Chapter 4: Planning

• Part 1: Goal setting and

Organizational planning
• Part 2: Strategy formulation and
implementation

Lecturer: Duong Thi Hoai Nhung (MBA)

Faculty of Business Administration
Foreign Trade University

Email: nhungdth@ftu.edu.vn
Mobile: 0985 867 488
Part 1: Organizational planning and
goal setting
Learning objectives
• Define goals and plans, and explain the relationships
between them
• Explain the concept of organizational mission and the
way it influences goal setting and planning
• Describe the types of goals an organization should
have and why they assemble a hierarchy
• Define the characteristics of effective goals
• Describe the four essential steps in the process of
management by objectives (MBO)
• Describe how responsibility can be allocated to
accomplish planning and goal setting
 Outline

1. Goals and plans in organization

a. Definition of goals and plans
b. Types of goals and plans

2. Planning types and models

a. Traditional approaches to planning
b. Modern approaches to planning
 1. Goals and plans in organization

a. Definition of goals and plans

• A goal is a desired future statement that the organization
attempts to realize.

• A plan is a blueprint for goal achievement: it specifies the

necessary resource allocations, schedules, tasks and other
actions.
 Planning means determining the organization’s goals and
defining the means for achieving them.
Reasons for Planning?????
The levels of goals and plans in an organization
Missio
n External message
statem
Legitimacy for investors,
ent
customers, suppliers,
community
Strategic goals/plans
Senior management
(Organization as a
whole) Internal message
Legitimacy, motivation,
guides, rationale,
Tactical goals/plans standards
Middle management
(Major divisions, functions)

Operational goals/plans
Lower management
(Departments, individuals
 a. Definitions of goals and plans

 Organizational mission
- The mission describes the organization’s value, aspirations
and reason for being- the organization’s reason for
existence
- A well-defined mission:
+ the basis for development of all subsequent goals and plans
+ a clear mission
+ short and straightforward
+ describing basic business activities and purposes as well as
the values that guide the organization
 b. Types of Goals and plans

Types of Goals
• Strategic goals
- Broad statements describing where the
organization wants to be in the future
• Tactical goals
- The results that major divisions and
departments within the organization intend to
achieve
• Operational goals
- The specific results expected from
departments, work groups and individuals
 b. Types of goals and plans

Types of Plans

BREADTH TIME FREQUENCY

OF USE FRAME SPECIFICITY OF USE

Strategic Long term Directional Single use

(beyond 5 years)

Tactical Short term Specific Standing

(less than 1 year)
Operational Short term Specific Standing
 Planning: Focus and Time

• Strategic Plans
- The action steps by which the organization
intends to attain strategic goals.
• Tactical Plans
– Specify the details of how an organization’s
overall objectives are to be achieved.
• Operational plans
- Specify action steps towards achieving
operational goals and to support tactical plans
Planning in the Hierarchy of Organizations
EFFECTIVE GOAL

S pecific

M easurable

A greement

R ealistic

T ime-framed
 2. Planning types and models
a. Traditional approaches to planning
- Central Planning has been done entirely by top
executives, consulting firms or, most commonly, by
central planning departments
Managing Director

Planning Department

Division
Head

Breakfast cereals Frozen foods Canned foods

Line
managers

Finance Production Marketing Finance Production Marketing Finance Production Marketing

Structural location of central planning department

 a. Traditional approaches to planning

Disadvantages
- Planners may be out of touch with day-to-day realities
- Formal plans may inhibit flexibility
- Formal plans may limit creativity and learning
 b. Modern approaches to planning

- Decentralized planning: assigned to major departments

and divisions to help managers develop their own
strategic plans
Managing Director

Planning support staff member

Division
Head

Breakfast Frozen foods Canned foods

Line cereals
managers

Finance Production Marketing Finance Production Marketing Finance Production Marketing

Structural location of decentralized planning department

 b. Modern approaches to planning

 Management by Objectives
• Peter Drucker published ‘The Practice of
Management,’ which included his theory of
Management by Objectives (MBO)
 b. Modern approaches to planning

• Management by objectives (MBO)

- MBO is a method whereby managers and employees
defines goals for every department, project and person,
and use them to monitor subsequent performance
 Management by objectives (MBO)

Common Elements in
an MBO Program

Participative Explicit
Goal Performance
Decision Performance
Specificity Feedback
Making Period
 Model of the MBO process
Step 1: Set goals Step 2: Develop action plan

- Corporate strategic goals

- Departmental goals Action plans
- Individual goals

Review progress

Step 3:
Take corrective action Review progress

Appraise performance

Step 4:
Appraise overall performance
 Model of the MBO process

1. Set goals
- To answer the question: what are we trying to
accomplish?
- A good goal should be
+ concrete and realistic
+ a specific target
+ time frame
+ assign responsibility
+ quantitative or qualitative

2. Develop action plans

An action plan defines the course of action needed to
achieve the sated goals. An action plans are made for
both individuals and departments
 Model of the MBO process
3. Review progress
- To ensure that action plans working.
- Occurring informally between managers and
employees
- The action plan can be changed whenever goals
are not being met
4. Appraise overall performance
- Evaluate whether annual goals have been part
for both individuals and departments
 The MBO cycle repeats itself on an annual
basis
 Benefits and problems with MBO

• Benefits of MBO
1. Managers’ and employee efforts are focused
on activities that will lead to goal attainment.
2. Performance can be improved at all company
levels.
3. Employees are motivated.
4. Department and individual goals are aligned
with company goals.
 Benefits and problems with MBO
• Problems with MBO
1. Constant change prevents MBO from taking
hold
2. An environment of poor employer-employee
relations reduces MBO effectiveness.
3. Strategic goals may be displaced by
operational goals.
4. Mechanistic organization and values that
discourage participation can harm the MBO
process.
5. Too much paperwork saps MBO energy