Chapter Eight: Planning
Objectives are end states or targets that an organisation's managers aim for. Plans are the means by which managers hope to reach the desired state. Planning is a decision making process that focuses on the future of an organisation andhow it will achieve its goals. Strategic plans focus on the broad future of the organisation and incorporate both external environmental demands and internal resources into managers' actions. They are typically 3-5 years in scale, and the most complex with high levels of interdependence. Tactical plans are for 1-2 years, rarely broader than a business unit and with moderate interdependence. Operational plans are usually focused for twelve months or less with low interdependence.
In addition to planning variation managers at different levels managers at different levels of the company face different planning strategies. The three primary levels are the corporate level, the business level and the functional level. At the corporate level concerns include what sort of industry should the organisation be involved in, what markets should they the be in, where should time and money be invested. At the business level the concerns are on who are the direct competitors, what are their strengths and weaknesses, what are our strengths and weaknesses, what advantages do we have, what do our customers value? At a functional level the questions are what activities should the unit perform well in, what information do we need about our competitors, what are our unit's strengths and weaknesses? Strategic plans affect the corporate and business level, tactical plans the business and functional level and operational plans the functional level alone.
The planning process begins with analysing the environment, making forecasts, assigning benchmarks, engaging in competitor analysis, assessing environmental uncertainty and making contingency plans, and proposing scenarios. Benchmarking is the investigation of the best results among competitors and non-competitors and the practises that lead to those results. The second element of the planning process is the setting of objectives or desired outcomes. One of the first challenges is to determine action priorities and temporal priorities. One the objectives are clear the means of measuring them must be determined. The third element in the planning process is the determination of requirements. In order to this the key drivers for the journey are necessary. The fourth element is the assessment of required resources and the resources available. The fifth element is the development of specific action plans which includes sequence and timing, accountability, monitoring the implementation and real-time adjustment. The final element involves monitoring outcomes. Most plans also produce unanticipated consequences.
Planning tools include budgets (capital expenditure budget, expense budget, proposed budget, approved budget). The two main approaches are the incremental budgeting approach, which is simple and easy to implement but suffers the problem of budget momentum. The alternative is zero-based budgeting which assumes that allocations of funds must be justified from zero each year.
Goal-setting is a specific planning process for managing performance. Effective goal setting can be captured the acronym SMART; specific, measured, agreed, realistic and time-bound. A similar alternative is MBO (Management By Objectives). The process involves the implementation of plans with jointly set-goals which are then differentiated by acceptance, difficulty, specificity and their explicit time-period, all of which contribute to performance, which is then reviewed and evaluated with feedback sent back to jointly set goals.