Chapter 7

Microsoft’s Windows Is everywhere… Revenues & stock prices are at an all time high

If Bill plans succeed, one wont be able to escape Microsoft

Software will follow you on vacations Riding along in your car to map out the best

travel route Control your appliances & feed programs &

information to an entire city’s television sets

Why should Bill Gate’s worry about the future & suffer new product setbacks rather than concentrate on the business that has made Microsoft a dominant corporate Power?

Difficult for employees & top executives to see the need to contemplate future developments when a Company is successful like Microsoft

Bill Gate’s as a leader to decide where he wants the Company to be in future & how to get there

If you were in gate’s position, how would you make sure Microsoft employees keep

today’s business healthy while also taking a long-range view toward an

uncertain future?

If you were in gate’s position, how would you make sure Microsoft employees keep

today’s business healthy while also taking a long-range view toward an

uncertain future?

Companies like Shell, IBM, managers follow a well-defined planning framework.

Mission----Develop Formal Goals------Strategic Plans These companies undertake a strategic

planning exercise each year– reviewing their missions, goals, and plan to meet environmental changes

In this chapter “we are going to explore the process of planning

& whether it can help bring needed rain” Goals & goal setting

Types of plans organizations can use to achieve those goals

Goal Desired future state that Organization

attempts to realize Goals are important because Organization

exists for a purpose & goals define and state that purpose

Example: P&G set goal of doubling its revenues over a 10 year period

GE: every business owned by the firm would be either number 1 or number 2 in its industry

Is a blue print for goal achievement & specifies the necessary resource allocations, schedule, tasks & other actions

Goals specify future ends Plans specify today’s means

Planning: incorporates both ideas determining the Organization’s Goals defining the means for achieving

them

Compaq Goal – to transform itself from a supplier of PC’s to corporations into a maker of Machines for every market

From small pocket communicators to home computers, all at high competitive price

Began running factories around the clock Changed manufacturing system to a “build-

on-order” model Added thousands of retailers (Wal-Mart) Began working with Microsoft to become

the biggest maker of servers to anchor office networks

Launched a sub notebook “stunning turnaround at Compaq in only 2

years”

Developing explicit goals and plans at each level is important because of the external and internal audiences and provide important benefits for the Org

External Message

Internal Message

Legitimacy for investors,Customer

, suppliers,community

Legitimacy, motivation, guides, rationale, standards

Org mission describes what the org stands for and its reason for existences

Symbolizes legitimacy to external audiences such as investors, customers and suppliers

A strong mission also has an impact on employees enabling them to become committed to the organization because they can identify with its overall purpose & reason for existence

Example: Main Street Muffins

Things went great when Co. first began branching into new lines of business

New opportunities turned into problems Employee morale sank, calling sick at 3am,

walking off the job without no notice heading towards bankruptcy owner developed a mission statement to

remind themselves the main goal of MSM “ To profitably improve an organization that

overwhelms the food industry with its devotion to high-quality products & services”

Goal statement describes the purpose of the Org to employees

A goal provides the “ Why” of an Org’s existence

A plan tells employees what actions to undertake, “How” to achieve the goal

Goals & plans help motivate them by reducing uncertainty & Clarifying what the should accomplish

Example: Italian Furniture manufacturer

Each craftsperson has a goal for how long it should take to perform his/her job

Sewing leather sheets together to make sofa cushion etc

At the completion of tasks worker enter their ID numbers & job numbers into the firms computer

If , They get the job done faster than their goal, a bonus is automatically added to their paycheck

Goals and plans provide a sense of direction.

They focus attention on specific and direct employee efforts toward important outcomes

Through goal setting and planning managers learn what the Org is trying to accomplish

They can make decisions to ensure that internal policies, performance, products and expenditure will be made in accordance with desired outcomes

Decisions throughout the Org will be in alignment with the plan

Goals define desired outcomes for the Org, they also serve as performance criteria.

They provide standard of assessment When Organizations drift away from goals

and plans, they typically get into trouble Du Pont example

Example: United Way of America set a goal of collecting $250,000 from a particular small community

If midway through the campaign, they raised only $50000 they know that they need to change their efforts

If they succeed in raising $265000, evaluation of their efforts will take on an entirely different character

Organizational Mission The Organization reason for existence Describes the Organization’s values,

aspirations and reason for being Well-defined mission is the basis for

development of all subsequent goals and plans

More than half of the companies in the US now have a formal statement of some kind

Broadly stated definition of basic business scope and operations that distinguishes the organization from others of a similar type

Mission statements often reveal the company’s philosophy as well as purpose

Describes company characteristics such as corporate values, product quality, location of facilities and attitude toward employees

Strategic Goals / Plans

Tactical Goals / Plans

Operational Goals / Plans

Broad statement describing where the organization wants to be in the future

They pertain to the Org as a whole rather than to specific divisions or departments

Also called official goals, because they are the stated intentions of what the organization wants to achieve

Ex: P&G goal to double the sales revenues

The action steps by which the company intends to attain strategic goals

The strategic plan is the blueprint that defines the organizational activities and resource allocations– in the form of cash, personnel, space & facilities – required for meeting these targets

The purpose of strategic plans is to turn organizational goals into realities within that time period

Plans are set by BOD & Top management Have extended time Horizon

The results that major divisions and departments within the organization intend to achieve

These goals apply to middle management and describe what major subunits must do in order for the Org to achieve its overall goal

Ex: P&G might center on which new products to launch, which existing products to revise, and so forth

Designed to help execute major strategic plans & to accomplish a specific part of the company’s strategy

Have a shorter time horizon than strategic plans

The word tactical comes from the military Define what the major departments &

organizational subunits will do to implement the overall strategic plan

It involves middle management

Are set by and for lower level managers Specific results are expected from

departments, work groups and individuals They are precise and measurable “ Process 150 sales applications each

week” “ achieve 90 % of deliveries on time”Example: P&G might target number of new

products to launch each of the next five years

Developed at the lower levels of the Org to specify action steps toward achieving operational goals & to support tactical plans

Have a short-term focus & relatively narrow in scope

Is the departments managers tool for daily & weekly operations

Goals are stated in quantitative terms & the departments plan describes how goals will be achieved

Operational planning specifies plans for supervisors, deptt managers and individuals employees

Example: ICM (individual career mangt) program at Du Pont involves series of discussions that define what each managers new goals should be & whether last year’s Operational goals were met- if yes rewards to whose who excelled

Effectively designed Organizational goals fit into a hierarchy; that is the achievement of goals at low levels permits the attainment of high-level goals

Means-ends chain : low level goals lead to accomplishment of high-level goals

Shrinking of middle mangT combined with a new emphasis on employee in goal setting & planning at each level

Example : Strategic goal translate – Lower mangT level

“ Excellence service to customers”

“ Open new sales office”

“Respond to customer inquiries within two hours”

Mission StatementOur mission is to operate a chain of restaurants that will prepare & serve high quality

food on timely basis & at reasonable prices

•Keep corporate debt to no more than 20% of liquid assets for next ten years•Revise computerized accounting system with in five years

•Increase per store sales 5% per year for 10 years•Target & attract two new market segments during next 5 years• Develop new promotional strategy for next year

•Open 150 new restaurants during next five years•Decrease average customer wait by 30 seconds this year

•Implement this year’s promotional strategy•Develop regional advertising campaigns with in 1 year•Negotiate 5 % lower advertising rates next yr

•Competitive payroll system for each restaurant this year•Pay all invoices within thirty days

•Hire & train new assistant manager•Decrease waste by 5% this year•Implement incentive system within 1 year

•Start or purchase new restaurant•Chain within few years•Provide 14% return to investors for at least 10 years

Strategic Goals(President & CEO)

VP-Operations VP-Marketing VP- Finance

Restaurant Manager Advertising Director Accounting Manager

Specific & Measurable Cover Key Result Areas Challenging But Realistic Defined Time Period Linked To Rewards

Goals should be expressed in quantitative terms such as increasing profits by 2%, decreasing scrap by 1%

Not all goals can be expressed in numerical terms but vague goals have little motivating power for employees

At the Top Org, goals often are qualitative as well as quantitative

Example (Book): Trimming workforce b 8500, decentralizing into smaller units: Employee satisfaction

Goals cannot be set for every aspect of employee behavior or Organizational performance

Managers should identify a few key result areas—4 or 5 for any Organizational dept or job

Example: Marketing dept for ALLTEL key result areas for which goals were

specified 1. identify emerging areas of service opportunities 2.Improve marketing of existing products 3. develop a strategic market plan based on customer

needs

Goals should be challenging but not unreasonably difficult

When goals are unrealistic, they set employees up for failure and lead to decreasing employee morale

(staff working 100-hour weeks to accomplish everything expected of them)

How ever if goals are too easy, employee may not feel motivated

Managers should, however make sure that goals are set within the existing resource base, not beyond dept’s time, equipment & financial resource

( Kmart: set a goal to have more revenues than Wal-Mart next year)

Goals should specify the time period over which the will be achieved

A time period is a deadline specifying the date on which goal attainment will be measured

Example: Strategic sales goals could be established on a three-year time horizon

1st year target $100 million 2nd year target $129 million 3rd year target $165 million

The ultimate impact of goals depends on the extent to which salary increases, promotions and awards are based on goal achievement

People who attain goals should be rewarded

Rewards give meaning & significance to goals and help commit employee to achieving goals

Failure to attain goals often is due to factors outside employees control

Example: Federal Express stated goal of encouraging risk

Lost $233 M on an unsuccessful service called Zapmail, no one was punished

Single Use Plans: developed to achieve a set of goals that are not likely to be repeated in the future

Example: Disney theme park in Honk Kong- individuals rides, attractions & hotels\

Programs Projects

Programs A single use plan for a

large set of activities Example: Black &

Decker brought GE small appliance business: largest brand name switch in history

140 steps were used for each product

Projects similar to projects but

is generally of less scope and complexity

Project may be a part of broader program

Conversion of each of the 150 product was a separate project

Are the ongoing plans that are used to provide guidance for tasks performed repeatedly within the organization

Policies Standing Operating Procedures Rules & Regulations

Policy: Organizations general response to a designated problem or situation

McDonald’s will not grant a franchise to an individual who already owns another fast-food restaurant

University admission will be granted only to applicants with a min SAT score

Standing Operating Procedures: More specific than policy, in that it outlines the steps to be followed in particular circumstances

McDonald’s has SOP’s explaining how Big Macs are to be cooked, how long they can stay in the warming rack and so forth

Rules & Regulations : Narrowest of the standing plans, describe exactly how specific activities are to be carried out

McDonald’s prohibiting customers from using its telephones

Contingency Planning: Company responses to be taken in the case of emergencies or setbacks

Determination of alternative course of action to be taken if an intended plan of action is unexpectedly disrupted

Example: Y2K Bug: banks, hospital Org

Crisis Management : set of procedures the org uses in the even of disaster

Example: 911

Management by Objectives (MBO) Setting Goals Developing Action Plans Reviewing Progress Appraising overall Performance

Is a method whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance

1) Setting Goals 2) Developing Action Plans3) Reviewing Progress4) Appraising overall Performance

This is the most difficult step in MBO Setting goals involves employees at all levels and

looks beyond day-to-day activities to answer the question “What are we trying to accomplish?”

A good goal should be concrete & realistic, provide a specific target & time frame & assign responsibility

Goals maybe quantitative or qualitative, depending on whether outcomes are measurable

Example: “salesperson Jones will obtain 16 new accounts in

December” Quantitative terms “Marketing will reduce complaints by improving

customer service next year” Qualitative terms Mutually agreed : All members should participate

in setting goals

Defines the course of action needed to achieve the stated goals

Action plans are made for both individuals and departments

A periodic progress review is important to ensure that action plans are working.

These reviews can occur informally between managers and subordinates

(Org may wish to conduct 3, 6, 9 month reviews during the year)

this checkup allows managers & employees to see whether they are on target or whether corrective action is necessary

The point of MBO is to achieve goals The Action plan can be changed whenever

goals are not being met

The final step in MBO is to carefully evaluate whether annual goals have been achieved for both individuals and departments

Success or failure to achieve goals can become part of the performance appraisal system and the designation of salary increases & other rewards

This appraisal of departmental & overall corporate performance shapes goals for next year

MBO cycle repeats itself on an annual basis Example: High employee accident rate: Gas

Company

Benefits1. Manager & employee

efforts are focused on activities that will lead to goal attainment

2. Performance be improved at all company level

3. Employees are motivated

4. Departmental & individual goals are aligned with company goals

Problems with MBO1. constant change

prevents MBO from taking hold

2. An environment of poor employer-employee relations reduces MBO effectiveness

3. Strategic goals may be displaced by operational goals

4. Mechanistic Org & values that discourage participation can harm the MBO process

5. Too much paper work saps MBO energy

Traditional Approaches To Planning Central Planning Departments

Modern Approaches To Planning Decentralized Planning Staff Planning Task Force

The New Paradigm

Find out the difference