Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin3 5.1 Planning & Uncertainty HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY?. Kinicki/Williams, Ma
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5.1 Planning & Uncertainty
HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY?
Planning: defined as
setting goals and
deciding how to achieve
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5.1 Planning & Uncertainty
HOW CAN PLANNING HELP MANAGERS DEAL WITH UNCERTAINTY?
Planning is used together with strategic management and evolves from the company’s mission and vision
Planning covers strategic planning (done by top
managers, tactical planning (done by middle managers), and operational planning (done by first-line managers)
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5.1 Planning & Uncertainty
Figure 5.1: Planning and Strategic Management
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5.1 Planning & Uncertainty
WHY NOT PLAN?
Managers need to be cautious when planning for two reasons:
1 Planning requires managers to set aside their regular responsibilities to develop plans
2 Managers need to be flexible enough to react
to new events because there may not always be enough time to plan
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5.1 Planning & Uncertainty
HOW DOES PLANNING HELP?
There are four main benefits of planning:
1 Organizations can use plans to check their
progress toward their goals
2 Plans define the responsibilities of a firm’s
departments and coordinates their activities
3 Planning requires managers to consider what may happen in the future
4 Planning for unpleasant contingencies helps managers deal with uncertainty
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Why not plan?
Planning requires you to set
aside time to do it
Most managers are time-starved
Hard to set aside time to plan
You may have to make some
decisions without a lot of time
to plan
Even in today’s computer age, you
may not have time to plan a decision
Plan need not be perfect to be
executable
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The Benefits of Planning
1) Planning helps you check on your progress
2) Planning helps you coordinate activities
3) Planning helps you think ahead
4) Above all, planning helps you cope with uncertainty
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5.1 Planning & Uncertainty
There are three types of uncertainty:
1 State Uncertainty
2 Effect Uncertainty
3 Response Uncertainty
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Three Types of Uncertainty
“What possible harmful event could occur?”
State Uncertainty: when the environment
is considered unpredictable.
Example: the uncertainty regarding the
weather
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Three Types of Uncertainty
“What possible harmful impact might an environmental change have?”
Effect Uncertainty: when the effects of
environmental changes are unpredictable.
Example: losing the trail in a snowstorm and
risking hypothermia.
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Three Types of Uncertainty
“What possible harmful consequence might a decision have?”
Response Uncertainty: when the
consequences of a decision are uncertain.
Example: you might have a cell phone in a
snowstorm, but someone has to receive the call.
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
A firm that is analyzing what possible harmful event could occur is looking at
A) response uncertainty
B) effect uncertainty
C) defense uncertainty
D) state uncertainty
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
A firm that is analyzing what possible harmful event could occur is looking at
A) response uncertainty
B) effect uncertainty
C) defense uncertainty
D) state uncertainty
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5.1 Planning & Uncertainty
Raymond E Miles and Charles C Snow
suggested that firms will adopt one of four strategies to respond to uncertainty:
1 Defenders
2 Prospectors
3 Analyzers
4 Reactors
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Analyzers: let the other organizations take the risks
of product development and marketing and then imitate what seems to work best.
Prospectors: focus
on developing new markets or services and in seeking out new markets rather than
waiting for things to happen.
Reactors: make
adjustments only when finally forced to by
environmental pressures.
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5.1 Planning & Uncertainty
Miles and Snow also argued that firms
continuously make decisions about three kinds
of business problems:
1 entrepreneurial - selecting and making
adjustments of products and markets
2 engineering - producing and delivering the products
3 administrative - establishing roles,
relationships, and organizational processes
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5.2 Fundamentals Of Planning
WHAT IS INVOLVED WITH PLANNING?
Planning translates an organization’s mission
(purpose or reason for being) into objectives
The mission statement answers the question
“what is our reason for being?”
The vision statement answers the questions
“what do we want to become where do we want
to go strategically?”
Planning begins with the mission statement
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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.
The World Bank’s Mission
1) In the last chapter, we learned about the World Bank.
2) Go to http://web.worldbank.org
3) Explore the “about us” section
4) What is the World Bank’s mission?
5) Does this mission statement meet the criterion laid
out in this chapter?
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5.2 Fundamentals Of Planning
Figure 5.2: Making Plans
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5.2 Fundamentals Of Planning
Having clearly defined mission and vision
statements allows three things to happen:
1 strategic planning by top management where long-term goals are determined and available
resources are identified
2 tactical planning by middle management where contributions their departments or similar work units can make are determined
3 operational planning by first-line managers
where how specific tasks will be accomplished
using available resources is determined
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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.
Types of Planning
Strategic planning: top managers
decide what the organization’s
long-term goals should be for the next
1-5 years with the resources they
expect to have available.
Tactical planning: middle managers
decide what contributions their
departments or similar work units
can make with their given resources
during the next 6-24 months.
Operational planning: first-line
managers determine how to
accomplish specific tasks with
available resources within the next
1-52 weeks.
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5.2 Fundamentals Of Planning
Figure 5.3: Three Levels of Management, Three
Types of Planning
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5.2 Fundamentals Of Planning
The purpose of planning is to set goals and
then formulate action plans
Specific commitments to achieve a measurable result within a stated period of time are known as
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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.
Types of Goals
Strategic Goals: are set by and for top
management and focus on objectives for
the organization as a whole.
Tactical Goals: are set by and for middle
managers and focus on the actions
needed to achieve strategic goals.
Operational Goals: are set by and for
first-line managers and are concerned
with short-tem matters associated with
realizing tactical goals.
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
Goals set by top management that focus on objectives for the organization as a whole are
A) tactical goals
B) operational goals
C) strategic goals
D) organizational goals
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
Goals set by top management that focus on objectives for the organization as a whole are
A) tactical goals
B) operational goals
C) strategic goals
D) organizational goals
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5.2 Fundamentals Of Planning
Once goals are set, the firm makes an action plan which defines the course of action needed to achieve stated goals
An operating plan defines how the firm will conduct
business based on the action plan - it identifies clear
targets such as revenues, cash flow, and market share
Plans developed for activities that occur repeatedly over
a period of time are called standing plans
Standing plans consist of policies (a standing plan that outlines the general response to a designated problem or situation), procedures (a standing plan that outlines the
response to a particular problem or circumstance), and
rules (a standing plan that designates specific required
action)
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
“No smoking anywhere in the building” is an example of a
A) policy
B) procedure
C) rule
D) request
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
“No smoking anywhere in the building” is an example of a
A) policy
B) procedure
C) rule
D) request
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5.2 Fundamentals Of Planning
Plans developed for activities that are not likely
to be repeated in the future are called single-use plans
Single-use plans can be either programs
(encompass a range of projects or activities) or
projects (have less scope and complexity than a program)
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5.2 Fundamentals Of Planning
WHAT ARE SMART GOALS?
Good goals are SMART:
they should be stated in specific terms
they should be measurable or quantifiable
they should be challenging but attainable
they should be results-oriented and support the
organization’s vision
they should specify target dates by which they should
be accomplished
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
Good goals should have all of the following characteristics except
A) results-oriented
B) target date
C) supportive
D) attainable
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Chapter 5: Planning
CLASSROOM PERFORMANCE SYSTEM
Good goals should have all of the following characteristics except
A) results-oriented
B) target date
C) supportive
D) attainable
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5.3 The Planning/Control Cycle
WHY HAVE PLANNING AND CONTROL?
Once an organization has a plan, it needs to make sure
it stays on track
The planning/control cycle has two planning steps, and two control steps:
planning steps : make the plan, and carry out the plan
control steps : control the direction by comparing
results with the plan, and control the direction by taking corrective actions
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Chapter 5: Planning
Figure 5.5: The Planning/Control Cycle
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Peter Drucker developed a system called Management
by Objectives (MBO) designed to motivate employees to achieve goals
MBO has four steps:
1 Managers and employees jointly set objectives for the employee
Goals should include improvement objectives, personal development objectives, and maintenance objectives
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5.4 Promoting Goal Setting:
Management By Objectives
2 Managers develop action plans
Action plans should be developed at each level
describing how goals will be attained
3 Managers and employees periodically review the
employee’s performance
Formal and informal meetings are used to review
progress and provide feedback
4 The manager makes a performance appraisal and
rewards the employee according to the results
Performance that meets objectives should be rewarded, and poor performance should be addressed
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1 Top management must be committed
Commitment translates to productivity gains
2 It must be applied organization-wide
To be successful, MBO must be applied in all divisions and departments
3 Objectives must cascade
MBO works by cascading objectives down through the organization
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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.
Three Types of Objectives Used in MBO
Improvement objectives: Increase sport
utility sales by 10%
Personal development objectives: attend
five days of leadership training
Maintenance objectives: continue to
meet the increased sales goals specified last quarter