Three Strategic Planning Tools Business Essay


Planning is the first of the functions of management. According to Hale (2004), "planning is a process for setting goals or objectives; and plans are made up of strategies and tactics to accomplish the goal." There is formal and informal planning in a company. There is nothing written down for informal planning and little or no sharing of objectives with others in the organization. Formal planning has specific defined objectives covering a period of years and these objectives are written and made available to organizational members.

According to Robbins & Coulter (1999), "the purposes of planning are to give direction, reduce the impact of change, minimize waste and redundancy, and set the standards used in controlling." Planning give the direction to all members in an organization where to go and what they must contribute. Therefore, they can coordinate their activities, cooperate with each other, and work in teams. Planning also reduces the uncertainly that force managers to develop appropriate responses and clarifies the consequences of actions managers might take in response to change. In addition, inefficiency and wasteful activities can be reduced, corrected or eliminated by planning function when means and ends are clear. Finally, planning establishes objectives or standards that are used in controlling.

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According to Robbins & Coulter (1999), "the most popular ways to describe organizational plans are by their breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single-use versus standing)." Strategic plans are plans that apply to the entire organization, establish the organization's overall objectives, and seek to position the organization in terms of its environment. Operational plans are plans that specify the details of how the overall objectives are to be achieved. Long term plan define as those with a time frame beyond three years while short term plan means those covering one years or less. Specific plans have clearly defined objectives and there is no ambiguity, no problem with misunderstanding. Directional plans identify general guidelines and provide focus but do not lock managers into specific objectives or course of action. Single-use plan is a one-time that is specifically designed to meet the needs of a unique situation and is created in response to non-programmed decisions that managers make. Standing plans are ongoing plans that provide guidance for activities repeatedly performed in the organization.

According to Robbins & Coulter (1999), there are three contingency factors that affect planning which is level in the organization, degree of environmental uncertainty, and length of future environments. The planning function in different level of organization is divided into strategy planning and operational planning. Lower level managers in charge in operational planning while higher level managers in charge in strategy planning. The planning functions also will be different based on different degree of environmental uncertainly. Plans need to be directional and emphasis placed on the short term if the environmental uncertainly is greater. Besides that, planning functions are also affected by length of future commitments. The time frame of plans that formulated must based on the length of those commitment made today. Therefore, a successful organization has needed to prepare a contingency plans, set of action to be taken when a company's initial plans have not worked well or if event in the external environment require a sudden change.

Before start plan a strategy, we have to identify an objective or the end that management desire to reach. Objective are important to planning because they provide the direction for all management decisions and form the criterion against which actual accomplishments can be measured. It shows that situational analysis should be the first step to summarize all information to understand the organization's own situation, needs and goal. Second step in planning is alternative plan. This step claim creativity and encourage manager and employees to think in broad term about the goal and plan. Then, goal and plan evaluation force manager identify opportunities and treats, strengths and weaknesses and organizations resources. SWOT analysis can be a useful tool for examining organization skills because it bring together the organization's strengths, weaknesses, opportunities and threats in order to identify a strategic niche that the organization might exploit. Managers must consider carefully the implications of alternative plans for meeting high priority goals. The internal analysis provides important information about an organization specific assets, skills, and work activities. In additional, core competencies are the organization's major value, creativity skills, capabilities, and resources that determine the organization's competitive weapons. From internal analysis and core competencies help manager know better about the organization's capabilities and manager can select the plan and option that is most appropriate and feasible. After manager selects the goal and plan, manager can proceed to the next to last step which is implementation. Manager and employees must understand the plan, and might need to recruit, train, and promote employee to achieve the organization strategic objectives. Top management leadership is a necessary ingredient is a successful strategy. They are motivated group of middle and lower level manager who carry out senior management's specific plans. Evaluating results is the final step. Manager must continually monitor the actual performance. These strategic actions can be developed after assessing the results and determining that correction action.

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There are three strategic planning tools available for organizations to carry out planning. The first one is environmental scanning. According to Phillip (2001), "environmental scanning is to determine what is taking place in the organization's environment." Organizations use it to screen large amounts of information to detect emerging trends and to create scenarios to anticipate and interpret changes in their environment. Organizations that implement this tool in advance are able to increase their profits and revenue growth. The second strategic planning tool is forecasting. According to Robbins & Coulter (1999), "environmental scanning creates the foundation for forecasts. Information obtained through scanning is used to develop scenarios. These, in turn, establish for forecasts, which are predictions of outcomes." There are two types of forecasting: revenue forecasting and technological forecasting. Revenue forecasting is predicting an organization's revenues and technological forecasting is predicting changes in technology. Benchmarking is the third strategic planningtool. According to DuBrin (2000), "benchmarking is the process of comparing a firm's quality performance to that achieved by a competing firm." Through benchmarking, managers can improve their management quality by analyzing and then copying the methods of the leaders in various fields.

2.2 Organizing

The second function of management is organizing. According to Daft (2003), "organizing is the management function concerned with assigning tasks, grouping tasks into departments, and allocating resources into departments; the deployment of organizational resources to achieve strategic goals." This process is compulsory to an organization and it serves many objectives. According to Robbins & Coulter (1999), there are a total 7 objectives for an organization carries out organizing function. A manager uses organizing function to separate a whole work to be done into specific jobs and departments and to allocate the tasks and responsibilities associated with individual jobs. Besides that, organizing also can coordinates diverse organizational tasks and put together different jobs into units. Furthermore, this function enables an organization to establish relationships and formal lines of authority among individuals, groups, and departments inside the organization. Lastly, manager is able to allocate and deploy their resources in a manner way.

We also can say that an organizing function is an organizational design which aims to develop and change organization's structure. To design an organization, a manager must involve decisions in six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. According to Robbins & Coulter (1999), "work specialization, or division of labor, determine the degree to which tasks in an organization are divided into separate jobs." Rather than doing the entire activity, individual employees are being specialized into different parts of jobs. According to Robbins & Coulter (1999), "departmentalization defines the basis on which jobs are grouped in other to accomplish organizational goals and there are six different types of departmentalization: functional departmentalization which grouping jobs by function performed, product departmentalization which grouping jobs by product lines, geographical departmentalization which grouping jobs on the basis of territory or geography, process departmentalization which grouping jobs on the basis of product or customer flow, customer departmentalization which grouping jobs on the basis of common customers and lastly a cross-functional team which is a hybrid grouping of individuals who are experts in various specialties (or functions) and who work together." Different departments are in charge in different types of activities which gather the total efforts to help an organization to achieve the goals. According to Schermerhorn (2008), "chain of command is the line of authority that vertically links each position with successively higher levels of management." A subordinate must reports to and follows the instructions and tasks gave by the superior. According to DuBrin, Essentials of Management-7th ed. (2006), "span of control determines the number of workers reporting directly to a manager." It can be divided into tall, short, wide, and narrow four types span of control. Usually a tall and narrow span of control manager will only supervise a few subordinates while a short and wide span of control manager will supervise a lot of subordinates. According to Drucker (1974), "centralization is a method of organizing that concentrates decision making at the top of an organization's hierarchy and decentralization is a method of organizing that disburses decision making to multiple locations and levels rather than concentrating it at the top of the organization's hierarchy." Centralization will results a short and wide span of control organizational structure and decentralization will results a tall and narrow span of control organizational structure. And the last elements, formalization, according to Robbins & Coulter (1999), "is refers to the degree to which jobs within an organization are standardized and the extent to which employee behavior is guided by rules and procedures." An employee no need to make decision about what, when and how should be done when a job is highly formalization because there are always the same ways and constant procedures that guide the employee to handle the input for result a consistent and uniform output.

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Not all organization been structured in exactly the same way. Some organization may have only 20 employees but some may have more than 20000 employees and they must be organized in different ways. To determine what kind of organizational structure is suitable for what kind of organization, we use the contingency approach to organizational design. According to Robbins & Coulter (1999), "what the appropriate structure is depends on four contingency variables: the organization's strategy, size, technology, and degree of environmental uncertainly." An overall organization's strategy determines the objectives of the organization and the organization's structure help managers to achieve the objective. Therefore, strategy and structure should be closely linked, or in other words, structure should follow the strategy. Besides that, the bigger size of an organization, the organization tends to have more specialization, departmentalization, centralization, and rules and regulations than those small organizations. The third variable is the organization's technology. Based on different technologies used, the production of an organization can be divided into unit production which produces items in units of small batches, mass production which manufacturing large-batch products, and process production which is a continuous-process production. Because of different production has different way the communication flow and organization design, therefore we say that technology and organization's structure are close-relationship. Lastly, because of environmental uncertainly such as stable and simple or dynamic and complex environments, managers need to adjust the organization's structure to minimize the threats to the organization's effectiveness.

In advance, there are five types of different structures that can managers apply to design organization: simple structure, bureaucracy structure, team-based structure, project and matrix structure and autonomous internal units. According to Robbins & Coulter (1999), "simple structure is an organizational design with low departmentalization, wide span of control, authority centralized in a single person, and little formalization." This type of structure mostly used by small business which owner and the manager is one and the same. The advantages of this structure is that it is fast, flexible, and inexpensive to maintain, and accountability is clear while the disadvantages is it only suitable for small business and it is risky because everything depends on one person. Next, according to Boone & Kurtz (1992), "bureaucratic control is a control that use of rules, regulations, authority, and reward systems to assess performance and influence employee behavior." We can say that bureaucracy structure is a typically structure when an organization organize their increasing employees with legitimate of authority, rule and regulation. The other type of structure is team-based structure and according to Robbins & Coulter (1999), "in a team-based structure, the entire organization is made up of work groups or teams that perform the organization's work." In a team-based structures, there is no rigid line of managerial authority flowing from top to bottom level therefore employee empowerment is crucial. While, according to Robbins & Coulter, 1999, "project and matrix structure is an organizational structure that assigns specialists from different functional departments to work on one or more projects being led by project managers." In a single project, there is a manager who lead a group of people come from each functional departments to work together to achieve the project's objectives. This type of structure created a dual chain of command which a subordinate need to report to departmental manager and project manager. It violated the classical organizing principle unity of command. The last organization structure is autonomous internal units and according to Robbins & Coulter (1999), "it is an organizational structure composed of autonomous decentralized business units, each with its own products, clients, competitors, and profit goals." This type of structure is used to organize some large organizations which composed of many different business units or involve in variety of industry.

2.3 Leading

Leading is the third functions of management, according to Daft & Lane, Management, Ninth Edition (2010), "leading is the use of influence to motivate employees to achieve organizational goals." Simply, leading is creating a shared culture and values, communicating goals to employees among the organization, and motivating employees to a better performance.

To carry out an effective leading, first of all, managers need to focus and understand the organizational behavior. According to Robbins & Coulter (1999), "organizational behavior is concerned more specifically with the action of people at work, and organizational behavior focuses primarily on two major areas. First, organizational behavior looks at individual behavior. Second, is concerned with group behavior." Individual behavior is based on contributions from psychologists; meanwhile group behavior is totally different with individual behavior due to individual in a group setting behave distinctly from acting alone, thus, it cannot be understood by merely total up the actions of the individual in the group. When manager clear about the organization behavior of his/her company, she/he able to lead employee easily and effectively based on employee's behavior and needs, instead of, optionally leading, which may cause dissatisfaction of employees.

According to Robbins & Coulter (1999), "the goals of organizational behavior are to explain and to predict behavior". In order to manage and lead their employee's behavior, managers must comprehend and understand the factors that help them predict and explain employee productivity, absence and turnover rate, and job satisfaction, and those factors are related to the individual behavior, such as attitudes, personality, perception, and learning. First, according to Robbins & Coulter (1999), "attitudes are evaluative statement- either favorable or unfavorable- concerning objects, people, or event." Attitudes are made up of three components, which are cognition, affect, and behavior. Firstly, cognitive component of an attitude is made up of the opinions, knowledge, beliefs, or information held by employees. Secondly, the affective component of an attitude is the feeling part of an attitude. Lastly, the behavioral component of an attitude is an intention to behave in particular way against something or someone. Second, according to Robbins & Coulter (1999), "personality is the unique combination of the psychological traits we use to describe that person." Personality traits refer to the characteristic of a person and how other describe on she/he, for example, shy, loyal, lazy, and so on. Third, according to Robbins & Coulter (1999), "perception is a process by which individual organize and interpret their sensory impressions in order to give meaning to their environment." Perception may be differently even there are same thing, this because the perceiver; in the object, or target, being perceived; or in the context of the situation in which the perception occurs, those factors cause perception being distort. Last, according to Robbins & Coulter (1999), "a psychologist define learning is considerably broader than the average person's view that "it is what we did when we went to school"." If manager want to predict and explain the employee's attitude, she/he must focus on how their employee learn, because employee's behavior will change based on their experience or what they had learn.

Besides that, as mention before, to be carry out an effective leading, manager need to focus and understand the organizational behavior, which include individual behavior and group behavior. According to Robbins & Coulter (1999), "a group is defined as two or more interacting and interdependent individuals who come together to achieve particular objective." Group can be in a form of formal or informal. Formal group, all members are assigning work assignment and specific task, appropriate behavior are stipulated by the organizational goals; while informal group occur naturally in the work environment due to the need for social contact. To understand well about the group behavior, manager must find out the basic group concepts, which are roles, norms, conformity, status systems, group size, group cohesiveness, conflict management and informal communication. In additional, to understanding work group behavior, manager need to determine the group performance and group satisfaction through the group behavior model, according to Robbins & Coulter (1999), "group behavior model help you to sort out the key variable and their interrelationship.", including external conditions imposed on the group, group member resources, group structure, group processes, group tasks.

After understanding the organization behavior, managers just have the ability to execute an efficiency and effectively motivation toward their employees based on their behavior and needs. According to Cheminais, Fox, Van Der Valdt, & Bayat (1998),

"The Oxford English Dictionary (1989:31) defines motivation as the "conscious or unconscious stimulus for action towards a desired goal provided by psychological or social factor; that which gives purpose or direction to behavior."

Normally, people will consider money is the only factor can fulfill and satisfy the other needs, thus, in real life, some manager just use money to motivate employee; in facts, there have several contemporary motivation approaches to motivate employees, such as three-needs theory, goal-setting theory, reinforcement theory, designing motivating jobs, equity theory, and expectancy theory.

Firstly, according to Robbins & Coulter (1999), "three-needs theory is the needs for achievement, power, and affiliation are major motives in work." The need for achievement (nAch) is the desire of employee to do or achieve something better than before; the need for power refer to the desire of hold the authority to influence over other; while, the need of affiliation is the desire for a close relationship with others. Secondly, according to Robbins & Coulter (1999), "goal-setting theory is the proposition that specific goals increase performance and that difficult goal, when accepted, result in higher performance than easy goal."In summary, goals may be motivators. A challenging and difficult goal may lead to better performance than the generalized goal only if it is accepted by employees, so, manager must set a logically and acceptable goal rather than unacceptable goal. Thirdly, according to Robbins & Coulter (1999), "reinforcement theory argues that behavior is a function of its consequences." According to Bateman & Snell (2003), "four key consequences of behavior either encourage or discourage people's behavior, including positive reinforcement, negative reinforcement, punishment and extinction." Overall, positive reinforcement and negative reinforcement tend to same behavior likely to be repeated due to employees either gains something or avoid something bad; while punishment and extinction result in same behavior less likely to be repeated. Consequently, manager must careful to match consequences to what employees will actually find desirable or undesirable.

Fourthly, manager also can motivate employees by design motivating jobs, such as job enlargement, job rotation, job enrichment, and job characteristic model. According to Bateman & Snell (2003), "job enlargement is giving people additional task at the same time", "job rotation is changing from one task to another", both job designs will help to alleviate boredom; meanwhile according to Bateman & Snell (2003), "job enrichment means that jobs are restructured or redesigned by adding higher levels of responsibility", this will make employees more motivating, satisfying, and rewarding; according to Robbins & Coulter (1999), "job characteristics model (JCM) is a framework for analyzing and designing jobs", JCM identifies five primary job characteristics, such as their interrelationships, and their impact on employee productivity, motivation, and satisfaction. Fifthly, according to Robbins & Coulter (1999), "equity theory is the theory that an employee compares his job's inputs and outcomes ratio with that of relevant others and then corrects any inequity", outcomes refer to the things received by the person, and input refer to the contributions of the person, in this case, manager should be treating fairly toward all employees, when deciding outcome of employee must assessing his/her input first, and the outcome-to-input ratio must equally to everyone. If the ratios are equivalent, this will cause people to be satisfied with their treatment. Lastly, according to Robbins & Coulter (1999),"expectancy theory states that an individual tends to act in a certain way based on the expectation that act will be followed by a given outcome and on the attractiveness of that outcome to the individual". Expectancy theory includes three relationships, which are expectancy or effort-performance linkage, instrumentality or performance-rewards linkage, and valence or attractiveness of reward, In summary, first, managers must offer a reward or outcome that align with employee's need. Second, manager must make sure the outcome is enough attractive to employee. Third, manager need to emphasize the expected behavior to the employee, and confirm the employee is behave the behavior in order to get the reward. Finally, the theory is concerned with the perception. An individual's own perception of reward, performance and goal satisfaction outcomes, will determine his/her level of effort.

In conclusion, to be lead employee in the way of effective and efficiency, manager must understand the organization behavior at the beginning, this is important, because it will help manager to determine and be conscious of the needs of different employees. After underline the needs, from the needs, manager can decide to use which motivation theories to lead them.

2.4 Controlling

Controlling is the fourth of the functions of management. According to Schermerhorn, Management-7th ed. (2002), "controlling is defined as a process of measuring performance and taking action to ensure desired results." For the sake of organization goals, an effective controlling function is very crucial to ensure the daily activities in the organization are completed. To determine how effective an organization uses a control system, we want to determine how well the control system facilitates its goal achievement. There are three types of control approach to design control system: market control, bureaucratic control, and clan control.

According to Robbins & Coulter (1999), "market control is an approach to design control system that emphasizes the use of external market mechanisms, such as price competition and relative market share, to establish the standards used in the control system." This approach is clearly specified and distinct and where there is considerable marketplace competition used by organization's products or services. When an organization use market control, it will always turn the divisions in the organization into profit centers and will evaluate them by the profit of each centers generate. Corporate managers will use this measurement to make decisions about how to allocate the future resources, how to develop the strategies, and determine the work activities that may need attention. When works are certain and the employees are independent, the overall work performance will be highly improve.

According to Robbins & Coulter (1999), "bureaucratic control is an approach to design control system that emphasizes organizational authority and relies on administrative rules, regulations, procedures, and policies." Using this type of control, an organization will utilize the standardization of activities, well-defined job descriptions, and other administrative mechanisms to ensure that employees' behaviors and performance meet appropriate standards. If the tangible output can be identified, the work performances will be the best and is able to establish a market between parties.

According to Boone & Kurtz (1992), "clan control is aform of social control in which shared values, trust, traditions, and common beliefs result in individual compliance with organization objectives." For example, annual employee performance award dinners or holiday bonuses are play a significant part in establishing control. To identify expected and appropriate behaviors and performance measures, clan control emphasizes on the dependent upon the individual and the group. Organizations which use teams for work activities and their technologies are changing often will often use clan control to control their employees. The work performances will be the best where there is "no one way" to do a job and employees are empowered to make decisions.

To carry out controlling function, there must have a set of procedures to follow. According to Robbins & Coulter (1999), "the control process consists of three separate and distinct steps: measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards." First, the top management must measuring and obtains their actual performance currently; then, this actual performance need to compared with a standard either come from other company or set by top management itself; finally, top management need to take managerial action or strategies to correct deviations or inadequate standards.

According to Robbins & Coulter (1999), "four common sources of information frequently used by managers to measure actual performance are personal observation, statistical reports, oral reports, and written reports." To increases both the amount of input sources and the probability of receiving reliable information, a combination of information sources are needed. Managers can use personal observation with intimate knowledge of actual activities to get firsthand information. The information that is obtained by this approach is not filtered through others. Because of the whole performance activities no matter are minor or major can be observed, therefore intensive coverage can be permit. Those factual omissions, facial expressions, and tones of voice that may be missed by other sources can be picked up by management with walking around. But personal observation is often considered a deficient information source in a time when quantitative information suggests objectivity. It's subject to personal biases; what one manager sees, another might not. There can be a significant drawback when companies continue to redesign and the managers' spans of control continue to increase. Finally, this method suffers from obtrusiveness because a manager's overt observation might be treated as a sign of a lack of confidence in them or of mistrust by the employees. Currently, managers increasingly rely on statistical reports which generated by the use of computers in organizations for measuring actual performance. Managers may use bar charts, graphs, and numerical displays to assess performance. Statistical data are effective show the relationships and easy to visualize but they also provide limited information in an activity. Just a few key areas that can measure in numerically and it often ignore some important factors on statistics reports. Information can also be obtained through oral reports with meetings, telephone calls, conferences, or one-to-one conversations. Although the information is filtered, but it also very fast, allows for feedback, permits for language expression and tone of voice, as well as words themselves to convey meaning. Basically, the major drawbacks of oral reports are the problem of documenting information for the later references. Now, with the technological capabilities progress, oral reports can be efficiently recorded and becomes as permanent as if they were written. Actual performance can also measured by written reports. Lastly, written reports are usually easy to file and to reference.

After an actual performance was obtained, the next step is to compare it with a chosen standard. According to Robbins & Coulter (1999), "the comparing step determines the degree of variation between actual performance and the standard." If the deviations have exceeded the range, it become significant and need the manager's attention. In comparison stage, managers are specified concerned the size and direction of the variation.

The third and final step in the control process is taking managerial action. According to Robbins & Coulter (1999), "managers can choose among three possible courses of action: They can do nothing; they can correct the actual performance; or they can revise the standards." The manager will quickly take the corrective action if they detected that the source of the variation in actual performance has been deficient work activities or actions. Some examples of corrective action comprise changes in strategy, structure, compensation practices, or training programs in job redesign or the replacement of personnel. Immediate corrective action corrects problems at once and gets performance back on track. Basic corrective action will at first determine how and why performances deviate with the standard and then proceeds to solve the source of deviation. It is crucial for an effective manager to analyze the performance deviations. The manager must take the time to permanently eliminate the significant variances between standard and actual performance for the benefits of organization. Besides that, they also can revise and practice the standard. While, an unrealistic and unattainable standard comes from the goal is set too high also will cause the variance to happen. In such cases, it is the standard that needs corrective attention, not the performance. The revision of a performance standard downward is a troublesome problem. The natural response will shift the blame to the variance of the standard if an employee or unit falls significantly short for reaching the target. Reaffirm your position to the employee or manager that you expect the future performance, then take the essential corrective action to turn that expectation into reality.

According to Robbins & Coulter (1999), "managers can implement controls before an activity begins, while the activity is going on, or after the activity has been completed." The first type is called feedforward control, the second is concurrent control, and the last is feedback control.

According to Boddy (2008), "feedforward control focuses on preventing problems as it takes place before the work activity." Feedforward control takes place in advance of the actual activity happen. The key to feedforward controls is taking managerial action before a problem occurs. Feedforward controls are desirable because they allow management to prevent problems rather than having to cure them later. These controls require timely and accurate information that often is difficult to develop. As a result, managers frequently have to rely on the other two types of controls.

According to Donnelly, Gibson, & Ivancevich (1998), "concurrent control monitors ongoing operations to ensure that objectives are pursued." When control is enacted while the work is being performed, management can correct problems before they become too costly. The best-known form of concurrent control is direct supervision. When a manager directly oversees the actions of a subordinate, the manager can concurrently monitor the employee's actions and correct problems as they occur. It can clearly see there is some delay between the activity and the manager's corrective response. Technical equipment can be designed to include concurrent controls. If an error is made the most computers are programmed can provide operators in immediate response. Many of the organizational quality programs are rely on concurrent controls to inform workers if their performance output and levels are sufficient and to ensure that the quality standards are being met.

According toDonnelly, Gibson, & Ivancevich (1998), "feedback control methods are focus on end results." The control takes place after the activity is done. The major drawback of this type of control is that the manager has the information on the time and the defect has already done. But for many activities, feedback is the only viable type of control available. Financial statements are an example of feedback controls. For instance, the income statement shows that sales revenues are declining, the decline has already occurred. So at this point, the manager's only option is to try to determine why sales fell and to correct the situation.