Organization and Management

WEEK 5 - NATURE AND LEVEL OF PLANNING AND TYPES OF PLANS

PLANNING APPLICATION OF PLANNING TECHNIQUES AND TOOLS

Planning is a process that involves the setting of the organization’s goals, establishing strategies for
accomplishing those goals, and developing plans of action or means that managers intend to use to
achieve organizational goals.

Nature of Planning:

-Planning provides direction to all of the organization’s human resources

-Planning is important because it reduces uncertainty. -Minimizing waste.

-Establishing goals and standards

3 Levels of Planning:

1.Top/ Corporate Level- is when higher-up management and owners review their current strategy to
determine their long-time goals.

2.Middle/ Business Level- has to do with staying competitive by creating useful products and staying
competitive with other goods or services.

3.Low/ Functional Level-plans that establish the organization’s overall goals and apply to the entire firm.

Goals– the identification of targets or desired ends

Vision – a mental image of what the organization will be in the future.

Mission – basic purpose of an organization and range of their operation

Objectives – steps needed in order to attain desired ends.

Types of Plans:

1. Operational plans focused on the specific procedures and processes that occur within the lowest
levels of the organization.

2. Strategic plans-plans that establish the organization’s overall goals and apply to the entire firm.

3. Organizational plans- plans that apply to a particular unit area only.

4. Long term plans- plans that go beyond three years.

5. Short term plans– plans that cover one year or less.

6. Directional plans-plans that are flexible or give general guidelines only.

7. Specific plans – plans that are clearly stated and which have no room for interpretation; language used
must be very understandable

Planning Application of Planning Techniques and Tools

For effective planning in today ‘s dynamic environments, different techniques and tools must be used,
such as forecasting, contingency planning, scenario planning, benchmarking, and participatory planning.

According to Schermerhorn (2008), forecasting is an attempt to predict what may happen in the future.
All planning types, without exception, make use of forecasting.

Business periodicals publish forecasts such as employment and unemployment rates, increase or
decrease of interest rates, stock market data, GNP/GDP data, and others. Forecasts used may either be
quantitative or qualitative. Opinions of prominent economists are used in qualitative forecasts while
mathematical calculations and statistical analyses of surveys/research are used in quantitative forecasts.
These, however, are just aids to planning and must be treated with caution. As the name implies,
forecasts are predictions and may be inaccurate, at times, due to errors of human judgment.

Contingency factors may offer alternative courses of action when the unexpected happens or when
things go wrong. Contingency plans must be prepared by managers, ready for implementation when
things do not turn out as they should be. Contingency factors called ―trigger points-indicate when the
prepared alternative plan should be implemented. Meanwhile, planning for future states of affairs is a
long-term version of contingency planning and is also known as scenario planning. Several future states
of affairs must be identified, and alternative plans must be prepared in order to meet the changes or
challenges in the future. This is a big help for organizations because it allows them to plan ahead and
make necessary adjustments in their strategies and operations. Some examples of changes or challenges
that may arise in future scenarios are environmental pollution, human rights violations, climate and
weather changes, earthquake damage to communities, and others. Some organizations use a Gantt chart
to properly schedule production processes and allocate resources.

Benchmarking is another planning technique that generally involves external comparisons of a

company’s practices and technologies with those of other companies. Its main purpose is to find out
what other people and organizations do well and then plan how to incorporate these practices into the
company operations. A common benchmarking technique is to search for best practices used by other
organizations that enable them to achieve superior performance. This is known as external
benchmarking. Internal benchmarking is also practiced by some organizations when they encourage all

their employees working in their different work units to learn and improve by sharing one another ‘s
best practices. Participatory planning is a planning process that includes the people who will be affected
by the plans and those who will be asked to implement them in all planning steps. Creativity, increased
acceptance and understanding of plans, and commitment to the success of plans are the positive results
of this planning technique.

Decision-making

All managers and workers/employees in organizations make decisions or make choices that affect their
jobs and the organization they work for. This lesson ‘s focus is on how they make decisions by going
through the eight steps of the decision-making process suggested by Robbins and Coulter (2009).

Types of Decisions

A decision is a choice among possible alternative actions. Like planning, decision-making is a challenge
and requires careful consideration for both types of decisions, namely:

Structured or programmed decision – a decision that is repetitive and can be handled using a routine
approach. Such repetitive decision applies to resolving structured problems which are straightforward,
familiar, and easily defined. For example, a restaurant customer complains about the dirty utensils the
waiter has given him. This is not an unusual situation, and, therefore, standardized solutions to such a
problem may be readily available.

Unstructured or nonprogrammed decisions – applied to the resolution of problems that are new or
unusual, and for which information is incomplete. Such nonprogrammed decisions are described as
unique, nonrecurring and need custom-made decisions. For example, a hotel manager is asked to make a
decision regarding the building of a new hotel branch in another city to meet the demands of
businessmen there. This is an unstructured problem and, therefore, needs unstructured or
nonprogrammed decisions to resolve it.

Types of Decision-making Conditions

Conditions, under which decisions are made, also vary. These are:

Certainty conditions – ideal conditions in deciding problems; these are situations in which a manager
can make precise decisions because the results of all alternatives are known. For example, bank interests
are made known to clients, so it is easier for business managers to decide on the problem of where to
deposit their company‘s funds. The bank which offers the highest interest rate, therefore, is the obvious
choice of the manager when asked to make a decision.

Risk or uncertainty conditions – a more common condition in deciding problems. Risk or uncertainty
conditions compel the decision maker to do estimates regarding the possible occurrence of certain
outcomes that may affect his or her chosen solution to a problem. Historical data from his or her own
experiences and other secondary information may be used as a basis for decisions to be made by the
decision maker under such risky conditions. For example, a manager is asked to invest some of their
company funds in the money market offered by a financial institution. Risk factors must be considered,
because of the uncertainty conditions involved, before making a decision—whether to invest or not in
the said money market