INFORMATION SHEET # 3.

1-1
TOPIC: PLANNING CONCEPTS IN BUSINESS

Picture source: https://www.google.com/url?sa=i&url=https%3A%2F%2Ffanyv88.com%3A443%2Fhttps%2Fwww.thealternativeboard.com%2Fstrategic-business-

plan&psig=AOvVaw2VmAjNxiTAlMP9L-tHWbTg&ust=1607740312277000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCOi5-
ZHIxu0CFQAAAAAdAAAAABAD

Summary of learning content.

At the end of this module you will be able to:

1. Discuss the nature of planning

2. Compare and contrast the different types of plans
3. Describe planning at different levels in the firm
4. Apply appropriate planning techniques and tools
5. Formulate a decision from several alternatives

Motivation:
1. Why and how do managers plan?
2. What types of plans do managers use?
3. What are the useful planning tools and techniques?
4. How can plans be well implemented?
PLANNING

1. Why and How Managers Plan

1. Importance of planning
2. The planning process
3. Benefits of planning
2. Types of Plans Used by Managers
1. Long-range and short-range plans
2. Strategic and tactical plans
3. Operational plans
3. Planning Tools and Techniques
1. Forecasting
2. Contingency planning
3. Scenario planning
4. Benchmarking
5. Use of staff planners
4. Implementing Plans to Achieve Results
1. Goal setting
2. Goal alignment
3. Participation and involvement

• Planning
– The process of setting objectives and determining how to accomplish them
• Objectives and goals
– 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 alternatives and make a plan
– Implement the plan and evaluate results
 Figure 1. Planning Concept

Benefits of planning:
– Improves focus and flexibility
– Improves action orientation
– Improves coordination and control
– Improves time management

Personal time management tips:

– DO say “no” to requests that distract from what you should be doing
– DON’T get bogged down in details that can be addressed later
– DO screen telephone calls, emails, and meeting requests

More personal time management tips:

– DON’T let drop-in visitors instant messaging use up your time
– DO prioritize your important and urgent work
– DON’T become calendar bound by letting others control your schedule
– DO follow priorities; do most important and urgent work first

Types of plans
– Long-term plans look three or more years into the future
– Short-term plans typically cover one
year or less
 Most of us
• 3 month time
frame

A few of us
• 1 year time frame

Very few of us
• 20 year time
frame

Figure 2. Types of Plans

• Strategic plans — set broad, comprehensive, and longer-term action directions for the
entire organization
– Vision – clarifies purpose of the organization and what it hopes to be in the future
• Tactical plan – helps to implement all or parts of the strategic plan
• Functional plans – indicate how different operations within the organization will help
accomplish the overall strategy
• Production plans
• Financial plans
• Facilities plans
• Logistics plans
• Marketing plans
• Human resource plans

Tactical planning is short range planning emphasizing the current operations of various parts of
the organization. Short Range is generally defined as a period of time extending about one year or
less in the future. Managers use tactical planning to outline what the various parts of the
organization must do for the organization to be successful at some point one year or less into the
future.
Tactical plans are usually developed in the areas of production, marketing, personnel,
finance and plant facilities. Because of the time horizon and the nature of the questions dealt,
mishaps potentially occurring during the execution of a tactical plan should be covered by
moderate uncertainties and may lie closer to the control of management (next year shipping prices,
energy consumption, but not a catastrophic black-out, etc.) than strategic ones. Those mishaps, in
conjunction to their potential consequences are called “tactical risks”.

Functional planning – This plan is driven by the strategic plan in areas such as marketing,
accounting, research and development and human resources. The functional plan is the overall
strategy describing how and when the goals set in the strategic plan will be achieved. The
function plan is the concrete, specific actions and timeframes of making the goal of opening that
branch a reality.

• Operational plans — identify short-term activities to implement strategic plans

– Policies are standing plans the communicate guidelines for decisions
 – Procedures are rules that describe actions to be taken in specific situations
– Budgets are plans the commit resources to projects or activities
• Zero based budgets allocate resources as if each budget were brand new
Operational planning is the process of linking strategic goals and objectives to tactical goals and
objectives. It describes milestones, conditions for success and explains how, or what portion of, a
strategic plan will be put into operation during a given operational period.
An operational plan addresses four questions:
• Where are we now?
• Where do we want to be?
• How do we get there?
• How do we measure our progress?

Operational risks are those arising from the people, systems and processes through which a
company operates and can include other classes of risk, such as fraud, legal risks, physical or
environmental risks. Operational risk are those resulting from inadequate or failed internal
processes, people and systems, or from external events (man-made or natural hazards). A tailings
dam failure, an open pit slide, a black-out (man-made or natural external hazard), and explosion
in a processing plant are all operational hazards generating operational risks.
• Since upper Management generally have a better understanding of the organization as a
whole than lower level managers do, upper Management generally develops strategic
plans. Because lower level managers generally have better understanding of the day-to-
day organizational operations, generally they develop tactical and operational plans.
Because strategic plans are generally longer term and are surrounded by more uncertainties
in terms of their occurrence and consequences (one exception example: tailings
management planned until closure, and after closure) strategic plans are generally less
detailed than tactical plans. Thus the following can be inferred for a list of “top hazards”
discussed in a report we reviewed recently:
• Strategic, tactical, and operational planning example.
• However, despite their differences, strategic, tactical and operational planning are
integrally related. Manager need both tactical and strategic planning program, and these
program must be closely related to be successful. Thus, it can be inferred that Entreprise
Risk Management (ERM) should deal very closely with these relations and the use of
multiple Probability Impact Graph (PIG) matrices with multiple arbitrary scales is
definitely not a rational, transparent solution.

Forecasting
– Attempts to predict the future
– Qualitative forecasting uses expert opinions
– Quantitative forecasting uses mathematical models and statistical analysis of
historical data and surveys
Contingency planning
– Identifying alternative courses of action to take when things go wrong
– 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 and internal comparisons to plan for future improvements
– Adopting best practices: things people and organizations do that lead to superior
performance
– Staff planners assist in all steps of the planning process

Figure 3. Great Goals

Figure 4. Goal Alignment

Goal Alignment Between Team Leader and Team Member

– Jointly plan: set objectives, set standards, choose actions
– Individually set: perform tasks (member), provide support (leader)
– Jointly control: review results, discuss implications, renew cycle

Participatory Planning
– unlocks the motivational potential of goal setting
– management by objectives (MBO) promotes participation
– when participation is not possible, workers will respond positively if supervisory
trust and support exist