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PLANNING

BASIC FUNCTIONS OF MANAGEMENT

Presented by:

ARIEL A. CATAPALMBA OLIVAREZ COLLEGE1st SemesterS.Y. 2009 - 2010

MR. ERNESTO M.APODACAProfessor

Subject:

MANAGEMENT PRINCIPLES & DYNAMICS

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ACKNOWLEDGEMENT

I would like to acknowledge and extent my heartfelt gratitude to the following persons

who made the completion of this Formal Paper possible:

Our Dean of Graduate School, Dr. Eric L. Olivarez, for his vital encouragement and

support.

Dr. Avelino S. De Chavez, our Assistant to the Dean, for his understanding and

assistance.

Ms. Bernadette Uy, Secretary of Graduate School for the constant reminders and much

needed motivation.

Mr. Ernesto M. Apodaca, my professor in Management Principles & Dynamics for the

continuing help and support and inspiration he extended.

All the Graduate School, faculty members and Staff.

Most especially to my family and friends.

And to GOD, who made all things possible.

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TABLE OF CONTENTS

I. INTRODUCTION

II. IMPORTANCE OF PLANNING

III. THE PLANNING PROCESS

Define your objectives

Determine where you stand vis-a-vis objectives

Develop premises regarding future conditions

Analyze and choose among action alternatives

Implement the plan and evaluate results

IV. BENEFITS OF PLANNING

Planning Improves Focus and Flexibility

Planning Improves Action Orientation

Planning Improves Coordination

Planning Improves Time Management

Planning Improves Control

V. TYPES OF PLANS

Short-Range and Long-Range Plans

Strategic and Operational Plans

Policies and Procedures

Budgets and Projects

VI. PLANNING TOOLS AND TECHNIQUES

Forecasting

Contingency Planning

Scenario Planning

Benchmarking

Staff Planners

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Participation and Involvement

VII. DECISION-MAKING PROCESS

Identify and Define the Problem

Generate and Evaluate Alternative Courses of Action

Decide on a Preferred Course of Action

Implement the Decision

Evaluate Results

VIII. RATIONAL DECISION MAKING

The Nature of Managerial Decision Making

Models of Decision Making

IX. NATURE AND TYPES OF MANAGERIAL DECISIONS

Nature of Managerial Decision making

Types of Problems and Decisions

General Organizational Situations

Decision Making Styles

X. STRATEGY AND STRATEGIC MANAGEMENT

What is Strategy?What is Strategic Management?

The Strategic Management Process

y Analysis of Mission, Values, and Objectives

y Analysis of Organizational Resources and Capabilities

y Analysis of Industry and Environment

Strategy Used by Organizations

y Levels of Strategy

y Growth and Diversification Strategies

y Restructuring and Divestiture Strategies

y Global Strategies

y Cooperative Strategies

y E-Business Strategies

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Strategy Formulation

y Porters Competitive Strategies

y Portfolio Planning

y Incrementalism and Emergent Strategy

y Strategy Implementation

y Management Practices and Systems

y Corporate Governance

y Strategic Leadership

XI. SUMMARY OF TOPICS

Additional Relevant ReadingsInterview with an expert on topics assigned

XII. BIBLIOGRAPHY

XIII. APPENDIX

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INTRODUCTION

The process of management involves planning, organizing, leading, and controlling the

use of resources to accomplish performance goals. The first of these four functions,

planning, sets the stage for the others by providing a sense of direction. It is a process

of setting objectives and determining how best to accomplish them. Said a bit

differently, planning involves deciding exactly what you want to accomplish and how

best to go about it. Planning involves defining the organizations goals, establishing an

overall strategy for achieving these goals, and developing a comprehensive set of plans

to integrate and coordinate organizational work. The term planning as used in this

chapter refers to formal planning. The quality of the planning process and appropriate

implementation probably contribute more to high performance than does the extent of

planning. Planning as just described is an application of the decision making process. It

is a systematic way to approach two important tasks: setting performance objectives,

and deciding how best to achieve them. But remember, planning is not something

managers do while working alone in quite rooms, free from distractions, and at

scheduled times. It is an ongoing process, often continuously being done even while

dealing with an otherwise busy and demanding work setting. And like other decision

making, the best planning is done with active participation of those people whose work

will eventually determine whether or not the plans are well implemented and the

objectives are accomplished.

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IMPORTANCE OF PLANNING

When planning is done well, it creates a solid platform for the other management

functions: organizing allocating and arranging resources to accomplish tasks; leading-

guiding the efforts of human resources to ensure high levels of tasks accomplishment;

and controlling monitoring tasks accomplishments and taking necessary corrective

action. The centrality of planning in management is important to understand. In todays

demanding organizational and career environments it is essential to stay one step

ahead of the competition. This involves always striving to become better at what you are

doing and to be action oriented.

THE PLANNING PROCESS

In the planning process, objectives identify the specific results or desired outcomes that

one intends to achieve. The plan is a statement of action steps to be taken in order to

accomplish the objectives. Five steps in the planning process are:

1. Define your objectives: Identify desired outcomes or results in very specific ways.

Know where you want to go; be specific enough that you will know you have

arrived when you get there, or know how far off the mark you are at various

points along the way.

2. Determine where you stand vis-a-vis objectives: Evaluate current

accomplishments relative to the desired results. Know where you stand in

reaching objectives; know what strengths work in your favour and what

weaknesses may hold you back.

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3. Develop premises regarding future conditions: Anticipate future events;

Generates alternative scenarios for what may happen; identify for each

scenario things that may help or hinder progress toward your objectives.

4. Analyze and choose among action alternatives: List and carefully evaluate

possible actions. Choose the alternative(s) most likely to accomplish your

objectives; describe step-by-step what must be done to follow the chosen course

of action.

5. Implement the plan and evaluate results: Take action and carefully measure your

progress towards objectives. Do what the plan requires, evaluate results, take

corrective action, and revise plans as needed.

BENEFITS OF PLANNING

Organizations in todays dynamic times are facing pressures from many sources.

Externally, these include ethical expectations, government regulations, uncertainties of

a global economy, changing technologies, and the sheer cost of investments in labor,

capital, and other supporting resources. Internally, they include the quest for operating

efficiencies, new structures and technologies, alternative work arrangements, greater

diversity in the work-place, and related managerial challenges. As you would expect,

planning in such conditions offers a number of benefits.

Planning Improves Focus and Flexibility

Good planning improves focus and flexibility, both of which are important for

performance success. An organizationwith focusknows what it does best, knows the

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needs of its customers, and knows how to serve them well. An individualwith focus

knows where he or she wants to go in a career or situation, and in life overall. An

organization with flexibility is willing and able to change and adapt to shifting

circumstances, and operates with an orientation toward the future rather than the past.

An individualwith flexibilityadjusts career plans to fit new and developing opportunities.

Planning Improves Action Orientation

Planning is a way for people and organizations to stay ahead of the competition and

become better at what they are doing. It helps avoid the complacencytrap simply being

carried along by the flow of events. It keeps the future visible as a performance target

and reminds us that the best decisions are often those made before events force

problems upon us.

Planning Improves Coordination

Planning improves coordination. The different individuals, groups, and subsystems in

organizations are doing many different things at the same time. But even as they pursue

their specific tasks and objectives, their accomplishments must add up to meaningful

contributions to the organization as a whole. Good planning throughout an organization

creates a means-endschain or hierarchy of objectives in which lower-level objectives

lead to the accomplishment of higher-level ones. Higher-level objectives as ends are

directly tied to lower-level objectives as the means for their accomplishment.

Planning Improves Time Management

One of the side benefits that planning offers is better time management. Lewis Platt,

former chairman of Hewlett-Packard, says: Basically, the whole day is a series of

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choices. These choices have to be made in ways that allocate your time to the most

important priorities. Platt says that he was ruthless about priorities and that you have

to continually work to optimize your time.

Most of us have experienced the difficulties of balancing available time with the many

commitments and opportunities we would like to fulfil. It is easy to lose track of time and

fall prey to what consultants identify as time wasters. Too many of us allow our time to

be dominated by other people and/or by nonessential activities. To do lists can help,

but they have to contain the right things. In daily living and in management, it is

important to distinguish between things that you mustdo (top priority),shoulddo(high

priority), would be nicetodo (low priority), and really dontneedtodo (no priority).

Planning Improves Control

When planning is done well, it facilitates control, making it easier to measure

performance results and take action to improve things necessary. Planning helps make

this possible by defining the objectives along with the specific actions through which

they are to be pursued. If results are less than expected, either the objectives or the

actions being taken, or both, can be evaluated and adjusted. In this way planning and

controlling work closely together in the management process. Without planning, control

lacks objectives and standards for measuring how well things are going and what could

be done to make them go better. Without control, planning lacks the follow-through

needed to ensure that things work out as planned.

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TYPES OF PLANS

Managers face many different planning challenges in the flow and pace of activities in

organizations. In some cases the planning environment is stable and quite predictable;

in others it is more dynamic and uncertain. A variety of plans are used to meet these

different needs.

Short-Range and Long-Range Plans

A rule of thumb is that short-range plans cover 1 year or less, intermediate range plans

cover 1 to 2 years, and long range plans look 3 or more years into the future. Top

management is most likely to be involved in setting long-range plans and directions for

the organization as a whole, while lower management levels focus more on short-run

plans that help achieve long-term objectives. Unless everyone understands an

organizations long-term plans, there is always risk that the pressure of daily events will

create confusion and divert attention from important tasks. In other words, without a

sense of long-term direction, people can end up working hard but without achieving

significant results.

Strategic and Operational Plans

Plans differ not only in time horizons but also in scope. Strategic plans set broad,

comprehensive, and longer-term action directions. Strategic planning by top

managementinvolves determining objectives for the entire organization, describing what

and where it wants to be in the future.

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Operational plans define what needs to be done in specific functions or work units to

implement strategic plans. Typical operational plans for a business firm include

productionplans dealing with the methods and technology needed by people in their

work; financial plans dealing with money required to support various operations;

facilitiesplans dealing with facilities and work layouts; marketingplans dealing with

the requirements of selling and distributing goods or services; and human resource

plans dealing with the recruitment, selection, and placement of people into various

jobs.

Policies and Procedures

Among the many plans in organizations, standingplansin the form of organizational

policies and procedures are designed for use over and over again. A

policycommunicates broad guidelines for making decisions and taking action in specific

circumstances. For example, typical human resource policies address such matters as

employee hiring, termination, performance appraisals, pay increases, promotions, and

discipline.

Rules or proceduresdescribe exactly what actions are to be taken in specific

situations. They are often found stated in employee handbooks or manuals as SOPs

standard operating procedures. Whereas a policy sets a broad guideline for action,

procedures define precise actions to be taken.

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Budgets and Projects

In contrast to standing plans, single-useplans are used once, serving the needs and

objectives of well-defined situations in a timely manner. Budgets are single-use plans

that commit resources to activities, projects, or programs. They are powerful tools that

allocate scarce resources among multiple and often competing uses. Most managers

bargain for adequate budgets to support the needs of their work units or teams. They

are also expected to achieve performance objectives while keeping within the allocated

budget.

PLANNING TOOLS AND TECHNIQUES

The benefits of planning are best realized when the foundations are strong. Among the

useful tools and techniques of managerial planning are forecasting, contingency

planning, scenarios, benchmarking, participative planning, and the use of staff planners.

FORECASTING

Forecasting is the process of predicting what will happen in the future. All plans involve

forecasts of some sort. Periodicals such as Business Week, Fortune, and the

Economistregularly report forecasts of economic conditions, interest rates,

unemployment, and trade deficits, among other issues. Some are based on qualitative

forecasting,which uses expert opinions to predict the future. Others involve quantitative

forecasting, which uses mathematical models and statistical analyses of historical data

and surveys to predict future events.

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CONTINGENCY PLANNING

Planning by definition, involves thinking ahead. But the more uncertain the planning

environment, the more likely that ones original assumptions, forecasts, and intentions

may prove inadequate or wrong. Contingency planning identifies alternative courses

of action that can be implemented to meet the needs of changing circumstances.

Although one cant always predict when things will go wrong, it can be anticipated that

they will. It is highly unlikely that any plan will ever be perfect; changes in the

environment will sooner or later occur, as will crises and emergencies. And when they

do, the best managers and organizations have contingency plans ready to be

implemented. Contingency plans contain trigger points that indicate when preselected

alternative plans should be activated.

SCENARIO PLANNING

A long-term version of contingency planning, called scenario planning, involves

identifying several alternative future scenarios or states of affairs that may occur. Plans

are then made to deal with each should it actually happen.

BENCHMARKING

All too often planners becomes too comfortable with the ways things are going and

overconfident that the past is a good indicator of the future. It is often better to keep

challenging the status quo and not simply accept things as they are. One way to do this

is through benchmarking, the use of external comparisons to better evaluate ones

current performance and identify possible actions for the future.

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The purpose of benchmarking is to find out what other people and organizations are

doing very well, and then plan how to incorporate these ideas into ones own

operations. One benchmarking technique is to search forbest practices, thing people

and organizations do that help them achieve superior performance. Well-run

organizations emphasize internal benchmarking that encourages all members and work

units to learn and improve by sharing one anothers best practices. They also use

external benchmarking to learn from competitors and non competitors alike.

STAFF PLANNERS

As organizations grow, there is a corresponding need to increase the sophistication of

the planning system itself. In some cases, staff planners are employed to help

coordinate planning for the organization as a whole or for one of its major components.

These planning specialists are skilled in all steps of the planning process, as well as

with planning tools and techniques. They can help bring focus and energy to accomplish

important, often strategic, planning tasks. But one risk is a tendency for a

communication gap to develop between staff planners and line manager. Unless

everyone works closely together, the resulting plans may be inadequate, and people

may lack commitment to implement the plans no matter how good they are.

PARTICIPATION AND INVOLVEMENT

Participation is a key word in the planning process. Participatory planning includes in

all planning steps the people who will be affected by the plans and/or who will be asked

to help implement them. Participation can increase the creativity and information

available for planning. It can also increase the understanding and acceptance of plans,

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as well as commitment to their success. And even though participatory planning takes

more time, it can improve results by improving implementation.

DECISION-MAKING PROCESS

The decision-making process involves a set of activities that begins with identification

of a problem, includes making a decision, and ends with the evaluation of results. The

steps in managerial decision making are (1) identify and define the problem, (2)

generate and evaluate alternative solutions, (3) choose a preferred course of action and

conduct the ethics double check, (4) implement the decision, and (5) evaluate results.

All five steps can be understood in the context of the following short-but-true case.

STEP 1 IDENTIFY AND DEFINE THE PROBLEM

The first step in decision making is to find and define the problem. This is a stage of

information gathering, information processing, and deliberation. It is important to clarify

goals by identifying exactly what a decision should accomplish. The more specific the

goals, the easier it is to evaluate results after the decision is actually implemented. The

way a problem is defined can have a major on how it is resolved.

STEP 2 GENERATE AND EVALUATE ALTERNATIVE COURSES OF ACTION.

Once the problem is defined, it is time to assemble the facts and information that will be

helpful for problem solving. It is important here to clarify exactly what is known and what

needs to be known. Extensive information gathering should identify alternative courses

of action, as well anticipated consequences.

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The process of evaluating alternatives often benefits from stakeholder analysis. Key

stakeholders in the problem should be identified, and the effects of possible courses of

action on each of them should be considered. Another useful approach for the

evaluation of alternatives is a cost-benefit analysis, the comparison of what an

alternative will cost in relation to the expected benefits. At a minimum, the benefits of an

alternative should be greater than its costs. Typical criteria for evaluating alternatives

include the following:

y Benefits:What are the benefits of using the alternative to solve a performance

deficiency or take advantage of an opportunity?

y Costs: What are the costs of implementing the alternative, including resource

investments as well as potential negative side effects?

y Timeliness: How fast will the benefits occur and a positive impact be achieved?

y Acceptability: To what extent will the alternative be accepted and supported by

those who must work with it?

y Ethicalsoundness: How well does the alternative meet acceptable ethical criteria

in the eyes of the various stakeholders?

STEP 3 DECIDE ON A PREFERRED COURSE OF ACTION

This is the point of choice, where an actual decision is made to select a preferred

course of action. Just how this is done and by whom must be successfully resolved in

each problem situation.

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The classical decision model views the manager as acting rationally in a certain

world. Here, the manager faces a clearly defined problem and knows all possible action

alternatives as well as their consequences. As a result, he or she makes an optimizing

decision that gives the absolute best solution to the problem. The classical approach is

a rational model that assumes perfect information is available for decision making. The

behavioural decision model, accordingly, assumes that people act only in terms of

what they perceive about a given situation. Because such perceptions are frequently

imperfect, the decision maker has only partial knowledge about the available action

alternatives and their consequences. Consequently, the first alternative that appears

give a satisfactory resolution of the problem is likely to be chosen.

STEP 4 IMPLEMENT THE DECISION

Once a preferred solution is chosen, actions must be taken to fully implement it. Nothing

new can or will happen unless action is taken to actually solve the problem. Managers

not only need the determination and creativity to arrive at a decision, they also need the

ability and willingness to implement it.

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