PLANNING

• Planning

• Importance/Purpose

• Process

• Planning tools and techniques

Planning

• It is the determination of goals andobjectives for future and decidingappropriate means for achieving them.

• The objectives may be of organization , adepartment or an individual in it.

PLAN

• The plan is a written document that specifiesthe predetermined courses of action.

• The effectiveness of the plan pertains to thedegree to which it achieves the purpose ofobjectives.

• The efficiency of the plan, however refers toits contribution to purpose and objectives,offset by costs and other factors required toformulate and operate it.

Importance of planning

• In an organization planning is needed atall levels.

• All the managers and supervisors areinvolved in planning including thedetermination of objectives, evaluationof internal and external environment,determination of actions and alternativeaction 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 organization’s unique purpose andfundamental reason for existence or scope ofoperation that distinguish one organization fromother of its type.

Objectives/Goals

Objectives or goals are not only the end result ofplanning but also ends towards which organizing,staffing , leading and controlling are aimed.Objectives and goals are guides for futureactions.

Strategies

Strategies are the courses of actions adopted anddevelopment of resources necessary to achievepredefined objectives of the enterprise. It furnisha framework for guiding, thinking and action andthus have importance in guiding planning.

Policies

Policies are general guide that specifies thebrad parameters within which organizationmembers are expected to operate in pursuit oforganizational goals.

Procedures

The prescribed series of related steps taken to accomplish certain objectives are called procedures.

The well established and formalized procedure written in Standard Practice of a firm are the S.O.Ps.

Unlike policies procedures provide detailed step by step instructions as to what should be done.

Rules

Rules are general statement of specific actionsor non actions to be taken in a given situation,allowing no discretion or alternative.

Programs

It is a combination of goals, policies,procedures, rules, task, assignments, steps tobe taken, resources to be employed and otherelements necessary to carry out a givencourse of action.

Projects

The projects are the plans thatcoordinate a set of limited scopeactivities that do not needed to bedivided into several major projects inorder to achieve important non recurringgoals.

Budget

It is a statement of expected results expressedin numerical terms and may also be called asnumberized program.

It may be expressed in labor-hours, units ofproducts, machine hours or in any othermeasureable numerical term.

Master Budget; It is overall financial plan thatlooks similar to the income statement andbalance sheet.

Component Budget; The details of the masterbudget are contained in a series of componentbudget.

Process of planningGoal 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

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Planning Tools and Techniques

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OUTLINE• Environment Assessment Techniques

– Environmental Scanning– Forecasting–Benchmarking–Budgeting– Scheduling–Breakeven Analysis– Linear Programming

• Contemporary Planning–Project Management– Scenario Planning

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Assessing the Environment (cont’d)• Environmental Scanning (cont’d)

– Global Scanning

• Screening a broad scope of information on global forces that might affect the organization

• 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 information.

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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 competitors—who 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 largeamounts of information to anticipate and interpretchanges in the environment. It’s used by both large andsmall organizations, and research has shown thatcompanies with advanced environmental scanningsystems increased their profits and revenue growth.

• Reverse engineering. the reproduction of anothermanufacturer's product following detailed examinationof its construction or composition.

• Competitor intelligence: fastest growing environmentalscanning activity that seeks to identify who competitorsare, what they are doing, and how their actions willaffect the organization.

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Assessing the Environment (cont’d)• Forecasting

– 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.

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Making Forecasting More Effective

• Use simple forecasting methods

• Compare each forecast with its corresponding “no change” forecast

• Don’t rely on a single forecasting method

• Don’t 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) Don’t rely on a single forecasting method.• 4) Don’t 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.

Benchmarking

• evaluate (something) by comparison with a standard.

“we are benchmarking our performance against external criteria

• A measurement of the quality of an organization's policies,products, programs, strategies, 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.

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Benchmarking

• 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 standard.

• "we are benchmarking our performance against

external criteria"

Steps in Benchmarking

BESTPRACTICES

Analyze data to identifyperformance gaps.

Form a benchmarkingplanning team.

Gather internal andexternal data.

Prepare and implementaction plan.

The benchmarking process typically follows four steps .

a. A benchmarking planning team is formed. The

team’s 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

• Financial

• Physical

• Human

• Intangible

• Structural/culturalManagers need to figure out ways to allocate the resources listed on this slide.

Techniques for Allocating Resources

Scheduling

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

mathematical

technique to solve

resource allocation

Budgeting

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 unit’’s profit contribution

Expense Budget

Lists primary activities

and allocates dollar

amount to each

OR

BUDGET An estimation of the revenue and expenses over a specified future period oftime. A budget can be made for a person, family, group of people, business,government, country, multinational organization or just about anything else thatmakes 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 ofa company might produce a profit budget in order to provide a reasonable estimate ofprojected net revenue that will permit the company and its shareholders to assesshow well it is attaining its profitability goals.Revenue budge The amount of money allocated to the maintenance and growth of abusiness. A revenue budget is essential to management and is the result ofa business's forecasts of sales revenue, expenses and capital expenditures. Revenuebudgets help business save time and effort by the proper allocation of resourcesExpense 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

for.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 itimpulsively.4.a plan for saving and spending different amounts of money during a given timeperiod.

Cash Cash is the amount of assets that a business has available to spendimmediately. 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 businessover a specific period of time.Fixed budget Financial plan designed to remain unchanged irrespective ofthe fluctuations in a firm's output.

A fixed budget is one that is drafted on the basis of specific criteria without anyprovision for any changes at any point during the period of time covered by thebudget. The budget lets those involved know how much they have to spend during agiven time frame, regardless of any eventualities such as a slump in sales orincreased profits.Flexible/variable budgetA budget that shows how costs vary with different rates of output or at differentlevels 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 ofactivity. 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 Budgeting

• Be flexible.

• Understand that goals should drive budgets—budgets 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 schedulingprocedures is that they do not address theissues of resource utilization and availability.

Scheduling procedures tend to focus ontime 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 resources.

A fundamental measure of the project manager’s 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 following:

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

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A Gantt Chart

Copy-edit manuscript

Design sample pages

Draw artwork

Print first pages

Print final pages

Design cover

1 2

Month

Reporting Date

Activity

3 4

Actual progress

Goals

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 taken.

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 firm’s 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 manager’s responsibility to ensure that the required resources, in the required amounts, are available when and where they are needed.

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A Load Chart

Ling

Antonio

Kim

Maurice

Dave

Rashid

1 2

MonthEditors

3 4 5 6

Work scheduled

A load chart for six production editors at the samepublishing company.Each editor supervises the production and design ofseveral books. By reviewing a load chart, the executiveeditor, who supervises the six production editors, can seewho is free to take on a new book. If everyone is fullyscheduled, the executive editor might decide not toaccept any new projects, to accept new projects anddelay others, to have the editors work overtime, or toemploy more production editors.In this exhibit, only Antonio and Maurice are completelyscheduled for the next six months. The other editorshave some unassigned time and might be able to acceptnew projects or be available to help other editors whoget 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 interdependent.

– 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.

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Allocating Resources: Analysis (cont’d)• 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:

CostsVariableUnit-PriceUnit

CostsFixedTotalBreak-even:

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

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Break-even Analysis70 000

60 000

50 000

40 000

30 000

20 000

10 000

100 200 300

Output (in thousands)

400 500 600

Breakeven

Point

Variable Costs

Fixed Costs

Profit

AreaTotal

Revenue

Loss

Area

Total

Costs

Reve

nu

e/C

ost ($

)

Assume that Pierre’s 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

50

Contemporary Planning Techniques

• Project– A one-time-only set of activities that has a definite

beginning and ending point time

• Project Management– The task of getting a project’s activities done on

time, within budget, and according to specifications• 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 that’s 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 project’s activities done on time, within budget, and according to specifications.

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Project Planning Process

Define

objectives

Identify

activities

and

resources

Establish

sequences

Estimate

time for

activities

Determine

project

completion

date

Compare

with

objectives

Determine

additional

resource

requirements

. 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; they’re usually assigned to two or three at any given time.

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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.

55

Contemporary Planning Techniques (cont’d)

• Scenario

– 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.

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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 system to

identify early indicators.

• Have appropriate responses (plans) in place if

these unexpected events occur.