5 Chapter Foundations of Planning © Pearson Education Limited 2015 5-1 Learning Outcomes • Discuss the nature and purposes of planning • Explain what managers in the strategic management process • Compare and contrast approaches to goal setting and planning • Discuss contemporary issues in planning © Pearson Education Limited 2015 5-2 5.1 Discuss the nature and purposes of planning © Pearson Education Limited 2015 5-3 What is Planning? Planning: The primary management function © Pearson Education Limited 2015 5-4 Reasons for Planning © Pearson Education Limited 2015 5-5 Criticisms of Formal Planning • May create rigidity • Can’t replace intuition and creativity • Focuses attention on today’s success, not tomorrow’s survival • Reinforces success, which may lead to failure © Pearson Education Limited 2015 5-6 Formal Planning and Organizational Performance Does it pay to plan? • • • • Higher profits Higher return on assets Improved quality of planning Appropriate implementation © Pearson Education Limited 2015 5-7 5.2 Explain what managers in the strategic management process © Pearson Education Limited 2015 5-8 Strategic Management What managers to develop an organization’s strategies © Pearson Education Limited 2015 5-9 The Importance of Strategic Management • It has a positive impact on organizational performance • It prepares managers to cope with changing situations • It guides managers to examine relevant factors in planning future action © Pearson Education Limited 2015 5-10 Functional Strategy Those strategies used by an organization’s various functional departments to support the competitive strategy © Pearson Education Limited 2015 1-20 Strategic Weapons Customer service Employee skills & loyalty Innovation Quality Social media Big data © Pearson Education Limited 2015 1-21 Strategic Weapons (cont.) Social Media •Help people connect •Reduce costs and/or increase revenue Big Data Translate business knowledge into improved decision making and performance © Pearson Education Limited 2015 1-22 5.3 Compare and contrast approaches to goal setting and planning © Pearson Education Limited 2015 5-23 Setting Goals and Developing Plans Types of Plans Financial versus strategic Stated versus real © Pearson Education Limited 2015 5-24 Traditional Goal Setting © Pearson Education Limited 2015 5-25 Management by Objectives Goal specificity Participative decision making Explicit time period Performance feedback © Pearson Education Limited 2015 5-26 Well-Written Goals © Pearson Education Limited 2015 5-27 Steps in Goal-Setting Review the organization’s mission and employees’ key job tasks Evaluate available resources Determine the goals individually or with input from others Make sure goals are well-written and communicate to all who need to know Build in feedback mechanisms to assess goal progress Link rewards to goal attainment © Pearson Education Limited 2015 5-28 Types of Plans © Pearson Education Limited 2015 1-29 Developing Plans © Pearson Education Limited 2015 1-30 Approaches to Planning Top-down traditional approach Development by organizational members © Pearson Education Limited 2015 1-31 5.4 Discuss contemporary issues in planning © Pearson Education Limited 2015 5-32 Contemporary Issues • Planning in dynamic environments • Environmental scanning © Pearson Education Limited 2015 5-33 © Pearson Education Limited 2015 5-34