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Management
, Ninth Edition
Robert Kreitner, Arizona State University
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| | Chapter Summaries
Chapter 6:
The Basics of Planning and Project Management
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Planning has been labeled the primary management function because it sets the stage for all other aspects of management. Along with many other practical reasons for planning, managers need to plan in order to cope with an uncertain environment. Three types of uncertainty are state uncertainty (What will happen?), effect uncertainty (What will happen to our organization?), and response uncertainty (What will be the outcome of our decisions?). To cope with environmental uncertainty, organizations can respond as defenders, prospectors, analyzers, or reactors.
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A properly written plan tells what, when, and how something is to be accomplished. A clearly written organizational mission statement tends to serve as a useful focus for the planning process. Strategic, intermediate, and operational plans are formulated by top-, middle-, and lower-level management, respectively.
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Objectives have been called the single most important feature of the planning process. Well-written objectives spell out in measurable terms what should be accomplished and when it is to be accomplished. Good objectives help managers by serving as targets, acting as measuring sticks, encouraging commitment, and strengthening motivation. Objective setting begins at the top of the organization and filters down, thus forming a means-ends chain. Priorities affect resource allocation by assigning relative importance to objectives. Plans are formulated and executed as part of a more encompassing planning/control cycle.
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Management by objectives (MBO), an approach to planning and controlling, is based on measurable and participatively set objectives. MBO basically consists of four steps: (1) setting objectives participatively, (2) developing action plans, (3) periodically reevaluating objectives and plans and monitoring performance, and (4) conducting annual performance appraisals. Objective setting in MBO flows from top to bottom. MBO has both strengths and limitations and requires a supportive climate favorable to change, participation, and the sharing of authority.
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Project planning occurs throughout the project life cycles four stages: conceptualization, planning, execution, and termination. Big-picture tactical planningproject goal, budget, and scheduleoccurs during stage 1 and into stage 2. During stage 2 and into the execution phase in stage 3, project planning deals with the little details of facilities and equipment, personnel and job assignments, and scheduling. Starting near the end of stage 3 and carrying into the termination stage, both little-details and big-picture planning are required to pass the project along and identify new project opportunities. Planning is central to project success because projects are schedule-driven and results-oriented. Project planners need to keep constantly abreast of both the big picture and the little details. Novice project managers too often shortchange planning. Challenging but realistic project deadlines are project managers most powerful motivational tool.
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Enterprise resource planning (ERP) creates a unified computer information system for all business functionsfrom customer orders to inventory control to employee records. ERP systems have a reputation for being very expensive and hard to implement. An effective ERP system can save money, provide decision support, and enhance global integration. Critics say ERP systems are only for the largest companies, are too expensive, do not live up to promises, have high operating costs, and are not an ultimate solution.
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Flow charts, Gantt charts, and PERT networks, found in project management software packages, are three graphics tools for more effectively planning, scheduling, and controlling operations. Flow charts visually sequence important events and yes-or-no decisions. Gantt charts, named for Frederick W. Taylors disciple Henry L. Gantt, are a graphic scheduling technique used in a wide variety of situations. Both flow charts and Gantt charts have the advantage of forcing managers to be analytical. But Gantt charts realistically portray the time dimension, whereas flow charts do not. PERT, which stands for Program Evaluation and Review Technique, is a sequencing and scheduling tool appropriate for large, complex, and nonroutine projects. Weighted PERT times enable management to factor in their uncertainties about time estimates.
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Break-even analysis, or cost-volume-profit analysis, can be carried
out algebraically or graphically. Either way, it helps planners gauge the potential impact of price changes and profit objectives on sales volume. A major limitation of break-even analysis is that specialized accounting knowledge is required to identify relevant fixed and variable costs.
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