Planning Foundation What Is Planning Define planning

Planning Foundation What Is Planning? • Define planning, goals and plans and t their importance • • Differentiate between formal and informal planning Describe the purposes of planning Describe the types of goals organizations might have Relationship between planning and performance 2008 REI Supplementary PPT Presentation on Management for Doing Business

What Is Planning? n Planning – A primary managerial activity that involves: v Defining the organization’s goals v Establishing an overall strategy for achieving those goals v Developing plans for organizational work activities. – Types of planning v Informal: not written down, short-term focus; specific to an organizational unit. v Formal: written, specific, and long-term focus, involves shared goals for the organization. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Why Do Managers Plan? n Purposes of Planning – – Provides direction Reduces uncertainty Minimizes waste and redundancy Sets the standards for controlling 2008 REI Supplementary PPT Presentation on Management for Doing Business

Planning and Performance n The Relationship Between Planning And Performance – Formal planning is associated with: v Higher profits and returns on assets. v Positive financial results. – The quality of planning and implementation affects performance more than the extent of planning. – The external environment can reduce the impact of planning on performance, – Formal planning must be used for several years before planning begins to affect performance. 2008 REI Supplementary PPT Presentation on Management for Doing Business

How Do Managers Plan? n Elements of Planning – Goals (also Objectives) v Desired outcomes for individuals, groups, or entire organizations v Provide direction and evaluation performance criteria – Plans v Documents that outline how goals are to be accomplished v Describe how resources are to be allocated and establish activity schedules 2008 REI Supplementary PPT Presentation on Management for Doing Business

Types of Goals n Financial Goals – Are related to the expected internal financial performance of the organization. n Strategic Goals – Are related to the performance of the firm relative to factors in its external environment (e. g. , competitors). n Stated Goals versus Real Goals – Broadly-worded official statements of the organization (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in the organization). 2008 REI Supplementary PPT Presentation on Management for Doing Business

Types of Plans 2008 REI Supplementary PPT Presentation on Management for Doing Business

Types of Plans n Strategic Plans – Apply to the entire organization. – Establish the organization’s overall goals. – Seek to position the organization in terms of its environment. – Cover extended periods of time. n Operational Plans – Specify the details of how the overall goals are to be achieved. – Cover short time period. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Classification of Plans n Long-Term Plans – Plans with time frames extending beyond three years n Short-Term Plans – Plans with time frames on one year or less n Specific Plans – Plans that are clearly defined and leave no room for interpretation n Directional Plans – Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Exhibit 7– 4 The Downside of Traditional Goal Setting 2008 REI Supplementary PPT Presentation on Management for Doing Business

Steps in Goal Setting 1. Review the organization’s mission statement. Do goals reflect the mission? 2. Evaluate available resources. Are resources sufficient to accomplish the mission? 3. Determine goals individually or with others. Are goals specific, measurable, and timely? 4. Write down the goals and communicate them. Is everybody on the same page? 5. Review results and whether goals are being met. What changes are needed in mission, resources, or goals? 2008 REI Supplementary PPT Presentation on Management for Doing Business

Exhibit 7– 7 Planning in the Hierarchy of Organizations 2008 REI Supplementary PPT Presentation on Management for Doing Business

Tools and Techniques in Planning n Establishing a formal planning department – A group of planning specialists who help managers write organizational plans. – Planning is a function of management; it should never become the sole responsibility of planners. n Involving organizational members in the process – Plans are developed by members of organizational units at various levels and then coordinated with other units across the organization. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Assessing the Environment (cont’d) n Forecasting – The part of organizational planning that involves creating predictions of outcomes based on information gathered by environmental scanning. v Facilitates managerial decision making. v Is most accurate in stable environments. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Assessing the Environment (cont’d) n Forecasting Techniques – Quantitative forecasting v Applying a set of mathematical rules to a series of hard data to predict outcomes (e. g. , units to be produced). – Qualitative forecasting v Using expert judgments and opinions to predict less than precise outcomes (e. g. , direction of the economy). n Collaborative Planning, Forecasting, and Replenishment (CPFR) Software – A standardized way for organizations to use the Internet to exchange data. 2008 REI Supplementary PPT Presentation on Management for Doing Business

• Quantitative • Time series analysis • Regression models • Econometric models • Economic indicators • Substitution effect • Qualitative • Jury of opinion • Sales force composition • Customer evaluation 2008 REI Supplementary PPT Presentation on Management for Doing Business

Making Forecasting More Effective 1. Use simple forecasting methods. 2. Compare each forecast with its corresponding “no change” forecast. 3. Don’t rely on a single forecasting method. 4. Don’t assume that the turning points in a trend can be accurately identified. 5. Shorten the time period covered by a forecast. 6. Remember that forecasting is a developed managerial skill that supports decision making. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Benchmarking n The search for the best practices among competitors and non-competitors that lead to their superior performance. n By analyzing and copying these practices, firms can improve their performance. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Benchmarking Source: Based on Y. K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance, ” Long Range Planning. February 1993, p. 42. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Allocating Resources: Budgeting n Types of Resources – The assets of the organization v v Physical: buildings, equipment, and raw materials v Human: experiences, skills, knowledge, and competencies v n Financial: debt, equity, and retained earnings Intangible: brand names, patents, reputation, trademarks, copyrights, and databases Budgets – Are numerical plans for allocating resources (e. g. , revenues, expenses, and capital expenditures). – Are used to improve time, space, and use of material resources. – Are the most commonly used and most widely applicable planning technique for organizations. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Exhibit 9– 3 Types of Budgets Source: Based on R. S. Russell and B. W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Allocating Resources: Charting n Gantt Chart – A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis. – Shows the expected and actual progress of various tasks. n Load Chart – A modified Gantt chart that lists entire departments or specific resources on the vertical axis. – Allows managers to plan and control capacity utilization. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Allocating Resources: Analysis n Program Evaluation and Review Technique (PERT) – A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. v Events: endpoints for completion. v Activities: time required for each activity. v Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start. v Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Developing a PERT Network 1. Identify every significant activity that must be achieved for a project to be completed. 2. Determine the order in which these events must be completed. 3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities. 4. Compute a time estimate for completing each activity. 5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Allocating Resources: Analysis (cont’d) n Breakeven Analysis – Is used to determine the point at which all fixed costs have been recovered and profitability begins. v Fixed cost (FC) v Variable costs (VC) v Total Fixed Costs (TFC) v Price (P) n The Break-even Formula: 2008 REI Supplementary PPT Presentation on Management for Doing Business

Allocating Resources: Analysis n Linear Programming – A technique that seeks to solve resource allocation problems using the proportional relationships between two variables. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Contemporary Planning Techniques n Project – A one-time-only set of activities that has a definite beginning and ending point time. n Project Management – The task of getting a project’s activities done on time, within budget, and according to specifications. v Define project goals v Identify all required activities, materials, and labor v Determine the sequence of completion 2008 REI Supplementary PPT Presentation on Management for Doing Business

Contemporary Planning Techniques (cont’d) n n n n Scenario – A consistent view of what the future is likely to be. Scenario Planning – An attempt not try to predict the future but to reduce uncertainty by playing out potential situations under different specified conditions. Contingency Planning Developing scenarios that allow managers determine in advance what their actions should be should a considered event actually occur. Identify potential unexpected events. Determine if any of these events would have early indicators. Set up an information gathering system to identify early indicators. Have appropriate responses (plans) in place if these unexpected events occur. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Entrepreneurial ventures and small businesses. n What Is Entrepreneurship? – Entrepreneurship is the process of starting new businesses, generally in response to opportunities. n Entrepreneurial Ventures – Organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals. n Small Business – A firm that is independently owned, operated, and financed; has fewer than 100 employees; doesn’t necessarily engage in new or innovative practices, and has relatively little impact on its industry. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Why Is Entrepreneurship Important? n Innovation – Engage in the creative destruction process – Act as agents of change n Number of New Startups – Increasing numbers of new firms n Job Creation – New ventures create 60 -80% of net new jobs 2008 REI Supplementary PPT Presentation on Management for Doing Business

The Entrepreneurial Process Exploring the Entrepreneurial Context Identifying Opportunities and Possible Competitive Advantages Starting the Venture Managing the Venture 2008 REI Supplementary PPT Presentation on Management for Doing Business

Potential Sources of Opportunity The Unexpected New Knowledge Changes in Perception Demographics The Incongruous Environmental Context The Process Need Industry and Market Structures 2008 REI Supplementary PPT Presentation on Management for Doing Business

Researching Competitors n Competitor Intelligence: – What types of products or services are competitors offering? – What are the major characteristics of these products or services? – What are their products’ strengths and weaknesses? – How do they handle marketing, pricing, and distributing? – What do they attempt to do differently from other competitors? – Do they appear to be successful at it? Why or why not? – What are they good at? – What competitive advantage(s) do they appear to have? – What are they not so good at? – What competitive disadvantage(s) do they appear to have? – How large and profitable are these competitors? 2008 REI Supplementary PPT Presentation on Management for Doing Business

Investing in Entrepreneurial Ventures n Venture Capitalists – External equity financing provided by professionallymanaged pools of investor money. n Angel Investors – A private investor (or group of private investors) who offers financial backing to an entrepreneurial venture in return for equity in the venture. n Initial public offering (IPO) – The first public registration and sale of a company’s stock. 2008 REI Supplementary PPT Presentation on Management for Doing Business

Developing a Business Plan n Business Plan – A written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited. n Elements of a Business Plan – – – Executive summary Analysis of opportunity Analysis of context Description of the business Financial data and projections Supporting documentation 2008 REI Supplementary PPT Presentation on Management for Doing Business

Human Resource Management Issues in Entrepreneurial Ventures n Employee Recruitment Concerns – Locating high potential employees who: v can perform multiple roles v are willing to “buy-in” (commitment) – Filling critical skill gaps n Employee Retention Issues – Potential for damage to client/customer relationships due to loss of employees – Need to offer desirable benefits – Compensation: base pay and incentives 2008 REI Supplementary PPT Presentation on Management for Doing Business

Leading Issues n Personality Characteristics of Entrepreneurs – High level of motivation, abundance of self-confidence, ability to be involved for the long term, high energy level, persistent problem solver, high degree of initiative, ability to set goals, and moderate risk-taker. n Proactive personality – Individuals who are more prone to take actions to influence their environment—that is, they’re more proactive. n Motivating Employees Through Empowerment n Empowering Employees – Participative decision making; delegation; redesigning jobs 2008 REI Supplementary PPT Presentation on Management for Doing Business

Controlling Issues Managing Growth Managing Downturns Exiting the Venture Managing personal life choices and challenges 2008 REI Supplementary PPT Presentation on Management for Doing Business

Managing Personal Life Choices and Challenges n Balancing Work and Personal Life – Become a good time manager – Seek professional business advice when needed – Deal with conflicts as they arise – Developing a network of trusted friends and peers – Recognize when personal stress levels are too high 2008 REI Supplementary PPT Presentation on Management for Doing Business