INTRODUCTION TO BUSINESS MANAGEMENT
CHAPTER 7: PLANNING
The benefits and costs of planning: Managers need to know which way to go and planning provides that
direction.
The benefits of planning
Managers can plan to steer the organisation in the best possible direction, taking into consideration the
organisation’s internal strengths and weaknesses. Good managers understand that although they are
leading the organisation in a predetermined direction, they should anticipate change in the environment,
and adjust their goals and plans accordingly when necessary.
• Planning provides direction
• Planning reduces the impact of change
• Planning promotes co-ordination
• Planning ensures cohesion
The costs of planning
Despite the obvious benefits of planning, it can also result in the following costs to the organisation
• Planning may create rigidity
• Planning consumes management time
• Formal plans may replace intuition and creativity
• Planning could cause delays in decision-making
Managerial goals and plans
• Where do we want this organisation to be at a specific future date? (This will entail setting goals.)
• How will the organisation achieve its goals? (This will entail formulating plans.)
• Planning incorporates two components: determining the organisation’s goals and developing plans
to achieve these goals..
The nature of goals
• Organisational goals are the starting point of the planning process. Goals flow directly from the
mission statement but are more specific.
• The focus of goals differs because different goals pertain to different aspects of the organisation,
such as finances, the environment, participants and survival. Strategic goals are holistic in that they
apply to the whole organisation.
• The time period of goals may be short term, intermediate or long term.
, PRINTED BY: Tawanda George <>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted
without publisher's prior permission. Violators will be prosecuted.
The importance of goals
It is crucial for managers to establish where the organisation is heading. Goals are important in this regard
for the following reasons:
• Goals provide guidance and agreement on the direction of the organisation, and they steer all the
employees and the activities they perform in the same direction. Without goals, a business is like a
ship without a rudder.
• Clearly formulated, unambiguous goals facilitate effective planning in terms of resource deployment.
• Goals can inspire and motivate employees, especially if the employees can perceive a specific link
between their performance in terms of goal achievement and the rewards they receive.
• Goals provide the basis for the effective evaluation of employee and organisational performance,
and for the control of organisational resources.
Criteria for effective goals
The SMART framework states that goals should be specific, measurable, attainable, relevant and time
bound. Managers can follow this framework in order to formulate goals properly:
• When a goal is specific, it indicates what the goal relates to, the period to which the goal refers and
the specific desired results of the goal.
• When a goal is measurable, the manager has stated the goal in such terms that the result can be
evaluated objectively and in quantified terms. Managers must be able to see if the goals are satisfied
when they compare actual results with predetermined goals. This is especially true for tactical and
operational goals. To say, for example, ‘market share should be increased’ is too vague and not
measurable, whereas to say, ‘market share should increase by 10 per cent over the next two years in
Gauteng’ is precise and measurable.
• When a goal is attainable, it is realistic, yet it should still provide a challenge. Furthermore, managers
should assign the responsibility for reaching goals to specific individuals. Each manager generally has
responsibilities for setting goals at his or her level in the organisation. This means that the
relationship between the expected results and the people responsible for the results should be
clearly stated so that managers fully understand the aims and goals, and are in no doubt about what
they have to do to achieve them.
• When a goal is relevant, that it relates to the organisation’s mission and strategic goals. It follows
that the various goals in an organisation should be compatible with one another because they all
derive from the same mission and strategic goals. ‘Horizontal consistency’ refers to the compatibility
of the objectives of various departments with one another. If, for example, the marketing
department proposes to extend its line of products, the costs of production will increase, and
therefore the production division will find it difficult to embark on cost-cutting as one of its goals.
‘Vertical consistency’ means that departmental goals are compatible with those of subsections. For
example, if marketing sets a target of an 8 per cent increase in sales, this has to be compatible with
the sales objectives set for the geographical markets of the business (in other words, the total
increase in sales for the particular regions should add up to 8 per cent).
• When a goal is time bound, it has a specific time limit. People are likely to ignore goals with no time
limit because there is no sense of urgency associated with them. So, instead of saying, ‘increase
production by 1 000 units’, managers should rather say, ‘increase production by 1 000 units by the
end of December this year’.
CHAPTER 7: PLANNING
The benefits and costs of planning: Managers need to know which way to go and planning provides that
direction.
The benefits of planning
Managers can plan to steer the organisation in the best possible direction, taking into consideration the
organisation’s internal strengths and weaknesses. Good managers understand that although they are
leading the organisation in a predetermined direction, they should anticipate change in the environment,
and adjust their goals and plans accordingly when necessary.
• Planning provides direction
• Planning reduces the impact of change
• Planning promotes co-ordination
• Planning ensures cohesion
The costs of planning
Despite the obvious benefits of planning, it can also result in the following costs to the organisation
• Planning may create rigidity
• Planning consumes management time
• Formal plans may replace intuition and creativity
• Planning could cause delays in decision-making
Managerial goals and plans
• Where do we want this organisation to be at a specific future date? (This will entail setting goals.)
• How will the organisation achieve its goals? (This will entail formulating plans.)
• Planning incorporates two components: determining the organisation’s goals and developing plans
to achieve these goals..
The nature of goals
• Organisational goals are the starting point of the planning process. Goals flow directly from the
mission statement but are more specific.
• The focus of goals differs because different goals pertain to different aspects of the organisation,
such as finances, the environment, participants and survival. Strategic goals are holistic in that they
apply to the whole organisation.
• The time period of goals may be short term, intermediate or long term.
, PRINTED BY: Tawanda George <>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted
without publisher's prior permission. Violators will be prosecuted.
The importance of goals
It is crucial for managers to establish where the organisation is heading. Goals are important in this regard
for the following reasons:
• Goals provide guidance and agreement on the direction of the organisation, and they steer all the
employees and the activities they perform in the same direction. Without goals, a business is like a
ship without a rudder.
• Clearly formulated, unambiguous goals facilitate effective planning in terms of resource deployment.
• Goals can inspire and motivate employees, especially if the employees can perceive a specific link
between their performance in terms of goal achievement and the rewards they receive.
• Goals provide the basis for the effective evaluation of employee and organisational performance,
and for the control of organisational resources.
Criteria for effective goals
The SMART framework states that goals should be specific, measurable, attainable, relevant and time
bound. Managers can follow this framework in order to formulate goals properly:
• When a goal is specific, it indicates what the goal relates to, the period to which the goal refers and
the specific desired results of the goal.
• When a goal is measurable, the manager has stated the goal in such terms that the result can be
evaluated objectively and in quantified terms. Managers must be able to see if the goals are satisfied
when they compare actual results with predetermined goals. This is especially true for tactical and
operational goals. To say, for example, ‘market share should be increased’ is too vague and not
measurable, whereas to say, ‘market share should increase by 10 per cent over the next two years in
Gauteng’ is precise and measurable.
• When a goal is attainable, it is realistic, yet it should still provide a challenge. Furthermore, managers
should assign the responsibility for reaching goals to specific individuals. Each manager generally has
responsibilities for setting goals at his or her level in the organisation. This means that the
relationship between the expected results and the people responsible for the results should be
clearly stated so that managers fully understand the aims and goals, and are in no doubt about what
they have to do to achieve them.
• When a goal is relevant, that it relates to the organisation’s mission and strategic goals. It follows
that the various goals in an organisation should be compatible with one another because they all
derive from the same mission and strategic goals. ‘Horizontal consistency’ refers to the compatibility
of the objectives of various departments with one another. If, for example, the marketing
department proposes to extend its line of products, the costs of production will increase, and
therefore the production division will find it difficult to embark on cost-cutting as one of its goals.
‘Vertical consistency’ means that departmental goals are compatible with those of subsections. For
example, if marketing sets a target of an 8 per cent increase in sales, this has to be compatible with
the sales objectives set for the geographical markets of the business (in other words, the total
increase in sales for the particular regions should add up to 8 per cent).
• When a goal is time bound, it has a specific time limit. People are likely to ignore goals with no time
limit because there is no sense of urgency associated with them. So, instead of saying, ‘increase
production by 1 000 units’, managers should rather say, ‘increase production by 1 000 units by the
end of December this year’.
