Managerial Planning

and Goal Setting

Ch 07

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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 maps 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 and standing plans.
 8. Discuss the benefits and limitations 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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 Planning is Fundamental
 Of the four management functions—planning, organizing, leading, and controlling—
planning is considered the most fundamental.
 All of the other management functions stem from planning
 How do you plan for an undefined future with uncertainty?
 The economic, political, and social turmoil of recent years has sparked a renewed
interest in organizational planning, particularly planning for crises and unexpected
events, yet it also has some managers questioning whether planning is even
worthwhile in a world that is in constant flux.
 Planning cannot read an uncertain future. Planning cannot tame a turbulent
environment.
 No plan is perfect but
Without plans and goals, organizations flounder
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Goals and Plans

A goal is a desired future state that the organization

attempts to realize

PLANNING

A plan is a blueprint for goal achievement and specifies the

necessary resource allocations, schedules, tasks, and other
actions

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Levels of Goals
and Plans

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 Levels of Goals and Plans
 The mission is the basis for the strategic (company) level of goals and plans, which in turn
shapes the tactical (divisional) level and the operational (departmental) level.

 That is, a broad higher-level mission, such as “Improve the lives of families by providing
consumer-preferred paper products for kitchen and bathroom,” provides the framework for
establishing more specific goals for top managers, such as “improve company profits by 5
percent next year.”

 This might translate into “increase sales by 10 percent next year” for the manager of the
Northwest sales division,” and an individual salesperson might have a goal of calling on 10
percent more customers.

 Top managers are typically responsible for establishing strategic goals and plans that
reflect a commitment to both organizational efficiency and effectiveness.
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 Levels of Goals and Plans
 Tactical goals and plans are the responsibility of middle managers, such as the
heads of major divisions or functional units. A division manager will
formulate tactical plans that focus on the major actions that the division must
take to fulfill its part in the strategic plan set by top management.

 Operational plans identify the specific procedures or processes needed at

lower levels of the organization, such as individual departments and
employees. mission is the basis for the strategic (company) level of goals and
plans, which in turn shapes the tactical (divisional) level and the operational
(departmental) level.

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 The Organizational Planning Process

 That is, a broad higher-level mission, such as “Improve the lives of families by providing consumer-
preferred paper products for kitchen and bathroom,” provides the framework for establishing more
specific goals for top managers, such as “improve company profits by 5 percent next year.”

 This might translate into “increase sales by 10 percent next year” for the manager of the Northwest
sales division,” and an individual salesperson might have a goal of calling on 10 percent more
customers.
 Top managers are typically responsible for establishing strategic goals and plans that reflect a
commitment to both organizational efficiency and effectiveness.

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The Organizational
Planning Process

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 Goal-Setting in Organizations
 Organizational mission – the organization’s reason for existence
 The mission describes the organization’s values, aspirations, and reason
for being.
 A well defined mission is the basis for development of all subsequent
goals and plans.
 Without a clear mission, goals and plans may be developed haphazardly
and not take the organization in the direction it needs to go.
 One of the defining attributes of successful companies is that they have a
clear mission that guides decisions and actions.

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 Mission Statement

 Mission Statement
 The formal mission statement is a
broadly stated definition of purpose that
distinguishes the organization from
others of a similar type.

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 Goals and Plans
 Strategic goals – official goals, broad statements describing the organization’s future
 These goals pertain to the organization as a whole rather than to specific divisions or
departments.
 Samsung, for example, set a new strategic goal to become a “quality-based” company
rather than a “quantity-based” company.
 The shift in strategic direction, with its focus on creativity and innovation rather than
making inexpensive knock-off products, has led to amazing results. Samsung is now a
leader in the electronics industry, including threatening Apple in the smartphone
market.
 Strategic plans – define the action steps the company will take
 The strategic plan is the blueprint that defines the organizational activities and
 resource allocations—in the form of cash, personnel, space, and facilities—required
for meeting these targets. Strategic planning tends to be long-term and may define
organizational action steps from two to five years in the future. The purpose of
strategic plans is to turn organizational goals into realities within that time period
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 Goals and Plans
 Tactical Goals :After strategic goals are formulated, the next step is to define tactical
goals, which are 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
for the organization to achieve its overall goals.
 Tactical plans are designed to help execute the major strategic plans and to
accomplish a specific part of the company’s strategy. Tactical plans typically have a
shorter time horizon than strategic plans—that is, over the next year or so.
 The word tactical originally comes from the military.
 In a business or nonprofit organization, tactical plans define what major departments
and organizational subunits will do to implement the organization’s strategic plan.

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 Goals and Plans
 Tactical goals and plans help top managers implement their overall strategic plan.
Normally, it is the middle manager’s job to take the broad strategic plan and identify
 specific tactical plans.

 The results expected from departments, work groups, and individuals are the
operational goals.
 They are precise
 and measurable.

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 Goals and Plans
 Operational plans are developed at the lower levels of the organization to specify
 action steps toward achieving operational goals and to support tactical plans.
 The operational plan is the department manager’s tool for daily and weekly
operations.
 Goals are stated in quantitative terms, and the department plan describes how goals
will be achieved.
 Operational planning specifies plans for department managers, supervisors, and
individual employees. Schedules are an important component of operational planning.

 Schedules define precise time frames for the completion of each operational goal
required for the organization’s tactical and strategic goals.

 Operational planning also must be coordinated with the budget because resources
 must be allocated for desired activities.
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 Operational Planning

 Direct employees and resources

 Guide toward efficient and effective performance
 Includes planning approaches:
1. Management-by-Objectives (MBO)
2. Single-Use Plans
3. Standing Plans

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 Goal Setting
 Managers should design goals so that they can be translated into measurement of key result areas.
 Managers establish goals based on the idea of measurement and clarity. A few carefully chosen
goals with clear measures of success can focus organizational attention, energy,
 and resources more powerfully.
 The measurements are sometimes referred to as key performance indicators.
 Key performance indicators (KPIs) assess what is important to the organization and how well the
organization is progressing toward attaining its strategic goal, so that managers can establish
lower-level goals that drive performance toward the overall strategic objective.
 Managers should set goals that are challenging but realistic.
 When goals are unrealistic, they set employees up for failure and lead to a decrease in
 employee morale.
 Goals should also be linked to rewards. The ultimate impact of goals depends on the extent to
which salary increases, promotions, and awards are based on goal achievement.
 Employees pay attention to what gets noticed and rewarded in the organization.
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Characteristics of Effective Goal Setting

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 MBO
 (MBO) is a system whereby managers and employees define goals for every department,
project, and person and use them to monitor subsequent performance.
 1. Set goals. Setting goals involves employees at all levels and looks beyond day-today
activities to answer the question, “What are we trying to accomplish?” Managers heed the
criteria of effective goals described in the previous section and make sure to assign
responsibility for goal accomplishment.
 2. Develop action plans. An action plan defines the course of action needed to achieve the
 stated goals. Action plans are made for both individuals and departments.
 3. Review progress. A periodic progress review is important to ensure that action plans are
working. KPIs often provide the data for the review. These reviews can occur informally
between managers and subordinates, where the organization may wish to conduct three-,
six-, or nine-month reviews during the year. This periodic checkup allows managers and
employees to see whether they are on target or whether corrective action is needed.

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 MBO
 4. Appraise overall performance.
 The final step in MBO is to 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 and other rewards.
 The appraisal of departmental and overall corporate performance shapes goals for the next
year.
 The MBO cycle repeats itself annually.

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Model of the MBO Process
 Defined in 1954 by Peter Drucker
 Method for defining goals and monitoring performance

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MBO Benefits

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 Single-Use and Standing Plans

Single-Use Plans
Achieve one-time goals
Programs and projects

Standing Plans
Ongoing plans
Policies, rules, procedures

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 Types of Single-Use and Standing Plans

 Single-Use Plans
Program: building new headquarters, converting paper files to digital
Project: renovating the office, setting up a new company intranet

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 Types of Single-Use and Standing Plans

 Standing Plans
Policy: Sexual harassment policies, Internet and social media policies
Rule: No eating rule in areas of company where employees are visible to
public
Procedure: Procedures for issuing refunds, Procedures for handling
employee grievances

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Major Types of Single Use and Standing Plans

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 Benefits and Limitations of Planning
1. Goals and plans provide a source of motivation and commitment
2. Goals and plans guide resource allocation
3. Goals and plans are a guide to action
4. Goals and plans set a standard of performance
5. Goals and plans can create a false sense of certainty
6. Goals and plans may cause rigidity in a turbulent environment
7. Goals and plans can get in the way of intuition and creativity

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 Planning for a Turbulent Environment
 Contingency Planning
Planning for emergencies, setbacks, or unexpected conditions
 Building Scenarios
A forecasting technique to look at current trends and discontinuities and
visualize future possibilities
 Crisis Planning
Unexpected events that are sudden and devastating

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 Planning for a Turbulent Environment
 Contingency Planning
Planning for emergencies, setbacks, or unexpected conditions
 Building Scenarios
A forecasting technique to look at current trends and discontinuities and
visualize future possibilities
 Crisis Planning
Unexpected events that are sudden and devastating

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Essential Stages of Crisis Planning

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 Stages of Crisis Planning
 Crisis prevention. The crisis prevention stage involves activities that managers undertake
to try to prevent crises from occurring and to detect warning signs of potential crises.
 A critical part of the prevention stage is building open, trusting relationships with key
stakeholders such as employees, customers, suppliers, governments, unions, and the
community.
 By developing favorable relationships, managers can often prevent crises from happening
and respond more effectively to those that cannot be avoided,
 Crisis preparation. The crisis preparation stage includes all the detailed planning to
handle a crisis when it occurs. Three steps in the preparation stage are
 (1) designating a crisis management team and spokesperson,
 (2) creating a detailed crisis management plan, and
 (3) setting up an effective communications system.
 The crisis management team, for example, is a cross-functional group of people who are
designated to swing into action if a crisis occurs.
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 Innovative Approaches to Planning
 A fresh approach to planning is to involve everyone in the organization, and
sometimes outside stakeholders as well, in the planning process.
 The evolution to a new approach begins with a shift to decentralized planning,
which means that planning experts work with managers in major divisions or
departments to develop their own goals and plans.
 Managers throughout the company come up with their own creative solutions to
problems and become more committed to following through on the plans.

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 Set Stretch Goals for Excellence
 Stretch goals are highly ambitious
 Clear, compelling, and imaginative
 Require innovation
 Goals must be seen as achievable
 Like Big Hairy Audacious Goal (BHAG) from 1996 article on “Building Your
Company’s Vision”
 As times move faster and become more turbulent, these are important

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 Use Performance Dashboards

 Dashboards
keep track of key performance metrics

align and track goals

can be applied throughout the company on the factory or sales floor.

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A Performance Dashboard for Planning

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 Deploy Intelligence Teams
 An intelligence team is a cross-functional group of managers and
employees, usually led by a competitive intelligence professional, who
work together to gain a deep understanding of a specific business issue,
with the aim of presenting insights, possibilities, and recommendations
about goals and plans related to that issue.

 Intelligence teams are useful when the organization confronts a major

intelligence challenge.

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 Discussion Questions
1. What strategic plans could the college or university at which you are taking this
management course adopt to compete for students in the marketplace? Would these
plans depend on the school’s goals?
2. From the information provided in the chapter example, identify how Western Digital
Thailand used both the prevention and the preparation stages of crisis
planning.
3. One of the benefits of a strategy map is that goals and how they are linked can be
communicated clearly to everyone in the organization. Does a minimum-wage
maintenance worker in a hospital really need to understand any goals beyond keeping
the place clean? Discuss.
4. The MBO technique has been criticized for putting too much emphasis on achieving
goals (ends) and not enough on the methods that people use to achieve them (means).
Do you think this is a flaw in the technique, or in the way managers apply it? How
would you place a balanced emphasis on ends and means?
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 Discussion Questions
5. A new business venture must develop a comprehensive business plan to borrow
money to get started. Companies such as FedEx and Nike say they did not follow the
original plan closely. Does that mean that developing the plan was a waste of time for
these eventually successful companies?
6. How do you think planning in today’s organizations compares to planning 25 years
ago? Do you think planning becomes more important or less important in a world
where everything is changing quickly and crises are a regular part of organizational
life? Why?
7. Assume that Southern University decides to do two things: (1) raise its admission
standards, and (2) initiate a business fair to which local townspeople will be invited.
What types of plans might it use to carry out these two activities?

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