PLANNING

Copyright 2004 Prentice Hall, Inc. All rights reserved.

31

 Steps,Dimensions,Nature of Planning
Types of Plans
Planning Tools
Budgets
MBO
Merits,Limitations,Barriors in Planning
Types of Strategies
Forcasting
Decision Making

Copyright 2004 Prentice Hall, Inc. All rights reserved.

32

The roles of planning and controlling in the management process

Copyright 2004 Prentice Hall, Inc. All rights reserved.

33

Plans: A Definition

Planning Defined
Defining the organizations objectives or goals
Establishing an overall strategy for achieving
those goals
Developing a comprehensive hierarchy of plans
to integrate and coordinate activities
Planning is concerned with ends (what is to be done)
as well as with means (how it is to be done).

35

Reasons for
Planning

EXHIBIT 3.1
36

How do managers plan?

Benefits of planning:
Improves focus and flexibility.
Improves action orientation.
Improves coordination.
Improves time management.
Improves control.

Criticisms Of Formal Planning

Planning may create rigidity.
Plans cant be developed for a dynamic
environment.
Formal plans cant replace intuition and
creativity.
Planning focuses managers attention on todays
competition, not on tomorrows survival.
Formal planning reinforces success, which may
lead to failure.
38

Planning and Performance

Formal planning generally means higher profits,
higher return on assets, and other positive
financial results.
Planning process quality and implementation
probably contribute more to high performance
than does the extent of planning.
When external environment restrictions allowed
managers few viable alternatives, planning did
not lead to higher performance.

39

What types of plans do managers use?

Short-range and long-range plans
Short-range plans = 1 year or less
Intermediate-range plans = 1 to 2 years
Long-range plans = 3 or more years

People vary in their capability to deal effectively

with different time horizons.
Higher management levels focus on longer time
horizons.

10

What types of plans do managers use?

Strategic and operational plans
Strategic plans set broad, comprehensive, and
longer-term action directions for the entire
organization.
Operational plans define what needs to be done
in specific areas to implement strategic plans.
Production plans
Financial plans
Facilities plans
Marketing plans
Human resource plans

11

What types of plans do managers use?

Policies and procedures
Standing plans
Policies

use.

and procedures that are designed for repeated

Policy
Broad

guidelines for making decisions and taking action

in specific circumstances.

Rules or procedures
Plans

that describe exactly what actions are to be taken

in specific situations.

Management - Chapter 8

12

What types of plans do managers use?

Budgets and project schedules
Single-use plans
Only used once to meet the needs and objectives of a well-

defined situation in a timely manner.

Budgets
Single-use plans that commit resources to activities, projects,
or programs.
Fixed, flexible, and zero-based budgets.

Projects
One-time activities that have clear beginning and end points.
Project management and project schedules.

Management - Chapter 8

13

Types of Plans

BREADTH
OF USE

TIME
FRAME

SPECIFICITY

FREQUENCY
OF USE

Strategic

Long term

Directional

Single use

Tactical

Short term

Specific

Standing

314

Planning: Focus and Time

Strategic plans
Plans that are organization-wide, establish overall
objectives, and position an organization in terms of its
environment

Tactical plans
Plans that specify the details of how an organizations
overall objectives are to be achieved

Short-term plans
Plans that cover less than one year

Long-term plans
Plans that extend beyond five years
315

Strategic Planning
Strategic plans
Apply broadly to the entire organization
Establish the organizations overall objectives
Seek to position the organization in terms of its
environment
Provide direction to drive an organizations efforts to
achieve its goals.
Serve as the basis for the tactical plans.
Cover extended periods of time
Are less specific in their details
316

Tactical Planning
Tactical plans (operational plans)
Apply to specific parts of the organization.
Are derived from strategic objectives
Specify the details of how the overall objectives are to
be achieved.
Cover shorter periods of time
Must be updated continuously to meet current
challenges

317

Directional versus Specific Plans

EXHIBIT 3 .3
318

Specific and Directional Plans

Specific plans
Plans that have clearly defined objectives and leave
no room for misinterpretation
What,

when, where, how much, and by whom

(process-focus)

Directional plans
Flexible plans that set out general guidelines
Go

from here to there (outcome-focus)

319

Single-Use and Standing Plans

Single-use plans
A plan that is used to meet the needs of a particular
or unique situation
Single-day

sales advertisement

Standing plan
A plan that is ongoing and provides guidance for
repeatedly performed actions in an organization
Customer

satisfaction policy

320

Management by Objectives
Management by Objectives (MBO)
A system in which specific performance objectives are
jointly determined by subordinates and their
supervisors, progress toward objectives is periodically
reviewed, and rewards are allocated on the basis of
that progress.
Links individual and unit performance objectives at all
levels with overall organizational objectives
Focuses operational efforts on organizationally
important results.
Motivates rather than controls
321

Management by objectives as an
integrated planning and control
framework.

22

What are the common organizational

controls?
MBO involves a formal agreement specifying
Workers performance objectives for a specific time
period.
Plans through which performance objectives will be
accomplished.
Standards for measuring accomplishment of
performance objectives .
Procedures for reviewing performance results.

23

Cont..
The MBO process:
Supervisor and workers jointly set objectives,
establish standards, and choose actions.
Workers act individually to perform tasks; supervisors
act individually to provide necessary support.
Supervisor and workers jointly review results, discuss
implications, and renew the MBO cycle.

24

Cont..
Types of MBO performance objectives
Improvement
Personal development
Maintenance
Criteria for effective performance objectives
Specific
Time defined
Challenging
Measurable

25

Cont..
Pitfalls to avoid in using MBO
Tying MBO to pay.
Focusing too much attention on easily quantifiable
objectives.
Requiring excessive paperwork.
Having managers tell workers their objectives.

26

Cont..
Advantages of MBO
Focuses workers on most important tasks and
objectives.
Focuses supervisors efforts on important areas of
support.
Contributes to relationship building.
Gives workers a structured opportunity to participate
in decision making.

27

Cascading of Objectives

EXHIBIT 3.4
328

Elements of MBO
Goal specificity
Participative decision making
Explicit time period for performance
Performance feedback

329

Setting Employee Objectives

Identify an employees key job tasks.
Establish specific and challenging goals for each
key task.
Allow the employee to actively participate.
Prioritize goals.
Build in feedback mechanisms to assess goal
progress.
Link rewards to goal attainment.

330

Strategic Management
Strategic Management Process
A nine-step process that involves strategic planning,
implementation, and evaluation

The organizations current identity

Mission statement
Defines

the purpose of the organization

Objectives
Strategic plan
A

document that explains the business founders vision

and describes the strategy and operations of that
business.
331

The Strategic Management Process

EXHIBIT 3.5
332

Analyze the Environment

Environmental scanning
Screening large amounts of information to detect
emerging trends and create a set of scenarios

Competitive intelligence
Accurate information about competitors that allows
managers to anticipate competitors actions rather
than merely react to them

333

SWOT: Identifying
Organizational
Opportunities

SWOT analysis
Analysis of an organizations strengths,
weaknesses, opportunities, and threats in
order to identify a strategic niche that the
organization can exploit
EXHIBIT 3.6
334

Copyright 2004 Prentice Hall, Inc. All rights reserved.

335

SWOT :
SWOT Analysis is a strategic planning method used to
evaluate the Strengths, Weaknesses, Opportunities, and
Threats involved in a project or in a business venture.
It involves specifying the objective of the business
venture or project and identifying the internal and
external factors that are favorable and unfavorable to
achieving that objective

 Strengths: attributes of the person or company

that are helpful to achieving the objective.
Weaknesses: The absence of certain strengths
maybe considered a weakness.
Opportunities: external conditions that are
helpful to achieving the objective.
Threats: changes in the external conditions
which could do damage to the objective.

Creative use of SWOT

How can we Use and Capitalize on each
Strength?
How can we Improve each Weakness?
How can we Exploit and Benefit from each
Opportunity?
How can we Mitigate each Threat ?

SWOT analysis framework

Environmental Scan
Internal Analysis

External Analysis

Strengths Weaknesses Opportunities Threats

SWOT Matrix

Strengths :
Strong brand name
Good reputation among customers
Exclusive access to high grade natural
resources
Favourable access to distribution networks

Weakness:
A weak brand name
Poor reputation among customers
High cost structure
Lack of access to best natural resources

Opportunities:
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers

Threats:
Shift in consumer tastes away from the firms
products
Emergence of substitute products
New regulations
Increased trade barriers

SWOT MATRIX

Strengths

Weakness

Opportuniti
es

S-O
W-O
Strategies Strategies

Threats

S-T
W-T
Strategies Strategies

The SWOT matrix

 S-O Strategies: Pursue opportunities that are a

good companys fit to the companys strengths
W-O Strategies: Overcome weaknesses to
pursue opportunities
S-T Strategies: Identify ways to use strengths
to reduce vulnerability to external threats
W-T Strategies: Establish a defensive plan to
prevent the firms weaknesses from making it
highly susceptible to external threats

SWOT Analysis
Strengths (strategic)
Internal resources that are available or things that an
organization does well
Core competency: a unique skill or resource that
represents a competitive edge

Weaknesses
Resources that an organization lacks or activities that it
does not do well

Opportunities (strategic)
Positive external environmental factors

Threats
Negative external environmental factors
347

Grand Strategies
Growth strategy
A strategy in which an organization attempts to increase the
level of its operations;

Retrenchment strategy
A strategy characteristic of a company that is reducing its
size, usually in an environment of decline

Combination strategy
The simultaneous pursuit by an organization of two or more
of growth, stability, and retrenchment strategies

Stability strategy
A strategy that is characterized by an absence of significant
change
348

Growth Strategies
Merger
Occurs when two companies, usually of similar size,
combine their resources to form a new company

Acquisition
Occurs when a larger company buys a smaller one
and incorporates the acquired companys operations
into its own

349

Competitive Strategies
Strategies that position an organization in such a
way that it will have a distinct advantage over its
competition
Cost-leadership strategy
Becoming

the lowest-cost producer in an industry

Differentiation strategy
Attempting

to be unique in an industry within a broad

market

Focus strategy
Attempting

to establish an advantage
(cost/differentiation) in a narrow market segment
350

Benchmarking
Benchmarking
The search for the best practices among competitors
or noncompetitors that lead to their superior
performance

ISO 9000 series

Standards designed by the International Organization
for Standardization that reflect a process whereby
independent auditors attest that a companys factory,
laboratory, or office has met quality management
standards

351

Attaining Six Sigma Quality

Six sigma
A philosophy and measurement process developed in
the 1980s at Motorola.
To design, measure, analyze, and control the input
side of a production process to achieve the goal of no
more than 3.4 defects per million parts or procedures.
A philosophy and measurement process that attempts
to design in quality as a product is being made.

352

Six Sigma 12-Process Steps

Select the critical-to-quality characteristics.
Define the required performance standards.
Validate measurement system, methods, and procedures.
Establish the current processes capability.
Define upper and lower performance limits.
Identify sources of variation.
Screen potential causes of variation to identify the vital few variables
needing control.
Discover variation relationship for the vital variables.
Establish operating tolerances on each of the vital variables.
Validate the measurement systems ability to produce repeatable data.
Determine the capability of the process to control the vital variables.
Implement statistical process control on the vital variables.
Source: Cited in D. Harold and F. J. Bartos, Optimize Existing Processes to Achieve Six Sigma Capability,
reprinted with permission from Control Engineering, March 1998, p.87, Cahners Business Information.

Copyright 2004 Prentice Hall, Inc. All rights reserved.

353

Identifying A Competitive Advantage

Environmental sources of entrepreneurial
opportunity
The unexpected
The incongruous
The process need
Industry and market structures
Demographics
Changes in perception
New knowledge

Copyright 2004 Prentice Hall, Inc. All rights reserved.

354

Planning Tools

Copyright 2004 Prentice Hall, Inc. All rights reserved.

355

What is forecasting?

Forecasting is a tool used for predicting

future demand based on
past demand information.

Why is forecasting important?

Demand for products and services is usually uncertain.
Forecasting can be used for

Strategic planning (long range planning)

Finance and accounting (budgets and cost controls)
Marketing (future sales, new products)
Production and operations

What is forecasting all about?

We try to predict the
future by looking back
at the past

Demand for Mercedes E Class

Jan Feb Mar Apr May Jun Jul Aug

Actual demand (past sales)

Predicted demand

Time

Predicted
demand
looking
back six
months

Whats Forecasting All About?

From the March 10, 2006 WSJ:

Ahead of the Oscars, an economics professor, at the request of

Weekend Journal, processed data about this year's films nominated for
best picture through his statistical model and predicted with 97.4%
certainty that "Brokeback Mountain" would win. Oops. Last year, the
professor tuned his model until it correctly predicted 18 of the previous
20 best-picture awards; then it predicted that "The Aviator" would win;
"Million Dollar Baby" won instead.
Sometimes models tuned to prior results don't have great predictive
powers.

Some general characteristics of

forecasts
Forecasts are always wrong
Forecasts are more accurate for groups or families
of items
Forecasts are more accurate for shorter time
periods
Every forecast should include an error estimate
Forecasts are no substitute for calculated demand.

Key issues in forecasting

1. A forecast is only as good as the information included in the
forecast (past data)
2. History is not a perfect predictor of the future (i.e.: there is
no such thing as a perfect forecast)

REMEMBER: Forecasting is based on the assumption

that the past predicts the future! When forecasting, think
carefully whether or not the past is strongly related to
what you expect to see in the future

 Forecasting (continued)
Methods of Sales Forecasting

Jury of Executive Opinion Method

Delphi method:
Step 1Experts are asked to answer, independently and in writing, a series
of questions
Step 2A summary of all the answers is then prepared
Step 3Copies of the summary are given to the individual experts
Step 4Another summary is made of these modifications
Step 5Third summary made of opinions and justifications, and copies are
again distributed
Step 6Forecast generated from all of the opinions and justifications that
arise from step 5

 Forecasting (continued)
Methods of Sales Forecasting (continued)
Salesforce
Time

Estimation Method

Series Analysis Method

Product Stages

Evaluating Sales Forecasting Methods

Planning Tools
Scheduling
Gantt Charts
Coordinate organizational resources
Establish realistic worker output standards

PERT charts

Representing and Scheduling Project

Plans
Gantt Charts
Useful for depicting simple projects or parts of large
projects
Show start and completion dates for individual tasks

PERT Charts
PERT = Program Evaluation Review Technique
Show order of activities or dependencies between
activities

Gantt Charts
Graphical Representation of a schedule
Helps to plan, coordinate and track specific tasks
in a project
Named after Henry Gantt who invented them in
1917
Depicts some of the same information as on a
PERT chart
Also depicts new information

UWO

Computer Science Department

66

Example Gantt Chart

TASKS
A
Study current email system
B Define end-user requirements
C
Design Class diagram
D
Acquire computer technology
E
Plan & code email modules
F
Acceptance test new system
G
Deliver new system

Questions: From the above, can you guess:

1 2 3 4 5 6 7 8 9 10
Today

11 12

Which, if any, tasks should have been completed by today and arent
even started? ______
Which, if any, tasks have been completed? ______
Which, if any, tasks have been completed ahead of schedule:? ______
Which, if any, tasks are on or ahead of schedule? _________
Which, if any, tasks are behind schedule? ________
Computer Science Department

UWO

67

Figure 3-16
Graphical diagrams that depict project plans
(a) A Gantt Chart
(b) A PERT chart

Planning Tools

Gantt Scheduling Chart for Acme

Strategic Report Projects, Jan 115,
2003

FIGURE 48
G.Dessler, 2003

April 6, 2006

LIS580- Spring 2006

70

PERT Charts
PERT = Project Evaluation and Review Technique
PERT chart = graphical representation of the scheduling of events in a
project
Sample PERT Chart:
6

0
0

A
4

4
4

B
2
C
3

3 10
7

E
3

10

13
6 13
3

A PERT chart is a graph

4 7
5 10
3
Edges are tasks/activities that need to be done
Nodes are the events or milestones
Task edge T from event node E1 to event node E2 signifies:
Until event E1 happens, task T cannot be started
Until task T finishes, event E2 cannot happen
Events often simply represent completion of tasks associated with arrows
entering it

UWO

Computer Science Department

71

PERT Chart Event Nodes

Event Number:
Sequence number
assigned
Only task edges
indicate
dependencies

9
19

Earliest Completion
Time (ECT):
Earliest time this event
can be achieved, given
durations and
dependencies

Latest Completion Time (LCT):

Latest time that this event could be safely achieved
UWO

Computer Science Department

72

Sample PERT Chart

 Scheduling (continued)
Program Evaluation and Review Technique (PERT)

Defining PERT

Features

Critical Path

Steps in Designing a PERT Network

Step 1List all the activities/events that must be accomplished and the
sequence
Step 2Determine how much time will be needed to complete each
activity/event
Step 3Design PERT network that reflects all of the information in steps 1
and 2
Step 4Identify the critical path

Planning Tools

Comparison of Gantt and PERT Charts

Gantt
Visually shows
duration of tasks
Visually shows
time overlap
between tasks
Visually shows
slack time

PERT
Visually shows
dependencies
between tasks
Visually shows
which tasks can be
done in parallel
Shows slack time
by data in
rectangles

Bouncy Castle PERT Example using MS

Project

Lethbridge/Laganire 2005

Chapter 11: Managing the Software

Process
77

Bouncy Castle Gantt Example using MS

Project

In MS Project set the task length to be 0 to get a milestone

Lethbridge/Laganire 2005

Chapter 11: Managing the Software

Process
78