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Planning Tools And Techniques
Transcript of Planning Tools And Techniques
What is Planning?
Types of Goals
Types of Plans
Does MBO works?
Steps in Goal Setting
-A primary managerial activity that involves:
Defining the organization's goals
establishing an overall strategy for achieving those goals
Developing plans for organizational work activities
What is Planning?
How Do Managers Plan?
Elements of Planning
-Goals (also Objectives)
Desired outcomes for individuals, groups, or entire organizations
Provide direction and evaluation performance criteria
Documents that outline how goals are to be accomplished
Describe how resources are to be allocated and establish activity schedules
Planning & Performance
Planning Tools And Techniques
Types of Planning
not written down,short-term focus;specific to an organizational unit
written,specific and long-term focus, involves shared goals for the organization
The quality of planning and implementation affects performance more than the extent of planning.
The external environment can reduce the impact of planning on performance.
Formal planning must be used for several years before planning begins to affect performance.
Are related to the expected internal financial performance of the organization.
Are related to the performance of the firm relative to factors in its external environment (e.g., competitors).
Stated Goals versus Real Goals
Execute strategic roadmap—“Plan to Win.”
Grow the business profitably.
Identify and develop diverse talent.
Promote balanced, active lifestyles.
Maintain industry’s lowest inventory shrinkage rate.
Open 25-30 new locations in fiscal 2006.
Live by the code of ethics every day.
Continue to win market share globally.
Focus on higher-value products.
Reduce production costs.
Lower purchasing costs.
Gain ISO 14001 certification for all factories.
Expand selection of competitively priced products.
Manage inventory carefully.
Continue to improve store format every few years.
Operate 2,000 stores by the end of the decade.
Continue gaining market share.
Respect the environment.
Respect and support family unity and national traditions.
Promote community welfare.
Continue implementing quality systems.
Continue to be a strong cash generator.
Roll out newly-designed environmentally friendly cup in 2006.
Open approximately 1,800 new stores globally in 2006.
Attain net revenue growth of approximately 20 percent in 2006.
Attain annual EPS growth of between 20 percent to 25 percent for the next 3 to 5 years.
Types of Plan
Apply to the entire organization.
Establish the organization’s overall goals.
Seek to position the organization in terms of its environment.
Cover extended periods of time.
Specify the details of how the overall goals are to be achieved.
Cover short time period.
Plans with time frames extending beyond three years
Plans with time frames on one year or less
Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation.
Types of Plans
Plans that are clearly defined and leave no room for interpretation
Exhibit 7-3 Specific Versus Directional Plans
Types of Plans (cont’d)
A one-time plan specifically designed to meet the need of a unique situation.
Ongoing plans that provide guidance for activities
Establishing Goals & Developing Plans
Broad goals are set at the top of the organization.
Goals are then broken into subgoals for each organizational level.
Assumes that top management knows best because they can see the “big picture.”
Goals are intended to direct, guide, and constrain from above.
Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility.
The Downside of
Traditional Goal Setting
Establishing Goals and Developing Plans (cont’d)
-Maintaining the Hierarchy of Goals
The integrated network of goals that results from establishing a clearly-defined hierarchy of organizational goals.
Achievement of lower-level goals is the means by which to reach higher-level goals (ends).
Management By Objectives (MBO)
Specific performance goals are jointly determined by employees and managers.
Progress toward accomplishing goals is periodically reviewed.
Rewards are allocated on the basis of progress towards the goals.
Key elements of MBO:
Goal specificity, participative decision making, an explicit performance/evaluation period, feedback
Steps in a Typical MBO Program
The organization’s overall objectives and strategies are formulated.
Major objectives are allocated among divisional and departmental units.
Unit managers collaboratively set specific objectives for their units with their managers.
Specific objectives are collaboratively set with all department members.
Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.
The action plans are implemented.
Progress toward objectives is periodically reviewed, and feedback is provided.
Successful achievement of objectives is reinforced by performance-based rewards.
Does MBO Work?
Reason for MBO Success
Top management commitment and involvement
Potential Problems with MBO Programs
Not as effective in dynamic environments that require
constant resetting of goals.
Overemphasis on individual accomplishment may create problems with teamwork.
Allowing the MBO program to become an annual paperwork shuffle.
Exhibit 7-6 Characteristics of Well-Designed Goals
Written in terms of outcomes, not actions
Focuses on the ends, not the means.
Measurable and quantifiable
Specifically defines how the outcome is to be measured and how much is expected.
Clear as to time frame
How long before measuring accomplishment.
Challenging yet attainable
Low goals do not motivate.
High goals motivate if they can be achieved.
Focuses, defines, and makes goals visible.
Communicated to all necessary organizational members
Puts everybody “on the same page.”
Steps in Goal Setting
1. Review the organization’s mission statement.
Do goals reflect the mission?
2. Evaluate available resources.
Are resources sufficient to accomplish the mission?
3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
4. Write down the goals and communicate them.
Is everybody on the same page?
5. Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?
-Contingency Factors in A Manager’s Planning
Manager’s level in the organization
Strategic plans at higher levels
Operational plans at lower levels
Degree of environmental uncertainty
Stable environment: specific plans
Dynamic environment: specific but flexible plans
Length of future commitments
Commitment Concept: current plans affecting future commitments must be sufficiently long-term to meet those commitments.
Planning in the Hierarchy
Approaches to Planning
Establishing a formal planning department
A group of planning specialists who help managers write organizational plans.
Planning is a function of management; it should never become
the sole responsibility of planners.
Involving organizational members in the process
Plans are developed by members of organizational units at various levels and then coordinated with other units across the organization.
Contemporary Issues in Planning
Criticisms of Planning
Planning may create rigidity.
Plans cannot be developed for dynamic environments.
Formal plans cannot replace intuition and creativity.
Planning focuses managers’ attention on today’s competition not tomorrow’s survival.
Formal planning reinforces today’s success, which may lead to tomorrow’s failure.
Effective Planning in Dynamic Environments
Develop plans that are specific but flexible.
Understand that planning is an ongoing process.
Change plans when conditions warrant.
Persistence in planning eventually pay off.
Flatten the organizational hierarchy to foster the development of planning skills at all organizational levels.
Assessing the Environment
The screening of large amounts of information to anticipate and interpret change in the environment.
The process of gathering information about competitors—who they are; what they are doing
Is not spying but rather careful attention to readily accessible information from employees, customers, suppliers, the Internet, and competitors themselves.
May involve reverse engineering of competing products to discover technical innovations.
Environmental Scanning (cont’d)
Screening a broad scope of information on global forces that might affect the organization.
Has value to firms with significant global interests.
Draws information from sources that provide global perspectives on world-wide issues and opportunities.
-The part of organizational planning that involves creating predictions of outcomes based on information gathered by environmental scanning.
Facilitates managerial decision making.
Is most accurate in stable environments.
Applying a set of mathematical rules to a series of hard data to predict outcomes (e.g., units to be produced).
Using expert judgments and opinions to predict less than precise outcomes (e.g., direction of the economy).
Collaborative Planning, Forecasting, and Replenishment (CPFR) Software
A standardized way for organizations to use the Internet to exchange data.
Exhibit 9-1 Forecasting Techniques
Time series analysis
Jury of opinion
Sales force composition
Making Forecasting More Effective
Use simple forecasting methods.
Compare each forecast with its corresponding “no change” forecast.
Don’t rely on a single forecasting method.
Don’t assume that the turning points in a trend can be accurately identified.
Shorten the time period covered by a forecast.
Remember that forecasting is a developed managerial skill that supports decision making.
The search for the best practices among competitors and non-competitors that lead to their superior performance.
By analyzing and copying these practices, firms can improve their performance.
Steps in Benchmarking
Types of Resources
The assets of the organization
Financial: debt, equity, and retained earnings
Physical: buildings, equipment, and raw materials
Human: experiences, skills, knowledge, and competencies
Intangible: brand names, patents, reputation, trademarks, copyrights, and databases
Allocating Resources: Budgeting
Are numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures).
Are used to improve time, space, and use of material resources.
Are the most commonly used and most widely applicable planning technique for organizations.
Types of Budgets
Exhibit 9–4 Suggestions for Improving Budgeting
Collaborate and communicate.
Goals should drive budgets—budgets should not determine goals.
Coordinate budgeting throughout the organization.
Use budgeting/planning software when appropriate.
Remember that budgets are tools.
Remember that profits result from smart management, not because you budgeted for them.
Allocating Resources: Scheduling
Plans that allocate resources by detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed.
Represent the coordination of various activities.
Allocating Resources: Charting
A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis.
Shows the expected and actual progress of various tasks.
A modified Gantt chart that lists entire departments or specific resources on the vertical axis.
Allows managers to plan and control capacity utilization.
Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
-A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity.
Events: endpoints for completion.
Activities: time required for each activity.
Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start.
Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time.
-Is used to determine the point at which all fixed costs have been recovered and profitability begins.
Fixed cost (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
The Break-even Formula:
Allocating Resources: Analysis (cont’d)
Contemporary Planning Techniques
-A one-time-only set of activities that has a definite beginning and ending point time.
-The task of getting a project’s activities done on time, within budget, and according to specifications.
Define project goals
Identify all required activities, materials, and labor
Determine the sequence of completion
Exhibit 9–13 Project Planning Process
Identify activities & Resources
Estimate Time for Activities
Determine Project Completion Date
Determine Additional Resources Requirements
Compare With Objectives
Contemporary Planning Techniques (cont’d)
A consistent view of what the future is likely to be.
An attempt not try to predict the future but to reduce uncertainty by playing out potential situations under different specified conditions.
Developing scenarios that allow managers determine in advance what their actions should be should a considered event actually occur.
Exhibit 9–14 Preparing for Unexpected Events
Identify potential unexpected events.
Determine if any of these events would have early indicators.
Set up an information gathering system to identify early indicators.
Have appropriate responses (plans) in place if these unexpected events occur.
PRESENTED BY :
Sajid Asghar Rana
Project Planning Process
The Relationship Between Planning And Performance
-Formal planning is associated with:
Higher profits and returns on assets.
Positive financial results.
Broadly-worded official statements of the organization (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in the organization).
Exhibit 7–1 Stated Goals of Large Global Companies
Why do Managers Plan?
Purposes of Planning:
Minimizes waste and redundancy
Sets the standards for controlling