Chapter Planning PowerPoint slides by R Dennis Middlemist Colorado State University Learning Objectives After studying this chapter, you should be able to:     Define strategy Define planning and explain its purpose Differentiate between strategic, operational, and tactical plans Explain the planning process ©2005 Learning Objectives After studying this chapter, you should be able to:     Identify key contingency factors in planning Explain budgeting as a planning tool Describe an MBO planning system Describe effective goals ©2005 Overview of Planning  Objectives  End states or targets  Plans  Means to hit the desired targets  Planning  Decision-making process focused on the future of an organization and how it will achieve its goals ©2005 Types of Plans  Strategic plans  Broad future of the organization  External environmental demands  Internal resources  Tactical plans  Translate strategic plans into specific goals  Specific parts of the organization ©2005 Types of Plans  Operational plans  Translate tactical plans into specific goals and actions  Small units of the organization  Near term ©2005 Types of Plans Strategic Plans Tactical Plans Operational Plans Time horizon Typically 3-5 years Often focused on 1-2 years in the future Usually focused on the next 12 months or less Scope Broadest,originating with a focus on the entire organization Rarely broader than a strategic business unit Narrower, usually centered on departments or smaller units of the organization Complexity The most complex and general, because of the different industries and business potentially covered Somewhat complex but more specific, because of the more limited domain of application The least complex, because they usually focus on small homogenous units ©2005 Adapted from Exhibit 8.1: Types of Plans: Key Differences Types of Plans Impact Strategic Plans Tactical Plans Have the potential to dramatically impact, both positively and negatively, the fortunes and survival of the organization Can affect specific businesses but generally not the fortunes or survivability of the entire organization Impact is usually restricted to specific department or organization unit Moderate interdependence, must take into account the resources and capabilities of several units within a business Low interdependence, the plan may be linked to higher-level tactical and strategic plans but is less interdependent with them Interdependence High interdependence, must take into account the resources and capabilities of the entire organization and its external environments ©2005 Operational Plans Adapted from Exhibit 8.1: Types of Plans: Key Differences Organizational Levels  Corporate level  What industries should the firm be in?  What markets should the firm be in?  In which businesses should the firm invest money?  Business level  Who are our direct competitors?  What are their strengths and weaknesses? What advantages we have over them?  What are our own strengths and weaknesses?  What customers value in our products/services? ©2005 Organizational Levels  Functional level  What activities must my unit perform well in order to meet customer expectations?  What information about competitors does my unit need in order to help the firm compete effectively?  What are our unit’s strengths and weaknesses? 10 ©2005 Business Plans and Levels 12 Types of Plans Organizational Levels Strategic Plans Corporate Level Tactical Plans Business Level Operational Plans Functional Level ©2005 Adapted from Exhibit 8.3: Interaction Between Business Plans and Levels The Planning Process Analyzing the Environment  Analyzing the environment  Forecasts  Environmental uncertainty  Contingency plans: identify key factors that could affect the desired results and specify what actions will be taken if key events change  Benchmarking  Investigation of the best results among competitors and noncompetitors and the practices that lead to those results 13 ©2005 The Planning Process Analyze environment (forecasts, benchmarks, contingencies, competitor analysis, scenarios) Set objectives Assess resources Determine requirements Develop action plans Implement plans Feedback 14 ©2005 Monitor outcomes Feedback Adapted from Exhibit 8.4: Planning Process The Planning Process Setting Objectives  Setting objectives  Priorities and multiple objectives  Establish which objectives are most important and which have temporal priorities,  Measuring objectives  Financial performance    Profits relative to sales Profits relative to assets Many others  Non-financial 15 ©2005 performance The Planning Process Determining Requirements  Determining requirements  Assess current performance  What will it take in order to get from current levels of performance to that level specified in the objectives?  What drives market share?  What capital will be required? 16 ©2005 The Planning Process Assessing Resources  Assessing resources  Resources required  What resources are needed to achieve the stated objectives?  Resources available  Do we have the needed human talent to meet the requirements?  Do we have the financial resources available?  Do we have the required technology? 17 ©2005 The Planning Process Developing Action Plans  Developing action plans  Sequence and timing  Raw materials, manpower and components must be brought together in the right amounts and sequences  Accountability  Who 18 ©2005 is accountable for which actions? Gantt Chart May June July August Sept Oct Nov Contact clients Obtain contract specifications Submit bid Receive feedback Revise bid Submit revised bid Final approval or rejection Complete bid review 19 ©2005 Adapted from Exhibit 8.5: Gantt Chart The Planning Process Implementing Plans  Implementing Plans  Monitoring the implementation  Monitor the progress of the plan and its implementation  Monitor the level of support that the plan receives as it is being implemented  Monitor the level of resistance  Real-time adjustment 20 ©2005 The Planning Process Monitoring Outcomes  Monitoring outcomes  Unanticipated consequences  Negative unanticipated consequences  Positive unanticipated consequences  Feedback loop  21 ©2005 Apply what has been learned to modify and improve the planning process Planning Tools  Budgets  Capital expenditure budget  Specifies the amount of money to be spent on specific items that have long-term use and require significant amounts  Expense budget  Includes all primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year 22 ©2005 Planning Tools  Budgets  Proposed budget  Provides a plan for how much money is needed, and is submitted to a superior or budget review committee  Approved budget  Specifies what the manager is actually authorized to spend money on and how much 23 ©2005 Planning Tools  Two budgetary approaches  Incremental budgeting approach  From the approved budget of the previous year present arguments for why the upcoming budget should be more or less  Zero-based budgeting approach  Justify all allocations of funds from zero each year 24 ©2005 Goal Setting  Attributes of effective goals  Specific  Measured  Agreed  Realistic  Time bound 25 ©2005 MBO Process Individual motivation and ability Goal acceptance Organization Strategy Strategic plan Tactical plan Operational plan Goal difficulty Jointly set goals Performance ©2005 Feedback Goal specificity Explicit time period 26 Periodic review and evaluation Top management support and involvement Adapted from Exhibit 8.6: The Process of MBO ... Assess resources Determine requirements Develop action plans Implement plans Feedback 14 ©2005 Monitor outcomes Feedback Adapted from Exhibit 8.4: Planning Process The Planning Process Setting Objectives... Goal difficulty Jointly set goals Performance ©2005 Feedback Goal specificity Explicit time period 26 Periodic review and evaluation Top management support and involvement Adapted from Exhibit... consequences  Negative unanticipated consequences  Positive unanticipated consequences  Feedback loop  21 ©2005 Apply what has been learned to modify and improve the planning process Planning