BOH4M – Grade 12 Business Leadership – Planning and Controlling

Chapter 8: Planning and Controlling

 

How and Why Managers Plan

 

  • Planning: 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: Statement of action steps to be taken in order to accomplish objectives

 

  • Five steps in the planning process:
  1. Define your objectives
  2. Determine where you stand in relation to your objectives
  3. Develop premises regarding future conditions
  4. Analyze and choose among action alternatives
  5. Implement the plan and evaluate results

 

  • Benefits of planning include improvement in focus and flexibility, action orientation, coordination, time management, and control

 

  • Two theoretical approaches to planning:
  1. Rational comprehensive planning (RCP): focuses on a logical decision-making approach and advocates an integrated systems (holistic) viewpoint. Logical and deliberate process that uses mathematical models and statistical analysis. Unrealistic and can only be applied to relatively simple problems
  2. Incrementalism: Looks at decision-making as it naturally occurs – quickly and with imperfect information (just “muddle through”). Limited in scope
  • In practice, planners usually take a collectivist approach: take advantage of the strengths of both. Initially examine a problem using an incremental planning approach and then switch over to a more comprehensive, or vice-versa

 

 

 

 

 

 

 

Types of Plans Used By Managers

 

  • 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
  • Higher management more likely to focus on longer time horizons while lower management levels focus more on short-run plans

 

  • Plans not only differ in time horizons but also in scope:
    • Strategic plans: Address long-term directions for the organization
    • Operational plans: Define what needs to be done in specific areas to implement strategic plans and achieve strategic objectives (such as financial plans or marketing plans)

 

  • Standing plans in the form of policies and procedures are designed for use over and over again
  • Policy: A broad guideline for making decisions and taking action in specific circumstances
  • Procedures or Rules: Plans that describe exactly what actions are to be taken in specific circumstances. Often found in handbooks and manuals

 

  • In contrast, single-use plans such as budgets and project schedules are only used once to meet the needs of a well-defined situation in a timely manner 
  • Budgets: Commit resources to activities, projects, or programs
  • Fixed: Allocates resources based on a single estimate of costs 
  • Flexible: Allocates resources in proportion to level of activity
  • Zero-based budgets: Allocates resources as if project were new
  • Project schedules: Identify activities required to accomplish a specific major project (one-time activities that have clear beginning and end point). Project management involves making sure that activities required to complete a project are done on time, within budget, and correctly

 

 

 

 

 

Planning Tools and Techniques

 

Useful planning tools and techniques include:

  • Forecasting: Making assumptions about what will happen in the future
  • Qualitative forecasting uses expert opinions to predict the future
  • Quantitative forecasting uses mathematical and statistical analysis to predict events
  • Planning aids, not substitutes. Forecasting always relies on human judgment
  • Contingency planning: Identifies alternative courses of action to take when things go wrong such as crises and emergencies. Pre-selected alternative plans
  • Scenario planning: Long-term version of contingency planning that identifies alternative future scenarios and makes plans to deal with each should they occur
  • Benchmarking: Use of external comparisons gain insights for planning. Search for best practices incorporating successful ideas of other organizations into ones own operations
  • Use of staff planners: Planning specialists that lead and coordinate planning for organization as a whole or for one of its major components. Skilled in all steps of the planning process as well as planning tools and techniques

 

  • Participation is the key word in the planning process
  • Participatory planning requires that the planning process includes people who will be affected by the plans and/or will help implement them
  • Participation can increase creativity and information available for planning, understanding and acceptance of plans, and commitment to their success and implementation

 

The Control Process

 

  • Controlling:The process of measuring performance and taking action to ensure desired results
    • Ensures plans are achieved and actual performance meets/surpasses objectives
    • Foundation of control is information
    • Sees to it that right things happen in the right way at the right time
    • An after-action review identifies lessons learned in a completed project, task force or special operation

 

 

  • Four steps in the management control process:
  1. Establish performance objectives and standards
  • Key results that one wants to accomplish. Output standards measure performance results in terms of quantity, quality, cost, or time. Input standards measure work efforts that go into a performance task
  1. Measure actual performance
  • Accurately measure actual results on output and/or input standards
  • Without measurement effective control is not possible
  1. Compare results with objectives and standards
  • Control equation: Need for action = Desired performance – Actual performance
  • Methods of comparing desired and actual performance:
  • Historical comparison – Use past performance as a benchmark
  • Relative comparison – Use performance achievements of others as the standard
  • Engineering comparison – Use established engineering standards such as time as motion studies
  1. Take corrective action as needed
  • Take any action necessary to correct problems or make improvements
  • Management by exception is the practice of giving priority attention to situations showing the greatest need for action
  • Types of exceptions that may be encountered:
  • Problem situation – Actual performance is below standard
  • Opportunity situation – Actual performance is above standard

 

  • There are three major types of managerial controls:
  1. Feedforward (preliminary) controls ensures that directions and resources are right before the work begins
  2. Concurrent controls focus on what happens during work process
  3. Feedback controls take place after work is completed

 

  • Managers have two broad options with respect to control:
    1. Internal control: Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations
    2. External control: occurs through direct supervision and the use of formal administrative systems such as rules and procedures

 

Organizational Control 

 

  • Management by objectives (MBO): Structured process of regular communication in which a supervisor/team leader and worker jointly set worker’s performance objectives and jointly review results
    • Formal agreement specifying:
      • Worker’s performance objectives for a specific time period
      • Plans through which they will be accomplished
      • Standards for measuring results
      • Procedures for reviewing results
  • Types of objectives that may be specified in an MBO contract include improvement, personal development, and maintenance objectives
    • Criteria for effective performance objectives include that they be specific, time defined, challenging, and measurable
    • Pitfalls to avoid in using MBO:
      • Focusing too much attention on easy objectives
      • Requiring excessive paperwork
      • Having managers tell workers their objectives
    • Advantagesof MBO:
      • Focuses worker’s efforts on most important tasks and objectives
      • Focuses supervisor’s efforts on important areas of support
      • Contributes to relationship building
      • Encourages self-management

 

  • Employee discipline systems
    • Undesirable conduct (absenteeism, tardiness, sloppy work) should be formally addressed through employee discipline systems
    • Discipline is the act of influencing behavior through reprimand
    • Progressive discipline ties reprimands to the severity and frequency of the employee’s infractions

 

 

 

 

 

 

 

  • Information and financial control
    • Managers should be able to understand and assess the following financial performance measures:
      • Liquidity: ability to generate cash to pay bills
      • Leverage: ability to earn more in returns than the cost of debt
      • Asset management: ability to use resources efficiently and operate at minimum cost
      • Profitability: ability to earn revenues greater than costs

 

  • Break-even Analysis
    • Calculates the point at which sales revenues cover costs
    • Managers need to know how to determine their Break Even Point (BEP)
    • BEP=FC/(P-VC) where FC is Fixed Costs, P is Price and VC is Variable Costs

 

  • Operations and management control
    • Control is integral to operations management where the emphasis is on utilizing people, resources and technology to best advantage

 

  • Purchasing control is an important productivity tool
  • Efficient purchasing can control rising costs of materials through:
  • Leveraging buying power by buying in volume
  • Committing to a small number of suppliers
  • Working together in supplier-purchaser partnerships

 

  • Inventory control ensures that the amount of material kept in storage is the right size to meet performance needs, thus minimizing the cost
  • Methods of inventory control:
    • Economic order quantity – Materials ordering automatically when inventory level drops to a certain point
    • Just-in-time scheduling – Almost no inventory is maintained; materials arrive “just in time” to be used  

 

  • Statistical quality control involves checking processes, materials, products, and services to ensure that they meet high standards. In statistical quality control, the process is supported by statistical analysis that involves taking samples of work, measuring quality in the samples, and determining the acceptability of results