Chapter 4
Planning in the Contemporary
Organization
Pamela S. Lewis
Stephen H. Goodman
Patricia M. Fandt
Slides Prepared by
Bruce R. Barringer
University of Central Florida
©2001 South-Western College Publishing
Learning Objectives
Slide 1 of 3
1.Describe the managerial function of
planning and explain why managers should
plan.
2.Discuss three approaches for initiating the
planning process.
3.Define strategic planning and describe the
three levels of strategic planning.
© 2001 South-Western Publishing
Transparency 4-2
Learning Objectives
Slide 2 of 3
4.Define operational planning and distinguish
between standing and single-use plans.
5.Describe a management-by-objectives
program and discuss the advantages and
disadvantages of this system of planning.
6.Define contingency planning and identify
the circumstances under which contingency
planning would be appropriate.
© 2001 South-Western Publishing
Transparency 4-3
Learning Objectives
Slide 3 of 3
7.Discuss how advances in information
technology have affected the planning
process.
8.Describe the common barriers to effective
planning and explain ways to reduce these
barriers.
9.Discuss how tomorrow’s managers can
achieve success through planning.
© 2001 South-Western Publishing
Transparency 4-4
Planning Defined
The process of outlining the activities that are
necessary to achieve the goals of the
organization.
© 2001 South-Western Publishing
Transparency 4-5
Purpose of Planning
The purpose of planning is simple - to ensure
that the organization is both effective and
efficient in its activities.
© 2001 South-Western Publishing
Transparency 4-6
Planning as a Linking Mechanism
Goals
Plans
Control
Relationship among goals,
plans, and controls
© 2001 South-Western Publishing
Transparency 4-7
Benefits of Planning
Slide 1 of 5
• Better Coordination
– Planning provides a foundation for the
coordination of a broad range of organizational
activities.
– A plan helps to define the responsibilities of
individuals and work groups and helps
coordinate their activities.
© 2001 South-Western Publishing
Transparency 4-8
Benefits of Planning
Slide 2 of 5
• Focus on Forward Thinking
– The planning function forces managers to think
ahead and consider resource needs and potential
opportunities or threats that the organization
may face in the future.
© 2001 South-Western Publishing
Transparency 4-9
Benefits of Planning
Slide 3 of 5
• Participatory Work Environment
– Successful planning requires the participation
of a wide range of organizational members.
This creates a more participatory work
environment.
© 2001 South-Western Publishing
Transparency 4-10
Benefits of Planning
Slide 4 of 5
A participatory work environment is good for
two reasons:
The organization
benefits by having
access to a broad
base of experience
and knowledge in
the planning process.
© 2001 South-Western Publishing
Organizational
members are more
likely to “buy in” to a
plan that they have
helped develop.
Transparency 4-11
Benefits of Planning
Slide 5 of 5
• More Effective Control System
– An organization’s plan provides a foundation
for control. A plan provides a mechanism for
ensuring that the organization is moving in the
right direction and making progress toward
achieving its goals.
© 2001 South-Western Publishing
Transparency 4-12
Costs of Planning
Slide 1 of 2
• Managerial Time
– Done properly, the planning process requires a
substantial amount of managerial time and
energy.
© 2001 South-Western Publishing
Transparency 4-13
Costs of Planning
Slide 2 of 2
• Delay in Decision Making
– Planning can result in delays in decision
making, which must be weighed against the
importance of speed in response time.
© 2001 South-Western Publishing
Transparency 4-14
Weighing the Benefits Against the
Costs of Planning
In the final analysis, managers plan because
planning leads to higher performance.
Planning also helps managers cope with the
many complex situations they face.
© 2001 South-Western Publishing
Transparency 4-15
Where Does Planning Start?
Slide 1 of 3
Top-Down Vs. Bottom-Up
Planning
Top-Down Planning
Bottom-Up Planning
Planning efforts begin
with the board of
directors and top
executives of the firm.
Planning is initiated at
the lowest level in the
organization.
© 2001 South-Western Publishing
Transparency 4-16
Where Does Planning Start?
Slide 2 of 3
• Top-Down Planning
– The advantage is that the top managers, who
are the most knowledgeable about the firm as a
whole, drive the development of the plan.
• Bottom-Up Planning
– The primary advantage is that the people
closest to the operating system, customers, and
suppliers drive the development of the plan.
© 2001 South-Western Publishing
Transparency 4-17
Where Does Planning Start?
Slide 3 of 3
• Which Approach is Better - Top-Down or
Bottom-Up?
– Top-down planning works best when success is
dependent upon the ability to make high-level
organizational changes in response to general
threats and pressures.
– A bottom-up approach works best when success
is dependent upon sensitivity to customer needs
and demands.
© 2001 South-Western Publishing
Transparency 4-18
Strategic Versus Operational
Planning
In general, most organizations engage in
both strategic and operational planning.
Although strategic and operational
planning differ in a number of ways, they
are also interrelated.
© 2001 South-Western Publishing
Transparency 4-19
Strategic Planning
Slide 1 of 7
• Strategic Planning
– Is the process by which an organization makes
decisions and takes actions that affect its longrun performance.
– A strategic plan is the output of the strategic
planning process. Strategic plans define both
the markets in which the firm competes and the
ways in which it competes in those markets.
© 2001 South-Western Publishing
Transparency 4-20
Strategic Planning
Slide 2 of 7
The purpose of strategic planning is
to move the organization from where
it is to where it wants to be.
Today
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Vision for the Future
Transparency 4-21
Strategic Planning
Slide 3 of 7
Levels of strategic planning
and their focus:
Corporate
Addresses the
question, “What
business should
we be in?”
© 2001 South-Western Publishing
Business
Defines how
each of the
firm’s business
units will
operate in its
market arena.
Functional
Specifies the
specific activities
necessary to
implement the
firm’s corporate
and business
strategies.
Transparency 4-22
Strategic Planning
Slide 4 of 7
Levels of strategic planning
and their participants:
Corporate
Board of
directors and
top-level
executives
© 2001 South-Western Publishing
Business
Top-level
executives and
managers within
the business unit
Functional
Middle-level
managers and
lower-level
managers
Transparency 4-23
Strategic Planning
Slide 5 of 7
Levels of strategic planning, the specificity of
their strategies, and their time horizons:
Corporate
Broad strategies
5-10 year time
horizon
Business
More specific
strategies than
the corporate
level
Functional
Very specific
strategies
1-2 year time
horizon
1-5 year time
horizon
© 2001 South-Western Publishing
Transparency 4-24
Strategic Planning
Slide 6 of 7
• Functional Strategic Planning
– Functional strategic planning leads to the
development of functional strategy.
• Functional strategy specifies the operations, R&D,
financial, human resource management, and
marketing activities necessary to implement the
organization’s corporate and business strategies.
© 2001 South-Western Publishing
Transparency 4-25
Strategic Planning
Slide 7 of 7
• Customizing the Strategic Planning Process
– In general, a successful planning process must
fit the organization's focus on creating value for
its customers and its shareholders.
– In other words, it must be customized for the
organization based on its specific and unique
needs.
© 2001 South-Western Publishing
Transparency 4-26
Operational Planning
• Operational Planning
– Focuses on determining the day-to-day
activities that are necessary to achieve the longterm goals of the organization.
– Operational plans
• Are more specific than strategic plans, address
shorter-term issues, and are formulated by the midand lower-level managers who are responsible for
the work groups in the organization.
• Operational plans can be categorized as standing or
single-use plans.
© 2001 South-Western Publishing
Transparency 4-27
Standing Plans
• Standing Plans
– Are designed to deal with organizational issues
or problems that recur frequently.
– Standing plans include policies, procedures,
and rules:
• Policies - general guidelines that govern how certain
organizational situations will be addressed.
• Procedures - are more specific and are designed to
give explicit instructions on how to complete a
recurring task.
• Rules - provide detailed and specific guidelines for
action.
© 2001 South-Western Publishing
Transparency 4-28
Single-Use Plans
Slide 1 of 2
• Single-Use Plans
– Are developed to address a specific
organizational situation.
– Single-use plans include programs, projects,
and budgets:
• Programs - govern a relatively comprehensive set of
activities that are designed to accomplish a
particular set of goals.
• Projects - direct the efforts of individuals or work
groups toward the achievement of specific, welldefined objectives.
© 2001 South-Western Publishing
Transparency 4-29
Single-Use Plans
Slide 2 of 2
• Single-Use Plans
– Budgets - specify how financial resources
should be allocated.
© 2001 South-Western Publishing
Transparency 4-30
Management by Objectives
Slide 1 of 4
A method for developing individualized
plans which guide the activities of individual
members of an organization.
© 2001 South-Western Publishing
Transparency 4-31
Management by Objectives
Slide 2 of 4
• Benefits of Management by Objectives:
– Provides a foundation for a more integrated and
system-oriented approach to planning.
– Requires communication between employees
and their managers since they must agree on the
performance goals outlined in the plan.
– Creates a participatory work environment
where employees have a voice in how their jobs
are designed and what their performance targets
should be.
© 2001 South-Western Publishing
Transparency 4-32
Management by Objectives
Slide 3 of 4
• Disadvantages of Management by
Objectives:
– Requires time and commitment of top
management.
– May require excessive paperwork.
– May create a tendency to focus on short-term
vs. long-term planning.
– Can be difficult to establish and operationalize.
© 2001 South-Western Publishing
Transparency 4-33
Management by Objectives
Slide 4 of 4
Preparation of next
period’s objectives by
employees
End-of-period
review by
employee and
supervisor
Intermittent
review of ongoing
performance as
needed
Mutual setting of
objectives by
employee and
supervisor
Mutual agreement on
criteria for measuring
accomplishment of
objectives
Action planning and
job performance by
employee
© 2001 South-Western Publishing
Transparency 4-34
Contingency Planning
Slide 1 of 2
Contingency planning requires the
development of two or more plans, each of
which is based on a different set of strategic or
operating conditions that could occur.
© 2001 South-Western Publishing
Transparency 4-35
Contingency Planning
Slide 2 of 2
• When is Contingency Planning Needed?
– Contingency planning is necessary in business
environments that change rapidly and in
unpredictable ways.
– Contingency planning is useful when a firm’s
effectiveness is dependent on a particular set of
business conditions.
© 2001 South-Western Publishing
Transparency 4-36
Barriers to Effective Planning
• Demands on the Manager’s Time
• Ambiguous and Uncertain Operating
Environments
• Resistance to Change
© 2001 South-Western Publishing
Transparency 4-37
Overcoming the Barriers to Planning
• Involve Employees in Decision Making
– Input from all levels of a firm is essential for
successful planning.
• Tolerate a Diversity of Views
– Diverse views lead to a broader assessment of
organizational problems and opportunities.
• Encourage Strategic Thinking
– Effective strategic thinking can be developed
through training and practice.
© 2001 South-Western Publishing
Transparency 4-38
Precursors of Effective Planning
Slide 1 of 2
• Recognize and communicate the importance
of planning in achieving organizational
success.
• Understand and appreciate the relationship
between strategic and operational planning.
• Involve those responsible for implementing
the plan in the planning process.
© 2001 South-Western Publishing
Transparency 4-39
Precursors of Effective Planning
Slide 2 of 2
• Look to contingency planning as a means of
maintaining flexibility in rapidly changing
business environments.
• Utilize technology to enhance the effectiveness
and efficiency of the planning process.
• Remove the barrier to planning at the work
group and individual levels.
• Reward those who think strategically and
follow through with operational planning.
© 2001 South-Western Publishing
Transparency 4-40