Planning Learning outcomes • Understand the importance of planning. • Understand the planning process. • Identify the importance of goals and the specifications for goal setting. • Explain some important contemporary factors and issues in planning. • Realise the importance of time management and its role in planning. Introduction • Planning is a central management task for a manager, because the saying “fail to plan, is plan to fail” is wellknown and true. • Important that an organisation develops some goals that it wants to achieve in order to take the organisation a step further. • Managers should develop a plan (strategy) for achieving these goals. • The essence of planning involves that managers must decide on a plan of action in order to achieve the goals of the organisation. What is planning? • The process of planning involves defining what the organisation wants to achieve in the near future – developing goals. • It is important to establishing an overall strategy (plan) for achieving these goals. • This involves a comprehensive set of plans to integrate and coordinate the organisational work. What is planning? Definition • Planning can be defined as the consideration and visualisation of what the organisation or departments in the organisation should achieve within a particular time span and the development of a plan (or set of plans) to achieve these goals. What is planning? • An important issue about planning is whether planning should be formal or informal. Informal planning: Formal planning: Nothing is written down and there is little or no sharing of goals with others in the organisation. The specific goals covering a specific time period, are defined and written down. What is planning? • Important to know what the situation in the organisation is, then: • Develop the goals (long term) and objectives (short term) in each area of the organisation where performance and results are expected. • Draft a feasible plan of action that indicates the activities, resources, policies, schedules, procedures and other methods that are necessary to achieve the stated goals and objectives. • Planning is a thought process (reflects on what should happen) as well as an action process (implements the plans). What is planning? Past Present Things happened in Plans the internal must Future be Diagnose what future and formulated that will opportunities external environments answer the following: threats that have an influence What on the organisation. achieved? Existing and weaknesses strengths will influence planning. must the be external environment will be applicable and How will it be have an influence on done? from and the organisation. When must it be done? Figure 5.1: Serves as Serves as a basis a basis for for Relationship between the past, present and future in planning Why do managers plan? • The most important reason to plan is to take the organisation to a next and better level and to obtain a competitive advantage. – Competitive advantage is if the organisation has or do something better that its competitors. • There are especially four good reasons why planning is an important management task. • Planning gives direction in the organisation. • Planning reduces the impact of uncertainty during changes. • Planning minimises wasted time and resources and redundancy. • You can only control what you have planned. Why do managers plan? Planning and performance • Formal planning is associated with higher profits and other positive financial results. • It makes financial sense to plan. • The relationship between planning and performance is influenced by environmental issues. Why do managers plan? Dysfunctional aspects of planning • There are some points of critic against planning: – plans can’t be developed for a dynamic environment; – formal plans can’t replace intuition and creativity; – planning focuses managers’ attention on today’s competition, not on tomorrow’s survival; and – formal planning reinforces success and this success groove thereby ultimately may lead to failure. Why do managers plan? Management in action 5.1 • Why planning is important: – Increases efficiency – Reduces business-related risks – Facilitates proper coordination – Assists with organising – Gives direction – Keeps good control – Helps to achieve objectives – Motivates personnel – Encourages creativity and innovation – Helps in decision-making How do managers plan? • Planning can be divided into practical steps, irrespective of the level of management and also irrespective of the complexity of the situation. These steps in the planning process are: – Identify the purpose of planning – Establish goals – Develop commitment – Develop alternative plans – Evaluate the different alternative plans – Implement the plan – Control and evaluating the results of the plan Step 1: Identify the purpose of planning • If the organisation does not identify the purpose of planning, it will not really understand the need for planning. • The first step in the planning process is thus to make a realistic diagnosis of why is planning necessary. • If this is not clear, the focus of planning will be blurred. • There must be agreement on the assumptions and purpose of planning to ensure that all levels of the management plan are in line with the goal of the end result. Step 2: Establish goals • If a problem or purpose is clear, an organisation must determine the goals. • Goal setting gives direction to the organisation and is fundamental in planning. • It is important to set goals to give direction to what should be included in plans. • A goal is defined as a future desirable state of an organisation and is usually long term oriented. Step 2: Establish goals (cont.) • The first step in goal setting is to determine what the organisation wants to achieve in the long term. • To achieve the long-term goal, a number of short-term goals or objectives are determined. • Goals are called the foundation of planning. Stated goals are official statements of what an organisation says, and what it wants its various stakeholders to believe, its goals are. An example of a stated goal is the mission statement of an organisation. Real goals are those goals that an organisation actually pursues, as defined and visible by the actions of its members. A real goal can be to improve the profitability of the organisation with 5% in the next financial year. Step 2: Establish goals (cont.) • Approaches to establishing goals – Traditional goal setting is an approach in which goals are set at the top organisational level and then broken down into sub-goals for each management level of the organisation. At each level, managers define the goals, applying their own interpretations and biases as they translate them in more specific objectives. Traditional goal setting Vision and mission Strategic goal To increase market share with 5% in 20xx Marketing department Production department Tactical goals To introduce one new product line in the next 12 months To increase the sales of products with 500 000 units per year. Tactical goal To increase production of products with 5% in the next year Operational objectives Respond to customers’ inquires within 2 hours To sell 150 units per day Operational objectives To manufacture 200 units per day Figure 5.2: Hierarchy of goals Step 2: Establish goals (cont.) • Approaches to establishing goals – Management by objectives (MBO) is a management system in which specific performance goals are jointly determined by employees and their managers. – The steps in the MBO program highlight also the essential features of it: • Identify the employee’s tasks and job • Establish challenging objectives for each task • Employee must participate in this process • Prioritise these objectives • Build in a feedback mechanism to asses the progress towards achieving the objectives • Link rewards to achieving the objectives Step 2: Establish goals (cont.) • Criteria for goals and objectives – SMART principle. • Specificity • Measurability • Achievability (Acceptable) • Realistic • Time • One important requirement is that goals and objectives must be congruent with one another – the attainment of one objective must not eliminate the possibility of achieving another objective. Step 2: Establish goals (cont.) Types of goals • Top management are responsible for determining the strategic goals for the organisation as a whole in terms of the following: – Profitability – Productivity – Market share – Human resources – Technology – Social responsibility Step 3: Develop commitment • Everyone in the organisation must be committed to the planning process. • This step in the planning process to get commitment has a strong link with the management functions of leadership and motivation. • Approaches to get commitment: – Employees need to understand the necessity of the goals and therefore they will be determined to achieve it. – Let employees participate in goal-setting. – Make some of the goals public. Step 4: Develop alternative plans • Different alternative options should be developed so that the best alternative can be implemented. • Answers to questions such as who, where, when and how are now important in developing the specific plans. – programming will provide the answers to who, what and where; – scheduling answers the question when; and – budgeting provides an answer to what resources are necessary, that is how will the plan be implemented. • There are also different levels of plans: – Strategic plans – Operational – Standing plans – A rule - Tactical plans Single-use plan A policy A procedure Step 5: Evaluating the various alternative plans • The various alternative plans must now be evaluated in the light of the assumptions and goals. • One possible plan may appear to increase profitability, but the cost of machinery replacement may be too high. • Evaluation can be a difficult task, but there are qualitative and quantitative techniques available to help with evaluation. • The important thing is that the different alternatives or options must be evaluated and the manager must select that alternative that will best achieve the stated goals and objectives. Step 6: Implementation of the plan • The implementation of the plan demonstrates the action process – time to work the plan. • The other management tasks now take over from planning. The work must be organised and the employees must get active through leadership, motivation and communication to work with the plan. • This is the most important step, because a plan means nothing if it is not implemented. Step 7: Control and evaluating the results of the plan • The implementation of the plan and the results achieved must be evaluated continuously and corrective actions should be taken if something is not correct. • If the plans do not achieve the desired results, the managers must have a look at the plans and perhaps revise some of the plans to achieve the desired results. Important factors in planning • Contemporary issues and factors that managers must consider during planning: – Significance – Increasing demand – Technology – Legal issues – Financing – Marketing Time management • Time is the most important resources to deal with in management in general – “time is money”. • Time is one of the most important aspects in terms of competitive advantage. • The fast and quick response from an organisation in terms of the delivery of products and services can create a competitive advantage. • If managers are not successful in time management, they will experience difficulty in achieving the goals and objectives of the organisation. • Managers must identify their discretionary time and must plan how they are using this discretionary time effectively and efficiently. Time management • Time management refers to the techniques that a manager can apply to get more done in less time with better results. • Table 5.1 provides a guideline on how to rate activities with regard to its urgency and importance. Importance Urgency Very important – activity must be done Very urgent – must happen now Important – activity should be done Urgent – should happen now Not so important – activity may be done, Not so urgent – can be done later Not urgent – time is really not a factor because it may be useful Not important – activity will not help accomplishing something Time management • Using this rating, the following process can be applied in time management: – Be clear about the objectives that must be achieved. – Rank the objectives in terms of its importance and urgency. – List the activities that are necessary to achieve these objectives. – Assign priorities to the activities in terms of its importance and urgency. – Schedule the activities that must be done according to the priorities determined in the previous step. • By following this process, managers can be successful in applying the 80-20 principle – can produce 80% of results in 20% of the time. Summary • Although planning is the fundamental management function, managers are sometimes reluctant to plan. The reason for this can be a lack of knowledge about the importance of planning. • It is important that mangers realise why planning is important for any organisation that is serious about improving its competitive position in the marketplace. • Planning is a systematic procedure and therefore the steps in the planning process are helpful.
