Management: Principles and Practices

11e
Ricky W. Griffin

CHAPTER 7
Basic Elements of Planning
and Decision Making

PART 3
Planning and Decision Making

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 Learning Objectives

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.
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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7–2
Decision Making and the Planning Process

• Decision Making
 Is the cornerstone of planning.
 Is the catalyst that drives the planning process.
 Underlies every aspect of setting goals and
formulating plans.
• Planning
 All organizations plan, but not in the same fashion.
 All planning occurs within an environmental
context.
 All goals require plans to guide in their 7–3
7.1 The Planning Process

7–4
 Organizational Goals
Purposes of Goals

Guidance and Promotion of Source of Evaluation

unified direction good planning motivation and control

 Specific and  Performance can be

 Where the  Facilitates future goal
moderately difficult assessed in the future
organization is going setting
goals can motivate in terms of how
 Why getting there is
people to work hard successfully today’s
important
E if there is a reward goals are
E X also accomplished
E
X A Ambitious revenue X
A M goal set A
M P M Job done faster
P L P than goal
Every business will
L be either one or two E Demonstrates how L Bonus added
setting goals and
E in its industry develop plan to reach E automatically
7–5
 Kinds of Goals

Setting Organizational Goals

By Level By Area Time Frame

Mission statement Operations Long-term goals
Strategic goals Marketing Intermediate goals
Tactical goals Finance Short-term goals
Operational goals Production Explicit goals
Open-ended goals

7–6
 Kinds of Goals
Setting Organizational Goals
By Level
 State the fundamental, unique purpose that sets a
business apart from other firms of its type
 Identifies the scope of the business’s operations in
MISSION STATEMENT product and market terms

 Set by top management

 Focus on broad and general issues
STRATEGIC GOALS

 Set by and for middle managers

TACTICAL GOALS  Focus on how to operationalize actions necessary to the
strategic goals

 Set by and for lower level managers

OPERATIONAL GOALS  Concern on short term issues associated with tactical
goals
 Used instead of the term Objective
7–7
 Kinds of Goals
Setting Organizational Goals
By Level
E The premier purveyor of the finest coffee
in the world while maintaining our
MISSION STATEMENT X uncompromising principles while we grow

A Increasing the profitability of each of its

coffee stores by 25 percent over the next
STRATEGIC GOALS
M five years

Working on company-owned versus

TACTICAL GOALS
P licensed versus licensed stores and global
distribution of stores in different countries
L
Boost the profitability of a certain number
OPERATIONAL GOALS E of stores in each of the next five years

7–8
 Responsibilities of Setting Goals

• Who Sets Goals?

 All managers
 Managerial responsibility for goal setting
should correspond to the manager’s level

in the organization.
• Managing Multiple Goals
 Optimizing allows managers to
balance and reconcile inconsistent or
conflicting goals.
 Managers can pursue one goal and 7–9
 Kinds of Organizational Plans
 Set by the board of director and top
management
Strategic Plans  Have an extended time horizon and address
(upper management) questions of scope, resource deployment,
and competitative advantage and synergy

 Set by the upper & middle management

Tactical Plans  Compared with strategic plans, have a
(middle management) somewhat shorter time horizon and more
specific and concrete focus

Operational Plans  Set by the middle and lower-level

managers
(lower-level managers)
 Relatively narrow in scope
 Deals with a fairly small set of activities

7–10
 Time Frames for Planning
• The Time Dimension of Planning
 Planning must provide sufficient time to fulfill
the managerial commitments involved.
1 5 10

Long-range (strategic)
plans of 5 or more years

Intermediate-range
(tactical) plans of 1–5 years

Short-range (operational)
action and reaction plans
of 1 year or less

7–11
 Responsibilities for Planning
• Planning Staff
 Gather information, coordinate planning activities,
and take a broader view than individual managers.
• Planning Task Force
 Created when the organization wants a special
circumstance addressed.
• Board of Directors
 Establishes corporate mission and strategy.
 May engage in strategic planning.
• Chief Executive Officer
 May serve as president or board chair; has a major role
in planning and implementing the strategy.

© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7–12
 Responsibilities for Planning (cont’d)

• Executive Committee
 Is composed of top executives.
 Meets regularly with the CEO
to review strategic plans.

• Line Management
 Have formal authority and responsibility
for management of the organization.
 Help to formulate strategy by providing
information.
 Are responsible for executing the plans
of top management.

7–13
 Contingency Planning
and Crisis Management
• Contingency Planning
 The determination of alternative courses of action to be taken if
an intended plan is unexpectedly disrupted or rendered
inappropriate.
 These plans help managers to cope with uncertainty and
change.
 Contingency planning is a proactive strategy that emphasizes
preparation over response.
• Crisis Management
 The set of procedures the organization uses in the event of a
disaster or other unexpected calamity.
 Crisis management is the process of managing the response to a
major incident after it has occurred. It is a reactive strategy.
7–14
 7.3 Contingency Planning

Ongoing planning process

Action point 1 Action point 2 Action point 3 Action point 4

Develop plan, Implement plan and Specify indicators Successfully complete
considering formally identify for the contingency plan or contingency
contingency events contingency events events and develop plan
contingency plans for
each possible event

Monitor contingency event indicators and

implement contingency plan if necessary

7–15
 7.4 Developing and Executing Tactical Plans
Developing tactical plans
• Recognize and understand
overarching strategic plans
and tactical goals
• Specify relevant resource and
time issues
• Recognize and identify human
resource commitments
Executing tactical plans
• Evaluate each course of action
in light of its goal
• Obtain and distribute
information and resources
• Monitor horizontal and vertical
communication and integration
of activities
• Monitor ongoing activities for
goal achievement
7–16
Developing and Executing Tactical Plans

Developing tactical plans

Recognize and understand Recognize that tactical planning must address a

overarching strategic plans number of tactical goals

and tactical goals

Represent a concrete action involving

Specify relevant resource and
measurable resources & a target date for
time issues completion

Recognize and identify human  Managers must be in a position to receive

resource commitments information from others within and outside
the organization
 Process that information in the most
effective way and pass it on to others
 Each activity has required considerable time
and effort from dozens of management
7–17
Developing and Executing Tactical Plans

Executing tactical plans

Evaluate each course of action EVALUATE AMONG
in light of its goal
A B C
Obtain and distribute
information and resources
&
Vertical Communication
Monitor horizontal and vertical
communication and integration
of activities

Horizontal
Communication
Monitor ongoing activities for
goal achievement

7–18
 7.1 Types of Operational Plans

Plan Type Description

Single-use plans Developed to carry out a course of action not likely to be
repeated in the future
Program Single-use plan for a large set of activities
Project Single-use plan of less scope and complexity than a
program

Standing plans Developed for activities that recur regularly over a period
of time
Policy Standing plan specifying the organization’s general
response to a designated problem or situation
Standard operating Standing plan outlining steps to be followed in particular
procedure circumstances
Rules and regulations Standing plans describing exactly how specific activities
are to be carried out

7–19
 Managing Goal-Setting
and Planning Processes
• Barriers to Goal Setting and Planning
 As part of managing the goal-setting and planning
process, managers must understand the barriers
that can disrupt them.
 Managers must also know how to overcome them.

7–20
 7.2 Barriers to Goal Setting and Planning

Major barriers Inappropriate goals

Improper reward system
Dynamic and complex environment
Reluctance to establish goals
Resistance to change
Constraints
Overcoming Understanding the purposes of goals and
the barriers planning
Communication and participation
Consistency, revision, and updating
Effective reward system

7–21
 Using Goals to Implement Plans

• Management by Objectives (MBO)

 Is a technique for integrating formal goal
setting and planning by giving subordinates a
voice and clarifying what they are expected to
accomplish.
 Is frequently tailored to the special
circumstances of firms which may use a
special term or name for it.

7–22
7.5 The Formal Goal-setting Process

7–23
The Effectiveness of Formal Goal Setting
• Strengths (Success)
 Improved employee
motivation
 Enhances communication
 Fosters more objective
performance appraisals
 Focuses attention on
appropriate goals and plans
 Helps identify managerial
talent
 Provides a systematic
management philosophy
 Facilitates control of the
organization
• Weaknesses (Failure)
 Poor implementation of the
goal setting process
 Lack of top-management
support for goal setting
 Delegation of the goal-
setting process to lower
levels
 Overemphasis on
quantitative goals
 Too much paperwork and
record keeping
 Managerial resistance to
goal setting
7–24
 KEY TERMS

• mission • short-range plan

• strategic goal • crisis management
• tactical goal • single-use plan
• operational goal • program
• optimizing • project
• strategic plan • standing plan
• tactical plan • policy
• operational plan • rules and regulations
• reaction plan • management by
• long-range plan objectives (MBO)
• intermediate plan

7–25