Management

Fifteenth Edition

Chapter 6
Foundations of Planning

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Learning Objectives
8.1 Define the nature and purposes of planning.

8.2 Classify the types of plans organizations might use.

8.3 Identify the key contingency factors in planning.

8.4 Compare and contrast approaches to objective setting.

8.5 Discuss contemporary issues in planning.

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What is Planning?
• Planning: management function that involves setting
goals, establishing strategies for achieving those goals,
and developing plans to integrate and coordinate work
activities
• Formal planning
– Specific, time-oriented goals
– Goals written and shared

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Why Do Managers Plan?
• Provides direction
• Reduces uncertainty
• Minimizes waste and redundancy
• Establishes the goals and standards for controlling

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Planning and Performance
• Formal planning is associated with positive financial results
• Quality of planning/implementation more important than
the extent of it
• External factors can reduce the impact of planning on
performance
• Planning-performance relationship seems to be influenced
by the planning time frame

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Goals and Plans
• Goals (objectives): desired outcomes or targets
• Plans: documents that outline how goals are going to be
met

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Exhibit 8.1 Types of Plans

Exhibit 8.1 shows the most popular ways to describe organizational plans.

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Strategic and Operational Plans
• Strategic plans: plans that apply to the entire organization
and establish the organization’s overall goals
• Operational plans: plans that encompass a particular
operational area of the organization

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Long-term and Short-term Plans
• Long-term plans: plans with a time frame beyond three
years
• Short-term plans: plans covering one year or less

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Specific and Directional Plans
• Specific plans: plans that are clearly defined and leave no
room for interpretation
• Directional plans: plans that are flexible and set out
general guidelines

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Exhibit 8.2 Specific Versus Directional Plans

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Single-Use and Standing Plans
• Single-use plans: a one-time plan specifically designed to
meet the needs of a unique situation
• Standing plans: ongoing plans that provide guidance for
activities performed repeatedly

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Contingency Factors in Planning
• Three contingency factors affect planning
1. Level in the organization
2. Degree of environmental uncertainty
3. Length of future commitments

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Exhibit 8.3 Planning in the Hierarchy of
Organizations

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Objectives and Goals
• Objectives and goals are the same thing.
• Objectives: Desired outcomes for individuals, groups, or
the entire organization.
• They provide management with direction and serve as a
means to measure progress.
• Stated Objectives: Official statements of what the
organization wants the public to believe.
• Real Objectives: Objectives that the organization actually
pursues.

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Approaches to Setting Objectives
• Traditional objective-setting: an approach to setting
objectives in which top managers set objectives that then
flow down through the organization and become subgoals
for each organizational area

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Exhibit 8.4 Traditional Objective Setting

Exhibit 8.4 illustrates what can happen as the objectives make their way down from the top
of the organization to lower levels.

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Management by Objectives (MBO)
• Management by objectives (MBO): a process of setting
mutually agreed-upon goals and using those goals to
evaluate employee performance
• MBO involves setting objectives that cascade down
through the organization that are translated into
operational objectives at each level

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Exhibit 8.5 Planning in the Hierarchy of
Organizations

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How Can Managers Plan Effectively in
Dynamic Environments?
• Develop plans that are specific but flexible
• Keep planning even when the environment is uncertain
• Allow lower organizational levels to set goals and develop
plans

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How Can Managers Use Environmental Scanning?

• Environmental scanning: screening information to detect

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Exhibit 8.6 Environmental Scanning
What Where
General Environment
Political Lobbyists; political representative
Economic Fed minutes; financial news
Social Social media
Technological Patent reports
Specific Environment
Industry Business media; industry associations
Competitors Web sites; others in the industry
Suppliers Vendors
Customers Surveys; focus groups

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Digital Tools
• Business intelligence: data that managers can use to
make more effective strategic decisions
• Digital tools: technology, systems, or software that allow
the user to collect, visualize, understand, or analyze data
• Social Media: Facebook, LinkedIn, Twitter, and other
social media sites are becoming increasingly important
places to extract competitive intelligence

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Virtual Reality
• Virtual Reality: a three-dimensional, interactive,
computer-generated experience that occurs within a
simulated environment.
• Potential applications include interviewing job candidates,
virtual meetings, complex job training, and previewing
office or plant layouts.

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Review Learning Objective 8.1
• Define the nature and purposes of planning.
– Planning involves defining the organization’s goals,
establishing an overall strategy for achieving those
goals, and developing plans for organizational work
activities.
– The four purposes of planning include providing
direction, reducing uncertainty, minimizing waste and
redundancy, and establishing the goals or standards
used in controlling.

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Review Learning Objective 8.2
• Classify the types of plans organizations might use.
– Goals are desired outcomes. Plans are documents that
outline how goals will be met.
 Strategic/financial
 Stated/real
 Long-term/short-term
 Specific/directional
 Single-use/standing

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Review Learning Objective 8.3
• Identify the key contingency factors in planning.
– Organizational level
– Degree of environmental uncertainty
– Length of future commitments

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Review Learning Objective 8.4
• Compare and contrast approaches to objective
setting.
– Traditional goal-setting and MBO
– Six characteristics of well-written goals
– Five steps of goal-setting
– Contingency factors

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Review Learning Objective 8.5
• Discuss contemporary issues in planning.
– Planning in dynamic environments
– Environmental scanning
 Competitive intelligence
– Virtual reality

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