If a man takes no thought about what is distant, he will find sorrow near at hand.

He who will not worry about what is far off will soon find something worse than worry

Organizational Goal Setting & Planning

Chapter 7

Microsofts 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 citys television sets

Why should Bill Gates 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 Gates as a leader to decide where he wants the Company to be in future & how to get there

If you were in gates position, how would you make sure Microsoft employees keep todays business healthy while also taking a long-range view toward an uncertain future?

OVERVIEW OF GOALS & PLANS

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

PLAN
Is a blue print for goal achievement & specifies the necessary resource allocations, schedule, tasks & other actions Goals specify future ends Plans specify todays means

Planning: incorporates both ideas

determining the Organizations Goals defining the means for achieving them

Planning Example:
Compaq Goal to transform itself from a supplier of PCs to corporations into a maker of Machines for every market

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

How to achieve this Outcome ?

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

Levels of Goals

Levels of Strategies
A Large Company
Corp Level Strategy making is not just a task for top executive All managers at all level must be involved

Division Level

Functional Level

Operational Level

Mission Statement Our mission is to operate a chain of restaurants that will prepare & serve high quality food on timely basis & at reasonable prices

Strategic Goals (President & CEO)

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

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

VP-Marketing

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

VP- Finance

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

Advertising Director
Implement this years promotional strategy Develop regional advertising campaigns with in 1 year Negotiate 5 % lower advertising rates next yr

Accounting Manager

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

Mission Statement

Goals In Organizations
Organizational Mission The Organization reason for existence Describes the Organizations 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

What is Our Business ?

Statement of purpose that distinguishes one organization from other similar enterprises Declaration of an Org reason for being Answers the question What is our business Essential for effectively establishing objectives & formulating strategies Reveals what an ORG wants to be and whom it wants to serve

The Process of Developing a Mission Statement

Select several articles about MS- ask managers to read these as background information

Ask managers to prepare a mission statement for the Organization

A facilitator, or committee of top mangers- merge these statements into a single document & distribute the draft to all mangers

Request for modifications, additions, deletion is needed next along with meeting to revise to revise the document

Process of developing a mission statement represents a great opportunity for strategists to obtain needed support from all managers in the firm

Customers

Products Services

Markets

Technology Employees

Mission Elements
Survival Growth Profit Self-Concept Philosophy

Public Image

Who are the firms customers Customers What are the firms major products or Product/Service services?
Geographically, where does the firm compete? Markets Is the firms Technology Current Technology Concern for survival, growth & profitability
Is the firm committed to growth & financial soundness ?

Philosophy Self Concept

What are the basic beliefs, values, aspiration & ethical priorities of the firm?

What are the firms distinctive competence or major competitive advantage ?

Concern for public image

Is the firm responsive to social , community & environmental concerns?

Concern for employees

Are employees a valuable asset of the firm?

Mission Statement Evaluation Matrix

COMPONENTS Concern for Survival, Growth, Profitability

Organization

Customers

Products Services

Markets

Technology

PepsiCo Dell

Yes Yes

No Yes

No Yes

Yes Yes

No Yes

Mission Statement Evaluation Matrix

COMPONENTS

Organization

Philosophy

SelfConcept

Concern for Public Image

Concern for Employees

PepsiCo Dell Computer

Yes No

No Yes

No Yes

No No

Goals & Plans

Strategic Goals / Plans

Tactical Goals / Plans

Operational Goals / Plans

Strategic Goals
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

Strategic Plans
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

Tactical Goals
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

Tactical Plans
Designed to help execute major strategic plans & to accomplish a specific part of the companys 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

Operational Goals
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

Operational Plans
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: Book

Goal Hierarchy
Example : Strategic goal translate Lower mangT level Excellence service to customers Open new sales office

Respond to customer inquiries within two hours

Criteria For Effective Goals

Specific & Measurable Cover Key Result Areas

Challenging But Realistic Defined Time Period Linked To Rewards

Specific & Measurable

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

Cover Key Result Areas

Goals cannot be set for every aspect of employee behavior or Organizational performance Managers should identify a few key result areas4 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

Challenging but Realistic

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 depts time, equipment & financial resource
( Kmart: set a goal to have more revenues than Wal-Mart next year)

Defined Time Period

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

Linked To Rewards
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

Planning Types & Models Single-Use & Standing Plans

Single Use Plans: developed to achieve a set of goals that are not likely to be repeated in the future
Non programmed decision making of a kind situation
Programs Projects

Programs

Projects

A single use plan for a large Plans created to set of activities complete various aspects of a program Integrated set of plans Project may be a part of broader program
Example: NASA (to reach moon) Example : Lunar model capable of landing on the moon and returning to the earth

Standing Plans
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

McDonalds 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 McDonalds has SOPs 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
McDonalds prohibiting customers from using its telephones

Standing Plan : Ethical behavior by employees Policy : Employees expected to behave ethically in their dealings with suppliers & customers Rule : Requires any employee who receives from customer a gift larger than $10 report the gift SOP: recipient of the gift to make disclosure in writing with in 30 days

Contingency Planning & Crisis Management

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

Planning Types & Models

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

MBO
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 Plans 3) Reviewing Progress 4) Appraising overall Performance

Setting Goals
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

Developing Action plans

Defines the course of action needed to achieve the stated goals Action plans are made for both individuals and departments

Reviewing progress
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

Appraising overall performance

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

Benefits & Problems with MBO

Benefits
1. Manager & employee efforts are focused on activities that will lead to goal attainment Performance be improved at all company level Employees are motivated Departmental & individual goals are aligned with company goals
1. 2. Problems with MBO constant change prevents MBO from taking hold An environment of poor employer-employee relations reduces MBO effectiveness Strategic goals may be displaced by operational goals Mechanistic Org & values that discourage participation can harm the MBO process Too much paper work saps MBO energy

2.

3. 4.

3.

4.

5.

Organization Responsibility for Planning

Traditional Approaches To Planning

Central Planning Departments

Modern Approaches To Planning

Decentralized Planning Staff Planning Task Force

The New Paradigm

Find out the difference

Summary