C H A P T E R

Foundations
of Planning
Lecture Outline

93

S E V E N

Introduction
What Is Planning?
Why Do Managers Plan?
Purposes of Planning
Planning and Performance
How Do Managers Plan?
The Role of Goals and Plans in
Planning
Types of Goals
Types of Plans
Establishing Goals and Developing Plans
Approaches to Establishing Goals
Characteristics of Well-Designed
Goals
Steps in Goal Setting
Developing Plans
Contingency Factors in Planning
Approaches to Planning
Contemporary Issues in Planning
Criticisms of Planning
Effective Planning in Dynamic
Environments

Your students may be familiar with the

adage, If you fail to plan, you plan to
fail. Chapter Seven examines skills
needed for effectiveness in the first of
the
four
management
functions
planning. After learning about the
purposes of planning, students will
discover how managers at different
levels
of an organization develop
plans and empower employees to
participate in the planning process.
A Managers Dilemma presents the
fascinating story of Edina Bukvic, an
entrepreneur in the northeastern Bosnian
village of Zivinice. (Locate this village
with your students on a world map,
such as the one found on the World Wide
Web
at
[http://konjuh.ba/eng/mapa.htm].) Edina
is using microfinance to turn her
childhood dream of owning her own
business into reality. Using a small loan
from the nonprofit group Mi-Bospo, Edina
has established a wedding dress
business with profits of nearly $10,000 a
year.
Students
are
asked
to
imagine
themselves in Edinas position as her
successful business makes plans for
expansion. What types of plans would
your students make to guide this
business? Why would knowledge and
understanding of the many facets of
planning be important for success in
Edinas
entrepreneurial
venture
in
Zivinice?

94

A variety of PowerPoint slides, including both original text art and

newly created images, are available for your use in enhancing the
presentation of Chapter Seven materials to your students.
ANNOTATED OUTLINE
1.

INTRODUCTION
Planning is one of the four functions of management.
Fundamental information about managerial planning is
presented in this chapter; the text discusses the nature and
purposes of planning, strategies for effective planning, and
contemporary planning issues.

NOTES

2.

Materials I Plan to Use:

WHAT IS PLANNING?
Planning
involves
defining
the
organizations
goals,
establishing an overall strategy for achieving these goals, and
developing plans for organizational work activities. The term
planning as used in this chapter refers to formal planning.

NOTES

Materials I Plan to Use:

Self-Assessment Library

Exercise in Planning Skills

Acquiring skills in effective planning requires practice that should begin

years before your students are employed as managers in a business
organization. To help students assess their current ability to create
effective plans, have them take Self-Assessment #I.E.3 How Good Am
I at Personal Planning? Completing this exercise will contribute to
students understanding of their present ability to plan. Students may
want to reflect on the following questions:
n
n
n

Q&A

What did you discover about yourself in doing this exercise? Did
anything surprise you about your assessment?
How does this information relate to uncertainty and planning?
How do you think this information will help you as a manager?

7.1 When is planning done? How often should it be done?

95

3.

WHY DO MANAGERS PLAN?

A.
Purposes of Planning
Planning serves a number of significant purposes.
1.
Planning gives direction to managers and
nonmanagers of an organization.
2.
Planning reduces uncertainty.
3.
Planning minimizes waste and uncertainty.
4.
Planning establishes goals or
standards used in controlling.

NOTES

B.

Materials I Plan to Use:

Planning and Performance

Although organizations that use formal planning do not always

outperform those that do not plan, most studies show positive
relationships between planning and performance.
Q&A

7.2 Can a person do too much planning?

1.

NOTES

Materials I Plan to Use:

2.

NOTES

4.

Effective
planning
and
implementation play a greater part in high
performance than does the amount of planning
done.

Studies have shown that when

formal planning has not led to higher performance,
the external environment is often the reason.

Materials I Plan to Use:

HOW DO MANAGERS PLAN?

A. Planning is often called the primary management function
because it establishes the basis for all other functions.
Planning involves two important elements: goals and
plans.
96

B.

Q&A

The Role of Goals and Plans in Planning

1.
Goals (often called objectives) are desired
outcomes for individuals, groups, or entire
organizations.

7.3 If for-profit organizations have only one real goalto make a profit
why do other objectives matter?

2.
a.
b.

Q&A

Types of goals
Financial performance versus strategic goals
(See Exhibit 7-1 and PowerPoint slide 710).
Stated goals versus real goals
1)
Stated goals are official statements
of what an organization says and what
it wants its various stakeholders to
believe its goals are.

7.4 Arent stated objectives just lies and window-dressing created to make
organizations look responsible and rational?

2)

NOTES

Real goals are those that an

organization actually pursues, as
defined by the actions of its members.

Materials I Plan to Use:

Focus on Leadership

Knowing Whats Important:

How Leaders Frame Issues

To help prepare your students for leadership roles, divide your class into groups
of four or five students and ask each group to select a leader from business,
government, or industry who is currently in the news.
Have students in each group work together to gather news articles featuring
this leader from current publications and the Internet. Ask each group to read
and analyze the information they have found and provide examples to the
entire class of how this leader is presently using framing to influence how
current issues are seen and understood.
If you have students in your class who have studied photography, you might
ask these individuals to introduce the class discussion by sharing what they
have learned about framing a photo to communicate a particular message.

3.

Types of Plans
97

Plans can be described by their breadth, time

frame, specificity, and frequency of use (see
Exhibit 7-2 and PowerPoint
slide 7-11).
a.
Breadth: Strategic versus operational plans.
Strategic plans (long-term plans) are plans
that apply to the entire organization,
establish the organizations overall goals,
and seek to position the organization in
terms of its environment. Operational
plans (short-term plans) are plans that
specify the details of how the overall goals
are to be achieved.
NOTES

Materials I Plan to Use:

b.

NOTES

Materials I Plan to Use:

c.

NOTES

Time frame: Short-term versus long-term

plans. Short-term plans are plans that
cover one year or less. Long-term plans
are plans with a time frame beyond three
years.

Specificity: Specific versus directional plans.

Specific plans are plans that are clearly
defined and leave no room for interpretation.
Directional plans are flexible plans that set
out general guidelines. (See Exhibit 7-3 and
PowerPoint slide 7-14 for illustrations on
how specific planning and directional
planning differ.)

Materials I Plan to Use:

d.

Frequency of use: Single-use versus standing

plans. A single-use plan is a one-time plan
specifically designed to meet the needs of a
unique situation. Standing plans are

98

ongoing plans that provide guidance for

activities performed repeatedly.
NOTES

Q&A

5.

Materials I Plan to Use:

7.5 Why do large organizations create rules and procedures whenever they
can?

ESTABLISHING GOALS AND DEVELOPING PLANS

A.
Approaches to Establishing Goals
Goals can be established through the process of
traditional goal setting or through MBO (management by
objectives).

Youre The Manager Putting Ethics Into

Action

1.

Q&A

Setting goals

Traditional goal setting is an approach to setting

goals in which goals are set at the top level of the
organization and then broken into subgoals for
each level of the organization.
a.
Traditional goal setting assumes that top
managers know what is best because of their
ability to see the big picture. Employees
are to work to meet the goals for their
particular area of responsibility.
b.
This traditional approach requires that goals
must be made more specific as they flow
down to lower levels in the organization. In
striving to achieve specificity, however,
objectives sometimes lose clarity and unity
with goals set at a higher level in the
organization
(see
Exhibit
7-4
and
PowerPoint slide 7-17).

7.6 What are the problems with traditional objective setting?

Passport

Passport Part 3 Scenario 2

Ask students to complete Passport Part 3 Scenario 2 on setting
goals.

c.

When the hierarchy of organizational goals is

clearly defined, it forms an integrated
means-end chainan integrated network of
99

goals in which the accomplishment of goals

at one level serves as the means for
achieving the goals, or ends, at the next
level.
NOTES

Materials I Plan to Use:

Practical Interactive Skills Modules

PRISM #12

Send students to the Web and complete PRISM #12 on Goal

Setting.
2.

NOTES

Management by objectives (MBO) is a process

of setting mutually agreed-upon goals and using
those goals to evaluate employee performance.
a.
Exhibit 7-5 and PowerPoint slide 7-20 list
the steps in a typical MBO program.
b.
Studies of actual MBO programs confirm that
MBO can increase employee performance
and organizational productivity. However, top
management commitment and involvement
are important contributions to the success of
an MBO program.

Materials I Plan to Use:

Passport

Passport Part 3 Scenario 1

Have students complete Passport Part 3 Scenario 1 on bottom-up
planning.

3.

NOTES

Whether an organization uses a more traditional

approach to establishing objectives, uses some
form of MBO, or has its own approach, managers
must define objectives before they can effectively
and efficiently complete other planning activities.

Materials I Plan to Use:

100

Q&A

7.7 What are the problems with MBO?

Thinking Critically About

Ethics

Is MBO Manipulation?

In this critical thinking exercise, students are asked to consider ethical dilemmas
associated with MBO programs. How do students perceive MBO? Ask them under what
conditions might subordinates view MBO as manipulation? How could ethical
dilemmas arise in an MBO system?
You might want to address this ethical dilemma by asking if any of your students have
actually had experience with an MBO system. If so, ask for volunteers to describe their
experiences. If none of your students has participated in an MBO system, be sure that
students fully understand what an MBO system is and how it should work.

B.

NOTES

C.

NOTES

D.

Characteristics of Well-Designed Goals (See Exhibit 7-6):

1
Written in terms of outcomes
2.
Measurable and quantifiable
3.
Clear as to a time frame
4.
Challenging, but attainable
5.
Written down
6.
Communicated to all organizational members
Materials I Plan to Use:

Five Steps in Goals Setting

1.
Review the organizations mission (the purpose of
the organization).
2.
Evaluate available resources.
3.
Determine the goals individually or with input from
others
4.
Write down the goals and communicate them to all
who need to know.
5.
Review results and whether goals are being met.
Make changes as needed.
Materials I Plan to Use:

Developing Plans
The process of developing plans is influenced by three
contingency factors and by the particular planning
approach used by the organization.
101

1.

NOTES

Three Contingency Factors in Planning:

a.
Managers level in the organization (see
Exhibit 7-7 and PowerPoint slide 7-25).
Operational planning usually dominates the
planning activities of lower-level managers.
As managers move up through the levels of
the organization, their planning becomes
more strategy oriented.

Materials I Plan to Use:

b.

NOTES

Materials I Plan to Use:

c.

NOTES

Degree of environmental uncertainty. The

greater the environmental uncertainty, the
more directional plans should be, with
emphasis placed on the short term.
1)
When uncertainty is high, plans should
be specific, but flexible.
2)
Managers must be prepared to rework
and amend plans, or even to abandon
their plans if necessary.

Length of future commitments

1)
According to the commitment concept,
plans should extend far enough to
meet those commitments made today.
2)
Planning for too long or for too short a
time
period
is
inefficient
and
ineffective.

Materials I Plan to Use:

2.

Approaches to Planning
a.
In the traditional approach, planning was
done entirely by top-level managers who
102

b.

NOTES

6.

were often assisted by a formal planning

department.
Another approach to planning is to involve
more members of the organization in the
planning process. In this approach, plans are
not handed down from one level to the next,
but
are
developed
by
organizational
members at various levels to meet their
specific needs.

Materials I Plan to Use:

CONTEMPORARY ISSUES IN PLANNING

The concluding section of Chapter Seven examines criticisms of
planning and addresses how managers can plan effectively in
dynamic environments.
A.
Criticisms of Planning
Although planning is an important managerial function
with widespread use, five major arguments have been
directed against planning:
1.
Planning may create rigidity. Formal planning may
lock an organization into specific goals and
specific timetables that were established under
certain
environmental
conditions.
If
the
environment changes, managers may believe they
are locked into the current plans.

NOTES

Materials I Plan to Use:

2.

NOTES

Plans cant be developed for a dynamic environment. Managing

under chaotic environmental conditions requires flexibility, and
this may mean not being tied to formal plans.

Materials I Plan to Use:

103

Q&A

7.8 Given the fact that external environments are increasingly dynamic and
complex, doesnt that make strategic and long-term planning obsolete?

3.

NOTES

Materials I Plan to Use:

4.

NOTES

Q&A

Planning focuses managers attention on todays

competition, not on tomorrows survival. An
organization that uses formal planning has a
tendency to focus on existing opportunities rather
than on creating or reinventing an industry, and
competitors may take the lead.

Materials I Plan to Use:

5.

NOTES

Formal plans cant replace intuition and creativity.

The formal planning process may emphasize the
mechanics and routines of planning, sometimes
inhibiting creativity and innovation.

Formal planning reinforces success, which may

lead to failure. Because the existing plans have led
to success, managers may be reluctant to change
or discard previously successful plans. The
mentality may be, If its not broken, why fix it?

Materials I Plan to Use:

7.9 If my planning is done well and once my plans are determined, why
should they ever have to change?

B.

Effective Planning in Dynamic Environments.

The external environment is constantly changing.
1.
Managers should develop plans that are specific,
but flexible.
104

2.

3.
4.

NOTES

Managers must recognize that planning is an

ongoing process, and they should be willing to
change directions if environmental conditions
warrant.
Flexibility is particularly important.
Managers must remain alert to environmental
changes
that
could
impact
the
effective
implementation of plans, and they must be
prepared to make changes as needed.

Materials I Plan to Use:

Self-Assessment Library

Exercise in Planning Skills

In examining personal productivity, one individual may find that

his/her most productive time of day may vary, in general, with that of
other individuals in the business environment. To help each of your
students increase awareness of the time of day at which he/she tends
to be most effective and efficient, ask students to complete SelfAssessment #I.E.2 What Time of Day Am I Most Productive? You may
wish to use this exercise as an introduction to class discussion of the
importance of considering personal productivity levels at different
times during the work day in scheduling work activities. Your students
may want to consider the following questions:
n
n
n

How can responses to change affect management planning

effectiveness?
How does this information relate to the planning function?
How do you think this information could help you as a manager?

Answers to Thinking About Management

Issues

1.

Will planning become more or less important to managers in the

future? Why?
Planning will become more important to managers in the future
because of the uncertainty in an increasingly dynamic
environment. Changes constantly occur in both the general and
specific environments of organizations, and many of these
changes take place rapidly. Planning helps managers cope with
the uncertainty by forcing managers to look ahead, anticipate
change, consider the impact of the change, and develop
appropriate responses.

105

2.

If planning is so crucial, why do some managers choose not to

do it? What would you tell these managers?
Managers may choose not to devote time to planning because
they do not know how to plan or feel that they do not have the
necessary time. Others may say that planning is a waste of
time, that the future is going to happen whether or not they
plan. However, these reasons do not discount the importance of
planning. Every manager should engage in planning.

3.

Explain how planning involves decisions today that will have an

impact later.
As managers plan, they make decisions that influence how
activities are organized, how employees are managed, and what
control mechanisms are implemented. As managers look to the
future by planning, the decisions they make as they plan will
have an impact on their other managerial activities.

4.

How might planning in a not-for-profit organization such as the

American Cancer Society differ from planning in a for-profit
organization such as Coca-Cola?
The process of planning is similar, but the content of the plans
will differ. The types of objectives that are established and the
plans that are formulated will be influenced by the fact that a
not-for-profit organization does not have profit as its major
objective. However, a not-for-profit organization must devote
efforts and resources to planning how to raise funds and to
recruit volunteers to achieve its mission.

5.

What types of planning do you do in your personal life? Describe

these plans
in terms of being (a) strategic or operational
plans, (b) short- or long-term plans, and (c) specific or
directional plans.
Students responses to this question will, of course, vary.
Students may mention their planning to meet educational and
career goals. Encourage your students to think of their everyday
lives about the types of daily, weekly, monthly, and yearly
planning they do.

WORKING
Exercise

TOGETHERTeam-Based

This exercise asks students to work in small groups of three to four

individuals in order to develop goals for each stage of a project
focusing on the development of an Internet research training program.
The three stages of the project are (1) researching corporate customer
needs, (2) using the Internet to find specific information sources and
techniques that could be used in the training module, and (3)
designing and writing specific training modules.
106

Consider making this an out-of-class assignment for which students are

to bring back at least three Web sites that could be used as training
modules. Then, break the class into small groups, and have them
develop goals (well-designed goals) for stages 1 and 3 of this specific
task.

107

Answers to Case Application Questions

Building for the Future

1.

What role do you think goals might play in a companys

planning for any potential bird flu outbreak? List some goals
that you think might be important.
Goals play a substantial role in an organizations planning for
emergency situations. The goals of maintaining the viability of a
company and making provisions for a safe and healthy
workplace require both short-range and long-range planning. As
Deutsche Bank has realized, additional goals might include
ensuring that employees in infected zones do not carry the
disease to their co-workers, communicating medical news
updates to company employees in all of the companys
locations, and preparing for economic slowdowns.

2.

What types of plans might companies need for this situation?

(For instance, short term, long term, or both?) Explain why you
think these plans would be important.
Planning involves defining the organizations goals, establishing
an overall strategy for achieving those goals, and developing a
comprehensive set of plans to integrate and coordinate
organizational work. Preparing for a possible catastrophic
pandemic requires both short-term and long-term planning. First
and foremost, managers must be aware of and alert to such
possibilities and proactively make the necessary plans, including
contingency plans.
You may want to direct your students to the article If You Fail to
Plan, You Plan to Fail, by Representative Nita Lowey (D-N.Y.).
This article strikingly communicates the urgency of the need for
organizational planning under the threat of avian influenza and
is an example of the type of information every manager should
know. The article can be found in the July 14, 2006, issue of The
Hill
at
[http://www.hillnews.com/thehill/export/TheHill/News/Frontpage/
111505/lowy.html].

3.

How does this scenario reflect planning in a dynamic

environment? What would managers need to do to make their
planning effective in such an environment?
HBSC has already made arrangements for its employees to work
from their homes in case of a pandemic and is planning to divide
work among the companys different locations. In order to have
timely contingency plans, managers must keep abreast of
medical developments and adjust their plans accordingly. They
will need to remain alert to changes in the environment and
establish mechanisms to examine their plans regularly.

108

4.

What could other businesses learn from Deutsche Banks and

HSBCs experiences?
Other businesses can learn from the proactive approach these
two organizations are using in planning for the future. Deutsche
Bank and HSBC could serve as a model for other companies in
the way
they have
faced a
frightening
possibility
straightforwardly, rather than simply hoping that it will not
occur. Both organizations have used creative thinking and
innovation in making plans and have carefully considered the
welfare of their employees in the planning process.

5.

Pick a company (any size, any kind, or any location) and

describe how an influenza pandemic might affect it. Now,
develop plans for this company to deal with such an outbreak.
You may want to divide your class into several teams and use
this activity as a group exercise. Encourage your students to
think creatively in developing their companys plans to combat
the effects of an influenza outbreak. Remind students that they
will want to make both short-term and long-term plans in this
situation.

ADDITIONAL CHAPTER INFORMATION

With a turbulent economy and high levels of uncertainty, planning and
strategic planning, in particular, present difficult challenges for
managers. The article There Is No Alternative to provides an
interesting contemporary approach to planning in an uncertain
economy. Scenario planning was pioneered by First, Royal Dutch/Shell
to anticipate global changes.
The article looks beyond scenario
planning in which everything is in a state of flux. The article can be
found in FastCompany, Issue 60, July 2002, Page 106 (By Ian Wylie). A
link
to
this
source
is
[http://www.fastcompany.com/magazine/60/tina.html].

109