Chapter 4 Planning and Decision Making Benefits and Pitfalls of Planning Benefits of Planning Planning involves choosing a goal and developing methods to achieve that goal Intensified effort persistence direction and creation of task strategies Managers and employees put forth greater effort when following a plan Encourages persistence even when there may be little chance of short term Leads to persistence that is working hard for long periods success Is direction Encourage managers and employees to direct their persistent efforts toward activities that help accomplish their goals and away from activities that don t Encourages the development of task strategies Encourages people to work hard for extended periods and to engage in behaviors directly related to goal accomplishment Encourages them to think of better ways to do their jobs Managers will get together at an offsite location for a couple of days Benefits and Pitfalls of Planning Benefits Intensified effort Persistence Direction Creation of task strategies Impedes change and prevents or slows adaptation Pitfall Creates a false sense of certainty Detachment of planners Pitfalls of Planning Impedes change and prevents or slows adaptation o Companies b so committed to achieving the goals set forth in their plans or on following the strategies and tactics spelled out in them that they fail to see that their plans aren t working or that their goals need to change Creates a false sense of certainty o Planners sometimes feel that they know exactly what the future holds for their competitors their suppliers and their companies o If however their assumptions about the future are wrong then the plans which are based on the assumptions will only lead to failure Detachment of planners o In theory strategic planners and top level managers are supposed to focus on the big picture and not concern themselves with the details of implementation i e carrying out the plan o According to management professor Henry Mintzberg detachment leads planners to plan for things they don t understand How to Make a Plan that Works Setting Goals S M A R T Goals o Specific o Measurable o Attainable o Realistic o Timely Developing Commitment to Goals Just because a company sets a goal doesn t mean that people will try to accomplish it If workers don t care about a goal that goal won t encourage them to work harder or smarter o Goal commitment o Set goals collectively The determination to achieve a goal Manager and workers must choose to commit themselves to a goal Rather than assigning goals to workers managers and employees choose goals together o Make the goal public o Obtain top management s support Top management can show support for a plan or program by providing funds speaking publicly about the plan or participating in the plan itself Developing Effective Action Plan Action Plan o The specific steps how people who and resources what and time period when to accomplish a goal Track Progress Gather and provide performance feedback Regular frequent performance feedback allows workers and managers to track their progress toward goal achievement and make adjustments in effort direction and strategies Proper action on performance feedback can keep you from failing to adapt one of the pitfalls of planning o Proximal goals Short term goals or sub goals Achieving them may be more motivating and rewarding than waiting to reach far off distal goals less intimidating and more attainable than distal goals which often feel like biting off more than you can chew Enable you to achieve a distal goal one little piece at a time o Distal goals Long term or primary goals Maintaining Flexibility Options based planning many alternative plans Slack resource o Keep options open by making small simultaneous investments in o A cushion of resources like extra time or money that can be used to address and adapt to unanticipated changes Planning from Top to Bottom Planning works best when the goals and action plans at the bottom and middle of the organization support the goals and action plans at the top of the organization Starting at the Top Strategic plans o Make clear how the company will serve customers and position itself against competitors in the next 2 to 5 years o Begins with the creation of an organizational purpose Purpose statement o A statement of a company s purpose or reason for existing o Should be brief no more than two sentences o Enduring inspirational clear and consistent with widely shared company beliefs and values Strategic objective o A more specific goal that unifies company wide efforts stretches and challenges the organization and possesses a finish line and a time frame o Must grow out of the organization s purpose which does not change significantly over time Bending in the Middle Middle management is responsible for developing and carrying out tactical plans to accomplish the organization s strategic objective Tactical plan Specify how a company will use resources budgets and people to accomplish specific goals related to its strategic objective Time frame 6 months to 2 years Management by Objectives MBO A management technique often used to develop and carry out tactical plans Discuss possible goals Collectively set goals Meet regularly to review progress Jointly develop tactical plans Finishing at the Bottom Lower level managers are responsible for developing and carrying out operational plans Operational Plans The day to day plans for producing or delivering the organization s products and services Plans direct the behavior efforts and priorities of operative employees for periods ranging from 30 days to 6 months Single Use Plans Standing Plans Plans deal with unique one time only events Can be used repeatedly to handle frequently recurring events Policies o Indicate the general course of action that company managers should take in response to a particular event or situation o A well written policy will also specify why the policy exists and what outcome the policy exists and what outcome the policy is intended to produce Procedures o More specific than policies because they indicate the series of steps that should be taken in response to a particular event Rules and regulations o Even more specific than procedures because they specify what must or must not happen and often describe precisely how a particular action should be performed Budgets o Quantitative planning because it forces managers to decide how to allocate available money to best