CHAPTER 3 - PLANNING

PLANNING
Planning is a process that involves the
setting of the organization’s goals,
establishing strategies for accomplishing
those goals and developing plans of
actions that managers intend to use to
achieve said organizational goals.

PLANNING
PLANNING is important because: it
provides direction to all of the
organization’s human resource’ managers
and employees, reduced uncertainty and
minimizes wastes of time, effort and
resources.

PLANNING
GOALS are the targets that management
desires to reach while PLANS are the
means or actions which management
intends to use to achieve the said
goals/targets.

PLANNING
Plans are best described in terms of their:
• Comprehensiveness
• Time frame
• Specificity
• Frequency of use

PLANS
Comprehen
siveness
Time frame Specificity
Frequency
of use
PLANNING

PLANNING
Planning steps include:
• Defining of goals/objectives
determining where you stand in relation
to set goals/objectives
• Developing premise regarding future
conditions

PLANNING
Planning steps include:
• Analyzing and choosing action
alternatives
• Implementing the plan
• Evaluating results and taking corrective
action

PLANNING Defining of
goals/objectives
determining where you
stand in relation to set
goals/objectives
Developing premise
regarding future
conditions
Analyzing and
choosing action
alternatives
Implementing the plan
Evaluating results and
taking corrective action
How does a
MANAGER
plan?

PLANNING
Planning types includes:
1. Strategic 6. Directional
2. Tactical 7. Specific
3. Operational8. Single use
4. Long term 9. Standing plans
5. Short term

TYPES OF PLANNING
STRATEGIC PLANNING
• Strategic planning sets the long-term
direction of the organization in which it
wants to proceed in future.

STRATEGIC PLANNING
• It focuses on the broad future of the
organization. Incorporating both external
information gathered by analyzing the
company’s competitive environment and the
firms internal resources, managers determine
the scope of the business to achieve the org
long-term objectives.

STRATEGIC PLANNING
• Strategic planning involves the analysis
of various environmental factors and the
competition.
• Most strategic plans focus on how to
achieve goals three to five years into the
future.

STRATEGIC PLANNING
• It has the potential to impact
dramatically, both positively and
negatively, on the survival and success of
the organization.
• Typically 3-5 years of horizon
• Top management is involved in
framing the strategic plans.

TACTICAL PLANNING
Tactical plans translate the strategic plans
into specific goals for specific parts of
the organizations.
They are for shorter time frame and
usually focused for 1-2 years

TACTICAL PLANNING
Instead of focusing on the entire corporation,
tactical plans typically affect a single business
within an organization.
Although tactical plans should complement
the organizations overall strategic plan, they
are often somewhat independent of other
tactical plans.

TACTICAL PLANNING
Tactical plans are concerned with
implementation of strategic plans by
coordinating the work of different
departments in the organization.
They try to integrate various
organization units and ensure the
commitment to strategic plans.

OPERATIONAL PLANNING
Operational plans translate the tactical
plans into specific goals and actions for
small units of the organization.
They typically focus on the short term
usually 12 months or less.

OPERATIONAL PLANNING
These plans are least complex than
strategic and tactical plans, and rarely
have a direct effect on other plans
outside of the department or unit for
which the plan was developed.

LONG-TERM PLANNING
Long term planning is of strategic nature
and involves long period say 3-5 yrs. The
long term plans usually encompass all the
functional areas of the business and are
affected within the existing and long-term
framework of economic, social and
technological factors.

SHORT-TERM PLANNING
Short term planning is usually a plan made
for one year. These are aimed at sustaining
organization in its production and
distribution of current products or services
to the existing markets. These plans
directly affect functional groups(
production, marketing, finance)

STANDING PLANS
Standing plans are put to use again and
again over a long period of time. Once
established they continue to apply until
they are modified or abandoned. Standing
plan help managers in dealing with routine
matters in a pre-determined and
consistent manner.

STANDING PLANS
Examples of standing plans are:
organizational mission and long term
objectives, strategies, policies, procedures
and rules.

SINGLE USE PLANS
Single use plans are relevant for a specified
time and after the lapse of that time, these
plans are formulated again for the next
period.
Single use plans are non-recurring in nature
and deal with problems that probably will
not be repeated in the same form in future.

SINGLE USE PLANS
Generally these plans are derived from the
standing plans
Examples: projects, budgets, targets.

STANDING vs. SINGLE USE
STANDING
PLANS
SINGLE-USE PLAN
PLANS
1) OBJECTIVES
2) POLICIES &
STRATEGIES
3) PROCEDURES
4) METHODS
5) RULES
1)PROGRAMMES
2) PROJECTS
3) BUDGETS

SPECIFIC PLANS
Plans that are clearly defined and leave no
room for interpretation

DIRECTIONAL PLANS
Flexible plans that set out general
guidelines, provide focus, yet allow
discretion in implementation.

PLANNING at DIFFERENT
LEVELS
CORPORATE LEVEL
 Most corporation of even moderate size have a
corporate headquarters. The heads of these groups
are typically part of the group of senior executives at
the corporate headquarters. Executives at the
corporate level in large firms include both those in the
headquarters and those heading up the large
corporate groups such as finance, human resources,
marketing etc.

LEVELS
CORPORATE LEVEL
 These corporate-level executives primarily focus on
the questions such as
 What industries should we get into?
 What markets should the firm be in?
 In which business should the corporation invest
money?
 What resources should be allocated to each
business?

LEVELS
BUSINESS LEVEL
 At this level managers focus on determining how they
are going to compete effectively in market.
 At this level, managers attempt to address questions
such as:
 Who are our direct competitors?
 What are their strengths and weaknesses?
 What are our strengths and weaknesses?
 What advantages do we have over competitors?

LEVELS
FUNCTIONAL LEVEL
 At this level managers focus on how they can facilitate the
achievement of the competitive plan of the business. These
managers are often the heads of departments such as
finance, marketing, human resources or product
development.
 Depending on the business structure this can include
managers responsible for business within a specific
geographic region or managers responsible for specific
retail stores.

LEVELS
FUNCTIONAL LEVEL
 Functional managers attempt to address questions such as:
 What activities does my unit need to perform well in
order to meet customer expectations?
 What information about competitors does my unit need
in order to help the business compete effectively?

INTERRELATIONSHIP BETWEEN PLAN
TYPES AND LEVELS
Types of plans
Strategic plans
Tactical plans
Organizational levels
Corporate level
Business level
Operational plans Functional plans

DECISION MAKING
RATIONAL
 A type of decision making in which choices are logical
and consistent and maximize value.
 Assumptions of rationality: a rational decision maker
would be fully objective and logical. He will have a
clear and specific goal and know all the possible
alternatives and consequences.

 FORECASTING
 CONTINGENCY PLANS
 SCENARIO PLANNING
 BENCHMARKING
 PARTICIPATORY PLANNING

DECISION MAKING
RATIONAL
 Making decisions rationally would consistently lead to
selecting the alternative that maximizes the likelihood
of achieving that goal.
 Decisions are made in the best interest of the
organization.

DECISION MAKING
BOUNDED RATIONALITY
 It is more realistic approach
 Managers make decisions rationally but are bounded by
their ability to process information. Because they cant
possibly analyze all information on all alternatives,
manager satisfice rather than maximize. i.e. they accept
the solutions that are good enough.
 They are being rational within the limits of their ability to
process information.

DECISION MAKING
INTUITION BASED
 Making decisions on the basis of experience, feelings
and judgment.
 It can be cognitive-based , experience-based, value or
ethics based, or subconscious mental processing

LINEAR THINKING STYLE is characterized by
a person’s preference for using external data
and facts and processing this information
through rational, logical thinking to guide
decisions and actions.
DECISION MAKING STYLES

DECISION MAKING STYLES
NON-LINEAR THINKING STYLE is
characterized by a person’s preference for
using the internal sources of information (
feeling and intuitions) and processing this
information with the internal insights,
feelings and hunches to guide decisions and
actions.

DECISION MAKING ERRORS and BIASES
1. Immediate gratification: it describes the
decision makers who tend to want
immediate rewards and to avoid immediate
costs. For this individuals, decision choices
that provides quick payoffs are more
appealing than those that may provide
payoffs in the future.

2. ANCHORING EFFECT: it describes the
situation when decision makers fixate on
initial information as a starting point and
once then set, fail to adequately adjust for
subsequent information. First impressions,
ideas, prices and estimates carry unwanted
weight relative to the information received
later.

3. SELECTIVE PERCEPTION BIAS: when
decision makers selectively organize and
interpret events based on their biased
perception, they are using selective
perception bias. This influences the
information they pay attention to , the
problems they identify and the alternatives
they develop.

4. CONFIRMATION BIAS: decision makers
that seek out the information that reaffirms
their past choices and discount information
that contradict the past judgments is the
confirmation bias. This people ignore the
critical information that challenges their
preconceived ideas.

6. AVAILABILITY BIAS: it causes decision
makers to tend to remember events that are
the most recent and vivid in their memory.
The bias distorts their ability to recall events
in an objective manner and results in
distorted judgments and probability
estimates.

7. REPRESENTATION BIAS: when decision
maker assess the likelihood of an event
based on how closely it resembles other
events. Managers see identical situation
where they don’t exist.
8. RANDOMNESS: it occurs when decision
makers try to create meaning out of random
events.

9. SUNK COST ERRORS: decision makers
forget that current choices cant correct the
past. They incorrectly fixate on past
expenditures of time, money or effort in
assessing their choice.

10. SELF-SERVING BIAS: decision makers
who are quick to take credit for their success
and to blame failure on outside factors
exhibit this bias.

11. HINDSIGHT BIAS: it is the tendency for
decision makers to falsely believe, after that
outcome is actually know, that they could
have accurately predicted the outcome of
the event.

STEPS in DECISION MAKING
STEP 1: IDENTIFICATION OF THE PROBLEM
STEP 2: IDENTIFICATION OF THE DECISION
CRITERIA
STEP 3: ALLOCATION OF WEIGHTS TO THE
CRITERIA
STEP 4: THE DEVELOPMENT OF
ALTERNATIVES

STEPS in DECISION MAKING
STEP 5: THE ANALYSIS OF ALTERNATIVES
STEP 6: SELECTION OF AN ALTERNATIVE
STEP 7: IMPLEMENTATION OF THE
ALTERNATIVE CHOSEN
STEP 8: EVALUATION THE DECISION
EFFECTIVENESS

DECISION MAKING CONDITIONS
1. CERTAINTY: it is the ideal situation to
make decision. The outcome of every
alternative is known.
2. RISK: a situation in which the decision
maker is able to estimate the likelihood of
certain outcomes.

DECISION MAKING CONDITIONS
3. UNCERTAINTY: A situation in which a
decision maker has neither certainty nor
reasonable probability estimates available.

TASK 1
State at least one long term plan for a
business firm with corresponding tactical
and operational plans to achieve them.

EXAMPLE
HOTEL SERVICE
STRATEGIC PLAN
To expand Hotel Service to different
parts of the Philippines in 7 years
OPERATIONAL PLAN FINANCIAL DEPARTMENT
To allocate 30% of annual hotel income
for planned expansion of hotel service
TACTICAL PLAN FRONTLINE MANAGERS FOR
TRAINING DEVELOPMENT
To have continuing training development
programs for Hotel Personnel to ensure
excellent Hotel services which will
ensure good hotel income.

TASK 2
Arrange the steps of the Decision Making
Process according to its chronological order.
Number the first step 1 and the last step 8.

TASK 2
___ Development of alternatives
___ Evaluation of Decision Effectiveness
___ Identification of Decision Criteria
___ Identification of a Problem
___ Analysis of alternatives
___ Implementation of alternative Chosen
___ Allocation of Weights to the Criteria
___ Selection of alternative

CHAPTER 3 - PLANNING

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CHAPTER 3 - PLANNING