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Planning tools and techniques
It is the determination of goals and
objectives for future and deciding
appropriate means for achieving them.
The objectives may be of organization , a
department or an individual in it.
The plan is a written document that specifies
the predetermined courses of action.
The effectiveness of the plan pertains to the
degree to which it achieves the purpose of
The efficiency of the plan, however refers to
its contribution to purpose and objectives,
offset by costs and other factors required to
formulate and operate it.
Importance of planning
In an organization planning is needed at
all levels.
All the managers and supervisors are
involved in planning including the
determination of objectives, evaluation
of internal and external environment,
determination of actions and alternative
action and budgeting.
Specific benefits of planning
Execution of managerial functions.
Coordination of efforts.
Offers management development.
Develops performance standards.
Furnishes standards for control.
Provides room for change.
Types of plan
According to time of horizon;
Long, intermediate and short term.
In terms of recurring use;
Single use plans (i.e. programs, projects) or
standing plans (i.e. policies, procedures).
Various types of plan
Purposes/ Missions
It is the organizations unique purpose and
fundamental reason for existence or scope of
operation that distinguish one organization from
other of its type.
Objectives or goals are not only the end result of
planning but also ends towards which organizing,
staffing , leading and controlling are aimed.
Objectives and goals are guides for future
Strategies are the courses of actions adopted and
development of resources necessary to achieve
predefined objectives of the enterprise. It furnish
a framework for guiding, thinking and action and
thus have importance in guiding planning.
Policies are general guide that specifies the
brad parameters within which organization
members are expected to operate in pursuit of
organizational goals.
The prescribed series of related steps taken to
accomplish certain objectives are called
The well established and formalized procedure
written in Standard Practice of a firm are the
Unlike policies procedures provide detailed
step by step instructions as to what should be
Rules are general statement of specific actions
or non actions to be taken in a given situation,
allowing no discretion or alternative.
It is a combination of goals, policies,
procedures, rules, task, assignments, steps to
be taken, resources to be employed and other
elements necessary to carry out a given
course of action.
The projects are the plans that
coordinate a set of limited scope
activities that do not needed to be
divided into several major projects in
order to achieve important non recurring
It is a statement of expected results expressed
in numerical terms and may also be called as
numberized program.
It may be expressed in labor-hours, units of
products, machine hours or in any other
measureable numerical term.
Master Budget; It is overall financial plan that
looks similar to the income statement and
balance sheet.
Component Budget; The details of the master
budget are contained in a series of component
Process of planning
Goal setting
Diagnosis/analysis of available opportunities
Establishing goals
Developing premises
Procedure outlining
Determining alternate courses
Evaluating alternate courses
Monitoring progress
Formulating derivative plans
Numbering plans by budget
Planning Tools and Techniques
Environment Assessment Techniques
Environmental Scanning
Breakeven Analysis
Linear Programming
Contemporary Planning
Project Management
Scenario Planning
Assessing the Environment (contd)
Environmental Scanning (contd)
Global Scanning
Screening a broad scope of
information on global forces
that might affect the
Has value to firms with
significant global interests
Draws information from
sources that provide global
perspectives on worldwide
issues and opportunities
Another type of environmental scanning is
global scanning in which managers assess the
changes and trends in the global environment
through the gathering of vital global
Assessing the Environment
Environmental Scanning
The screening of large amounts of information to
anticipate and interpret changes in the environment
Competitor Intelligence
The process of gathering information about
competitorswho they are, what they are doing,
and how their actions will affect the organization
Is not spying but rather careful attention to readily
accessible information from employees, customers,
suppliers, the Internet, and competitors themselves
May involve reverse engineering of competing
products to discover technical innovations
Environmental scanning is the screening of large
amounts of information to anticipate and interpret
changes in the environment. Its used by both large and
small organizations, and research has shown that
companies with advanced environmental scanning
systems increased their profits and revenue growth.
Reverse engineering. the reproduction of another
manufacturer's product following detailed examination
of its construction or composition.
Competitor intelligence: fastest growing environmental
scanning activity that seeks to identify who competitors
are, what they are doing, and how their actions will
affect the organization.
Assessing the Environment (contd)
The part of organizational planning that involves
creating predictions of outcomes based on
information gathered by environmental scanning
Facilitates managerial decision making
Is most accurate in stable environments
Quantitative forecasting
Applying a set of mathematical rules to a series of hard
data to predict outcomes (e.g., units to be produced)
Qualitative forecasting
Using expert judgments and opinions to
predict less than precise outcomes
(e.g., direction of the economy)
Environmental scanning provides the foundation for
developing forecasts, which are predictions of outcomes.
Making Forecasting More Effective
Use simple forecasting methods
Compare each forecast with its corresponding no
change forecast
Dont rely on a single forecasting method
Dont assume that the turning points in a trend can
be accurately identified
Shorten the time period covered by a forecast
Remember that forecasting is a developed
managerial skill that supports decision making
Forecasting effectiveness.
a. Forecasting techniques are most accurate when
the environment is not rapidly changing.
b. Some suggestions for improving forecasting
effectiveness are as follows:
1) Use simple forecasting techniques.
2) Compare every forecast with no change.
3) Dont rely on a single forecasting method.
4) Dont assume that you can accurately identify turning
points in a trend.
5) Shorten the length of the forecasts.
Forecasting is a managerial skill and can be
practised and improved.
evaluate (something) by comparison with a
we are benchmarking our
performance against external criteria
A measurement of the quality of
an organization's policies,products, programs, strateg
ies, etc., and their comparison
with standard measurements, or similar
measurements of its peers.
The objectives of benchmarking are
(1) to determine what and
where improvements are called for
(2) to analyze how other
organizations achieve their high performance levels
(3)to usethis information to improve performance.
The search for the best practices among
competitors and noncompetitors that lead to
their superior performance.
By analyzing and copying these practices, firms
can improve their performance
Benchmarking is the search for the best practices
among competitors or noncompetitors that lead
to their superior performance.
evaluate (something) by comparison with a
"we are benchmarking our performance against
external criteria"
Steps in Benchmarking
Analyze data to identify
performance gaps.
Form a benchmarking
planning team.
Gather internal and
external data.
Prepare and implement
action plan.
The benchmarking process typically follows four steps .
a. A benchmarking planning team is formed. The
teams initial task is to identify what is to be
benchmarked, identify comparative organizations, and
determine data collection methods.
b. The team collects internal and external data.
c. The data are analyzed to identify performance gaps
and to determine the cause of the difference.
d. An action plan is prepared and implemented.
Allocating Resources
Types of Resources
The assets of the organization
Managers need to figure out ways to allocate the resources
listed on this slide.
Techniques for Allocating Resources
Detailing what's to
be done, in what
order, by whom,
and when
Breakeven Analysis
Determining the
point where revenue
and costs of a
project will match
Linear Programming
Using a
technique to solve
resource allocation
Creating a numerical
plan for allocating
resources to
specific activities
Revenue Expense Profit Cash Gantt Load PERT
How are resources allocated effectively and
efficiently so that organizational goals are
met? Managers can choose from a number of
techniques for allocating resources (many of
which are covered in courses on accounting,
finance, human resources, and operations
management).summarizes the differences
among four techniques covered in the text:
budgeting, scheduling, breakeven analysis,
and linear programming.
Types of Budgets
Variable Budget
Takes into account
the costs that vary
with volume
Fixed Budget
Assumes fixed
level of sales
or production
Cash Budget
Forecasts cash on hand
and how much will
be needed
Revenue Budget
Projects future sales
Profit Budget
Combines revenue and expense
budgets of various units to determine
each units profit contribution
Expense Budget
Lists primary activities
and allocates dollar
amount to each
BUDGET An estimation of the revenue and expenses over a specified future period of
time. A budget can be made for a person, family, group of people, business,
government, country, multinational organization or just about anything else that
makes and spends money.
Profit budget A planned financial forecast for the net income of a business.
A manager in charge of projecting the future financial performance of
a company might produce a profit budget in order to provide a reasonable estimate of
projected net revenue that will permit the company and its shareholders to assess
how well it is attaining its profitability goals.
Revenue budge The amount of money allocated to the maintenance and growth of a
business. A revenue budget is essential to management and is the result of
a business's forecasts of sales revenue, expenses and capital expenditures. Revenue
budgets help business save time and effort by the proper allocation of resources
Expense budget.
1.Budget based on the cost of goods and services already received and paid for.
2. Financial plan based on the cost of goods and services already received and paid
3.An expense budget is a limit of the amount that is expected to be incurred as an
expense in the future. This helps you to use your money wisely and not to spend it
4.a plan for saving and spending different amounts of money during a given time
Cash Cash is the amount of assets that a business has available to spend
immediately. Cash includes bank account deposits, bank balances, and more.
Another word for cash is liquidity.
Cash Budget An estimation of the cash inputs and outputs of a person or a business
over a specific period of time.
Fixed budget Financial plan designed to remain unchanged irrespective of
the fluctuations in a firm's output.
A fixed budget is one that is drafted on the basis of specific criteria without any
provision for any changes at any point during the period of time covered by the
budget. The budget lets those involved know how much they have to spend during a
given time frame, regardless of any eventualities such as a slump in sales or
increased profits.
Flexible/variable budget
A budget that shows how costs vary with different rates of output or at different
levels of sales volume and projects revenue based on these different output levels.
A flexible budget is a budget that adjusts or flexes for changes in the volume of
activity. The flexible budget is more sophisticated and useful than a static budget,
which remains at one amount regardless of the volume of activity.
Tips for Managers: Improving
Be flexible.
Understand that goals should drive budgetsbudgets should
not determine goals.
Coordinate budgeting throughout the organization.
Use budgeting/planning software when appropriate.
Remember that budgets are tools.
Remember that profits result from smart management, not
because you budgeted for them.
Resource Allocation Problem
A shortcoming of most scheduling
procedures is that they do not address the
issues of resource utilization and availability.
Scheduling procedures tend to focus on
time rather than physical resources.
Resource Allocation Problem
Schedules should be evaluated not merely
in terms of meeting project milestones, but
also in terms of the timing and use of scarce
A fundamental measure of the project
managers success in project management is
the skill with which the trade-offs among
performance, time, and cost are managed.
Resource Allocation Problem
The extreme points of the relationship
between time use and resource use are the
Time Limited: The project must be
finished by a certain time, using as few
resources as possible. But it is time, not
resource usage, that is critical
Resource Limited: The project must be
finished as soon as possible, but without
exceeding some specific level of resource
usage or some general resource constraint
Gantt Charts
Gantt charts provide a standard format for displaying
project schedule information by listing project
activities and their corresponding start and finish
dates in a calendar format
Symbols include:
A black diamond: milestones or significant events
on a project with zero duration
Thick black bars: summary tasks
Lighter horizontal bars: tasks
Arrows: dependencies between tasks
A Gantt Chart
Copy-edit manuscript
Design sample pages
Draw artwork
Print first pages
Print final pages
Design cover
1 2
Reporting Date
3 4
Actual progress
A simplified Gantt chart for book production developed by a manager in
a publishing company. Time is expressed in months across the top of the
chart. The major work activities are listed down the left side.
Where a box sits within a time frame reflects its planned sequence. The
shading represents actual progress.
The chart also serves as a control tool because the manager can see
deviations from the plan.
In this example, both the design of the cover and the printing of first
pages are running behind schedule. Cover design is about three weeks
behind, and printing first pages is about two weeks behind schedule.
Given this information, the manager might need to take some action to
either make up for the two lost weeks or to ensure that no further
delays will occur. At this point, the manager can expect that the book
will be published at least two weeks later than planned if no action is
Resource Loading
Resource loading describes the amounts of
individual resources an existing schedule requires
during specific time periods.
The loads (requirements) of each resource type
are listed as a function of time period.
Resource loading gives a general understanding of
the demands a project or set of projects will make
on a firms resources.
Resource Loading
The project manager must be aware of the flows
of usage for each input resource throughout the life
of the project.
It is the project managers responsibility to ensure
that the required resources, in the required
amounts, are available when and where they are
A Load Chart
1 2
Month Editors
3 4 5 6
Work scheduled
A load chart for six production editors at the same
publishing company.
Each editor supervises the production and design of
several books. By reviewing a load chart, the executive
editor, who supervises the six production editors, can see
who is free to take on a new book. If everyone is fully
scheduled, the executive editor might decide not to
accept any new projects, to accept new projects and
delay others, to have the editors work overtime, or to
employ more production editors.
In this exhibit, only Antonio and Maurice are completely
scheduled for the next six months. The other editors
have some unassigned time and might be able to accept
new projects or be available to help other editors who
get behind.
Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
A flow chart diagram that depicts the sequence of
activities needed to complete a project and the time or
costs associated with each activity
Events: endpoints for completion
Activities: time required for each activity
Slack time: the time that a completed activity waits for
another activity to finish so that the next activity, which
depends on the completion of both activities, can start
Critical path: the path (ordering) of activities that allows
all tasks to be completed with the least slack time
3. PERT (program evaluation and review
technique) network analysis is a technique for
scheduling complicated projects comprising
many activities, some of which are
a. A PERT network is a flowchart-like diagram
that depicts the sequence of activities needed to
complete a project and the time or costs
associated with each activity.
Allocating Resources: Analysis (contd)
Break-even Analysis
Is used to determine the point at which all fixed costs
have been recovered and profitability begins
Fixed costs (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
Price (P)
The Break-even Formula:
Costs Variable Unit - Price Unit
Costs Fixed Total
Break-even analysis is a technique for identifying the point at
which total revenue is just sufficient to cover total costs. A
visual representation of break-even is shown in
Break-even Analysis
70 000
60 000
50 000
40 000
30 000
20 000
10 000
100 200 300
Output (in thousands)
400 500 600
Variable Costs
Fixed Costs

Assume that Pierres Photocopying Service charges
$0.10 per photocopy. If fixed costs are $27 000 a year
and variable costs are $0.04 per copy, Pierre can
compute his break-even point as follows: $27 000
($0.10 $0.04) = 450 000 copies, or when annual
revenues are $45 000 (450 000 copies x $0.10). This
relationship is shown graphically in
Contemporary Planning Techniques
A one-time-only set of activities that has a definite
beginning and ending point time
Project Management
The task of getting a projects activities done on
time, within budget, and according to
Define project goals
Identify all required activities, materials, and labour
Determine the sequence of completion
Two planning techniques that are appropriate for
planning in an environment thats both dynamic
and complex are project management and
scenario planning.
Project Management.
A project is a one-time-only set of activities that
has a definite beginning and ending point in time.
Project management is the task of getting a
projects activities done on time, within budget,
and according to specifications.
Project Planning Process
time for
. Project management process.
In a typical project, work is done by a project team whose
members are assigned from their respective work areas to
the project and who report to a project manager.
2. The role of the project manager.
a. The only real influence project managers have is their
communication skills and their power of persuasion.
b. Team members seldom work on just one project;
theyre usually assigned to two or three at any given
Linear Programming
A method of solving limited resource
allocation between two variables where the
goal is optimization such that the change in
one variable is accompanied by an exactly
proportional change in the other.
Contemporary Planning Techniques (contd)
A consistent view of what the future is likely to be
Scenario Planning
An attempt not to try to predict the future but to
reduce uncertainty by playing out potential
situations under different specified conditions
Contingency Planning
Developing scenarios that allow managers to
determine in advance what their actions should
be should a considered event actually occur
A scenario is a consistent view of what the future
is likely to be.
1. Developing scenarios also can be described as
contingency planning.
2. The intent of scenario planning is not to try to
predict the future but to reduce uncertainty by
playing out potential situations under different
specified conditions.
3. Scenario planning is difficult to use when
forecasting random events.
Tips for Managers: Preparing for
Unexpected Events
Identify potential unexpected events.
Determine if any of these events would have
early indicators.
Set up an information gathering systemto
identify early indicators.
Have appropriate responses (plans) in place if
these unexpected events occur.