Copyright © Houghton Mifflin Company. All rights reserved. 6-1 Chapter 6 The Basics of Planning and...

Chapter 6

The Basics of Planning and Project Planning

Chapter Outline

Coping with Uncertainty Three Types of Uncertainty Organizational Responses to Uncertainty Balancing Planned Action and Spontaneity in

the 21st Century

Chapter Outline (continued)

The Essentials of Planning Organizational Mission Types of Planning Objectives Priorities The Planning / Control Cycle

Chapter Outline(continued)

Management by Objectives and Project Planning

Management by Objectives Project Planning

Graphic Planning / Scheduling / Control Tools

Sequencing with Flow Charts Scheduling with Gantt Charts PERT Networks

Break-even Analysis Fixed Versus Variable Costs The Algebraic Method The Graphic Method Break-even Analysis: Strengths and

Limitations

COPING WITH UNCERTAINTY

Three Types of Uncertainty

State uncertainty: the environment, or a portion of it, is unpredictable.

(e.g., “Will it rain the day of our wedding?”)

COPING WITH UNCERTAINTY (continued)

Effect uncertainty: inability to predict the effects of specific environmental changes or events.

(e.g., “Will our outdoor reception guests get disgusted and leave early if it rains?”)

COPING WITH UNCERTAINTY (continued)

Response uncertainty: being unable to predict the consequences of a particular decision or organizational response.

(e.g., “Will our outdoor wedding reception still be fun if we decide to have it inside rented tents and it doesn’t rain?”)

ORGANIZATIONAL RESPONSES TO UNCERTAINTY

1. Defenders: “Be very good at doing a few things.”

2. Prospectors: “Stay a step ahead of the competition.”

3. Analyzers: “Follow the leader.”

4. Reactors: “If it isn’t broken, don’t fix it.”

ORGANIZATIONAL MISSION STATEMENTS

A well-written mission statement should do these things:

1. Define your organization for key stakeholders.

2. Create an inspiring vision of what the organization can be and can do.

3. Outline how the vision is to be accomplished.

4. Establish key priorities.

(continued)

5. State a common goal and foster a sense of togetherness.

6. Create a philosophical anchor point for all organizational activities.

7. Generate enthusiasm and a “can do” attitude.

8. Empower present and future organization members to believe every individual is a key to success.

(continued)

Individual or Team Exercise: Select an organization and write a mission statement for it.

Figure 6.1 Planning: The Primary Management Function

TYPES OF PLANNING AND PLANNING HORIZONS

Strategic Planning: process or determining how to pursue long-term goals with available resources.

Intermediate planning: process of determining the contribution subunits can make with allocated resources.

Operational planning: process of determining how specific tasks can best be accomplished on time with available resources.

TYPES OF PLANNING AND PLANNING HORIZONS

(continued)

Planning horizon: the time that elapses between the formulation and the execution of a planned activity.

Strategic planning horizon = One to ten years

Intermediate planning horizon = Six months to two years

Operational planning horizon = One week to one year

Figure 6.2 Types of Planning

EXERCISE: CAN YOU WRITE GOOD OBJECTIVES?

A well-written objective satisfies these three criteria:

1. It tells exactly what the intended result is.

2. It specifies when the intended result is to be accomplished.

3. It tells how the intended result will be measured.

EXERCISE: CAN YOU WRITE GOOD OBJECTIVES?

(continued)

Individual Exercise: Write three personal objectives that satisfy the three criteria.

Team Exercise: Write three organizational objectives that satisfy the three criteria.

WHY OBJECTIVES ARE IMPORTANT

1.They serve as targets.

2.They provide handy measuring sticks.

3.They generate individual commitment to collective results.

4.Challenging objectives motivate employees.

Figure 6.3 A Typical Means-Ends Chain of Objectives

PRIORITIES

Priorities: Ranking goals, objectives, or activities in order of importance.

A priorities: “Must do” objectives critical to successful performance.

B priorities: “Should do” objectives necessary for improved performance.

C priorities: “Nice to do” objectives desirable for improved performance.

PRIORITIES (continued)

Exercise: Make a personal “To Do” list for the next week. Next, assign each item on your list an A, B, or C priority rating.

THE MBO CYCLE

Step 1: Setting objectives

Step 2: Developing action plans

Step 3: Periodic review

Step 4: Performance appraisal

Figure 6.5 MBO’s Strengths and Limitations

PROJECT PLANNING

Stages in the Project Life Cycle: Conceptualization Planning Execution Termination

Source: Adapted in part from Figure 1.2 and discussion in Jeffrey K. Pinto and O.P. Kharbanda, Successful Project Managers: Leading Your Team to Success (New York: Van Nostrand Reinhold, 1995), pp. 17-21.

Figure 6.6 The Project Life Cycle and Project Planning Activities

PROJECT PLANNING AND CONTROL

Project Planning Activities:

Conceptualization stage: Develop overall project goals,

budget, and schedule

PROJECT PLANNING AND CONTROL (continued)

Planning Stage: Acquire needed facilities and

equipment Acquire needed personnel and assign

duties (goal setting) Schedule and coordinate individual

and team efforts

Termination stage: Turn project over to client Identify new project opportunities

Project Control Activities: Monitor progress and take corrective action.

Project Success Criteria:

1. Satisfy client’s expectations

2. Complete project on time and under budget

Figure 6.4 The Basic Planning/Control Cycle

PROJECT PLANNING GUIDELINES

Projects are schedule-driven and results-oriented

The big picture and the little details are of equal importance

Project planning is a necessity, not a luxury

Project managers know the motivational power of a deadline

Figure 6.7 A Sample Flow Chart

Figure 6.8 A Sample Gantt Chart

Figure 6.9 A Sample PERT Network

BREAK-EVEN ANALYSIS(continued)

The Algebraic Method:

Relying on the following labels,

FC = total fixed costs

P = price (per unit)

VC = variable costs (per unit)

BEP = break-even point

BREAK-EVEN ANALYSIS

Break-even point: level of sales at which there is no loss or profit.

Fixed costs: contractual costs that must be paid regardless of output or sales (e.g., rent, utilities, insurance).

Variable costs: costs that vary directly with production and sales (e.g., labor, material, supplies).

BREAK-EVEN ANALYSIS(continued)

The formula for calculating break-even point (in units) is:

BEP (in units) = FC

P - VC

Figure 6.10 Graphic Break-Even Analysis

Copyright © Houghton Mifflin Company. All rights reserved. 6-1 Chapter 6 The Basics of Planning and...

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