Planning

Chapter 4
Learning Outcomes
This chapter should enable you to:
• explain why planning is needed in an organisation
• explain what a goal is
• discuss the steps in the planning process
• compare the different organisational goals used by top, middle and
lower management
• discuss the requirements that must be met when setting goals
• compare the different plans that can be used by the organisation
• differentiate between strategic, tactical and operational planning.
Introduction
One of the major tasks of a
manager is to plan where Planning is also the
the organisation should go starting point of the
in the future, and how to management process.
get it there.

It entails a systematic and

intelligent description of
the direction a business
organisation must follow
to accomplish its goals.
Why planning is necessary
• Planning helps the organisation to discover new opportunities and to
anticipate and avoid future problems.
• Planning gives the organisation direction. It provides the road map that
tells the organisation where to go and how to get there.
• Planning helps the different functional areas of a business to work
together. It ensures cohesion.
• By creating desirable changes, improving productivity and maintaining
organisational stability, planning improves the chances of achieving the
organisation’s goals.
• Through the realisation of the organisation’s goals, planning enables the
organisation to achieve long-term growth, maintain profitability and
survive.
The planning process

FIGURE 4.1 The management process (p. 84)

Planning is always considered the foundation on which the other management tasks
are based. If planning is not done properly, it will have a detrimental effect on how the
tasks of organising, leading, motivating and controlling are performed.

Planning should not happen in isolation or as a once-off activity

FIGURE 4.2 The planning process (p. 85)
Setting goals
Top management selects organisational goals for the long-term survival
and growth of the business. These goals fulfil a number of purposes in
an organisation:
• They provide a sense of direction by directing and guiding employees’
efforts towards specific targets and important outcomes.
• They give a reason for decisions made in the organisation.
• They serve as performance criteria since they define desired
outcomes for the organisation.
• They provide a source of motivation and commitment for employees.
• They help managers decide where to allocate resources.
The mission statement of the organisation
• Defines what an organisation is, why it exists and its reason for being.
It is the organisation’s purpose, as set out by the management.
• The mission statement appears at the top of the goal hierarchy of an
organisation. It forms the basis for the development of all goals and
plans.

The environment of the organisation

• Management must consider the environment in which it operates.
• It is difficult for management to keep track of all the changes in the
business environment, let alone predict how it will change in the
future.
The values of management
• Management’s values influence the organisation’s
culture, strategy and structure.
• These values also determine the organisation’s
commitment to social responsibility and ethical
behaviour.

The experience of management

• The experience of management also plays a role in
developing effective organisational goals and plans.
A hierarchy of goals

FIGURE 4.3 The

levels of goals and
plans and their
time frames (p. 89)
Criteria for setting effective goals
Goals should be specific and Goals should be set for a
measurable specific time period

Goals must be challenging and

Goals must be realistic and particular employees must be
consistent made responsible for
particular goals

Goals must be linked to

rewards
 Two basic ways to set goals in an organisation:
Top–down approach:
• Ensures a holistic approach where resources are distributed evenly and employees do not pull in different
directions
• Risks:
• that top management does not always know enough about what is going on at the grassroots level when
setting goals
• the goals set by top management might not get enough buy-in from employees at the lower levels.

Bottom–up approach:
• Called management by objectives (MBO)
• Advantages:
• Employees feel more motivated (encouraged) as they have been part of the goal-setting process.
• There is also more buy-in and psychological commitment to objectives set by the employees themselves.
• Individual and organisational goals are also better aligned.
• Poor relations between managers and employees can, however, reduce the effectiveness of MBO and the
organisational culture may discourage its effective use.
Developing action plans

FIGURE 4.4 Different types of action plans (p. 92)

Implementing the selected plans
• Having goals and plans is vital in any organisation.
• However, if the plans are not implemented effectively, the goals will
not be achieved.
• The implementation of the plans involves organising how they will be
executed, leadership to set the plans in motion, motivation to make
all employees commit to finishing the plans, and the exercising of
control to determine whether the activities are going according to
what is expected.
• In short, it involves the other four tasks of the management process,
namely organising, leading, motivating and control.
The full circle Controlling also forces
management to
Planning is only the
starting point of the
reconsider goals and whole management
set new ones, in that process – the point
way completing the where management
circle and starting all has to decide what
over again. has to be done.

For example, without

performing the task of Management must
controlling, also carry out four
management will not other essential tasks in
find any deviations order to complete the
(changes) from the full circle and get
plans and be able to results.
correct them. C
Summary
• Planning is defined as the first step in the management process.
• It involves the development of goals, the formulation of action plans
to reach these goals, and the implementation of these plans.
• The three types of goal that are set at different levels in the
organisation are strategic goals, tactical goals and operational goals.
• The three types of action plan necessary to reach these three types of
goal are strategic plans, tactical plans and operational plans.
• Implementing them involves the other four tasks of management:
organising, leading, motivating and controlling.