Agribusiness Management and Trade 3(3+0)

Lesson 5. Planning

5.2 MEANING OF PLANNING:

The word planning incorporates both ideas: It means determining the organization's goals and defining the means for achieving them. Planning allows managers the opportunity to adjust to the environment instead of merely reacting to it. Planning increases the possibility of survival in business by actively anticipating and managing the risks that may occur in the future.

In short, planning is preparing for tomorrow, today. It's the activity that allows managers to determine what they want and how they will achieve it.

Not only does planning provide direction and a unity of purpose for organizations, it also answers six basic questions in regard to any activity:

• What needs to be accomplished?

• When is the deadline?

• Where will this be done?

• Who will be responsible for it?

• How will it get done?

• How much time, energy, and resources are required to accomplish this goal?

5.3  Recognizing the Advantages of Planning

The military saying, “If you fail to plan, you plan to fail,” is very true. Without a plan, managers are set up to encounter errors, waste, and delays. A plan, on the other hand, helps a manager organize resources and activities efficiently and effectively to achieve goals.

The advantages of planning are numerous. Planning fulfills the following objectives:

• Gives an organization a sense of direction. Without plans and goals, organizations merely react to daily occurrences without considering what will happen in the long run. For example, the solution that makes sense in the short term doesn't always make sense in the long term. Plans avoid this drift situation and ensure that short-range efforts will support and harmonize with future goals.

• Focuses attention on objectives and results. Plans keep the people who carry them out focused on the anticipated results. In addition, keeping sight of the goal also motivates employees.

• Establishes a basis for teamwork. Diverse groups cannot effectively cooperate in joint projects without an integrated plan. Examples are numerous: Plumbers, carpenters, and electricians cannot build a house without blueprints. In addition, military activities require the coordination of Army, Navy, and Air Force units.

• Helps anticipate problems and cope with change. When management plans, it can help forecast future problems and make any necessary changes up front to avoid them. Of course, surprises — such as the 1973 quadrupling of oil prices — can always catch an organization short, but many changes are easier to forecast. Planning for these potential problems helps to minimize mistakes and reduce the “surprises” that inevitably occur.

• Provides guidelines for decision making. Decisions are future-oriented. If management doesn't have any plans for the future, they will have few guidelines for making current decisions. If a company knows that it wants to introduce a new product three years in the future, its management must be mindful of the decisions they make now. Plans help both managers and employees keep their eyes on the big picture.

• Serves as a prerequisite to employing all other management functions. Planning is primary, because without knowing what an organization wants to accomplish, management can't intelligently undertake any of the other basic managerial activities: organizing, staffing, leading, and/or controlling.

5.4 USING PLANS TO ACHIEVE GOALS

Planning is a crucial activity, for it designs the map that lays the groundwork for the other functions. The plan itself specifies what should be done, by whom, where, when, and how. All businesses — from the smallest restaurant to the largest multinational corporation — need to develop plans for achieving success. But before an organization can plan a course of action, it must first determine what it wants to achieve. Objectives, the end results desired by the organization, are derived from the organization's mission statement. The mission statement explains what the organization stands for and why it exists. A strong mission statement symbolizes legitimacy to external audiences, such as investors, customers, and suppliers. Likewise, a strong mission statement allows employees to identify with the overall purpose of the organization and commit to preserving it.

The mission statement is the basis for all goals and plans outlined throughout the organization. Therefore, managers must use effective planning and goal-setting techniques to ensure that internal policies, roles, performances, structures, products, and expenditures are in line with the mission of the organization.

5.5 CRITERIA FOR EFFECTIVE GOALS

To make sure that goal setting benefits the organization, managers must adopt certain characteristics and guidelines. The following describes these criteria:

• Goals must be specific and measurable. When possible, use quantitative terms, such as increasing profits by two percent or decreasing student enrollment by one percent, to express goals.

• Goals should cover key result areas. Because goals cannot be set for every aspect of employee or organizational performance, managers should identify a few key result areas. These key areas are those activities that contribute most to company performance — for example, customer relations or sales.

• Goals should be challenging but not too difficult. When goals are unrealistic, they set employees up for failure and lead to low employee morale. However, if goals are too easy, employees may not feel motivated. Managers must be sure that goals are determined based on existing resources and are not beyond the team's time, equipment, and financial resources.

• Goals should specify the time period over which they will be achieved. Deadlines give team members something to work toward and help ensure continued progress. At the same time, managers should set short-term deadlines along the way so that their subordinates are not overwhelmed by one big, seemingly unaccomplishable goal. It would be more appropriate to provide a short term goal such as, “Establish a customer database by June 30.”

• Goals should be linked to rewards. People who attain goals should be rewarded with something meaningful and related to the goal. Not only will employees feel that their efforts are valued, but they will also have something tangible to motivate them in the future.

5.6 COORDINATION OF GOALS

All the different levels of management should have plans that work together to accomplish the organization's purpose. The plans of the top-, middle-, and first-level managers of an organization should work together to achieve the main goal.

All managers plan basically the same way, but the kinds of plans they develop and the amount of time they spend on planning vary. Here are some examples:

• Top-level managers are concerned with longer time periods and with plans for larger organizational units. Their planning includes developing the mission for the organizational units, the organizational objective, and major policy areas. These goals are called strategic goals or objectives.

• Middle-level managers' planning responsibilities center on translating broad objectives of top-level management into more specific goals for work units. These goals are called tactical goals or objectives.

• First-level managers are involved in day-to-day plans, such as scheduling work hours, deciding what work will be done and by whom, and developing structures to reach these goals. These goals are called operational goals or objectives.

If a first-level manager develops a set of plans that contradicts that of a middle-level manager, conflicts will result. Therefore, all managers must work together when planning their activities and the activities of others.

5.7 DETAILING TYPES OF PLANS

Plans commit individuals, departments, organizations, and the resources of each to specific actions for the future. Effectively designed organizational goals fit into a hierarchy so that the achievement of goals at low levels permits the attainment of high-level goals. This process is called a means-ends chain because low-level goals lead to accomplishment of high-level goals.

Three major types of plans can help managers achieve their organization's goals: strategic, tactical, and operational. Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment of strategic plans. In addition to these three types of plans, managers should also develop a contingency plan in case their original plans fail.

5.7.1 Operational plans

The specific results expected from departments, work groups, and individuals are the operational goals. These goals are precise and measurable. “Process 150 sales applications each week” or “Publish 20 books this quarter” are examples of operational goals.

An operational plan is one that a manager uses to accomplish his or her job responsibilities. Supervisors, team leaders, and facilitators develop operational plans to support tactical plans (see the next section). Operational plans can be a single-use plan or an ongoing plan.

• Single-use plans apply to activities that do not recur or repeat. A one-time occurrence, such as a special sales program, is a single-use plan because it deals with the who, what, where, how, and how much of an activity. A budget is also a single-use plan because it predicts sources and amounts of income and how much they are used for a specific project.

• Continuing or ongoing plans are usually made once and retain their value over a period of years while undergoing periodic revisions and updates. The following are examples of ongoing plans:

  • A policy provides a broad guideline for managers to follow when dealing with important areas of decision making. Policies are general statements that explain how a manager should attempt to handle routine management responsibilities. Typical human resources policies, for example, address such matters as employee hiring, terminations, performance appraisals, pay increases, and discipline.

  • A procedure is a set of step-by-step directions that explains how activities or tasks are to be carried out. Most organizations have procedures for purchasing supplies and equipment, for example. This procedure usually begins with a supervisor completing a purchasing requisition. The requisition is then sent to the next level of management for approval. The approved requisition is forwarded to the purchasing department. Depending on the amount of the request, the purchasing department may place an order, or they may need to secure quotations and/or bids for several vendors before placing the order. By defining the steps to be taken and the order in which they are to be done, procedures provide a standardized way of responding to a repetitive problem.

  • A rule is an explicit statement that tells an employee what he or she can and cannot do. Rules are “do” and “don't” statements put into place to promote the safety of employees and the uniform treatment and behavior of employees. For example, rules about tardiness and absenteeism permit supervisors to make discipline decisions rapidly and with a high degree of fairness.

5.7.2 Tactical plans

A tactical plan is concerned with what the lower level units within each division must do, how they must do it, and who is in charge at each level. Tactics are the means needed to activate a strategy and make it work.

Tactical plans are concerned with shorter time frames and narrower scopes than are strategic plans. These plans usually span one year or less because they are considered short-term goals. Long-term goals, on the other hand, can take several years or more to accomplish. Normally, it is the middle manager's responsibility to take the broad strategic plan and identify specific tactical actions.

5.7.3 Strategic plans

A strategic plan is an outline of steps designed with the goals of the entire organization as a whole in mind, rather than with the goals of specific divisions or departments. Strategic planning begins with an organization's mission.

Strategic plans look ahead over the next two, three, five, or even more years to move the organization from where it currently is to where it wants to be. Requiring multilevel involvement, these plans demand harmony among all levels of management within the organization. Top-level management develops the directional objectives for the entire organization, while lower levels of management develop compatible objectives and plans to achieve them. Top management's strategic plan for the entire organization becomes the framework and sets dimensions for the lower level planning.

5.7.4 Contingency plans

Intelligent and successful management depends upon a constant pursuit of adaptation, flexibility, and mastery of changing conditions. Strong management requires a “keeping all options open” approach at all times — that's where contingency planning comes in. Contingency planning involves identifying alternative courses of action that can be implemented if and when the original plan proves inadequate because of changing circumstances.

Keep in mind that events beyond a manager's control may cause even the most carefully prepared alternative future scenarios to go awry. Unexpected problems and events frequently occur. When they do, managers may need to change their plans. Anticipating change during the planning process is best in case things don't go as expected. Management can then develop alternatives to the existing plan and ready them for use when and if circumstances make these alternatives appropriate.