Foundations of Planning

Chapter 3: Foundations of Planning

Section 3.1 – Planning

Key Terms

• Strategic plans

• Tactical plans

• Short-term plans

• Long-term plans

• Specific plans

• Directional plans

• Single-use plan

• Standing plans

• Management by objectives

Summary

Planning encompasses defining the organization’s objectives or goals, establishing an overall strategy for achieving those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities.

Planning can be further defined in terms of whether it is informal or formal:

▪ In informal planning, very little, if anything, is written down. The organization’s objectives are rarely verbalized.

▪ However with formal planning specific objectives are written down and made available to organization members.

The environment managers face is too dynamic and has too great an effect on an organization’s survival to be left to chance. Accordingly, contemporary managers must plan—and plan effectively.

Managers should engage in planning for at least four reasons:

1. Planning provides direction

2. Reduces the impact of change

3. Minimizes waste and redundancy

4. Sets the standards to facilitate control

What are some criticisms of formal planning?

• Planning may create rigidity

• Plans can’t be developed for a dynamic environment

• Formal plans can’t replace intuition and creativity

• Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival

• Formal planning reinforces success, which may lead to failure

Many studies have explored the relationship between planning and performance. First, formal planning in an organization generally means higher profits, higher return on assets, and other positive financial results. Second, the quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning. Finally, in...