Im1013 Chap 9

04/13/2304/13/23 IM1013 chapter 9 & 10IM1013 chapter 9 & 10 11

Chapter 9: Planning tools Chapter 9: Planning tools and techniquesand techniques

Several techniques have been developed to assist managers in Several techniques have been developed to assist managers in assessing the organization’s environment:assessing the organization’s environment:

A. Environment scanning involves the screening of much A. Environment scanning involves the screening of much information to detect emerging trends and create scenarios. It is information to detect emerging trends and create scenarios. It is used by both large and small organizations. Two specific used by both large and small organizations. Two specific techniques are:techniques are: Competitor intelligence is an environmental scanning activity that Competitor intelligence is an environmental scanning activity that seeks to identify who competitors are, what they are doing and seeks to identify who competitors are, what they are doing and how their actions will affect the focus organization.how their actions will affect the focus organization. A scenario is a consistent view of what the future is likely to be. A scenario is a consistent view of what the future is likely to be. Developing scenarios allows management to see the impact of Developing scenarios allows management to see the impact of different assumptions on outcomes.different assumptions on outcomes.


B. Forecasting involves developing forecasts which are predictions of B. Forecasting involves developing forecasts which are predictions of future outcomes: e.g. Revenue forecasting is predicting future future outcomes: e.g. Revenue forecasting is predicting future revenues and technological forecasting is predicting changes in revenues and technological forecasting is predicting changes in technology and when new technologies are likely to be technology and when new technologies are likely to be economically feasible. Broadly, two categories of forecasting economically feasible. Broadly, two categories of forecasting techniques are quantitative forecasting applies a set of techniques are quantitative forecasting applies a set of mathematical rules to a series of past data to predict future mathematical rules to a series of past data to predict future outcomes and qualitative forecasting involves judgment and outcomes and qualitative forecasting involves judgment and opinions of knowledgeable individuals to predict future outcomes. opinions of knowledgeable individuals to predict future outcomes. Forecasting is effective i.e. accurate, 1. in a static environment 2. Forecasting is effective i.e. accurate, 1. in a static environment 2. use simple forecasting techniques 3. compare every forecast with use simple forecasting techniques 3. compare every forecast with ‘no change’ 4. don’t depend on a single forecasting method 5. ‘no change’ 4. don’t depend on a single forecasting method 5. don’t assume that you identify turning point in a trend 6. shorten don’t assume that you identify turning point in a trend 6. shorten the length of the forecaststhe length of the forecasts

C. Benchmarking is defined as the search for the best practice C. Benchmarking is defined as the search for the best practice among competitors or superior performance. The benchmarking among competitors or superior performance. The benchmarking process typically follows four steps:process typically follows four steps:


1.1. The organization forms a benchmarking team whose initial task is to The organization forms a benchmarking team whose initial task is to identify what is to be bench market, identify comparative organization identify what is to be bench market, identify comparative organization and determine data collection methods.and determine data collection methods.

2.2. The team collects internal and external dataThe team collects internal and external data3.3. The data is analyzed to identify performance gaps and to determine the The data is analyzed to identify performance gaps and to determine the

cause of the differencecause of the difference4.4. An action plan is prepared and implementedAn action plan is prepared and implemented

A budget is a numerical plan for allocating resources (4M) to specific activities. A budget is a numerical plan for allocating resources (4M) to specific activities. 1.1. Revenue budget – base on forecasted future salesRevenue budget – base on forecasted future sales2.2. Expense budget – base on the list of primary operational activities Expense budget – base on the list of primary operational activities

undertaken by a business unitundertaken by a business unit3.3. Profit budget – Revenue budget (1) less Expense budget (2)Profit budget – Revenue budget (1) less Expense budget (2)4.4. Cash budget – base on forecasted cash needed on handCash budget – base on forecasted cash needed on hand5.5. Capital expenditures (CAPEX) budget – base on forecasted investments Capital expenditures (CAPEX) budget – base on forecasted investments

in property, building and major equipmentin property, building and major equipment6.6. Most of the above budgets are fixed; the final type of budget is a variable Most of the above budgets are fixed; the final type of budget is a variable

budget which base on costs that vary with volumebudget which base on costs that vary with volume

Two basic approaches to budgeting are: Incremental budget – according to Two basic approaches to budgeting are: Incremental budget – according to previous period, and zero base budgeting (ZBB) – a system in which previous period, and zero base budgeting (ZBB) – a system in which budget requests start from scratch, regardless of previous periods.budget requests start from scratch, regardless of previous periods.


Operational planning tools can help a manager to be more effective.Operational planning tools can help a manager to be more effective.

A.A. Scheduling – a list of necessary activities, their order of Scheduling – a list of necessary activities, their order of accomplishment, who is to do each, and time needed to complete accomplishment, who is to do each, and time needed to complete them. Some useful scheduling devices include Gantt chart, load them. Some useful scheduling devices include Gantt chart, load chart (a modified Gantt chart that include capacity) and PERT chart (a modified Gantt chart that include capacity) and PERT network analysis - identify critical path of the longest or most time network analysis - identify critical path of the longest or most time consuming sequence of events; thus if critical path delayed the consuming sequence of events; thus if critical path delayed the project will be delayedproject will be delayed


B. Breakeven analysis – to identify the point at which total revenue is just B. Breakeven analysis – to identify the point at which total revenue is just sufficient to cover total costs.sufficient to cover total costs.

C. Linear programming – a mathematical technique to solve resource allocation C. Linear programming – a mathematical technique to solve resource allocation problemproblem

D. Queuing theory – balance the cost of having a waiting line against the cost of D. Queuing theory – balance the cost of having a waiting line against the cost of service to maintain that lineservice to maintain that line

E. Probability theory – use statistics to analyst past predictable patterns and to E. Probability theory – use statistics to analyst past predictable patterns and to reduce risk in future plans.reduce risk in future plans.

F. Marginal analysis - assesses incremental costs or revenues in a decisionF. Marginal analysis - assesses incremental costs or revenues in a decisionG. Simulation – model of a real world phenomenon that contains one or more G. Simulation – model of a real world phenomenon that contains one or more

variables that can be manipulated in order to assess their impactvariables that can be manipulated in order to assess their impact

Time management is defined as a personal form of scheduling time effectively. Time management is defined as a personal form of scheduling time effectively. Two forms of time i.e. response time; uncontrollable time spent responding Two forms of time i.e. response time; uncontrollable time spent responding to request, demand and problem initiated by others; and discretionary time; to request, demand and problem initiated by others; and discretionary time; controllable time by manager. To use your time effectively: 1. Make a list of controllable time by manager. To use your time effectively: 1. Make a list of your objectives 2. rank the objectives according to their importance 3. list the your objectives 2. rank the objectives according to their importance 3. list the activities necessary to achieve your objectives 4. for each objective, assign activities necessary to achieve your objectives 4. for each objective, assign priorities to the various activities required to achieve the objective 5. priorities to the various activities required to achieve the objective 5. schedule your activities according to the priorities you have set. A diary or schedule your activities according to the priorities you have set. A diary or time log is a good way to determine how well you use your time. Beware of time log is a good way to determine how well you use your time. Beware of wasting time in poorly run meetingswasting time in poorly run meetings


Chapter 10: Organization Chapter 10: Organization structure and designstructure and design

Organization structure is an organization’s framework as expressed by Organization structure is an organization’s framework as expressed by its degree of complexity, formalization and centralization. its degree of complexity, formalization and centralization. Formalization is the degree to which an organization relies on rules Formalization is the degree to which an organization relies on rules and procedures to direct the behavior of employees. Centralization is and procedures to direct the behavior of employees. Centralization is the concentration of decision making authority in top management. the concentration of decision making authority in top management. Decentralization is the empowerment of decision making to lower Decentralization is the empowerment of decision making to lower levels in an organization. Organization design is defined according to levels in an organization. Organization design is defined according to horizontal and vertical dimensions and also the contingency.horizontal and vertical dimensions and also the contingency.

Building the Building the vertical dimensionvertical dimension of organization refers to how the of organization refers to how the interaction among these levels of management and operatives. Unity interaction among these levels of management and operatives. Unity of command is defined as the principle that a subordinate should of command is defined as the principle that a subordinate should have only one superior to whom he is directly responsible. In classical have only one superior to whom he is directly responsible. In classical view unity of command was strictly adhered to. In current view the view unity of command was strictly adhered to. In current view the unity of command is applicable when organizations are simple.unity of command is applicable when organizations are simple.


Authority is defined as the rights inherent in a managerial position to give Authority is defined as the rights inherent in a managerial position to give orders and expect them to be obeyed. Responsibility is defined as an orders and expect them to be obeyed. Responsibility is defined as an obligation to perform assigned activities. In classical view authority obligation to perform assigned activities. In classical view authority was viewed as glue that held the organizations together. Authority was viewed as glue that held the organizations together. Authority related to position within the organization. When authority was related to position within the organization. When authority was delegated, relevant responsibility had to be allocated. Authority and delegated, relevant responsibility had to be allocated. Authority and responsibility needed to be equal. Although responsibility cannot be responsibility needed to be equal. Although responsibility cannot be delegated there are forms of responsibility: operating and ultimate. delegated there are forms of responsibility: operating and ultimate. Also there are two forms of authority relationships: Also there are two forms of authority relationships: line authorityline authority; a ; a manager to direct the work of a subordinate – it follows the chain of manager to direct the work of a subordinate – it follows the chain of command which is the flow of authority from top to the bottom of an command which is the flow of authority from top to the bottom of an organization; and organization; and staff authoritystaff authority; that supports, assists, and advises ; that supports, assists, and advises holders of the authority. Nowadays authority is only valid if holders of the authority. Nowadays authority is only valid if subordinates are willing to accept it and it is only one element in the subordinates are willing to accept it and it is only one element in the larger concept of power. Chester Barnard explain the acceptance of larger concept of power. Chester Barnard explain the acceptance of authority by subordinates depends on:authority by subordinates depends on:

They understand the orderThey understand the order They feel the order is consistent with the purpose of the organizationThey feel the order is consistent with the purpose of the organization The order does not conflict with their personal beliefsThe order does not conflict with their personal beliefs They are able to perform the task as directedThey are able to perform the task as directed Power is defined as the capacity to influence decisionsPower is defined as the capacity to influence decisions


Span of control is defined as the number of subordinates a manager can Span of control is defined as the number of subordinates a manager can direct efficiently and effectively. The classical view favored small direct efficiently and effectively. The classical view favored small spans typically no more than six in order to maintain close control. spans typically no more than six in order to maintain close control. Nowadays organizations are increasing their span of control. The Nowadays organizations are increasing their span of control. The span of control is increasingly being determined by looking at various span of control is increasingly being determined by looking at various contingency factors.contingency factors.

An organization’s structure also has a horizontal dimension that looks at An organization’s structure also has a horizontal dimension that looks at how work activities are organized at each specific level of the how work activities are organized at each specific level of the organization. Division of labor describes splitting a job into a number organization. Division of labor describes splitting a job into a number of steps with each step being completed by a separate individual. of steps with each step being completed by a separate individual. Departmentalization: activities in the organization had to be Departmentalization: activities in the organization had to be specialized and grouped into departments. Customer specialized and grouped into departments. Customer departmentalization is emphasized. The concept of cross functional departmentalization is emphasized. The concept of cross functional teams evolved from matrix organizations: assigns specialists from teams evolved from matrix organizations: assigns specialists from different functional departments to work on one or more projects that different functional departments to work on one or more projects that are led by a project manager.are led by a project manager.


Classical view of organization design was a mechanistic/bureaucratic Classical view of organization design was a mechanistic/bureaucratic organization; highly complex, formal and centralized; of either the functional organization; highly complex, formal and centralized; of either the functional structure; similar or related occupational specialties together; or the divisional structure; similar or related occupational specialties together; or the divisional structure; an autonomous self contained units. Organic organization has structure; an autonomous self contained units. Organic organization has simple structure, flexible, speed and inexpensive to maintain but small sized. simple structure, flexible, speed and inexpensive to maintain but small sized. We now recognize that the ideal organization design depends on contingency We now recognize that the ideal organization design depends on contingency factors. Strategy and structure are closely linked and as strategy changes the factors. Strategy and structure are closely linked and as strategy changes the structure should also change. The size of organization affects structure; as structure should also change. The size of organization affects structure; as organization grows and the number of employees rises, structure tends to organization grows and the number of employees rises, structure tends to become formalized/bureaucratic. Joan Woodward found that three distinct become formalized/bureaucratic. Joan Woodward found that three distinct technologies; unit production, mass production and process production; affect technologies; unit production, mass production and process production; affect the organization structure.the organization structure.

We can conclude that the processes or methods that transform inputs into outputs We can conclude that the processes or methods that transform inputs into outputs differ by their degree routineness; more routine, the more standardized the differ by their degree routineness; more routine, the more standardized the structure can be. Environment is a major influence on structure; mechanistic structure can be. Environment is a major influence on structure; mechanistic organization tend to be ill equipped to respond to dynamic environment of organization tend to be ill equipped to respond to dynamic environment of rapid change. Increasing globalization of markets and competitors has created rapid change. Increasing globalization of markets and competitors has created the need to response quickly to changes anywhere in the world. The advances the need to response quickly to changes anywhere in the world. The advances in technology and rapid innovation contributed to the development of boundary in technology and rapid innovation contributed to the development of boundary less organization.less organization.

Technology

Im1013 Chap 9