Chapter 4

Planning

©2004 by Nelson, a division of Thomson Canada Limited 1

What Would You Do?
 In early 2000 Air Canada controlled
90% of the domestic market
 By early 2001 Air Canada’s share
of the market had dropped to 73%
 WestJet’s share had climbed to
14%
 WestJet had a significantly lower
cost structure than Air Canada
 What would you do?
©2004 by Nelson, a division of Thomson Canada Limited 2
Learning Objectives:
Planning
After reading these next two
sections, you should be able
to:

1. discuss the costs and benefits

of planning
2. describe how to make a plan
that works
©2004 by Nelson, a division of Thomson Canada Limited 3
Costs and Benefits
of Planning

 Benefits of Planning

 Planning Pitfalls

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Benefits of Planning
 Intensified Effort
 Persistence
 Direction
 Creation of Task Strategies

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Planning Pitfalls

 Impede change and slow or

prevent adaptation
 Create a false sense of security
 Detachment of planners

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How to Make a
Plan That Works

Exhibit 4.1

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Setting Goals
 Specific
 Measurable
 Attainable
 Realistic
 Timely

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Goal Commitment
The determination to achieve a goal.
Increased by:
 Setting goals participatively
 Making goals reasonable
 Making goals public
 Obtaining top management support

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Developing an
Effective Action Plan
For accomplishing a goal an action
plan lists:
 Specific steps
 People
 Resources
 Time period

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Tracking Progress
 First method
 Set proximal (i.e., short-term) goals
 Set distal (i.e., long-term or primary)
goals
 Second method
 Gather and provide feedback
 Make adjustments in effort, direction,
and strategies
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Maintaining Flexibility
 Options-based planning
 keep options open through
simultaneous investment
 invest more in promising options
 Learning-based planning
 plans need to be continually tested,
changed and improved
 encourages frequent reassessment
and revision of goals
©2004 by Nelson, a division of Thomson Canada Limited 12
Learning Objectives:
Kinds of Plans
After reading the next two sections,
you should be able to:

3. discuss how companies can use plans

at all management levels, from top to
bottom
4. describe the different kinds of special-
purpose plans that companies use to plan
for change, contingencies, and product
development

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Planning From
Top to Bottom

Exhibit 4.3

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Planning From
Top to Bottom

Exhibit 4.3
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Starting at the Top
 Vision
 statement of a company’s purpose
 brief, inspirational, clear, and
consistent with company beliefs and
values
 Mission
 flows from the vision
 specific, unifying goal that stretches
and challenges the organization and
has a timeframe
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Planning Timeframes

Exhibit 4.4

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Setting Missions
 Targeting
 setting a clear, specific target
 Common-enemy mission
 vowing to defeat a corporate rival
 Role-model mission
 emulating a successful company
 Internal-transformation mission
 aiming to achieve dramatic change to
remain competitive

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Bending in the Middle
 Tactical Plans
 specify how a company will use resources,
budgets, and people to accomplish goals
 Management by Objectives
 develop and carry out tactical plans
 four steps

discuss goals

participatively select goals

jointly develop tactical plans
 meet to review performance

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What Really Works
Management by Objectives (MBO)
 Based on:

 goals
 participation
 Feedback
 Companies that use MBO are likely
to outproduce companies that do
not use it!

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Finishing at the Bottom
Operational plans
 day-to-day plans
Single-use plans
 deal with unique, one-time-only events
Standing plans
 plans for recurring events
 three types
 Policies
 Procedures

Rules and regulations
Budgets
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Special-Purpose Plans

 Planning for
Change
 Planning for
Contingencies
 Planning for
Product
Development

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Planning for Change
 Stretch goals
 extremely ambitious goals that you
don’t know how to reach
 Benchmarking
 identifying outstanding practices,
processes, and standards in other
companies
 adapting them to your company

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Planning for
Contingencies:
Scenario Planning
 Define the scope of  Using steps 1-4
the scenario create initial
 Identify the major scenarios
stakeholders  Check each scenario
 Identify for consistency and
environmental plausibility of facts
trends  Create contingency
 Identify key plans from each
uncertainties and scenario
outcomes  Develop measures to
indicate when
scenario events are
occurring
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Planning for Product
Development
Aggregate product plans:
 used to manage and monitor all new

products
 indicate resources being used for each

product
 indicate product’s place in company’s

plans
 help avoid having too many products in

development
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Product-development
Process
Four factors:
 cross-functional teams
 internal and external communication
 overlapping development phases
 frequent testing of product prototypes

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What Really Happened?
 Air Canada set specific goals
 Focused on cost structure
 Launched Tango and Zip
 Attempted to reduce labour costs
 Hit hard by SARS, Iraqi conflict and
a weakening economy
 Sought bankruptcy protection in
2003
©2004 by Nelson, a division of Thomson Canada Limited 27