Fundamentals of Managem

DMG 1043

Megatech International College

Learning Outcomes

Understand and explain the nature

and purpose
of management

Describe the structure and level of

management in organizations

Identify the function of leadership,

organizing, controlling and
planning in an organization

Prepare on forming the strategic

goal, setting objectives and
implementing and executing the
strategy

EmphasisMegatech
on International
issues
related to
College

Recommended Texts
Robbins & Decenzo (2010) Fundamentals
of Management, 7th ed Prentice Hall
Daft R (2006) The New Era of
Management International edition,
Thomson South-Western
David C Thomas Essentials of
International Management , 1st ed, SAGE
Publications
Slides Robbins & Decenzo (2010)
International College
FundamentalsMegatech
of Management,
7th ed

Unit 4: Basic Planning

Process

Megatech International College

What Is Planning?
Planning
A basic managerial function that involves:
Defining the organizations goals.
Establishing an overall strategy for
achieving those goals.
Developing a comprehensive set of
plans to integrate and coordinate
organizational work.

Megatech International College

Types of planning
Informal
Formal planning:
planning:
Written down
Not written
Clearly defined
down
long-term goals
Short-term
Goals are shared
goals
with other
Done in small
organizational
businesses or in
members.
single
organizational
units (little or no
sharing of goals
with others).
Megatech International College

Why Do Managers Plan?

Four Purposes (reasons) of
planning are identified:
1. It Provides direction (a focus)
2. It Reduces uncertainty (being
unsure)

3. It Minimizes waste,
inefficiencies and
redundancy (unnecessary
actions)

4. It Sets the standards

for controlling

(criteria)

Megatech International College

Planning and Performance

Studies of the Relationship Between Planning

And Performance have concluded that:
Formal planning is associated with positive
financial results
Higher profits.
Higher returns on assets.
The quality of planning and implementation is
more closely linked to high performance than
the extent (how wide) of planning.
The external environment (e.g. government
regulations) constrains managers options
(choices) and can reduce the impact (effect) of
planning on performance.
Formal planning must be used for several
years before it begins to positively affect
performance. Megatech International College

How Do Managers Plan?

The Role of Goals and Plans in
Planning
Goals or Objectives are desired outcomes
for individuals, groups, or entire
organizations.
They provide direction (focus) for plans and
decisions.
They form the criteria for evaluating results.

Plans are documents that outline (describe)

how goals are going to be met
(accomplished).
They determine resource allocations
(distribution), timetables and other necessary
actions to accomplish the goals
Megatech International College

Types of Goals
Financial Goals
Are related to the financial performance
of the organization.

Strategic Goals
Are related to the performance of the firm
in connection with its external
environment (e.g. customers,
competitors).

Megatech International College

Types of Goals
Stated Goals

Real Goals

The goals that an

Official statements
organization
from the
actually pursues, as
organization, saying
what it wants its
can be seen in the
stakeholders and
actions of its
the public to
members
Knowing that an organizations stated
believe.

and real goals are usually different is

important to understand what seems
to be management inconsistencies
(contradictions).
Megatech International College

Stated Objectives from Large U.S.

Companies

Financial Objectives

Strategic Objectives

Faster revenue growth

A bigger market share

Faster earnings growth

A higher more secure industry rank

Higher dividends

Higher product quality

Wider profit margins

Lower costs relative to key

competitors

Higher returns on invested

capital
Stronger bond and credit ratings
Bigger cash flows
A rising stock price
Recognition as a blue chip
company

Broader or more attractive product

line
A stronger reputation with
customers
Superior customer service

A more diversified revenue base

Recognition as a leader in
technology and/or product
innovation

Stable earnings during

recessionary periods

Increased ability to compete in

international markets
Megatech International
College

Expanded growth opportunities

Types of Plans
Long-Term
Plans
Plans with a
time frame of
more than three
years.

Short-Term
Plans
Plans with a time
frame of one
year or less.

Megatech International College

Types of Plans
Specific Plans
Plans that are
clearly defined
and leave no
room for
interpretation.
There is no
ambiguity and no
problem with
misunderstanding.

Directional Plans
Flexible plans that
set out (indicate)
general guidelines,
provide focus, yet
allow discretion
(freedom) in
implementation.
They dont force
managers into specific
courses of action.

Megatech International College

Specific Versus Directional Plans

Megatech International College

Types of Plans
Single-Use
Plans
One-time plans
that are
specifically
designed to
meet the needs
of a unique
situation.

Standing Plans
Ongoing plans that
provide guidance
for activities
performed
repeatedly.
They include policies,
rules and procedures.

Megatech International College

Types of Plans

Megatech International College

Approaches to Establishing Goals

Traditional Goal Setting
Broad (general) goals are set at the
organizations top level and then split into
sub goals for each lower level of the
organization.
This approach assumes that top managers know
whats best because they can see the big
picture.
The goals serve to direct, guide, and constrain
from above.
Goals lose clarity and focus as lower-level
managers apply their own interpretation
(understanding) when defining and applying them to
their areas of responsibility.
Megatech International College

Traditional Objective Setting

Megatech International College

Approaches to Establishing
Goals

MeansEnds Chain

Establishing a clearly-defined hierarchy

(order of accomplishment) of organizational goals
that results in an integrated (complete)
network (system) of goals.
Accomplishment of goals at a lower level
is the means (instrument) by which the
goals (ends) at the next higher level are
achieved.
Megatech International College

Approaches to Establishing
Goals
Management By
Objectives (MBO)
Specific performance goals are jointly
(together) determined by employees and their
managers.
Progress toward accomplishing goals is
periodically checked.
Rewards are allocated (distributed) on the
basis of progress.
Key elements of MBO:
Specific goals; employees motivation by
participation in decisions; explicit time period;
performance feedback/evaluation.
Megatech International College

Steps in a Typical MBO Program

1. The organizations overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmental
units.
3. Unit managers collaboratively set specific objectives for their units
with their managers.
4. Specific objectives are collaboratively set with all department
members.
5. Action plans, defining how objectives are to be achieved, are
specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback is
provided.
8. Successful achievement of objectives is reinforced by performancebased rewards.
Megatech International College

Characteristics of Well-Designed
Goals

Written in terms of
outcomes, not
actions

Focuses on the ends,

not the means.

Measurable and
quantifiable
Specifically defines
how the outcome will
be
measured/evaluated.

Clear as to time
frame

Challenging but
attainable

Low goals do not

motivate.
High goals motivate if
they can be achieved.

Written down
Forces people to focus
Written goals become
visible.

Communicated to all

Ensures that all

members work in ways
to secure
Specify a time frame
of
Megatech Internationalaccomplishment
College
for accomplishment.

Steps in Goal Setting

1. Review the organizations mission statement.
1.Does the goal reflect the purpose of the
organization?

2. Evaluate available resources.

1.Are resources sufficient to achieve the goal?

3. Determine goals individually or with others.

1.Does it conflict with other organizational goals?

4. Write down the goals and communicate

them.

1.Is everybody on the same page?

5. Review results and whether goals are being

met.
Megatech International College

1.Are any changes needed?

Planning in the Hierarchy of Organizations

Megatech International College

Contemporary Issues in
Planning
Criticisms of Planning
Planning may create rigidity: In achieving specific goals,
managers may not be able to cope with the changing
environment.

Plans cannot be developed for dynamic

environments: These conditions may mean not being tied to
formal plans.

Formal plans cannot replace intuition and creativity:

They may reduce intuition to programmed routine .
Planning focuses managers attention on todays
competition not tomorrows survival: They focus on
existing business opportunities, not creativity.
Formal planning reinforces todays success, which
may lead to tomorrows failure: Successful plans provide
a false sense of security than is warranted (justified, called for).

Contemporary Issues in Planning

Criticisms of Planning

Planning may create rigidity: In achieving specific goals,

managers may not be able to cope with the changing
environment.

Plans cannot be developed for dynamic

environments: These conditions may mean not being tied to
formal plans.

Formal plans cannot replace intuition and creativity:

They may reduce intuition to programmed routine .
Planning focuses managers attention on todays
competition not tomorrows survival: They focus on
existing business opportunities, not creativity.
Formal planning reinforces todays success, which
may lead to tomorrows failure: Successful plans provide
a false sense of security than is warranted (justified, called for).
Megatech International College

Contemporary Issues in Planning

Criticisms of Planning
How Valid are these criticisms?
They have some merit when plans are rigid
and inflexible. However, in todays
management effective planners should
understand dynamic, uncertain
environments.

Megatech International College

Contemporary Issues in
Planning

Effective Planning in Dynamic

Environments

Develop plans that are specific but flexible.

Understand that planning is an ongoing
process.
Make changes as needed if environmental
conditions change.
Continue in formal planning even in
uncertain environment to see any effect on
performance.
Push the responsibility to lower
organizational levels by training employees
Megatech
International
College
in setting goals
and
establishing
plans.

Summary
Planning a basic managerial function
Types of Planning
Types of goals
Contemporary issues in planning

Megatech International College

Question and Answer Session

Q&A
Megatech International College

Next Lecture
UNIT 5 STRATEGIC MANAGEMENT

Megatech International College