14-Jun-18

Chapter 7
Planning
and
Goal Setting

Learning Outcomes
After studying this chapter, you should be able to:
1. Define goals and plans and explain the relationship between them.
2. Explain the concept of organizational mission and how it influences
goal setting and planning.
3. Categorize the types of goals an organization should have.
4. Explain how managers use strategy map to align goals.
5. Define the characteristics of effective goals.
6. Outline the four essential steps in the management-by-objectives
(MBO) process.
7. Compare and contrast single-use-plans standing plans.
8. Discuss the benefits and limitation of planning.
9. Describe contingency planning, scenario building, and crisis planning,
and explain the importance of each for today’s managers.
10. Identify innovative planning approaches that managers use in a fast-
changing environment.

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Goal Setting and Planning Overview

Goal
 A desired future circumstance or condition that the
organization attempts to realize

Plan
 A blueprint for goal achievement and specifies the
necessary resource allocations, schedules, tasks, and
other actions.

Levels of Goals and Plans

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The Organizational Planning Process

Planning and Goal Setting

• Planning is the most fundamental of the four
management functions.
• A goal is a desired future circumstance or condition that
the organization wants to realize.
• Planning is the act of determining goals and defining
the means of achieving them.
• A plan is a blueprint specifying the resource
allocations, schedules, and other actions necessary for
attaining goals.
• Planning helps managers think about the future rather
than thinking merely in terms of day-to-day activities.

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Goal Setting in Organizations

• The overall planning process beings with a mission
statement and goals for the organization as a
whole.
Organizational Mission

Mission
• The Organization’s reason for existence.

Mission Statement
• A broadly stated definition of purpose that
distinguishes the organization from others of a
similar types.

Goals and Plans

Strategic Goals
• Broad statements describing where the organization wants to be in the
future.
Strategic Plans
• The action steps by which the company intends to attain strategic goals.
Tactical Goals
• The results that the major divisions and departments within the
organization intend to achieve.
Tactical Plans
• Plans are designed to help execute the major strategic plans and to
accomplish a specific part of the company’s strategy.
Operational Goals
• The results expected from departments, work groups, and individuals
Operational Plans
• Plans developed at the lower levels of the organization to specify action
steps toward achieving operational goals and to support tactical plans.

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Planning and Goal Setting

Planning and Goal Setting

• Planning starts with the organization’s purpose or reason
for existence which is called its Mission.
• A Mission Statement is a broadly stated definition of the
organization’s basic business scope and operations that
distinguishes it from similar types of organizations.
• Goals begin with broad strategic goals, followed by more
specific tactical goals, and then operational goals.
• Plans are defined similarly, which strategic, tactical, and
operational plans used to achieve the desired goals.
• Strategic goals are broad statements of where the
organization wants to be in the future and pertain to the
organization as a whole, rather than to specific divisions or
departments.
• Strategic Plans are the action steps by which an
organization intends to attain strategic goals.

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• The outcomes that major divisions and departments must

achieve for the organization to reach its overall goals are
called Tactical goals.
• Tactical Plans are designed to help execute major
strategic plans and to accomplish a specific part of the
company’s strategy.
• Operational Goals are specific, measurable results that are
expected from departments, work groups and individuals.
• Operational Plans specify the action steps toward
achieving operational goals and support tactical activities.
• Managers at Unilever set a strategic goal to double
revenues, to €80 billion, by 2020.
• Goals and plans need to be in alignment so that they ate
consistent and mutually supportive.
• A Strategy Map is a visual representation of the key drivers
of an organization’s success, showing the cause-and-effect
relationship among goals and plans.

Criteria for Effective Goals

• When possible, operational goals should be expressed in
quantitative terms, such as increasing profits by 2%.
Are specific and
measurable

Have a defined time

Are linked to rewards Effective
period
Goal

Are challenging but

Cover key result areas
realistic

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Management-By-Objectives (MBO)

MBO

Focuses manager
Aligns individual
and employee Can improve
Improves and
efforts on performance
employee departmental
activities that will at all company
motivation. goals with
lead to goal levels
company goals
attainment.

Single-Use Plans and Standing Plans

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Managers Formulate goals

• Managers formulate goals that are specific and measurable cover key result area, area
challenging but realistic, have a defined time period, and are linked to rewards.
• Key performance indicators (KPIs) are measures that reflect how well lower-level
goals are helping that organization progress toward attaining its strategic goal.
• Types of operational planning include management-by-objectives, single-use plans
and standing plans.
• Management-by-objectives (MBO) is a method whereby managers and employees
define goals for every department, project, and person and use them to monitor
subsequent performance MBO includes the steps of setting goals, developing action
plans, reviewing progress, and appraising performance.
• A recent approach that focuses people on the methods and processes used to attain
results, rather that on the results themselves, is called Management By Means
(MBM).
• Single-use Plans are plans that are developed to achieve a set of goals that are
unlikely to be repeated in the future.
• Standing plans are ongoing plans that are used to provided guidance for tasks that’s
occur repeatedly in the organization.
• One example of standing plan is a social media policy.

Benefits and Limitations of Planning

• Goals and plans provide a source of motivation
and commitment
• Goals and plans guide resource allocation
• Goals and plans are a guide to action
• Goals and plans set a standard of performance
• Goals and plans can create a false sense of
certainty
• Goals and plans may cause rigidity in a turbulent
environment
• Goals and plans can get in the way of intuition
and creativity

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Contingency Planning and Scenario building and Crisis Planning

• Managers use innovative planning approaches to cope with today’s
turbulent environment.
• Contingency planning identifies important factors in the
environment and defines a range of alternative responses to be taken
in the case of emergencies, setbacks, or unexpected conditions.
• With scenario building, managers look at trends and discontinuities
and imagine possible alternative futures to build a framework within
which unexpected future events can be managed.
• Scenarios are alternative vivid pictures of what the future might be
like .
• Many companies increased their use contingency and scenario
planning because of the global financial crisis and volatile economic
conditions.
• Crisis Planning involves the two major stages of prevention and
preparation.

Decentralized planning, Stretch goals and Intelligence

Team
• Approaches to planning change with the time. In many companies
today, planning is decentralized.
• Decentralized planning means that top executives or planning
experts work with managers in major divisions or departments to
develop their own goals and plans.
• Stretch goals are reasonable yet highly ambitious and compelling
goals that energize people and inspire excellence.
• At Amazon, a stretch goal was to build the first Kindle e-reader with
built-in cellular access so people didn’t have to connect to a PC.
• Business performance dashboards can help managers oversee plans
and measure progress toward goals.
• An intelligence team is a cross-functional group of people who work
together to gain a deep understanding of a specific competitive issue
and offer insight and recommendations for planning