Figure 4.1: Edward Deming PDCA cycle
Sources: Averson, Paul (online document: http://www.balancescorecard.org/bkgd/pdca.ntml) with modification.
Approaches to Planning
Inside-out Planning: Inside-out planning is an approach that uses internal organizational strengths as a basis for planning. It focuses future effort on what the organization is already doing, but always trying to find ways to do it better. The inside-out approach focuses on planning by incremental changes and has an objective to find a way to provide better products and services.
Outside-in Planning: Not every product within the same brand are the identical in every country. KFC in Thailand offers its customers with rice along with their chicken, while this is not on the menu in KFC in the United States. This approach to planning is known as the Outside-in planning. It uses external opportunities from changes in the environment for planning. Management that uses this approach looks for specific niches that can be taken advantage of and focus future effort on the anticipated changes in the environment. Similar to the inside-out planning approach, the outside-in planning approach has an objective to find a way to provide better products and services.
Top-down Planning: In this approach, the top executives set broad objectives for the whole organization. They then allow the middle and operational managements make operating plans within the defined boundaries. The advantage of this approach is that it ensures that everything is maintained in the organization’s direction.
Bottom-up Planning: The bottom-up approach is in contrast to the top-down approach. It begins at the lower levels. The lower level executives provide ideas for plans. As they are passed up from level to level, they express needs and direction consistent with operating level perspectives. Bottom-up planning has the advantage that offers the opportunity for participation and commitment.
Contingency Plan: It is best to expect during the process of planning that not everything will necessarily go as predicted. Alternatives to the existing plans might be developed and readied for used during the right circumstances. This process is called contingency planning. Contingency planning identifies alternative courses of action that can be implemented if and when circumstances change in certain ways over time that render the original plan inappropriate.
Good Planning Strategy: One obvious question is: Which approach is better than the other? Each approach has its advantages and disadvantages. Normally, what organizations will do is utilizes all approaches in a combination. They will normally begin with the top-down approach in an outside-in manner. From there, plans are developed using the bottom-up approach in the inside-out manner.
Types of Plans
Based on timeframes:
• Short-range plans--they cover 1 year or less.
• Intermediate-range plans--cover 1 to 2 years.
• Long-range plans--they look over 3 years into the future.
Top management mainly focuses on long-range plans, while the lower level management focuses mostly on short-range plan activities that serve the long-range plan. However, every level must understand that they need to work to reach the over all long-term plan.
Based on characteristics:
• Strategic plan- a comprehensive plan showing an organization’s future direction. Figure 4-2 shows an example of a strategic plan for a hotel in South East Asia.