PART III: Planning

Chapter 6: Planning
6.1 Introduction
As business conditions become more unstable, companies do more planning. Change creates
uncertainity, and planning helps people adapt to this by clarifying objectives, specifying how to achieve
them, and monitoring progress.
Plans include both ends (what to do) and means (how to do it).
Informal plans - not written down, nor widely shared.
Formal plans - which put into writing the goals of a business or unit, and who will do what to achieve
them.
6.2 Purposes of planning
Planner - an individual who contemplates future actions.
Planning - iterative task of setting goals, specifying how to achieve them, implementing the plan and
evaluating the results.
Goal (objective) - desired future state for an activity or organisational unit.
Planning, if done well:
clarifies direction (how best to contribute, cope with unexpected)
motivates people (knowing the wider picture helps commitment)
uses resources efficiently (to reduce overlap)
to measure progress (goal, targets...)
increases control
If done badly, planning has the opposite effect, leading to confusion and waste.
Advantages of plans: people working more effectively, coping with uncertainity, reducing overlap,
ensuring someone is responsible for each activity, time & resources saving, spotting inefficiencies or
unnecessary delays.
6.3 The content of plans
--> subject - what aspect of business it deals with
Business plan - a document that sets out the markets the business intends to serve, how it will do so
and what finance is required.
Strategic plan - sets out the overall direction for the business, covers all the major activities (markets,
revenues, plans for marketing, human resources and production), broad in scope (apply to the whole
organisation).

Deciding what business an organisation should be in, where it wants to be and how it is going to get
there.
STRATEGIC BUSINESS UNIT - consists of a number of closely related products for which it is meaningful
to formulate a separate strategy - divisonal plan for each major unit (in large businesses, usually set a
direction for several years)
Not fixed plans - ''rolling plans'' - managers regularly update them to take account of few conditions.
Operational plans - detail how the overall objectives are to be achieved, by specifying what senior
management expects from specific departments or functions, narrower in scope
(family of related plans forming a hierarchy: a strategic plan for the organisation and main divisions, and
several operational plans for departments or teams).
- annual plans - focus on finance and set budget for the coming year (sales, marketing...)
- activity plans - short-term plans, deal with immediate production or service delivery
(which order to deliver next week)
- standing plans - specify how to deal with routine (recruitment or customer complaints)
ENTERPRISE RESOURCE PLANNING (ERP) - computer-based planning system which links separate
databases to plan the use of all resources within the enterprise.
- specific plans - clear, quantified objectives with little discretion in how to achieve them
- directional plans - setting the objective but leaving stuff to decide how they achieve it
6.4 The process of planning
--> the way plans are produced
Planning system - processes by which the members of an organisation produce plans, including their
frequency and who takes part in the process.
Part of the planning task - designing and maintaining a suitable planning system.
Another issue - who is involved in making the plan?
Planning and doing may seem like separate activities (in stable conditions).
People often conduct them simultaneously (in volatile conditions: markets or technologies changing
quickly).
Seven generic tasks which people perform when they make a plan: gathering informaton, developing a
mission, setting goals and objectives, identifying actions and allocating resources, implementing plans,
monitoring progress, evaluating results.
They use them iteratively, often going back to an earlier stage when they find new information, miss a
stage, or spend too little or too much time on them.
6.5 Gathering information
Any plan depends on information.
Informal information - soft, gained from casual encounters with colleagues.
Formal informaton - analyses of economic and market trends.

Planners usually begin by drawing on information about competitive and general environments
(government economic and demographic statistics, industry surveys, general business intelligence
services). Also, attitudes towards particular firms or brand names, and satisfaction with existing
products.
SWOT analysis
Planning usually combines an analysis of external environmental factors with an internal analysis of the
organisation's strengths and weaknesses.
SWOT analysis - way of summarising the organisation's Strengths and Weaknesses relative to external
Opportuinities and Threats.
Internally - analyse S&W of organisation's resources.
Externally - identify main O&T people believe would affect the business.
(based on PESTEL and Porter's five forces)
Usefulness depends on recognising that it is a human representation of reality: participants will differ
about the significance of factors (subjective interpretation, not objective reality)
Diversity and complexity of organisational environments - make it easier to get much information.
Managers focus on the few trends and events that are likely to be of greates significance.
Critical success factor analysis
---> those aspects of a strategy that must be achieved to secure competitive advantage.
(in considering whether to enter a new market)
These are things which customers in that particular market most value about a product or service. They
are things that a company must be able to do well in order to succeed in that market. They play a key
role in entering.
FORECASTING
Pedictions of the future are often based on an analysis of past trends in factors
such as input prices, sales patterns, demographic characteristics.
All forecasts are based on assumptions. Relatively simple environment - past trends
will continue. In uncertain conditions - they need alternative assumptions.
Forecasting is big business, with companies selling analyses to business and
government. However, they are of little value as conditions become uncertain.
Optimism bias - a human tendency to judge future events in a more positive light
than is warranted by experience.
Strategic misrepresentation - where competition for resources leads planners to
underestimate costs and overestimate benefits, to increase the likelihood that
their project gains approval.
SENSITIVITY ANALYSIS
It is a way to test assumptions; analysis of the key variables.
By comparing them, managers can assess the relative tasks.
SCENARIO PLANNING
It is an attempt to create coherent and credible alternative stories about future.

(alternative to forecasting - considering possible scenarios)

Scenario typically begin by considering how external forces (internet, ageing
population, climate change) might affect companies business over next few years.
It brings new ideas about environment - now considering previously unthinkable
possibilities.
Two benefits: discourage of reliance on 'single-point-forecasting' (single view of the
future) and encourage of managers to develope alternatives.
6.6 Setting goals (objectives)
A clear plan depends on being clear about the ultimate purpose of a task: whether it concerns the
organisation or a unit. Goals give focus to a task.
Basis for specific goal is concise vision of the future.
Hierrarchy of goals
A way of relating goals to each other - building them into hierrarchy, in which overall goals are
transformed into more specific goals for different parts of the organization (marketing, finance,
operations).
Effective goal setting involves balancing multiple goals, considering whether they meet the SMART
criteria.
Single and multiple goals
Company statements of goals (long/short term) are usually expressed in the plural. Single measure
cannot indicate success or failure; emphasise on one goal ignores another. Managers balance multiple,
possibly conflicting goals.
Trying to balance stakeholders' diverse interests can lead to conflict between stated and real goals.
Stated goals - prominent in company publications and websites.
Real goals - to which people give most attention.
Criteria for assessing goals
SMART - acronym summarising some criteria for assessing a set of goals. What form of each is effective
depends on circumstances.
Specific - having a clear statement of what the activity is intended to achieve
Measurable - some goals may be quantified, and some qualitative (eqaully important and useful) - goals
can be defined precisely enough to measure progress towards them
Attainable - not unreasonably difficult, nor too easy
Rewarded - people need to see that attaining a goal will bring a reward
Timed - does the goal specify the time over which it will be achieved?
6.7 Identifying actions and allocating resources
Planning involves specifying the activities needed to meet the goals: deciding what needs
to be donea and who will do it.
In small activity, it requires only listing the tasks dividing them clearly among few memebers. When goal
is implicated (launching a new product) the plan could identify which part of an organisation will be
affected and what changes need to be make to each
element (finance, structure etc.)

Communicating the plan

In a small organisation/where the plan deals only with one area - communication in any formal way is
probably unnnecessary.
In larger enterprises managers will probably invest time and effort in communicating both the objectives
and actions required throughout the areas affected. They do this to:
- ensure that everyone understands the plan
- allow them to resolve any confusion and ambiguity
- communicate the judgements and assumptions that underlie the plan
- ensure that acitivities are coordinated in practice and on paper
6.8 Implementing plans and monitoring progress
Nothing worthwhile happens until plan is implemented, acting to make visible physical changes to
organisation and the way people work within it. Many managers find this the most challenging part of
the process. Implementing the plan tests the accuracy od the assumptions and methods.
Miller (2004) - implementation depends on:
- managers' experience of the issue
- organisational readiness for a change
(readiness - extent to which staff are able to specify objectives, tasks and resource reuirements of a plan
appropriately, leading to acceptance)
The final stage in planning is to set up a system that allows people to monitor progress towards the
goals. This happens at all levels of planning.
Project plan define and display every task and activity. To avoid being swamped with such detail,
programme manager needs to maintain a quick-to-understand snapshot of programme (progress to
date, main events being planned, issues, expecte completion dates).
''Planning is a necessary part of this approach to business, but is not sufficient in itself.'' (Miller)