bottom-Up
Planning
Best Planning
Approach
– begin at top
– proceed in a
participatory way
Schermerhorn - Chapter 7
17
Top-Down Versus Bottom-Up
Planning
Contingency Planning
– identifying alternative
courses of action if and
when original plan is
inadequate
Schermerhorn - Chapter 7
18
Planning Tools and Techniques
Forecasting
– making assumptions about what will happen in
the future
– part of a good plan
– ultimately relies on human judgment
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Planning Tools and Techniques
Types of forecasting
•
•
•
•
qualitative
quantitative
econometric modeling
statistical surveys
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20
Planning Tools and Techniques
Use of Scenarios
– identifying alternative future states of affairs
– plans made for each scenario
– increases organization’s flexibility
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21
Planning Tools and Techniques
Benchmarking
– use of external comparisons to better evaluate
one’s current performance
– identify possible actions for the future
– incorporate successful ideas into one’s own
organization
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Planning Tools and Techniques
Participation and Involvement
– Participative planning requires that workers
who will be affected be included in the
planning and/or implementation
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Planning Tools and Techniques
Role of Staff Planners
– lead and coordinate planning system
– help promote planning throughout organization
– sometimes used as advisors to hire managers
Schermerhorn - Chapter 7
24
Management by Objectives
(MBO)
MBO
– structured process of regular communication
– supervisor and worker jointly set performance
objectives
– jointly review results
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25
Management by Objectives
(MBO)
Formal agreement
– worker’s performance objectives for a specific
time period
– plans by which they will be accomplished
– standards for measuring results
– procedures for reviewing results
Schermerhorn - Chapter 7
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Management by Objectives
(MBO)
Advantages
– clearly focuses employee work efforts
– clearly focuses manager’s work efforts
regarding areas of support
– relationship building between manager and
employee
– employee participates in decisions that affect
work
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27
Management by Objectives
(MBO)
Performance objectives
– improvement
– personal development
– maintenance
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Management by Objectives
(MBO)
Performance objective criteria
–
–
–
–
specific
time defined
challenging
measurable
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Management by Objectives
(MBO)
How to make MBO work
– hire best people
– work with them to set challenging performance
objectives
– give best possible support
– hold employee accountable
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30
Management by Objectives
(MBO)
Pitfalls to avoid
– tying MBO to pay
– focusing too much attention on easily
quantifiable objectives
– requiring excessive paperwork
– have managers tell workers their objectives
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