The planning cycle looks a lot like the previously discussed strategy cycle because they have a lot in common. In fact, the planning process is an integral part of the strategy cycle, since developing objectives, creating strategies, and implementing firm-wide activities all require extensive planning.
The first step in planning is to set a goal to be accomplished. Making sure that the goal checks off all of the SMART criteria (explained in detail later in this chapter) will help make the planning process easier and more likely to be successful, so be sure to spend some time developing a good goal.
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Once you’ve figured out your goal, the next step is to design the plan. “Designing the plan” involves several distinct activities, so let’s break it down into what needs to happen. Think of planning as a problem-solving exercise. A plan is a set of actions developed to accomplish a goal, and planning is essentially figuring out what those actions should be. The goal is the end point, and the plan answers the question “How do we get there?”
When designing a plan, a manager may think of many ways to achieve a goal. He or she can have a group of employees brainstorm to come up with ideas. Not all of the potential ideas are likely to be feasible, however. Part of the manager’s task in designing a plan is to coordinate various ideas with a firm’s resources and capabilities and its time constraints. When does the goal need to be accomplished? What other resources does the firm need to complete the project?
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Designing the plan becomes a puzzle of figuring out what is the best way to reach a goal with the resources the firm has or can reasonably get in the time available. There is no prescription for this, and the best way to learn how to plan is to practice. Fortunately, you probably have a pretty good amount of practice already, because you’ve been planning in one form or another for a long time. You have planned study time, team practices, club events, and even meals. Strategic planning uses the same skills in a new context. Planning a product launch may sound complicated, but so is planning a wedding. The scale and scope of the things a manager must coordinate in order to reach company goals may be larger than what you are used to, but the specific skills are likely not new at all.
For example, let’s take a look at the challenge Tesla is currently facing.
Tesla has developed a mass-market car and has a line of about half a million customers waiting to buy one. Until now, Tesla has been more of a boutique car maker, manufacturing small numbers of cars that they are able to sell at high prices. The Model 3, however, has been specifically conceived as an affordable car that almost anyone can buy. The brand and reputation Tesla has built with its premium cars has generated a lot of enthusiasm and demand for this new model. So Elon Musk, CEO of Tesla, is planning to make cars in larger numbers and more quickly than ever before.
What’s Tesla’s goal? Manufacture cars at a rate of 500,000 per year in order to meet demand. Is this a SMART goal? Analysts around the world are arguing over this (is it achievable?), but it’s the goal that Tesla is focusing on, so Musk has to design a plan to reach that goal. What resources does Tesla need in order to reach this level of production? They developed a car that is easy to manufacture, because they knew that they would want to build it in large numbers. Still, they need manufacturing facilities, parts, and production employees. To get these resources, they need money. Elon Musk is a spectacular fundraiser, but they need billions of dollars to develop manufacturing capabilities on this scale. So while Tesla builds the world’s largest factory in Nevada, called the Gigafactory, Musk continues to raise funds.
Components (specifically the batteries) are also an issue for the Model 3, and Musk has built his giant factory in part to manufacture the hundreds of thousands of batteries needed to power the Model 3. Tesla’s planning involves many interrelated activities, and figuring out what the activities are, what resources Tesla needs to perform the activities, and how to obtain resources that they need but don’t have yet are the challenges Elon Musk is tackling. Tesla is a fascinating company that is multifaceted. There have been serious questions raised about their ability to produce enough cars and an examination of more recent commentary is encouraged.
Scale Levels of Planning
Another dimension that impacts strategic planning is scale. The day-to-day planning that managers do to take steps toward bigger objectives is key to achieving success. The following exhibit shows the typical levels of planning going on in a company at any given time.
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Let’s look at the levels one by one. Strategic planning is what we’ve been discussing so far. It’s the high-level planning performed by company executives in order to set the overall direction of the company. Strategic planning connects the company’s actions back to its vision and mission statements (the “why does this company exist” question).
Tactical planning is mid-level planning that consists of broad ideas of what the company should do to pursue its mission. This is the sort of planning done by division managers. For example, Walmart division managers carry out the company’s growth and cost-leadership strategies by finding ways for the company to grow and continue to be able to offer low prices. They may decide where to locate distribution centers to maximize store-stocking efficiency, which manufacturers of goods they can buy inventory from at low prices, and where to build new stores to attract more customers.
Operational planning lays out the front-line activities that each employee in the company will do to advance the tactical plans. A McDonald’s restaurant manager develops operational plans, but you might recognize them more as employee schedules or promotional plans. Operational plans are the daily activities required for the company to function, including ordering inventory or supplies, scheduling workers and defining their work tasks, and developing sales goals and promotions to help achieve those goals. At McDonald’s, as at other companies that pursue a cost-leadership strategy, scheduling enough employees to work in the restaurant at specific times to keep the store functioning smoothly without scheduling more than you need (and incurring excess labor costs) is a critical task for the manager, and doing that task successfully is how the manager contributes to the company’s larger cost-leadership strategy.
Implementing Planned Strategies
Implementation of planned strategies refers to the execution of a strategy by assigning tasks for people to carry out to accomplish the company’s strategic goals. Although a manager may talk about “implementing a differentiation strategy,” the real implementation of a strategy happens at the bottom of not just the strategy hierarchy, but the organizational hierarchy, in the actions of operational employees who carry out planned tasks that add value to the company’s product. Such tasks include research and development to add unique features, monitoring manufacturing to ensure company products meet high quality standards, and marketing the product to add brand value in the eyes of consumers.
Management 2020 text remixed from multiple sources under a CC Attribution-NonCommercial-ShareAlike 4.0 International License. View a complete list of original sources.
