Chapter 7Chapter 7Basic Elements ofBasic Elements of

Planning and Planning and

Decision MakingDecision Making

The Planning ProcessThe Planning Process

The Environmental The Environmental ContextContext

Organizational GoalsOrganizational Goals

Goals are critical to Goals are critical to organizational organizational effectiveness, and they effectiveness, and they serve a number of serve a number of purposes.purposes.

Purposes of Purposes of GoalsGoals

Goals serve four important Goals serve four important purposespurposes

11stst Purpose Purpose

They provide guidance and a They provide guidance and a unified direction for people in unified direction for people in the organization. Goals can the organization. Goals can help everyone understand help everyone understand where the organization is where the organization is going and why getting there is going and why getting there is important.important.

11stst Purpose Example Purpose ExampleSeveral years ago, top managers at Several years ago, top managers at General ElectricGeneral Electric set a goal that set a goal that every business owned by firm would every business owned by firm would be either number one or number two be either number one or number two in its industry.in its industry.

This goal still helps set the tone for This goal still helps set the tone for decisions made by decisions made by GE managersGE managers as as it compare with other firms like it compare with other firms like WhirlpoolWhirlpool and and Electrolux.Electrolux.

22ndnd Purpose Purpose

Goal setting practices Goal setting practices strongly affect other aspects strongly affect other aspects of planning. Effective goal of planning. Effective goal setting promotes good setting promotes good planning, and good planning planning, and good planning facilitates future goal setting.facilitates future goal setting.

22ndnd Purpose Example Purpose Example

The ambitious revenue goal set for The ambitious revenue goal set for P&G (Procter & Gamble Co) P&G (Procter & Gamble Co) demonstrates how setting goals and demonstrates how setting goals and developing plans to reach them developing plans to reach them should be seen as complementary should be seen as complementary activities. The strong growth goal activities. The strong growth goal should encourage managers to plan should encourage managers to plan for expansion.for expansion.

33rdrd Purpose PurposeGoals can serve as a source of Goals can serve as a source of motivation for employees of the motivation for employees of the organization. Goals that are organization. Goals that are specific and moderately difficult specific and moderately difficult can motivate people to work can motivate people to work harder, especially if attaining the harder, especially if attaining the goal is likely to result in rewards.goal is likely to result in rewards.

33rdrd Purpose Example Purpose Example

The Italian furniture manufacturer The Italian furniture manufacturer Industrie Natuzzi SpA uses goals Industrie Natuzzi SpA uses goals to motivate its workers.to motivate its workers.

If a worker get his job done faster If a worker get his job done faster than their goal, a bonus is than their goal, a bonus is automatically added to their automatically added to their paycheck.paycheck.

44thth Purpose PurposeGoals provide an effective Goals provide an effective mechanism for evaluation mechanism for evaluation and control. This means that and control. This means that performance can be assessed performance can be assessed in the future in the terms of in the future in the terms of how successfully today’s goal how successfully today’s goal are accomplished.are accomplished.

44thth Purpose Example Purpose ExampleSuppose that officials of United Way of Suppose that officials of United Way of America set a goal of collecting 250,000$ America set a goal of collecting 250,000$ from particular small community.from particular small community.

If they collect 50,000$ in the midway If they collect 50,000$ in the midway they have to change their efforts and they have to change their efforts and plans.plans.

If they collect 200,000 in the midway If they collect 200,000 in the midway they change their efforts and collect they change their efforts and collect more for their good performance.more for their good performance.

Kinds of GoalsKinds of Goals

There are four kinds of goalsThere are four kinds of goals

1.1. MissionMission

2.2. Strategic GoalsStrategic Goals

3.3. Tactical GoalsTactical Goals

4.4. Operational GoalsOperational Goals

MissionMission

A statement of an A statement of an organization’s fundamental organization’s fundamental

purpose.purpose.

Strategic GoalsStrategic Goals

A goal set by and for top A goal set by and for top management of the management of the

organization.organization.

Tactical GoalsTactical Goals

A goal set by and for middle A goal set by and for middle managers of the organization.managers of the organization.

Operational GoalsOperational Goals

A goal set by and for lower-A goal set by and for lower-level managers of the level managers of the

organization.organization.

Goals SettingsGoals Settings

Goals also set byGoals also set byLevelLevelAreaAreaTime FrameTime Frame

Managing Multiple GoalsManaging Multiple Goals

Sometimes organization have to Sometimes organization have to manage multiple goals this manage multiple goals this

Concept is called Concept is called OptimizingOptimizing..

OptimizingOptimizing

Balancing and reconciling Balancing and reconciling possible conflicts among possible conflicts among

goals.goals.

Example of OptimizingExample of OptimizingFew years ago Nike was making high Few years ago Nike was making high Quality shoes but not stylish. As a Quality shoes but not stylish. As a result the company lost market result the company lost market share.share.

On the other hand Reebok On the other hand Reebok International started making both International started making both High Quality and Fashionable shoes.High Quality and Fashionable shoes.

Organizational PlanningOrganizational Planning

Process of identifying an Process of identifying an organization’s immediate and organization’s immediate and long term objectives and long term objectives and formulating and monitoring formulating and monitoring specific strategies to achieve specific strategies to achieve them.them.

Kinds of Organizational PlansKinds of Organizational Plans

There are three kinds of There are three kinds of goals.goals.

1.1.Strategic PlansStrategic Plans

2.2.Tactical PlansTactical Plans

3.3.Operational PlansOperational Plans

Strategic PlansStrategic Plans

A general plan outlining A general plan outlining decisions of resource decisions of resource allocation, priorities, and allocation, priorities, and action steps necessary to action steps necessary to reach strategic goals.reach strategic goals.

Tactical PlansTactical Plans

A plan aimed at achieving A plan aimed at achieving tactical goals and developed tactical goals and developed to implement parts of a to implement parts of a strategic plan.strategic plan.

Operational PlansOperational Plans

Focuses on carrying out Focuses on carrying out tactical plans to achieve tactical plans to achieve operational goals.operational goals.

Time frames for Time frames for PlanningPlanning

Long-Range PlansLong-Range PlansIntermediate PlansIntermediate PlansShort-Range PlansShort-Range Plans

Long-Range PlansLong-Range Plans

A plan that covers many A plan that covers many years, perhaps even decades; years, perhaps even decades; common long-range plans are common long-range plans are for five years or more.for five years or more.

Intermediate Plans

A plan that generally covers from one to five years plans.

Short-Range Plans

A plan that generally covers a span of one year or less.

There are two basic kinds of Short-Range plans

1.Action Plan

2.Reaction Plan

Action & Reaction Plan

Action Plan:- A plan used to

operationalize any other kind of plan.

Reaction Plan:- A plan developed to

react to an unforeseen circumstance.

Responsibilities for Planning

All managers engage in planning to some degree.

Example

Marketing Sales managers develop plans for target markets, market penetration and sales increases.

Responsibilities for Planning

Planning also associated with the group of managers rather than with the individual managers.

Planning Staff Planning Task Force

Board of Directors Chief Executive Officer

Executive Committee Line Management

Crisis ManagementCrisis Management

Crisis managementCrisis management is the is the process by which an organization process by which an organization deals with a major event that deals with a major event that threatens to harm the threatens to harm the organization, its stakeholders, or organization, its stakeholders, or the general public.the general public.

Contingency Contingency PlanningPlanning

A A contingency plancontingency plan is a plan is a plan devised for a specific situation when devised for a specific situation when things could go wrong. Contingency things could go wrong. Contingency plans are often devised by plans are often devised by governments or businesses who want governments or businesses who want to be prepared for anything that to be prepared for anything that could happen.could happen.

Ongoing Planning Ongoing Planning ProcessProcess

Types of Operational Types of Operational PlansPlans

There are two types of Operational There are two types of Operational PlansPlans

Single-Use PlanSingle-Use Plan

Standing PlanStanding Plan

Single-Use PlanSingle-Use Plan

Single-use plans are created to address Single-use plans are created to address short-term challenges or provide short-term challenges or provide guidance for short-term initiatives. guidance for short-term initiatives. Single-use plans can be created in Single-use plans can be created in teams or by individual managers. The teams or by individual managers. The scope of these plans is generally smaller scope of these plans is generally smaller than the scope of standing plans.than the scope of standing plans.

Types of Single-Use PlanTypes of Single-Use Plan

Program:-Program:- A single-use plan for a A single-use plan for a

large set of activities.large set of activities.

Project:-Project:-A single-use plan of less A single-use plan of less

scope and complexity than a scope and complexity than a program.program.

Standing PlanStanding Plan

Standing plans are used over a long Standing plans are used over a long period of time, sometimes period of time, sometimes indefinitely, and can be altered to indefinitely, and can be altered to adapt to changing circumstances. A adapt to changing circumstances. A standing plan is often created with standing plan is often created with input from a wide range of input from a wide range of individuals over a longer period of individuals over a longer period of time than single-use plans. time than single-use plans.

Types of Standing PlansTypes of Standing Plans

Policy:- Policy:- A standing plan that furnishes A standing plan that furnishes broad guidelines for taking action consistent broad guidelines for taking action consistent with reaching organizational objectives.with reaching organizational objectives.Standard Operating Standard Operating Procedure(SOP):-Procedure(SOP):-A standing plan that A standing plan that outlines a series of related actions that outlines a series of related actions that must be taken to accomplish a particular must be taken to accomplish a particular task.task.Rules and Regulations:-Rules and Regulations:-Describe Describe exactly how specific activities are to be exactly how specific activities are to be carried out.carried out.

Barriers to Barriers to Goal Setting and PlanningGoal Setting and Planning

Inappropriate GoalsInappropriate GoalsImproper Reward SystemImproper Reward SystemDynamic and Complex Dynamic and Complex EnvironmentEnvironmentReluctance to Establish GoalsReluctance to Establish GoalsResistance to changeResistance to changeConstraintsConstraints

Overcoming the BarriersOvercoming the Barriers

Understand the Purposes of Understand the Purposes of Goals and PlanningGoals and Planning

Communication and ParticipationCommunication and Participation

Consistency, Revision and Consistency, Revision and UpdatingUpdating

Effective Reward SystemsEffective Reward Systems

Management byManagement byObjectives (MBO)Objectives (MBO)

Management by ObjectivesManagement by Objectives (MBO) is a process of defining (MBO) is a process of defining objectives within an organization objectives within an organization so that management and so that management and employees agree to the employees agree to the objectives and understand what objectives and understand what they need to do in the they need to do in the organization.organization.

Management by Objective Management by Objective (MBO)(MBO)

The Formal Goal-setting The Formal Goal-setting ProcessProcess

Formal goal setting is an Formal goal setting is an effective technique for effective technique for integrating goal setting integrating goal setting and planning.and planning.

The Formal Goal-setting The Formal Goal-setting ProcessProcess

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