Organization and Controlling

Planning

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?

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.

Steps in the planning process:

– Define your objectives.

– Determine where you stand vis-à-vis objectives.

– Develop premises regarding future conditions.

– Analyze and choose among action alternatives.

– Implement the plan and evaluate results.

The roles of planning and controlling in the

management process.

Benefits of planning:

– Improves focus and flexibility.

– Improves action orientation.

– Improves coordination.

– Improves time management.

– Improves control.

A sample means-ends chain for total quality

management.

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.

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

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

• Plans that describe exactly what actions are to be taken in specific situations.

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.

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.

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.

Scenario planning

– A long-term version of contingency planning.

– Identifying alternative future scenarios.

– Plans made for each future scenario.

– Increases organization’s flexibility and

preparation for future shocks.

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.

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.

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.

How participation and involvement help build

commitments to plans.

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.

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.

Four steps in 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.

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.

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

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

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.

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.

Feedback controls …

– Take place after work is completed.

– Focus on quality of end results.

– Provide useful information for improving future

operations.

The role of feed forward, concurrent, and

feedback controls in organizations.

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.

Management by objectives as an integrated

planning and control framework.

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.

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.

Types of MBO performance objectives

– Improvement

– Personal development

– Maintenance

Criteria for effective performance objectives

– Specific

– Time defined

– Challenging

– Measurable

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.

Advantages of MBO

– Focuses workers on most important tasks and

objectives.

– Focuses supervisor’s efforts on important areas

of support.

– Contributes to relationship building.

– Gives workers a structured opportunity to

participate in decision making.

Employee discipline systems

– Discipline is the act of influencing behavior

through reprimand.

– Discipline that is applied fairly, consistently,

and systematically provides useful control.

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.

Employee discipline systems

– Progressive discipline ties reprimands to the

severity and frequency of the employee’s

infractions.

– Progressive discipline seeks to achieve

compliance with the least extreme reprimand

possible.

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.

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

Graphical approach to break-even analysis.

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

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

Statistical quality control

– Quality control 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.