Chapter 4 Planning and Organizing

Chapter 4: Planning and Organizing Lesson 4.1 The Planning Function Why Plan? - New businesses are started every day - Lack of planning is often one of the reasons for business failures - Planning = Success - Good planning CAN mean a larger business, higher profits, and satisfaction - Poor planning CAN mean huge losses, and possible business failure - Business Plan - a written description of the nature of the business, its goals and objectives, and how they will be achieved - Include an analysis of opportunities and risks, as well as financial analysis showing potential profits. - - Small businesses - may have brief and simple plans - Large businesses - may have large and complex plans Managers use plans to determine whether the business is making progress - Plannings helps managers communicate with each other and with employees to coordinate activities - Large businesses require a great deal of coordination to avoid problems, conflicts, and missed opportunities - Elements of a Business Plan - Nature of the business - Detailed description of products and/or services - Estimation of risk based on analysis of the industry - Size of the business - Location of business - Background of entrepreneur(s) - - - - Goals and Objectives - Basic results expected in the short and long run - Results expressed in terms of sales value or profits Marketing Plan - Customers and their demand for the product or service - Pricing, distribution and promotion activities - Comparison of product or service with competitors Financial Plan - Investment needed to start and maintain the business - Projected income expenses, and profit - Cash start-up and cash flow needs Organization Plan - Legal form of ownership - Legal factors - licenses, leases, contracts - Organization chart - Job descriptions and employee skills needed - Physical facilities - buildings, equipment, tools Levels of Planning - Managers plan on two levels - strategic and operational - Strategic Planning - long-term and provides broad goals and direction or the entire business - SWOT analysis - the examination of the organization’s internal Strengths and Weaknesses as well as the external Opportunities and Threats - Internal Factors - all of the things within a business that managers can influence and control to help accomplish business plans - External Factors - The things operating outside of the business that managers cannot control but that may influence the success of business plans - Steps in Strategic Planning 1. External Analysis a. Study factors outside the business that can affect operations such as customers, competitors, the economy, and government 2. Internal Analysis a. Study factors inside the business that can affect success such as operations, finances, personnel, other resources 3. Mission a. Agreeing on the most important purposes or direction for the firm based on the info collected b. Mission - short, specific statement of the business’s purpose and direction c. Vision - the company’s reason for existing 4. Goals a. Develop outcomes for the business to achieve that fit within the mission 5. Strategies a. Identify the efforts expected from each area of the firm if goals are to be achieved - Operational Planning - short-term and identifies specific goals and activities for each part of the business. - Based on the business’s strategic plan and are developed after the strategic plan is completed 4.2 Using Planning Tools Establishing Direction - Goal - a specific statement of a result the business expects to achieve - Several characteristics of effective goals - Must be specific and meaningful - Must be achievable - Should be clearly communicated - Should be consistent with each other and with overall company goals Planning Tools - In order to be skilled and efficient in planning, a manager has a number of planning tools such as budgets, schedules, standards, policies, procedures, and research to help them with their work - Budgets - written financial plan for business operations developed for a specific period of time - Most widely used planning tool - Assist managers in determining the best way to use available money to reach goals - When department managers complete operational planning, they prepare budgets for their departments - They also prepare specific budgets (personnel expenses, equipment, costs of materials, etc.) - Schedules - A time plan for reaching objectives - Valuable in planning for the most effective use of time - Identify the tasks to be completed, the sequences of related tasks, and time allotted to complete each task. - Standards - A specific measure against which something is judged - Businesses set quality standards for products and services they produce - Standards are also set for time and defective products - Managers are responsible for setting realistic standards and for using those standards to judge performance - - Also must know when to revise outdated standards Policies - Guidelines used in making decisions regarding specific, recurring situations - A policy is often a general rule to be followed by the entire business or by specific departments - Help reduce misunderstandings and encourage consistent decisions for similar conditions by all managers and employees - Procedures - A sequence of steps to be followed for performing a specific task - Procedures for both routine and complex tasks improve business efficiency and are of special help to employees learning a new job - Experienced can help managers design new procedures and improve existing ones Research - Managers need a great deal of information to develop budgets, improve schedules, and establish better standards, policies, and procedures - Research is done to collect data for managers and to provide the info needed to improve their planning decisions Lesson 4.3 The Organizing Function - Before a plan can be put into operation, the company must be organized to carry out the plan and perform work effectively - Making a product involves several departments: research, manufacturing, human resources, marketing and sales, finance, and information management - Each manager organizes the assigned activities so work will be accomplished on schedule - Organizing - determining how plans can be accomplished most effectively and arranging resources to complete work - Organization Chart - An illustration of the structure of an organization, major job classifications, and the reporting relationships among the organization’s personnel. - Purposes of the chart - Shows the major work units that make up the business - Allows employees to identify which unit they are affiliated with, how it relates to other units, and to whom they are accountable - Identify lines of authority and formal communication within the organization - The process of organizing work has three elements - 1. The division of work - the total work to be done must be divided into units, such as departments, when establishing an organization structure. - Employees should be assigned to the units where they have expertise to complete that work. - 2. The facilities and working conditions - All necessary equipment and materials must be provided to employees to be able to complete their work - Morale must be considered - influenced by lighting, temperature, ventilation, and cleanliness, as well as quality and maintenance of tools and equipment - 3. The employees - Dividing the work into manageable units and providing adequate equipment and facilities must be done with employees in mind Characteristics of Good Organization - Responsibility - the obligation to do an assigned task - Tasks that are assigned must be clearly identified so all employees know exactly what work they are responsible for - Authority - the right to make decisions about work assignments and to require other employees to perform assigned tasks - - Delegated from the top of the organization to others at lower levels One of the greatest mistakes in business is to assign responsibilities to employees without giving them sufficient authority to carry out those responsibilities - Each employee and each manager should specifically know: 1. The description and duties of each job 2. What authority accompanies the job 3. The manager in charge 4. Who reports to the manager 5. What is considered satisfactory performance - Empowerment - the authority given to individual employees to make decisions and solve problems they encounter on their jobs with the resources available to them - A growing practice in many organizations today - Empowered employees need to be well trained and be effective decision makers and problem solvers - Effective organization is helpful in eliminating conflicts between managers, employees, and departments and in increasing cooperation and collaboration Accountability - Accountability - the obligation to accept responsibility for the outcomes of assigned tasks - Even when a manager assigns responsibility and delegates authority to an employee, they still do not give away the responsibility for ensuring the work is completed and for evaluating the quality of that employee’s performance - Managers evaluate employee’s work by comparing the work to established goals and work standards Unity of Command - Unity of Command - no employee reports to more than one supervisor at a time or for a particular task - Confusion and poor work relations result when a person has work assigned by and is accountable to more than one supervisor - The increase in use of teams makes problems with the unity of command more prominent - Teams need clear assignments of responsibility and authority for their tasks and all team members need to be aware of who is in charge Span of Control - Span of Control - the number of employees that any one manager supervises directly - Organizations must establish a reasonable span of control for each manager - If the manager is given to many people to supervise, they will become overworked and and unable to perform all duties effectively, employees may not have access to help when needed - If they are given too few people, the business is wasting money 4.4 Developing Effective Organizations - A business’ organizational structure identifies the relationships among departments and personnel and indicated the lines of communication and decision making - Two principal types of organizational structure - Line Organization - all authority and responsibility can be traced in a direct line from the top executive down to the lowest employee level in the organization - The top executive has direct control over all units of the business, but responsibility, authority are passed along from one person to another, down to the lowest level - Silo Effect - a type of isolation and focus on only one part of the organization in which there is not direct way that managers of different departments can communicate and work together - Line and Staff Organization - managers have direct control over the units and employees they supervise but have access to staff specialists for assistance - Adds staff specialists to a line organization - Designed to solve the problem of complexity and still retain the advantages of direct and definite lines of authority - Staff specialists give advice and assistance when needed but have no authority over line personnel to require them to perform tasks - - Line personnel are still only responsible to one manager Two newer structures in companies today - Matrix Organization (project organization) - organizes employees into temporary work teams to complete specific projects - Employees report to a project manager with authority and responsibility for the project - When a new project must be done, employees with the needed skills are assigned to work on the project team - Work assignments and relationships in a matrix organization are clear but temporary - Team Organization - divides employees into permanent work teams - Teams have responsibility and authority for important business activities with limited management control over their daily work - Teams often have team leaders who are likely to be experienced employees rather than managers - Self-directed work teams - when team members together are responsible for the work assigned to the team - Without a permanently designated team leader - In self-directed work teams, the team decides who will do which types of work and how they will do it - Effective work teams have been shown to increase productivity and improve quality - Members work hard to support the team and ensure they meet their goals - In order to be successful, team members must be competent in three areas: 1. Technical job skills 2. Interpersonal skills (writing, speaking, and negotiating) 3. Administrative skills (leading meetings, thinking analytically, and maintaining records) Improved Business Organization - Centralized Organization - when a few top managers do all major planning and decision making - Traditionally used by businesses - May cause communication problems and the need for many policies and rules to control the organization - Lack of communication leads to frustration when rules keep them from doing things they consider important - Decentralized Organization - a large business is divided into smaller operating units, and managers who head the units have almost total responsibility and authority for operations - - Often operate like independent companies - Could be separated by categories of products or by types customers Flattened Organization - fewer levels of management than traditional structures - Remaining managers and employees assume many of the responsibilities previously assigned to other levels of management - Often has better communication because info flows through fewer levels - Also would have more coordination and cooperation because there is less specialization within the organization - A complex organizational structure that requires a lot of time for decision making and for communicating information will not be as competitive as one that is more flexible and responsive