Chapter 5:Chapter 5:Planning and Planning and Goal SettingGoal Setting

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Learning Objectives

• Define goals and plans and explain the relationship between them.

• Explain the concept of organizational mission and how it influences goal setting and planning.

• Describe the types of goals an organization should have and why they resemble a hierarchy.

• Define the characteristics of effective goals.

• Describe the four essential steps in the MBO process.• Explain the difference between single-use plans and standing plans.• Describe and explain the importance of the three stages of crisis

management planning.

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Learning Objectives (contd.)

• Summarize the guidelines for high-performance planning in a fast-changing environment.

• Define the strategic planning process and SWOT analysis.

• Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies.

• Explain the major considerations in formulating functional strategies.

• Discuss the organizational dimensions used for implementing strategy.

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PlanningInputs from the environment• Human resources• Financial resources• Physical resources• Information resources

Organizational

Performance• Products• Services• Goal Attainment

Co

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Leading

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Overview of Planning

Source: Adapted from Griffin, 2001

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Goals and Plans

• Goal - A desired future state that the organization attempts to realize

• Plan - A blueprint specifying the resource allocations, schedules, and other actions necessary for attaining goals

• Planning – determining the organization’s goals and the means for achieving them

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Levels of Goals/Plans

Exhibit 5.1

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Purpose of Goals and Plans

• Legitimacy• What the organization stands for - reason for being• Employees identify with purpose

• Source of Motivation and Commitment • Employees’ identification with the organization• Motivate by reducing uncertainty

• Resource Allocation• Allocate employees, money, and equipment

• Guides to Action• Provide a sense of direction; focus attention on

specific targets• Direct efforts toward important outcomes

Internal and External Messages Goals and Plans Send:

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Purpose of Goals and Plans

• Rationale for Decisions– Learn what organization is trying to accomplish– Make decisions to ensure that internal policies, roles,

performance, structure, products, and expenditures will be made in accordance with desired outcomes

• Standard of Performance– Serve as performance criteria– Provide a standard of assessment

Internal and External Messages Goals and Plans Send:

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Organizational Mission

• Mission - organization’s reason for existing

• Mission Statement– Basic business scope – Distinguishes it from

other organizations

Our company’s mission is to extend and enhance human life by providing the highest-quality

pharmaceutical and related health care products.

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Mission and Vision Statements

• Examples from companies– General Motors

• “Our vision is to be the world leader in transportation products and related services.”

– Ford Motor Company• Our Vision

Our vision is to become the world’s leading consumer company for automotive products and services.

• Our MissionWe are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer needs and deliver outstanding products and services that improve people’s lives.

• Our ValuesThe customer is Job 1. We do the right thing for our customers, our people, our environment and our society. By improving everything we do, we provide superior returns to our shareholders.

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Mission and Vision Statements

• Examples from companies– Toyota

• Mission– “Toyota seeks to create a more prosperous society through

automotive manufacturing.”

• Vision– “Toyota aims to achieve long-term, stable growth in

harmony with the environment, the global economy, the local communities it serves, and its stakeholders.”

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Strategic Goals and Plans

Strategic Goals• Future plans

• Plans for whole organization

Strategic Plans• Action Steps used to attain strategic goals

• Blueprint that defines the organizational activities and resource allocations

• Long-term

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Tactical Goals and Plans

Tactical Goals• Apply to middle management• Goals that define the outcomes that major

divisions and departments must achieve

Tactical Plans• Plans designed to help execute strategic

plans• Shorter time frame than strategic plans

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Operational Goals and Plans

Operational Goals• Specific, measurable results

• Expected from departments, work groups,

and individuals

Operational Plans• Action steps toward operational goals• Daily and weekly operations• Schedules are an important component

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Goal Alignment

Means-end Chain

Achievement of goals at lower levels permits the attainment of high-level goals.

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Hierarchy of Goals

Exhibit 5.3

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Characteristics of EffectiveGoal Setting

• “SMART” acronym captures many of the essential features of effective goals– Specific– Measurable– Achievable (but challenging)– Relevant – Timely (predetermined deadline)

• Also… Written, Rewarded, Communicated

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Management by Objectives

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Management By Objective Process

Exhibit 7.5

Exhibit 5.5

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MBO Benefits and Problems

• Benefits:– Manager and employee

efforts are focused

– Performance can be improved

– Employees are motivated

– Departmental and individual goals are aligned

• Problems:– Constant change prevents

MBO from taking hold

– Poor employer-employee relations reduces MBO effectiveness

– Strategic goals may be displaced by operational goals

– Mechanistic organizations and values that discourage participation

– Too much paperwork saps MBO energy

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Single-Use Plans - Goals Not Likely To Be Repeated

• A program is a complex set of objectives and plans to achieve an important, one-time organizational goal

• A project is similar to a program, but generally smaller in scope and complexity

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Standing Plans – Tasks Performed Repeatedly

• A policy is a general guide to action and provides direction for people within the organization

• Rules describe how a specific action is to be performed

• Procedures define a precise series of steps to be used in achieving a specific job

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Types of Plans

• Business plan

• Marketing plan

• Succession plan– “Getting the right number of people– with the right skills, experiences, and

competencies– in the right jobs– at the right time.”

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Types of Plans

• Succession Planning

Supply Analysis•Workforce analysis and trends•Employee competencies•Workforce demographics•Current workload analysis

GAP Analysis•Comparison of future workforce competencies with future needs•Analysis of how workforce demographics will change•ID of areas in which management action will be needed to reach workforce objectives

Demand Analysis•Workforce knowledges, skillsand abilities to meet projected need•Staffing patterns•Anticipated programs and workloadchanges

Solution Analysis•Planning workforce transition•Employee development and retraining•Changes in staffing patterns

Source: Adapted from www.afm.ars.usda.gov/events/2001/AOConf2001/ Files/SuccessionPlanning.ppt

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Types of Plans: Succession Plans

Category/Level Now Required Available Gaps Possible Action?

Sales 100 110 71 -39 ?

Sales Manager 20 15 22 +7 ?

Customer Service Rep.

200 250 140 -110 ?

Customer Service Mgr.

12 25 22 -3 ?

Totals 335 400 255 -145 ?

Source: Adapted from www.instruction.bus.wisc.edu/rdunham/ MHR611/2004_PPT/planning.ppt

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Types of Plans: Financial Plans

Month 1 Month 2 Month 3 . . . Month 12 Total

CASH RECEIPTS: Cash Sales

Accts. Rec. Collections

Sales of Fixed Assets

New Debt or Equity

Decrease in Other Assets

Total Receipts

CASH PAYMENTS: Accts. Payable Payments

Salaries and Fringes

Fixed Asset Purchases

Debt Repayments

Total Payments

Net Cash Flow (Receipts Minus Payments)

Beginning of Period Cash

End of Period Cash (Beginning Cash plus or minus Net Cash Flow)

Source: Adapted from www.nacd.com/AnnualMeeting/presentations/Noon.ppt

04/10/23 27Source: Business Plan Pro, Palo Alto Software, Palo Alto, CA.

Types of Plans: Overlapping

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Forecasting

• Forecasting is projecting, predicting, or estimating future events or conditions in an organization’s environment.

• Forecasting deals with conditions or external events beyond the organization’s control that are important to its survival.

• Sales forecast is the estimate of the firms sales or income for a specified future period– Used for…

• Production scheduling• Financial planning• Inventory planning• Determination of personnel needs• Virtually all plans

Source: Adapted from www.edison.edu/distance_learning/spring_2004/ mcnulty/2011_chap_6.ppt

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Forecasting

• Quantitative forecasting employs statistical computations– Trend analysis– Computer simulations

• Qualitative forecasts are more subjective because they are based on opinion rather than historical data– Salespeople– Top executives– Outside surveys

Source: Adapted from www.edison.edu/distance_learning/spring_2004/ mcnulty/2011_chap_6.ppt

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Forecasting

• Decision support systems (DSS)– http://www.vanguardsw.com/decisionpro/

jforecast.htm

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Contingency PlansUnexpected Conditions

Identify Uncontrollable Factors– Economic turndowns– Declining markets– Increases in costs of supplies– Technological developments– Safety accidents

Flexible PlansMultiple Future Alternatives

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1. Planning may create rigidity• Unwise to force a course of action when the

environment is fluid

2. Plans can’t be developed for a dynamic environment

• Flexibility required in a dynamic environment

• Too many unknowns to be develop a formal plan

3. Formal plans can’t replace intuition and creativity• Mechanical analysis reduces the vision to some type

of programmed routine

Source: Adapted from Robbins, 2001

Criticisms of Formal Planning

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4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival

• Plans concentrate on capitalizing on existing business opportunities

• Hinders managers who consider creating or reinventing an industry

5. Formal planning reinforces success, which may lead to failure

• Success may breed failure in an uncertain environment

Source: Adapted from Robbins, 2001

Criticisms of Formal Planning

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• Generally, formal planning is associated with…– Higher profits– Higher return on assets

• The quality of the planning process contributes more to high performance than does the extent of planning– External environment may undermine the effects of formal

planning– Planning/performance relationship is influenced by the planning

time frame

• When external environment restrictions allowed managers few viable alternatives, planning did not lead to higher performance.

Source: Adapted from Robbins, 2001, Robbins & DeCenzo, 2004

Planning and Organizational Performance

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Building Scenarios

Looking at trends and discontinuities and imagining possible alternative futures to

build a framework within which unexpected future events

can be managed.

Managers can rehearse mentally what they would do if their best-laid plans were to collapse.

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Three Stages of Crisis Management

Prevention– Build trusting relationship with key stakeholders– Open communication

Preparation– Crisis Management Team & Plan– Establish an Effective Communications system

Containment– Activate the crisis management plan.– Get the awful truth out.– Meet safety and emotional needs.– Return to business.

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Planning for High Performance

Planning has changed as the global environment has changed

Less top-down management planning

Involve managers throughout the organization

Strategic thinking and execution is becoming job of all employees

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Planning In The New Workplace

• Have a strong mission statement and vision

• Set stretch goals for excellence

• Establish a culture that encourages learning

• Embrace event-driven planning

• Utilize temporary task forces

• Planning still starts and stops at the top

Planning comes alive when employees are involved in setting goals and determining the means to reach them

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Thinking Strategically

• Strategic management pertains to competitive actions in the marketplace

• Plan of action that describes resource allocation and activities

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Strategic Emphasis

Core Competence – something the

organization does especially well in

comparison to its competitors

Value – the combination of benefits received

and costs paid

Synergy –A joint effect that

is greater than the sum of the parts acting together

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Strategic Management Process

Exhibit 5.10

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SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats

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Business-Level Strategy: Porter’s Five Forces

Exhibit 5.12

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Porter’s Competitive Strategies

Differentiation • Flexible, loose knit with strong coordination• Creative flair, thinks “out of box”• Strong marketing abilities• Rewards employee innovation• Reputation for quality or technical leadership

Cost Leadership

• Central authority, tight cost controls• Efficient procurement and distribution systems• Close supervision, finite employee empowerment

Focus • Frequent, detailed control reports• Direct combination of policies to strategic target• Values and rewards flexibility and customer intimacy• Pushes empowerment to employees with customer

contact

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Partnership Strategies

• Collaboration is an alternative form of strategy

• Competition and collaboration are often present at the same time.

• The Internet is driving and supporting more partnerships.

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Strategy Implementation and Control

Exhibit 5.15

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Implementation During Turbulent Times

• Three Key Issues:– Global Mind-Set– Corporate Culture– Information Technology