Planning and Control Techniques Module
In the study of this module, students will have an opportunity to learn essential
knowledge about the planning tools and techniques that can help any business to reach
the objectives driven by its organizational mission.
CHAPTER OUTLINE
INTRODUCTION
This section introduces some of the basic planning tools and techniques that can
be used by managers in helping organizations to achieve their goals.
1. TECHNIQUES FOR ASSESSING THE ENVIRONMENT
The following techniques have been developed to assist managers in assessing
the organization’s environment:
A. Environmental Scanning
Environmental scanning is the screening of large amounts of
information to anticipate and interpret changes in the environment.
Research has shown that both large and small companies with advanced
environmental scanning systems have increased their profits and revenue
growth.
1. Competitor intelligence is an environmental scanning activity by
which organizations gather information about competitors. In
2. Global scanning is an especially important type of environmental
scanning used by managers to assess changes and trends in the
global environment through the gathering of vital global
information.
B. Forecasting
Environmental scanning provides the foundation for developing
forecasts, which are predictions of outcomes.
1. Forecasting techniques can be grouped into two main categories:
a. Quantitative forecasting applies a set of mathematical
2. Managers must consider effectiveness when deciding which
forecasting techniques to use.
a. Forecasting techniques are most accurate when the
b. The following suggestions may improve forecasting
effectiveness:
2. Involve more people in the process.
4. Do not rely on a single forecasting method.
6. Forecasting is a managerial skill and can be
practiced and improved.
C. Benchmarking
Benchmarking is the search for the best practices among competitors or
noncompetitors that lead to their superior performance.
The benchmarking process usually follows four steps (see Exhibit PC-2):
1. A benchmarking planning team is formed. The team’s initial task is
2. The team collects internal and external data.
4. An action plan is prepared and implemented.
2. TECHNIQUES FOR ALLOCATING RESOURCES
Resources are the assets of the organization including financial, physical,
human, intangible, and structural/cultural.
A. Budgeting
A budget is a numerical plan for allocating resources to specific activities.
Budgets are widely used because they can be applied to a wide variety of
organizations and units within an organization. Exhibit PC-3 describes
the different types of budgets that managers might use. Exhibit PC-4
provides 7 examples for improving the budget process.
B. Scheduling
Scheduling is detailing what activities have to be done, the order in
which they are to be completed, who is to do each, and when they are to
be completed. Some useful scheduling tools include the following:
1. The Gantt chart, developed by Henry Gantt, who was an
2. A load chart is a modified Gantt chart that schedules capacity by
entire departments or specific resources. (See Exhibit PC-6.)
3. The Program Evaluation and Review Technique (PERT) is a
technique for scheduling complicated projects comprising many
activities, some of which are interdependent.
a. A PERT network is a flowchart diagram showing the
2. Activities are the time or resources needed to
3. Slack time is the amount of time an individual
4. The critical path is the longest sequence of
activities in a PERT network.
c. Refer to Exhibit PC–9 to see an example of a PERT
network.
C. Breakeven Analysis
Breakeven analysis is a technique for identifying the point at which total
revenue is just sufficient to cover total costs. (See Exhibit PC-10.)
D. Linear Programming
Linear programming is a mathematical technique that solves resource
allocation problems. (See Exhibit PC-12.)
3. CONTEMPORARY PLANNING TECHNIQUES
Project management and scenario planning are two planning techniques that are
appropriate for planning in an environment that is both dynamic and complex.
A. Project Management
A project is a one-time-only set of activities that has a definite beginning
and ending point in time. Project management is the task of getting a
project’s activities done on time, within budget, and according to
specifications.
1. Project Management Process
2. Role of the Project Manager
a. The only real influence project managers have is their
usually assigned to two or three at any given time.
B. Scenario Planning
A scenario is a consistent view of what the future is likely to be.
1. Developing scenarios is also known as contingency planning.
2. The intent of scenario planning is not to try to predict the future,
4. Exhibit PC-13 outlines the project planning process.
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
Student answers to these questions will vary.
PC-1. Describe the different approaches to assessing the environment.
Environmental scanning is the screening of large amounts of information to anticipate
and interpret changes in the environment. Environmental scanning establishes the basis
PC-2. Describe the four techniques for allocating resources.
The four techniques are budgeting, scheduling, breakeven analysis, and linear
PC-3. How does PERT network analysis work?
A PERT network is a flowchart diagram that shows the sequence of activities needed to
PC-4. Why is flexibility so important to today’s planning techniques?
PC-5. What is project management, and what are the steps managers use in planning
projects?
Project management is the task of getting a project’s activities done on time, within
budget, and according to specifications. The essential features of the project planning
process are shown in Exhibit PC-13 and include, in order: defining objectives,
identifying activities, establishing sequences, estimating time for activities, determining
PC-6. It’s a waste of time and other resources to develop a set of sophisticated
scenarios for situations that may never occur. Do you agree or disagree? Support your
position.
Although the situations depicted in scenarios may never actually occur, the process of
PC-7. Do intuition and creativity have any relevance in quantitative planning tools and
techniques? Explain.
PC-8. The Wall Street Journal and other business periodicals often carry reports of
companies that have not met their sales or profit forecasts. What are some reasons a
company might not meet its forecasts? What suggestions could you make for improving
the effectiveness of forecasting?
A company could fail to meet its forecasts for a number of reasons. For instance, the
internal or external economic situation might experience a decline. A technological
PC-9. In what ways is managing a project different from managing a department or other
structured work area? In what ways are they the same?
PC-10. What might be some early warning signs of: (a) a new competitor coming into
your market, (b) an employee work stoppage, or (c) a new technology that could change
demand for your product?
Remaining alert to the external and internal environments of the organization is a key
ADDITIONAL CHAPTER INFORMATION
American Productivity and Quality Center (APQC) Founder and Chairman Jack Grayson
describes organizations who benchmark as being humble enough to admit that another
company is better at something and being wise enough to learn how to match or surpass
that company.
Benchmarking is the process of identifying, sharing, and using best practices to improve