Chapter 3 – the tasks of management: planning, controlling, and organizing
Planning is setting goals for specific results and determining how to achieve those results.
- Planning must take into account the uncertainty that the future holds by considering
anticipated but also unexpected events
- The goal of planning is to anticipate as many future events as possible in order to
successfully formulate a course of action, increase revenues, and satisfy owner requirements.
- Effective planning will help an organization save time and money, decrease stress, and ensure
that actions taken by personnel throughout the organization will work together so the
organization can meet its goals.
oGives the organization direction into the future
oDecreases uncertainty
oProgresses towards the goal
oTakes corrective action if actual progress does not align with the goal.
The basic planning process starts with knowing where the company wants to go and determining
how to achieve that objective. The formal planning process consists of 6 steps:
1) Conduct situational analysis
2) Generation of alternative goals and plans
3) Evaluation of goals and plans
4) Selection of goals and plans
5) Implementation of the chosen goals and plans
6) Monitoring and controlling of the goals and plans
- Conducting situational analysis
oAssess and evaluate an organization’s current status.
oConcerned with evaluating the current condition of an organization and its
capabilities in order to ascertain the plausibility of future plans and strategies.
oFundamental to the entire planning process.
oOne method is a SWOT analysis
- Two goals are common to all organizations: effectiveness and efficiency
oEffectiveness is a measure of achieving organizational goals
Chapter 3 – the tasks of management: planning, controlling, and organizing
oEfficiency is using resources wisely to get the most output for the least amount of
input.
oThey are companion goals ongoing, complementing and enhancing other goals being
pursued.
Strategic planning is the process by which an organization’s top managers envision the future
and develop action plans to make that future a reality. The strategic vision is the organization’s
overarching goal.
- The mission statement is the reason for existence and should be a succinct statement about
the purpose of the organization. A statement of purpose. Crucial for establishing the future
direction of the organization.
- The vision statement is a picture of the preferred future that works to build commitment for
the organization’s goals. Becomes the blueprint.
- Benchmarking is the process where an organization compares its performance against not
only its competitors but also other high performing organizations.
oStep one – determine what to benchmark
oStep 2 – form a team of knowledgeable individuals to work on the benchmarking
oStep 3 – identify sources to be used for information
oStep 4 – collect and interpret the data
oStep 5 – take action on the interpreted data.
- An organization’s chosen strategy will determine how the organization will operate and how
the products or services will be distributed. Four distinct strategies:
oConcentration focuses on the organization operating a single business
oVertical integration acquires or organizes businesses that provide the upstream or
downstream, or both, for the organization’s products/services
oConglomerate diversification will add new products or businesses that are unrelated
to any of the organization’s products, markets or businesses
oConcentric diversification adds new products or businesses that product similar
products and services to the organization’s current products or businesses.
Chapter 3 – the tasks of management: planning, controlling, and organizing
oTo form a strategy, an organization’s leaders determine which strategies to follow and
modify those strategies so they are a precise fit for the organization’s needs.
- Strategic plans must be fully implemented for an organization to meet its mission.
Strategic plans cascade down from the top, through the tactical level. Tactical plans, made at the
mid-level provide the foundation upon which operational plans are formed.
- Policies outline actions to be taken, given certain events and what is acceptable/not
acceptable within the workplace. Guidelines to be followed and corrective actions for any
deviations. Based upon organizational needs
- Organization’s procedures and rules set forth specific guidelines for employees to follow. A
procedure establishes a baseline by setting forth the steps to be taken by employees to ensure
success in the completion of a specific task.
oProcedures must be documented and written in a manner to clearly communicate the
specifications for compliance.
oRules help an organization to ensure that the workforce understands the boundaries in
which they must operate to secure a productive and successful workforce. **in order
to be enforced they must apply to all members from the top down.
- Managers use budgets to determine how to utilize organizational resources. It is a financial
plan
- Project management is a methodical approach to planning and guiding project processes from
start to finish.
oIncludes planning, scheduling, and ensuring the team is maintaining the scheduled
progress towards the project’s end.
oProject manager should forecast future events as they relate to the project and plan for
all aspects of a given project – both those that are expected, and especially those that
would not normally be expected.
oProject manager supervises every aspect of a given assignment to ensure project
accomplishment.
oSometimes, a PM will have to evaluate and determine whether to continue a project
or let it die.
Chapter 3 – the tasks of management: planning, controlling, and organizing
Going back to the formal planning process, after situational analysis, comes contingency
planning
- Develop alternative goals and actions. Alternative goals must be determined to ensure that
the business is prepared to meet a variety of future scenarios. Planners can forecast possible
scenarios and determine how the organization will respond under varying circumstances and
environmental conditions.
- Evaluation of alternative goals and plans is an essential phase in the planning process. While
goals may seem appropriate, if they are not evaluated in light of the organization’s
competencies and capabilities, they are likely to lead the business into failure. Alternatives
can be evaluated according to their potential for bringing forth the anticipated results and are
ranked accordingly.
- Select specific goals and plans. Goals must be scrutinized in terms of their legality,
conformity to ethical standards, fit with the organization’s culture and other such criteria.
- Implementation determines the practical direction, objectives, goals and plans of the
organization. Two things that must be considered: time frame and assignment of
responsibilities.
- After implementation, results must be monitored so that actions can be adapted, adjusted, and
assessed in terms of actual versus planned progress toward a goal. Unanticipated changes
often occur, new ideas are gleaned from benchmarking, or new tech emerges, thereby
necessitating changes and alternations in the organization’s plans.
- Scenario planning is an awareness of potential risks and developing plans for possible future
conditions. Useful for mitigating risks.
oMethods used are computer simulations and models.
oLessons to better understand and control risk:
Turbo charge the imagination. This will help think of the worst, unexpected
scenarios
Build scenarios
Think in probabilities – how likely is an event to occur
Use the power of markets – markets already have people betting on contracts
of scenarios/events taking place
Create a culture that insists on facing reality.
Chapter 3 – the tasks of management: planning, controlling, and organizing
oThe ability to predict the future and change as that future unfolds is an essential part
of an organization’s goal to increase profits for its shareholders.
The control process is an important managerial function and is directly linked to the planning
function.
- Gives managers the tools needed to effectively monitor progress towards and objective.
- Control is both anticipatory and retrospective. The process anticipates problems and takes
preventive action. With corrective action, the process also follows up on problems.
- There are internal controls, broadly defined as process affected by an entity’s board of
directors, management and other personnel, designed to provide reasonable assurance
regarding the achievement of objectives in the following categories: effectiveness and
efficiency of operations, reliability of financial reporting, compliance with applicable laws
and regulations.
oPreventive control designed to discourage errors or irregularities.
oDetective controls designed to identify an error or irregularity after it has occurred.
oFive inter-relates components of internal control should be fully integrated into the
management process
Control environment. Foundation for all other components
Risk assessment. Mechanisms in place to identify and deal with risk
Control activities. Actions taken to address risk that may affect an
organization’s ability to achieve its objectives.
Information monitoring. Information must not only flow effectively through
the organization, but also relevant information must be recognized,
summarized and conveyed in a format and within a period of time that allows
the workforce to perform their responsibilities.
Communication monitoring
- Controls that are external are largely out of an organization’s control.
Control systems and tools are utilized to keep employees motivated and focused. The goal of
every organization is to increase the levels of efficiency and effectiveness.
Chapter 3 – the tasks of management: planning, controlling, and organizing
- Manage by objectives (MBO) is effective planning that depends on every manager having
clearly defined objectives that apply specifically to his or her functions. The objective must
contribute to the objectives of higher management and of the organization as a whole.
oEmphasizes the relationship between employee and manager.
oThree steps: (1) organizational leaders set goals, (2) each subordinate meets with their
supervisor to develop appropriate goals, (3) objectively viewing the goals previously
set.
- Employee discipline systems ensure that employees are performing their job in an effective
manner and are following company guidelines in the performance of an employee’s pre-
established duties.
oMost systems follow the same process of preventing misconduct, addressing the
conduct problem, and formal discipline.
- Financial controls can help managers determine the correct financial steps to take to ensure
increased profits.
oBreakeven analysis and ratio analysis are two examples.
oRatios are used to analyze trends. Can be used as benchmarks.
Current ratio: current assets / current liabilities
Quick ratio: current assets (- inventories) / current liabilities
Inventory turnover ratio: cost of goods sold / average value of inventory
- The efficient transformation of an organization’s input into the output of a product or service
and the controls that ensure maximization of efficiency in operational areas, such as
purchasing and inventory.
oInventory control ensures that sizes of inventory is adequate to meet the needs of the
organization. Involves determining when to order products and how much to order, as
well as identifying the most effective source of supply for each item in each stocking
location. Forecasting and replenishment.
oPurchasing controls help to ensure ordering right quantities and materials and also
getting best values for their money.
Organizing can be viewed as the activities to collect and configure resources in order to
implement plans in a highly effective and efficient fashion. A manager in the function of
Chapter 3 – the tasks of management: planning, controlling, and organizing
organizing is coordinating resources to work collectively to accomplish the goals and objectives
of the organization.
- Specialization produces an organizational structure that groups workers into departments that
are connected in a way that best serves the needs of the organization. Structures can vary
dependent on the organization and the task at hand
- Traditional structures are generally associated with large corporations and are most
commonly used to perform a task or group of tasks.
oIn a functional structure, employees who perform comparable duties are organized
into a formal work group.
Advantages include: economies of scale with efficient use of resources; task
assignments consistent with expertise and training; high quality technical
problem solving; in-depth training and skill development within functions;
clear career paths within functions
Disadvantage: problems with communication and problem solving across the
functions
oDivisional structure is an organizational structure in which employees are grouped
according to the product or service that they produce or by their geographical
location.
Allows flexibility by focusing on specific customers, products, or regions.
Divisional configuration allows managers to break up similar but unique tasks
within an organization into smaller entities thus making the divisions more
manageable.
oMatrix structure is coordinated, structural device which constructively blends the
program orientation of project staffs with the specialty orientation of functional
personnel in a new and synergistic relationship.
Advantage is that each member brings a different area of expertise and
experience to the group. Synergy.
Disadvantage is found in reporting to two bosses
Successful if communication is central to the project structure.
- Contemporary approaches to structuring employees allow for flexibility when conducting
specialty projects and the most efficient use of resources.
Chapter 3 – the tasks of management: planning, controlling, and organizing
oTech advances have allowed for boundaryless organization requiring little physical
interaction
oUse of teams – group of people with complementary skills who are committed to a
common purpose, and hold themselves mutually accountable.
Collective works represent the joint contribution and the result of synergy
Advantage is they break down barriers between different departments or
divisions.
oA network structure is a central organization working together with assorted
independent companies as if they were a single operation through strategic alliances
or outsourcing.
To be effective, all components must fit together. Complex inner-relatedness
between systems must be understood.
- Corporate governance is about promoting corporate fairness, transparency and accountability.
Management function of control, monitoring top management.
oOrganization must police themselves to avoid governmental, political, or social
backlash for irresponsible behavior.
oChain of command outlines the structure of responsibility within an organization.
Allows for clear understanding of where an employee fits within an organization and
ensures that efforts are coordinated across the organization.
oSpan of control depends on each organization.
Narrow build a tall organization, while a wide builds a flatter organization.
Wide and flat: work of subordinates clearly defined; highly trained
subordinates; competent manager; subordinates all perform similarly
oDelegation is assigning a task or duty to a subordinate beyond their normal job
description that would normally be done by the manager.
Can motive employees to take more active roles.
oEmpowerment is the authority a subordinate has to make decisions without asking for
guidance.
oCentralization is when power is consolidated at the top, decentralization refers to
when power is distributed.
Centralized is advantageous for less work duplication and more uniform work
