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mia.hrusikova
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9.

FOUNDATIONS OF PLANNING

Planning = includes defining the organisation's objectives/goals, establishing


an overall strategy for achieving those goals, and developing a comprehensive
hierarchy of plans to integrate and coordinate activities. It is concerned with ends
(what is to be done), as well as with means (how it is to be done).

Informal Planning – do not have written form, primarily in small organisation.


However, this does not mean that small organisations cannot have formalised
planning procedures.
Formal Planning – goals, as well as the means to achieve them, are often
drawn up in writing. During planning, business opportunities are sold, the area of
business will be decided, the scope of activities is planned. Advantages: a well-
thought-out methodology, clearly and in writing formula, coordinated goals with
each other, and clearly determined resources needed to achieve these goals.
Written goals indicate a specific clear direction of the organization activities and
form the basis for evaluating the achievement of goals and then for controlling.

Why Do Managers Plan?


1. Planning provides direction – both for managers and employees.
Even if we do not achieve all the goals, the process itself is instructive, as
it forces managers to think about what the organisation wants to achieve
and how it can achieve it.
2. Planning reduces uncertainty – by forcing managers to think ahead,
anticipate changes, consider its impact on the organisation, and develop
an appropriate response, planning can reduce uncertainty to some extent.
Although planning cannot eliminate changes, e.g. from the environment, it
can prepare for them and use them to the benefit of the organisation.
3. Planning minimises waste and redundancy – elimination of the
waste of human, material, and financial resources by properly coordinating
activities.
4. Planning establishes the goals or standards – required for
control, written goals create standards for measuring and controlling
results.

Currently there are opinions that planning reduces the flexibility of an


organisation, but planning is not a one-time act, but an ongoing process, as plans
can be changed and adapted as the situations demands.

Planning & Performance


Formal planning is associated with positive financial results.
Quality of the planning process and the appropriate implementation of the plans
probably contribute more to high performance than does the extent of planning.
In those studies where formal planning didn't lead to higher performance, the
external environment is typically the culprit.

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Types of Plans

Breadth
Strategic plans – plans that apply to the entire organisation, establish the
organisation's overall objectives, and seek to position the orsanization in terms of
its environment. Usually involve long-term plans. Strategic plans also include
mission, so the purpose of an organization (Walmart's mission, is to save people‘s
money so they can live better.) Formulation of objectives.
Operational plans – plans that specify the details of how the overall objectives
are to be achieved. Usually connected with short-term plans (monthly, weekly,
day-to-day). Offering ways of obtaining objectives.

Time Frame
Short-term plans – plans covering less than one year. Usually connected with
operational plans.
Long-term plans – plans covering of 5+ years. Usually connected with strategic
plans.

Specificity
Specific plans – clearly defined plans that leave no room for interpretation. (e.g.
cut cost by 4% and increase revenues by 6% in the next six months)
Directional plans – flexible plans that set out general guidelines. (e.g. aim at
improving profits by 5 to 10% during the next six months)

As we can see on the picture, specific plans would dictate the exact route to get
from point A to point B. In contrast, directional plans would point out in the
general direction.

Frequency of Use
Single-use plans – a one-time plan specifically designed to meet the needs of a
unique situation. (e.g. we are opening a new manufacturing company in other
country in a new country)

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Ongoing plans – plans that provide guidance for activities performed
repeatedly. (e.g. hiring procedure)

Contingency Factors in Planning


There are several factors influencing the type of plans that managers need to
create.

1. Level in the Organisation

Strategic planning prevails in organisations at the highest organisational level,


as top management should primarily be concerned with deciding on strategic
issues. Long-term, too specific and mostly directional plans.
2. Degree of Environmental Uncertainty
The greater the environmental uncertainty, the more plans should be
directional, and emphasis placed on the short-term. If the organisation
operates in a stable environment, managers can develop specific plans for
relatively long periods. But if the organisation operates in a dynamic
environment, plans must have a greater degree of directional planning.
3. Length of Future Commitments
Commitment concept – plans should extend far enough to meet
commitments made when the plans were developed. Decisions have a long-
term impact on the efficiency and economy of the organisation because they
often create long-term obligations. (e.g. taking a loan based on forecast of
sales and cost and cash flows, it is necessary to calculate the payback period
of such invested funds over long-term.) Planning should therefore include the
time horizon for the return of invested funds.

Objectives
Objectives/Goals = desired outcomes for individuals, groups or entire
organization.

Stated Objectives = official statements of what an organisation says and what


it wants public to believe are its objectives. (organisation states objectives that
are often quite irrelevant to what actually goes on in that organisation)
Real Objectives = objectives that an organisation actually pursues as defined
by the actions of its members. To know what an organisation's real objectives are,
you need to observe what members of the organisation actually do.

When we are talking about setting objectives we can use two


different approaches:
Traditional objective setting – objectives are set at the top and then broken
down to sub goals for each level in an organisation. So, it is mainly a mechanical

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breakdown of goals and tasks from top to bottom without discussing them with
managers or employees. Which such an approach, it may happen that the goals
are not that are not realistic, not achievable, and not motivating.

Management by objectives – a system, in which objectives are jointly


determined by subordinates and their superiors, progress toward objective
periodically reviewed, and rewards are allocated based on this progress. Specific
goals, participative decision-making, an explicit time period, and performance
feedback. Currently used by majority of firms.

Top management will determine the main goals for organisational units, but by
discussion with the managers of such divisions, then divisional managers develop
and set goals for subordinate organisational units, but in cooperation with the
managers of these departments. The managers of the departments then will
develop and set goals for all employees of the department in cooperation with
them. If necessarily also corrections is done, then achieving set goals is
stimulated also by renumeration based on work results.

Issues in Planning
1) Environmental Scanning
Screening lots of information to detect emerging trends, but the most important
thing is to use the information for the company's growth. Most important
information is about our competitors.
Competitive Intelligence – gathering information about competitors that allows
managers to anticipate competitors actions – we can change behaviour or
strategies to be more competitive, can plan ahead, be flexible, etc.

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2) Virtual Reality
A 3D, interactive computer-generated experience that takes place within
a simulated environment. A tool for interviewing job candidates, holding virtual
meetings, conducting complex job trainings, but it has also potential to help
managers in the planning process. (creating 2 versions of a newly built factory)

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