Dan C. Lungescu, PhD, assistant professor2015-2016

ManagementPart II: Planning

Ch. 5. Organizational goals and plans

Course outline

Part I: Introduction

Part II: Planning

Part III: Organizing

Part IV: Leading

Part V: Controlling

Management

Part II outline

Part II: Planning

Ch. 5. Organizational goals and plans

Ch. 6. Strategic management

Ch. 7. Decision making

Ch. 8. Managing innovation and change

Management

Learning objectives

After studying this chapter, you should:

Describe the major components in the overall planning process. Explain the concept of organizational mission and the purposes

of a mission statement. Outline the major benefits of goals and explain how goals differ

according to organizational level. Explain how goals facilitate performance. Explain how plans differ by organizational level and extent of

recurring use. Describe the nature of tactical and operational planning. Discuss how to develop and implement tactical plans. Discuss the role of contingency planning. Identify the major barriers to effective planning and discuss

how managers can overcome them.

Chapter 5 outline

A. The overall planning process

B. Organizational goals

C. Organizational plans

D. Contingency planning

E. Managing the planning process

F. Management by objectives

A. The overall planning process

Outline » A. The overall planning process

MissionGoal

attainment

(organizational efficiency and effectiveness)

Goals Plans

Major components of planning

Outline » A. The overall planning process » Major components of planning

The organization’s purpose or fundamental reason for existence.

Mission

A future target or end result that an organization wishes to achieve.

Goal

More narrow target, shorter time frame.

Objective

The means devised for attempting to reach a goal.

Plan

A broad declaration of the basic, unique purpose and scope ofoperations that distinguishes it from others of its type.

Mission statement

Mission statement’s components Customers: who are the organization’s customers? Products or services: what are the organization’s major

products/services? Location: where does the organization compete? Technology: what is the firm’s basic technology? Concern for survival: what is the organization’s commitment to

economic objectives? Philosophy: what are the basic beliefs, values, aspirations, and

philosophical priorities of the organization? Self-concept: what are the organization’s major strengths and

competitive advantages? Concern for public image: what are the organization’s public

responsibilities and what image is desired? Concern for employees: what is the organization’s attitude

toward employees?

Outline » A. The overall planning process » Components » Mission statement’s components

Samples of mission statement

Outline » A. The overall planning process » Components » Mission statement » Samples

The purpose of Motorola is to honorably serve theneeds of the community by providing products andservices of superior quality at a fair price to ourcustomers.

Motorola™

To serve the worldwide need for knowledge at a fairprofit by gathering, evaluating, producing, anddistributing valuable information in a way thatbenefits our customers, employees, authors,investors, and our society.

McGraw-Hill™

The company feels an obligation to be a goodcorporate citizen wherever it operates.

Eli Lilly and Company™

B. Organizational goals

Outline » B. Organizational goals

Benefits of goals:

Goals can increase performance.

Goals help clarify expectations.

Goals facilitate the controlling function.

Goals increase motivation.

Levels of goals

Levels of goals

Outline » B. Organizational goals » Levels of goals

Top managementOrganization-wide perspective

Middle managementDepartment perspective

First-level managementUnit/individual perspective

Strategic goals

Strategic plans

Tactical goals

Tactical plans

Operational goals

Operational plans

Mission Owners

Levels of goals (2)

Outline » B. Organizational goals » Levels of goals (2)

Broadly defined targets or future end results set by top management. Typically address issues relating to the organization as a whole. May sometimes be stated in fairly general terms. Are sometimes called official goals.

Strategic goals

Targets or future end results usually set by middle management for specificdepartments or units. Spell out what must be done by various departments to achieve the

results outlined in the strategic goals. Tend to be stated in more measurable terms than is sometimes true of

strategic goals.

Tactical goals

Targets or future end results set by lower management that address specificmeasurable outcomes required from the lower levels.

Operational goals

The hierarchy of goals

Outline » B. Organizational goals » Levels of goals » The hierarchy of goals

Vice president of operations• Open 20 new

metropolitan stores• Reduce costs by 2%

To sell merchandise and services to consumers at a profit, primarily but not exclusively in the US, in a manner consistent with corporate ethics and responsibilities. Mission

To achieve and maintain:• A position of leadership in the business in which we compete

• 16% return on equity• 11% earnings growth

• 35-40% dividend payout

Strategic goals

Tactical goals

Operational goals

Vice president of merchandising

• Expand lines of apparel and soft home furnishings• Increase gross profit

margins by 5%

Vice president of marketing• Increase sales per sq.

foot by 15%• Plan and implement 2

national promotions

Store manager• Coordinate store

remodeling to be completed by Dec. 1

• Reduce customer complaints by 5%

• Reduce costs by 2%

Merchandising manager• Increase gross profit

margins by 5%• Achieve desired apparel /

home mix within budget• Reduce markdowns by

10%

Advertising manager• Develop advertising

campaign aimed at 5 targeted consumer types

• Test new advertising in 4 test markets

• Reach targeted segments within budget

How goals facilitate performance

Outline » B. Organizational goals » How goals facilitate performance

PerformanceWork behavior

Task complexity

Situational constraints

(tools, materials,

equipment)

Goal content

Goal commitment

Job knowledge and ability

Knowledge of results (or feedback)

1. Goal content

Outline » B. Organizational goals » How goals facilitate performance » 1. Goal content

Goals should be:

Within reasonable limits, difficult goals lead to higher performance; when individualsare asked to do their best, they typically do not perform nearly as well as they dowhen they have challenging goals.

1. Challenging

If individuals are making maximum use of their skills and abilities, they cannotachieve higher performance levels.

2. Attainable

Workers must clearly understand what is expected and know when the goal has beenachieved. When possible, goals should be stated in quantitative terms.

3. Specific and measurable

Otherwise, goals have little meaning – people can keep putting off achieving them.

4. Time-limited

In order to elicit support.

5. Relevant

2. Goal commitment

Outline » B. Organizational goals » How goals facilitate performance » 2. Goal commitment

One’s attachment to, or determination to reach, a goal.

Goal commitment

5 major factors, and another one sometimes helpful:

1. Supervisory authority

2. Peer and group pressure

3. Public display

4. Expectations of success

5. Incentives and rewards (only positive ones)

6. Participation

3. Work behavior

Outline » B. Organizational goals » How goals facilitate performance » 3. Work behavior

Goal content and goal commitment appear to affect an individual’s actual work behavior by influencing four factors:

Goals channel attention and action toward activities related to them.

Direction

Goals to which individuals are committed boost effort by mobilizing energy.

Effort

Some goals require persistence (maintaining direction and effort in behalf ofa goal until it is reached) – commitment to goals generates persistence.

Persistence

Individuals who have committed themselves to achieving difficult goals arelikely to develop plans or methods that can be used to attain those goals.

Planning

Potential problems with goals

Outline » B. Organizational goals » How goals facilitate performance » Potential problems

Solution: Analyze risk; avoid careless or foolish risks.

Excessive risk taking

Solution: Eliminate unnecessary stress by adjusting goal difficulty, adding staff, andoffering training in necessary skills.

Increased stress

Solution: Treat failure as a problem to be solved rather than a signal to punish.

Undetermined self-confidence (due to failure)

Solution: Make sure goals encompass key areas.

Ignored nongoal areas

Solution: Include some long-term goals.

Excessive short-run thinking

Solution: Set example of honesty, avoid using goals punitively, offer help inovercoming difficulties, give frequent feedback, and be open to informationindicating goals are inappropriate.

Dishonesty and cheating

C. Organizational plans

Outline » C. Organizational plans

Goals have little meaning unless careful consideration is given to how they will actually be achieved – goals are the desired ends,

plans are the means used to bring about the desired ends.

Plans differ by:

I. Level in the organization

II. Extent of recurring use

III. Time horizon

I. Levels of plans

Outline » C. Organizational plans » I. Levels of plans

Time intervals

Leve

l in

the

orga

niza

tion

high

middle

low

strategicplans

tacticalplans

operationalplans

1. Strategic plan

Outline » C. Organizational plans » I. Levels of plans » 1. Strategic plan

Detailed action steps mapped out to reach strategic goals. Address such issues as how to respond to changing conditions,

how to allocate resources, and what actions should be taken tocreate a unified and powerful organizationwide effort.

Developed by top management. Long time horizon (years).

Strategic plan

2. Tactical plan

Outline » C. Organizational plans » I. Levels of plans » 2. Tactical plan

The means charted to support implementation of the strategic planand achievement of tactical goals. Intermediate time frames (1 to 3 years). More specific and concrete than strategic plans. Outline the major steps that particular departments will take to

reach their tactical goals. Developed by middle managers.

Tactical plan

Strategy focuses on resources, environment, and mission, whereas tactics deal primarily with people and action.

3. Operational plan

Outline » C. Organizational plans » I. Levels of plans » 3. Operational plan

The means devised to support implementation of tactical plans andachievement of operational goals. Time frames of less than 1 year (even days). Developed by lower-level managers. Spell out specifically what must be accomplished over short time

periods in order to achieve operational goals.

Operational plan

II. Recurring use of plans

Outline » C. Organizational plans » II. Recurring use of plans

According to how frequently the plans will be used:

types

Plan aimed at achieving a specific goal that, once reached, will mostlikely not recur in the future.

a. Single-use plans

types

Plan that provides ongoing guidance for performing recurringactivities.

b. Standing plans

a. Single-use plans

Outline » C. Organizational plans » II. Recurring use of plans » a. Single-use plans

A plan that coordinates a set of limited-scope activities that do notneed to be divided into several major projects in order to reach amajor nonrecurring goal. Often has its own budget. May be one of several related to a particular program, or may be

a separate, self-contained set of activities sufficient to reach aparticular goal.

1. Project

A comprehensive plan that coordinates a complex set of activitiesrelated to a major nonrecurring goal. Typically involves several different departments or units. Is composed of several different projects. May take more than 1 year to complete.

2. Program

b. Standing plans

Outline » C. Organizational plans » II. Recurring use of plans » b. Standing plans

A general guide that specifies the broad parameters within whichorganization members are expected to operate in pursuit oforganizational goals.

3. Policy

A prescribed series of related steps to be taken under certainrecurring circumstances.

2. Procedure

A statement that spells out specific actions to be taken or not takenin a given situation.

1. Rule

III. Time horizons of goals and plans

Outline » C. Organizational plans » III. Time horizons of goals and plans

1 year

1 to 5 years

5+ years

Operational Tactical Strategic

Shortrange

Intermediaterange

Longrange

Goals

Plans

D. Contingency planning

Outline » D. Contingency planning

The determination of alternative courses of action to be taken if anintended plan is unexpectedly disrupted or rendered inappropriate.

Contingency planning

Action point 1:

Develop plan, considering contingency

events.

Action point 2:

Implement plan and formally identify

contingency events.

Action point 3:

Specify indicators for

the contingency events and

develop contingency

plans for each possible event.

Action point 4:

Successfully complete plan

or contingency

plan.

Monitor contingency event indicators and implement contingency plan if necessary.

E. Managing the planning process

Outline » E. Managing the planning process

Environment

Reluctance to establish goals

Resistance to change

Constraints

Time and expense

Start at the top

Recognize limits

Communication

Participation

Revision and updating

Contingency planning

Effective planning

Barriers to planning Overcoming the barriers

Barriers to effective planning

Outline » E. Managing the planning process » Barriers to effective planning

Rapid change, technological innovation, intense competition, andsimilar factors can each make it difficult for an organization toaccurately assess future opportunities and threats.

Dynamic and complex environment

The reason may be lack of confidence or fear of failure; if a managersets a goal that is specific concise, and time related, then whetherhe/she attains it is obvious; other factors: lack of ability, lack ofinformation, poor reward system.

Reluctance to establish goals

Barriers to effective planning (2)

Outline » E. Managing the planning process » Barriers to effective planning (2)

Almost by definition, planning involves changing one or moreaspects of the organization’s current situation. Reasons forresistance: fear of the unknown, a preference for familiar goals andplans, economic insecurity.

Resistance to change

A lack of human/financial/physical resources, governmentrestrictions, strong competition, a lack of information.

Constraints

“I’m too busy to plan today; I’ll do it tomorrow.”; effective planningtakes hours and hours of time, enormous energy, and anunwavering belief in its importance.

Time and expense

Overcoming the barriers

Outline » E. Managing the planning process » Overcoming the barriers

Top management must take the lead in establishing the importance ofplanning in determining the mission and strategy that the organization is tofollow. Such action sets the stage for subsequent planning at lower levelsand also reinforces the importance of planning to everyone in theorganization.

Starting at the top

Planning is not a panacea that will solve all of an organization’s problems,nor is it an iron-clad set of procedures to be followed at any cost »adjustments and exceptions are to be expected as the plan unfolds.

Recognizing the limits to planning

Planning must be communicated to others in the organization – everyoneinvolved in the planning process should know what the overridingorganizational strategy is, what the various functional strategies are, andhow they are all to integrated and coordinated.

Communication

Overcoming the barriers (2)

Outline » E. Managing the planning process » Overcoming the barriers (2)

It is important that people responsible for implementing plans have a voicein developing them from the outset – people are usually more committedto plans that they have helped to shape.

Participation

The manager should recognize that planning is a dynamic process in whichlong-range and intermediate plans are frequently revised and updated inresponse to new information ant the completion of short-range plans.

Revision and updating

Is especially useful when environmental turbulence is likely. Propercontingency planning enables the organization to avoid crisis management.When a contingency event occurs, the prepared organization is able tomake a smooth transition to the appropriate contingency plan rather thanhaving to react hastily by throwing a new plan together on short notice.

Contingency planning

F. Management by objectives

Outline » F. Management by objectives

A process through which specific goals are set collaboratively for theorganization as a whole and every unit and individual within it; thegoals are then used as a basis for planning, managing organizationalactivities, and assessing and rewarding contributions.

MBO

Dan C. Lungescu, PhD, assistant professor2015-2016