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Management 11th Edition Griffin Solutions Manual 1
Management 11th Edition Griffin Solutions Manual 1
SOLUTIONS MANUAL
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CHAPTER 7
Basic Elements of Planning and Decision Making
Part III of this book is entitled PLANNING AND DECISION MAKING. Its fundamental purpose is to
discuss the first basic management function—planning and decision making.
Part III has four chapters. Chapter 7 introduces the basic elements of planning and decision making.
Chapter 8 focuses on strategy and strategic planning. Chapter 9 addresses the management of decision
making. Entrepreneurship is the focus of Chapter 10.
Teaching Tip: Some instructors prefer to cover the material in Chapter 10 separately at the end of the
course. If you prefer this method, the chapter is written so that it can be covered “out of sequence.”
CHAPTER SUMMARY
Chapter 7 is the first of four devoted to planning and decision making. Its purpose, therefore, is to
introduce the basic elements of this management function and to build a foundation for the more detailed
coverage of the material that follows in the remaining chapters of the part.
LEARNING OBJECTIVES
After covering this chapter, students should be able to:
1. Summarize the function of decision making and the planning process.
2. Discuss the purpose of organizational goals, identify different kinds of goals, discuss who sets goals,
and describe how to manage multiple goals.
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Chapter 7: Basic Elements of Planning and Decision Making
3. Identify different kinds of organizational plans, note the time frames for planning, discuss who
plans, and describe contingency planning.
4. Discuss how tactical plans are developed and executed.
5. Describe the basic types of operational plans used by organizations.
6. Identify the major barriers to goal setting and planning, how organizations overcome those barriers,
and how to use goals to implement plans.
American International Group (AIG) benefitted financially by acting as the insurer for insurance
companies. In effect, it mitigated the risks for insurance companies by taking on those risks itself. When
the bottom fell out of the housing market in 2007, AIG lost billions of dollars and showed how risks its
strategy was.
Teaching Tip: Take a couple of insurance and investment banking companies as examples – say,
Travelers and Goldman Sachs – and examine how these companies managed their risks.
LECTURE OUTLINE
I. DECISION MAKING AND THE PLANNING PROCESS
Teaching Tip: Stress for students that the planning process portrayed in Figure 7.1 reflects an orderly
and logical sequence of steps. In reality, of course, the actual planning process used in any given
situation will likely reflect some variation in this process.
Decision making drives planning. Decisions underlie the establishment of organizational goals, for
example, and the formulation and implementation of all plans.
In order to plan effectively, managers must understand the environmental context in which the
organization exists. They must establish a mission that includes the organization’s purpose,
premises, values, and directions. Strategic goals and plans are devised from the mission statement;
tactical goals and plans are generated from the strategic goals and plans; and operational goals and
plans are devised from the tactical goals and plans.
Cross-Reference: Note for students that we are simply introducing decision making here. It is covered
much more thoroughly in Chapter 9.
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Chapter 7: Basic Elements of Planning and Decision Making
Strategic goals are set by and for the top managers of the organization who focus on
broad, general issues.
Tactical goals are set by and for middle managers who focus on how to operationalize
actions necessary to achieve the strategic goals.
Operational goals are set by and for lower-level managers who focus on shorter-term
issues associated with the tactical goals.
2. Goals are set for different areas such as finance, marketing, or human resources.
3. Goals are set across different time frames (long-term, intermediate-term, and short-term).
The length of each time frame differs by level.
C. Responsibilities for Setting Goals
All managers should be involved, but each manager generally is responsible for setting goals
that correspond to his or her level in the organization.
Teaching Tip: Figure 7.2 illustrates the kinds of organizational goals that might be set for a regional
fast-food restaurant chain.
Group Exercise: After discussing the material in the section titled “Kinds of Goals”, have students
construct a hypothetical hierarchy of goals like those shown in Figure 7.2 for different kinds of
organizations such as a retailer, a manufacturer, a college or university, and so forth.
D. Managing Multiple Goals
Goals set by different areas or at different levels may conflict. Optimizing involves balancing
and reconciling possible conflicts between goals.
Discussion Starter: Ask students to identify situations in which they have had to optimize multiple
goals. A very relevant example for students is the trade-off between socializing and studying for a test
or between studying for multiple tests during final exam periods.
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Chapter 7: Basic Elements of Planning and Decision Making
Management Update: As a corollary to the point noted above, planning task forces have become more
popular in recent years as firms have attempted to get their operating managers more involved in
planning.
Extra Example: Tenneco is a good example of a firm that has taken this approach. While Tenneco still
has a planning staff, it is much smaller than it was a few years ago. Its members usually provide
support for planning task forces composed of operating managers.
2. Planning task force—A planning task force is a group of line managers with a special
interest in the area of planning who are grouped together to address a particular issue.
Members of the planning staff also may be included in the task force.
Management Update: As the role of planning task forces has increased, so too has the role of
executive committees. These committees provide a natural analog to a planning task force. That is, the
executive committee can represent senior management, and a planning task force can represent line
management. The two groups can then work together to effectively develop plans.
3. Board of directors—The board of directors establishes the corporate mission and
strategy.
4. Chief executive officer—The CEO plays a major role in the complete planning process
and is responsible for implementing the strategy.
5. Executive committee—The executive committee provides input to the CEO on the
proposals that affect their own units and reviews the various strategic plans that develop
from this input.
Extra Example: Again, this closely mirrors the approach used at Tenneco today. The firm’s executive
committee works with planning task forces, with the efforts of both supported and assisted by a small
planning staff.
6. Line management—Line managers are individuals with formal authority and
responsibility for the management of the organization. They provide valuable inside
information as plans are formulated and implemented, and they execute the plans
developed by top management.
D. Contingency Planning
Contingency planning is the determination of alternative courses of action to be taken if an
intended plan of action is unexpectedly disrupted or rendered inappropriate.
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Chapter 7: Basic Elements of Planning and Decision Making
Contingency planning usually involves various action points that are used to identify the need
to implement alternative plans.
Extra Example: Starbucks recently developed a contingency plan. Recent frosts in Brazil drove up the
price of coffee beans to the point that Starbucks increased its own prices by 10 percent. It then
developed a contingency plan for dealing with future pricing alternatives. If the price of beans drops to
previous levels, Starbucks will lower its own prices back to previous levels as well. If bean prices
remain high, however, Starbucks will also keep its own prices high.
Discussion Starter: Ask students to recall examples of times when they have engaged in contingency
planning.
A closely related concept is crisis management—the set of procedures the organization uses in
the event of a disaster or other unexpected calamity.
IV. TACTICAL PLANNING
Tactical plans are an organized sequence of steps designed to execute strategic plans.
A. Developing Tactical Plans
Tactical plans must address a number of tactical goals derived from a broader strategic goal,
must deal with specific resource and time issues, and require the use of human resources.
B. Executing Tactical Plans
For proper execution of tactical plans, a manager must evaluate possible courses of action in
light of the goal, make sure each decision maker has the information and resources necessary
to get the job done, ensure vertical and horizontal communication to minimize conflicts and
inconsistent activities, and monitor ongoing activities derived from the plans to make sure the
desired end results are achieved.
V. OPERATIONAL PLANNING
A. Single-Use Plans
A single-use plan is developed to carry out a course of action that is not likely to be repeated
in the future.
1. Program—a single-use plan for a large set of activities
Extra Example: In 2009, Disney acquired Marvel Comics. The process of integrating the two
companies was a program.
2. Project—similar to a program, but generally of less scope and complexity
B. Standing Plans
A standing plan is used for activities that recur regularly over a period of time.
1. Policy—specify the organization’s general response to a designated problem or situation.
Discussion Starter: Give students several examples of policies at your college or university, for
example, the school’s policy regarding scholastic honesty or sexual harassment. Ask the students to
describe why that policy was developed. In the students’ opinion, is the policy adequately addressing
the problem?
2. Standing operating procedure (SOP)—outlines the steps to be followed in particular
circumstances.
3. Rules and regulations—describe exactly how specific activities are to be carried out.
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Chapter 7: Basic Elements of Planning and Decision Making
Interesting Quote: McDonald’s is famed for its SOPs and rules and regulations. To see where this
mentality comes from, consider this quote from Ray Kroc, founder of McDonald’s: “The French Fry
has become almost sacrosanct for me. Its preparation is a ritual to be followed religiously.” (Fortune,
July 3, 1989, 80.)
Discussion Starter: Ask students for examples of rules and regulations they have encountered that they
did not understand.
Group Exercise: Form students into small groups of four or five members each. Have each group
identify a rule or regulation. Then have them attempt to find out when and why that rule or regulation
was adopted, and how many exceptions are made to it.
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Chapter 7: Basic Elements of Planning and Decision Making
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Chapter 7: Basic Elements of Planning and Decision Making
Extra Example: Managers at Cypress Semiconductor use a comprehensive form of MBO to guide
virtually all performance. Each employee has dozens of goals, all of which are stored and continually
updated in a central computer network.
2. The process of formal goal setting must start at the top. Top managers must communicate
why they adopted the process, what it will accomplish, and that they are committed to it.
Employees must be educated about formal goal setting and it must be implemented in a
consistent manner. The process begins with collaborative goal setting between a manager
and a subordinate as the goals are clarified and written down. The resources needed to
achieve the goals are discussed and periodic reviews are held to ensure the subordinate is
on track in achieving the goals.
3. Formal goal setting can be effective in improving employee motivation, enhancing
communication, and making performance appraisals more objective. The process can be
ineffective if top management does not support it, if lower-level managers and
employees do not accept the goals of the organization, or if there is an overemphasis on
quantitative goals and plans.
Group Exercise: Have students develop a formal goal-setting system that could be used in teaching a
class such as this one.
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Chapter 7: Basic Elements of Planning and Decision Making
standing plans and can substitute for decision-making. Many airlines have a rule, for example, that a
flight attendant must smile at each passenger who addresses him or her.
4. List the steps in the formal goal-setting process. What are some of the advantages for companies
that use this approach? What are some of the problems that may arise from use of this approach?
Formal goal setting can increase employee motivation towards the accomplishment of specific
goals. It can also enhance communication and make decision making more objective. Formal goal
setting facilitates control too. Problems of formal goal setting include poor implementation, lack of
top management support, the burdensome paperwork that formal goal setting can encourage, and the
rigidity that can result.
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Chapter 7: Basic Elements of Planning and Decision Making
9. Tell about a time when an organization was not able to fully achieve all of its goals simultaneously.
Why did this occur? Is complete realization of all goals impossible for an organization? Why or
why not?
Students’ answers will vary, but here is one example: “At my workplace, we seek to hire
experienced personnel who will be able to offer great customer service, but our budget is limited, so
instead we usually hire entry-level workers, whose customer-service skills are weaker.” Other
reasons for the inability to achieve goals simultaneously might be related to a constraint in other
resources, such as insufficient labor, raw materials, or time. In theory, organizations should be able
to find creative ways to satisfy many or all goals simultaneously. In practice, organizations with
complex sets of stakeholders must try to assure that each group has at least some of its needs met
but is unlikely to be able to fully satisfy all groups.
10. From your library or the Internet, find information about a company’s mission statement and goals.
List its mission and some of its strategic, tactical, and operational goals. Explain the relationship
you see among the goals at different levels.
Answers will vary. For example, if students investigated the mission statement of the IRS, they
would find: “to provide America’s taxpayers with top quality service by helping them understand
and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.”
Among their strategic initiatives are the ability for all taxpayers to file their returns electronically. A
tactical plan that builds on that strategy is the development of relationships with third-party
providers of tax services, such as H&R Block. An operational plan that builds on that tactic is the
development of an IRS web site, which offers specific help and instructions online for every tax
form, to aid online filers. In general, students should find that the mission, strategy, tactics, and
operations build on plans at the previous level.
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Chapter 7: Basic Elements of Planning and Decision Making
D. If the team decides to keep the plant open, it must draw up a plan explaining how the company
can still remain competitive.
The team has to keep cost as well as quality issues in mind. The Italian competitors are
currently beating them on both fronts.
E. Each member of each team should be prepared to explain the choices that he or she made in
helping the group reach its decision.
MANAGEMENT AT WORK
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Chapter 7: Basic Elements of Planning and Decision Making
management process if the stepping down of the current CEO is sudden, which may happen due to
health or other reasons.
2. Case Question 2: How might a company use the process of goal setting to help it implement its
succession plan? Be sure to consider the barriers to successful implementation that it might
encounter.
The company can frame its long-term goals and find a person whose skills are best suited to lead the
organization toward those goals. Of course, such a process may be difficult to implement because
the goals may not be agreed upon and the suitability of various candidates may be debated.
3. Case Question 3: When asked if Apple would provide more details about Jobs’s second leave of
absence, a company spokeswoman responded ‘we’ve said all we’re going to say.” Is Apple
obligated to offer any more details, particularly about the health of its CEO? One lawyer who
advises corporate boards on such questions says that such details are material to investment
decisions only “if you’re asking shareholders to make decision based on [that] information …. You
can’t expect the company,” he adds, “to give a blow-by-blow account of Steve Jobs’s health.” What
do you think? If you were an Apple investor, what information would you regard as “material” to
your decisions? What would you want to know in deciding whether to keep or sell your shares of
Apple?
Not all companies are like Apple in that Steve Jobs is so closely identified with the company’s
amazing success that there is palpable fear that without him the company’s stream of innovative hit
products could very well come to an end. In fact, much like in the case of Peyton Manning and the
Indianapolis Colts (where most do not know who the back-up quarterback is), the public is unaware
of the other top managers at Apple, such is Jobs’s “larger-than-life” persona. Therefore, it is
important for Apple to keep the investment company appraised of Steve Jobs’s health. Of course,
student opinions may vary on this topic.
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