Chapter 7 Basic Elements of Planning and Decision Making.

Chapter 7

Basic Elements of Planning and

Decision Making

7–2

Learning Objectives

After studying this chapter, you should be able to:

1. Summarize the function of decision making and the planning process.

2. Discuss the purpose of organizational goals, identify different kinds of goals, discuss who sets goals, and describe how to manage multiple goals.

3. Identify different kinds of organizational plans, note the time frames for planning, discuss who plans, and describe contingency planning.

4. Discuss how tactical plans are developed and executed.

5. Describe the basic types of operational plans used by organizations.

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Decision Making and the Planning Process

• Decision making– Is the cornerstone of planning.– Is the catalyst that drives the planning process.– Underlies every aspect of setting goals and

formulating plans.

• Planning– All organizations plan, but not in the same fashion.– All planning occurs within an environmental context.– All goals require plans to guide in their achievement.– All goals are tied higher goals and plans

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The Planning Process

The Planning Process

• The planning process takes place within an environmental context. Managers must develop a complete and thought understanding of this context to determine the organization’s mission and develop its strategic , tactical and operational goals and plans.

• The planning process takes place within an environmental context. Managers must develop a complete and thought understanding of this context to determine the organization’s mission and develop its strategic , tactical and operational goals and plans.

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Organizational Goals

• Purposes of Goals

– Provide guidance and a unified direction for people in the organization.

– Strongly affect on the quality of other aspects of planning.

– Serve as a source of motivation for employees.

– Provide a mechanism for evaluation and control of the organization.

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Kinds of Goals

• By Level– Mission statement– Strategic goals– Tactical goals– Operational goals

• By Area– Different functional areas of the organization.

• By Time Frame– Long-term, intermediate-term, or short-term time

frames and explicit time frames or open-ended.

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Kinds of Organizational

Goals for a Regional Fast-

Food Chain

Learning topics• Goals: responsibilities and optimizing

• Plans– Timeframe– Types

• Tactical planning– Development

– Execution

• Operational Planning– Types

• Contingency planning– Definition

– Crisis Management

• Responsibilities for planning

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Responsibilities of Setting Goals

• Who Sets Goals?–All managers:

managerial responsibility for goal setting should correspond to the manager’s level in the organization.

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Responsibilities of Setting Goals

• Managing Multiple Goals– Optimizing allows

managers to balance and reconcile conflicting goals

• Managers can choose to pursue one goal and exclude all others or to seek a mid-range goal.

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Time Frames for Planning• Long-range Plans

– Cover present and future strategic issues extending beyond five years in the future.

• Intermediate Plans– Cover from 1 to 5 years and parallel tactical

plans.– Are the principal focus of organizational

planning efforts.

• Short-range Plans– Are operational (action) and contingency

(reaction) plans that have a time frame of one year or less.

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Action Plan• Operationally any

other kind of plan

Reaction Plan• A plan designed to

allow the company to react to unforeseen circumstance

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Kinds of Organizational Plans• Strategic Plans

– A general plan set by and for top management that outlines resource allocation, priorities, and action steps to achieve strategic goals.

• Tactical Plans– A plan aimed at achieving the

tactical goals set by and for middle management.

• Operational Plans– Short-term focus plans that are set

by and for lower-level managers.

Planning in more details ..

• Tactical Planning

• Operational Planning

• Contingency Planning

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Tactical Planning

Copyright © Houghton Mifflin Company. All rights reserved. 7–16

Developing TP Developing TP

Executing TP Executing TP

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Developing and Executing Tactical Plans

Developing TP

Developing TP

Developing TP Executing TP

Developing TP Executing TP

Operational Planning - Types

Single Use Plans

• Program

• Project

Standing plans

• Policy

• Standard Operating Procedure

• Rules and regulations

Copyright © Houghton MifflinCompany. All rights reserved. 7–22

Types of Operational Plans

Plan Description

Single-use plan Developed to carry out a course of action not likely to be repeated in the future

Program Single-use plan for a large set of activities

Project Single-use plan of less scope and complexity than a program

Standing plan Developed for activities that recur regularly over a pe-riod of time

Policy Standing plan specifying the organization’s general response to a designated problem or situation

Standard operating procedure Standing plan outlining steps to be followed in particu-lar circumstances

Rules and regulations Standing plans describing exactly how specific activi-ties are to be carried out

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Contingency Planning• Contingency is the

determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.

• Crisis Management: managing crisis (disasters) by following a set of procedures

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Responsibilities for Planning

General Manager

for A

General Managers

for B

LineManager C

LineManager D

LineManager E

LineManager F

LineManager G

LineManager H

Responsibilities of Planning

1. Identify BOD and explain their role in planning.

2. Identify CEO and explain what is her/his role in the planning process.

3. Identify the Executive Committee and explain what is their planning role.

4. What is the difference between a line and a staff managers?

5. What is the planning role of the line managers

6. Explain the planning role of “Planning Manager”.

7. Are all planning committees permanent

8. Can organization's create a planning committee for a specific purpose which will be eliminated when the plans are executed? If yes, what will it be called?

Responsibilities of Planning

The only function of this team is to plan. They are responsible to gather information, coordinate planning activities between the different part of the organization. As they are experts in planning, they take a broader view of planning than individual managers

This body is created when the organization wants to address special circumstances. For example to explore how to expand to Europe the team will include representatives from each of the major units within the company, the corporate planning staff, and the management team that would run the European operation. Once the plan for entering the European market was formulated and implemented, this team will be eliminated.

This body is responsible to establish corporate mission and strategy and to govern the overall corporation. Nowadays, this body is more active in the planning process.

Plays a major role in the complete planning process and is responsible for the implementation of the strategy.

This body is usually composed of the top executives in the organization working together as a group. The members usually provide input to the CEO on the proposals that effect their own unit and to review the various strategic plans that develop from this input.

This body plays an important role in an organization’s planning process for two reasons. First, they are a valuable source of inside information for other managers as plans are formulated and implemented. Second, they must executed plans formulated by higher level managers.

Line Management Chief Executive Office

Board of Directors

Planning Staff Planning Task Force

Line Managers

Responsibilities of Planning

Planning staff

The only function of this team is to plan. They are responsible to gather information, coordinate planning activities between the different part of the organization. As they are experts in planning, they take a broader view of planning than individual managers

Planning Task Force

This body is created when the organization wants to address special circumstances. For example to explore how to expand to Europe the team will include representatives from each of the major units within the company, the corporate planning staff, and the management team that would run the European operation. Once the plan for entering the European market was formulated and implemented, this team will be eliminated.

BOD This body is responsible to establish corporate mission and strategy and to govern the overall corporation. Nowadays, this body is more active in the planning process.

CEO Plays a major role in the complete planning process and is responsible for the implementation of the strategy.

Executive Committee

This body is usually composed of the top executives in the organization working together as a group. The members usually provide input to the CEO on the proposals that effect their own unit and to review the various strategic plans that develop from this input.

Line Management

This body plays an important role in an organization’s planning process for two reasons. First, they are a valuable source of inside information for other managers as plans are formulated and implemented. Second, they must executed plans formulated by higher level managers.

Executive Committee Chief Executive Office Board of Directors

Planning Staff Planning Task Force Executive Committee

Board of Directors

• Establishes corporate mission and strategy.

• May engage in strategic planning.

CEO

Has a major role in planning and implementing the strategy.

Executive Committee

• Top executives within the organization

• Frequent input to the CEO

• Review strategic plans

Planning Staff

• Planning staff personnel gather information, coordinate planning activities, and take a broader view than individual managers.

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Line Managers

• Providers of Information

• Responsible for executing the plans developed by top management.

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Planning Task Force

• Created when the organization wants a special circumstance addressed.

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Key Terms

• mission• strategic goal• tactical goal• operational goal• optimizing• strategic plan • tactical plan• operational plan• reaction plan• long-range plan• intermediate plan

• short-range plan• crisis management• single-use plan• program• project• standing plan• policy• rules and regulations