Principles of Management

Schermerhorn
 Planning Ahead Chapter 8 Study Questions

How do managers plan?

What types of plans do managers use?
What are the useful planning tools and
techniques?
What is the control process?
What are the common organizational
controls?

Management Fundamentals - Chapter 8 2

Study Question 1: How do managers plan?

Planning
The process of setting objectives and determining how
to best accomplish them.
Objectives
Identify the specific results or desired outcomes that
one intends to achieve.
Plan
A statement of action steps to be taken in order to
accomplish the objectives.

Management Fundamentals - Chapter 8 3

Study Question 1: How do managers plan?

Steps in the planning process:

Define your objectives.
Determine where you stand vis--vis objectives.
Develop premises regarding future conditions.
Analyze and choose among action alternatives.
Implement the plan and evaluate results.

Management Fundamentals - Chapter 8 4

Figure 8.1 The roles of planning and controlling in
the management process.

Management Fundamentals - Chapter 8 5

Study Question 1: How do managers plan?

Benefits of planning:
Improves focus and flexibility.
Improves action orientation.
Improves coordination.
Improves time management.
Improves control.

Management Fundamentals - Chapter 8 6

Figure 8.2 A sample means-ends chain for total
quality management.

Management Fundamentals - Chapter 8 7

Study Question 2: What types of plans do managers
use?

Short-range and long-range plans

Short-range plans = 1 year or less
Intermediate-range plans = 1 to 2 years
Long-range plans = 3 or more years

People vary in their capability to deal

effectively with different time horizons.
Higher management levels focus on
longer time horizons.

Management Fundamentals - Chapter 8 8

Study Question 2: What types of plans do managers
use?

Strategic and operational plans

Strategic plans set broad, comprehensive, and
longer-term action directions for the entire
organization.
Operational plans define what needs to be done
in specific areas to implement strategic plans.
Production plans
Financial plans

Facilities plans

Marketing plans

Human resource plans

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Study Question 2: What types of plans do managers
use?

Policies and procedures

Standing plans
Policies
and procedures that are designed for
repeated use.
Policy
Broad guidelines for making decisions and taking
action in specific circumstances.
Rules or procedures
Plansthat describe exactly what actions are to be
taken in specific situations.

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Study Question 2: What types of plans do managers
use?

Budgets and project schedules

Single-use plans
Only used once to meet the needs and objectives of a well-
defined situation in a timely manner.
Budgets
Single-use plans that commit resources to activities,
projects, or programs.
Fixed, flexible, and zero-based budgets.

Projects
One-time activities that have clear beginning and end
points.
Project management and project schedules.

Management Fundamentals - Chapter 8 11

Study Question 3: What are the useful planning tools and
techniques?

Forecasting
Making assumptions about what will happen in the
future.
Qualitative forecasting uses expert opinions.
Quantitative forecasting uses mathematical and
statistical analysis.
All forecasts rely on human judgment.
Planning involves deciding on how to deal with the
implications of a forecast.

Management Fundamentals - Chapter 8 12

Study Question 3: What are the useful planning tools and
techniques?

Contingency planning
Identifying
alternative courses of action that
can be implemented to meet the needs of
changing circumstances.
Contingency plans anticipate changing
conditions.
Contingency plans contain trigger points.

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Study Question 3: What are the useful planning tools and
techniques?

Scenario planning
A long-term version of contingency planning.
Identifying alternative future scenarios.
Plans made for each future scenario.
Increases organizations flexibility and
preparation for future shocks.

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Study Question 3: What are the useful planning tools and
techniques?

Benchmarking
Use of external comparisons to better evaluate
current performance and identify possible
actions for the future.
Adopting best practices of other organizations
that achieve superior performance.

Management Fundamentals - Chapter 8 15

Study Question 3: What are the useful planning tools and
techniques?

Use of staff planners

Coordinating the planning function for the total

organization or one of its major components.
Possible communication gaps between staff
planners and line management.

Management Fundamentals - Chapter 8 16

Study Question 3: What are the useful planning tools and
techniques?

Participation and involvement

Participatory planning requires that the planning
process include people who will be affected by the
plans and/or will help implement them.
Benefits of participation and involvement:
Promotes creativity in planning.
Increases available information.
Fosters understanding, acceptance, and commitment
to the final plan.

Management Fundamentals - Chapter 8 17

Figure 8.3 How participation and involvement help
build commitments to plans.

Management Fundamentals - Chapter 8 18

Study Question 4: What is the
control process?

Controlling
The process of measuring performance and taking
action to ensure desired results.
Has a positive and necessary role in the management
process.
Ensures that the right things happen, in the right way, at
the right time.
Organizational learning and after-action review.

Management Fundamentals - Chapter 8 19

Study Question 4: What is the
control process?

Steps in the control process:

Step 1 establish objectives and standards.
Step 2 measure actual performance.
Step 3 compare results with objectives and
standards.
Step 4 take corrective action as needed.

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Figure 8.4 Four steps in the control process.

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Study Question 4: What is the
control process?

Step 1 establishing objectives and

standards
Output standards
Measure performance results in terms of quantity,
quality, cost, or time.
Input standards
Measure effort in terms of amount of work expended
in task performance.

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Study Question 4: What is the
control process?

Step 2 measuring actual performance

Goal is accurate measurement of actual
performance results and/or performance efforts.
Must identify significant differences between
actual results and original plan.
Effective control requires measurement.

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Study Question 4: What is the
control process?

Step 3 comparing results with

objectives and standards
Need for action reflects the difference between
desired performance and actual performance
Comparison methods:
Historical comparison
Relative comparison
Engineering comparison

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Study Question 4: What is the
control process?

Step 4 taking corrective action

Taking action when a discrepancy exists
between desired and actual performance.
Management by exception
Giving attention to situations showing the greatest
need for action.
Types of exceptions

Problem situation
Opportunity situation

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Study Question 4: What is the
control process?

Feedforward controls
Employed before a work activity begins.
Ensures that:
Objectives are clear.
Proper directions are established.
Right resources are available.
Focuses on quality of resources.

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Study Question 4: What is the
control process?

Concurrent controls
Focus on what happens during work process.
Monitor ongoing operations to make sure they
are being done according to plan.
Can reduce waste in unacceptable finished
products or services.

Management Fundamentals - Chapter 8 27

Study Question 4: What is the
control process?

Feedback controls
Take place after work is completed.
Focus on quality of end results.
Provide useful information for improving future
operations.

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Figure 8.5 The role of feedforward, concurrent,
and feedback controls in organizations.

Management Fundamentals - Chapter 8 29

Study Question 4: What is the
control process?

Internal and external control

Internal control
Allows motivated individuals and groups to exercise
self-discipline in fulfilling job expectations.
External control
Occurs through personal supervision and the use of
formal administrative systems.

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Study Question 5: What are the common organizational
controls?

Management by Objectives (MBO)

A structured process of regular communication.
Supervisor/team leader and workers jointly set
performance objectives.
Supervisor/team leader and workers jointly
review results.

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Figure 8.6 Management by objectives as an
integrated planning and control framework.

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Study Question 5: What are the common organizational
controls?

MBO involves a formal agreement specifying

Workers performance objectives for a specific time
period.
Plans through which performance objectives will be
accomplished.
Standards for measuring accomplishment of
performance objectives .
Procedures for reviewing performance results.

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Study Question 5: What are the common organizational
controls?

The MBO process:

Supervisor and workers jointly set objectives,
establish standards, and choose actions.
Workers act individually to perform tasks;
supervisors act individually to provide
necessary support.
Supervisor and workers jointly review results,
discuss implications, and renew the MBO cycle.

Management Fundamentals - Chapter 8 34

Study Question 5: What are the common organizational
controls?

Types of MBO performance objectives

Improvement
Personal development
Maintenance
Criteria for effective performance objectives
Specific
Time defined
Challenging
Measurable

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Study Question 5: What are the common organizational
controls?

Pitfalls to avoid in using MBO

Tying MBO to pay.
Focusing too much attention on easily
quantifiable objectives.
Requiring excessive paperwork.
Having managers tell workers their
objectives.
Management Fundamentals - Chapter 8 36
Study Question 5: What are the common organizational
controls?

Advantages of MBO
Focuses workers on most important tasks and
objectives.
Focuses supervisors efforts on important areas
of support.
Contributes to relationship building.

Gives workers a structured opportunity to

participate in decision making.

Management Fundamentals - Chapter 8 37

Study Question 5: What are the common organizational
controls?

Employee discipline systems

Discipline is the act of influencing behavior

through reprimand.
Discipline that is applied fairly, consistently, and
systematically provides useful control.

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Study Question 5: What are the common organizational
controls?

To be effective, reprimands should

Be immediate.
Be directed toward actions, not personality.
Be consistently applied.
Be informative.
Occur in a supportive setting.
Support realistic rules.

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Study Question 5: What are the common organizational
controls?

Employee discipline systems

Progressive discipline ties reprimands to the
severity and frequency of the employees
infractions.
Progressive discipline seeks to achieve
compliance with the least extreme reprimand
possible.

Management Fundamentals - Chapter 8 40

Study Question 5: What are the common organizational
controls?

Important financial aspects of organizational

performance
Liquidity
The ability to generate cash to pay bills.
Leverage
The ability to earn more in returns than the cost of debt.
Asset management
The ability to use resources efficiently and operate at
minimum cost.
Profitability
The ability to earn revenues greater than costs.

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Study Question 5: What are the common organizational
controls?

Break-even analysis
Determination of the point at which sales
revenues are sufficient to cover costs.
Break-Even Point = Fixed Costs / (Price
Variable Costs)
Used in evaluating:
New products
New program initiatives

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Figure 8.7 Graphical approach to break-even
analysis.

Management Fundamentals - Chapter 8 43

Study Question 5: What are the common organizational
controls?

Purchasing control
A productivity tool
Trends in purchasing control:
Leveraging buying power
Committing to a small number of suppliers
Working together in supplier-purchaser partnerships

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Study Question 5: What are the common organizational
controls?

Inventory control
Goal is to ensure that inventory is just the right
size to meet performance needs, thus
minimizing the cost.
Methods of inventory control:
Economic order quantity
Just-in-time scheduling

Management Fundamentals - Chapter 8 45

Study Question 5: What are the common organizational
controls?

Statistical quality control

Qualitycontrol involves checking processes,
materials, products, and services to ensure that
they meet high standards.
Statistical quality control involves:
Taking samples of work.
Measuring quality in the samples.
Determining the acceptability of results.

Management Fundamentals - Chapter 8 46

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