MANAGEMENT FUNDAMENTALS

Chapter 5
Managerial Planning and Goal Setting
OVERVIEW OF GOALS AND PLANS

Goal Plan Planning

A blueprint The act of
A desired future state specifying the determining the
that the organization resource organization’s
attempts to realize. allocations, goals and the
schedules, and means for
other actions achieving them.
necessary for
attaining goals.
LEVELS OF PLANNING

External
Vission Message
Mission
Strategic Goals /
Plans
Senior Management
Organization as a
TacticalWhole
Goals/ Plans Internal
Message
Middle Level
Management
Major Divisions/
Operational Level Goals/
Functions
Plans
Lower Management
LEVELS OF PLANNING (CONT.)

• The planning process starts with a formal mission that defines the basic
purpose of the organization especially for external audiences. The mission is
the basis for the strategic (company) level of goals and plans set by the top
management, which in turn shapes the tactical (divisional) level and the
operational.
• Tactical goals and plans are the responsibility of middle managers, such as the
heads of major divisions or functional units. Tactical plans focus on the major
actions the division must take to fulfill its part in the strategic plan.
• Operational plans identify the specific procedures or processes needed at
lower levels of the organization such as individual departments and
employees. Front-line managers and supervisors develop operational plans
focus on specific tasks and processes and that help meet tactical and strategic
goals.
• Planning at each level supports the other levels.
 PURPOSES OF GOALS AND PLANS

• Legitimacy - Mission describes what the organization stands for and its reason for existence
to external audiences such as investors, customers, suppliers, and the local community.
• Source of motivation and commitment – Motivation happens through reducing
uncertainty, clarifying what they should accomplish and letting know what actions to
undertake to achieve the goal.
• Resource allocation - Goals help managers to decide where they need to allocate
resources, such as employees, money, and equipment.
• Guides to action - They provide a sense of direction. They focus attention on specific
targets and direct employee efforts toward important outcomes.
• Rationale for decisions - Through goal setting managers clarify what the organization is
trying to accomplish. They can make decisions to ensure that internal policies, roles,
performance, structure, products, and expenditures will be made in accordance with desired
outcomes.
• Standard of performance - Because goals define desired outcomes for the organization,
they also serve as performance criteria. They provide a standard of assessment.
T H E O R G A N I Z AT I O N A L P L A N N I N G P R O C E SS

1. Develop the plan

5. Monitor and learn 2. Translate the plan

4. Execute the plan 3. Plan operations

GOALS IN AN ORGANIZATION

• Mission - The organization’s reason for existence.

• Mission Statement - A broadly stated definition of the organization s’ basic
business scope and operations that distinguishes it from similar types of
organizations.
• Strategic Goals - Broad statements of where the organization wants to be in the
future. This is considering the organization as a whole rather than to specific
divisions or departments.
• Strategic Plans - The action steps by which an organization intend s to attain
strategic goals.
• Tactical Goals - These are the results that major divisions and departments within
the organization intend to achieve. These goals apply to middle management and
describe what major sub units must do for the organization to achieve its overall
goals.
• Tactical Plans - They are designed to help execute the major strategic plans and
 G OA L S I N A N O R G A N I Z AT I O N ( C O N T. )

• Operational Goals - The results expected from departments, work groups, and
individuals. They are precise and measurable.
• Operational Plans - are developed at the lower levels of the organization to
specify action steps toward achieving operational goals and to support tactical
plans. 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 - They 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.
 STRATEGY MAP

• A strategy map is a visual representation of the key drivers of an

organization’s success and shows how specific goals and plans in each area
are linked.
• This provides a powerful way for managers to see the cause-and-effect
relationships among goals and plans.
S T R AT E GY M A P ( C O N T. )
M A N A G E M E N T BY O B J E C T I V E S

This is a system whereby managers and employees define goals for every
department, project, and person and use them to monitor subsequent
performance.
 MANAGEMENT BY OBJECTIVES (CONT.)

1) Setting goals involves employees at all levels look “What are we trying to accomplish?”
Managers need the criteria of effective goals assigned responsibility for goal
accomplishment. However, goals should be jointly derived. Mutual agreement between
employee and supervisor creates the strongest commitment to achieving goals.
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 is important to ensure that action plans are working. 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.
4) Appraise overall performance. The final step in MBO is to carefully evaluate whether
annual goals have been achieved for both individuals and departments.
M A N A G E M E N T BY O B J E C T I V E S ( C O N T. )
SINGLE-USE AND STANDING PLANS
• Single-use plans are developed to achieve a set of goals that are not likely to be repeated in the
future.
• Standing plans are ongoing plans that provide guidance for tasks or situations that occur repeatedly
within the organization.
PLANNING FOR TURBULENT ENVIRONMENT

New planning approaches have emerged with the increasing

turbulence and uncertainty in today’s business environment.

Contingency Planning

Building Scenarios

Crisis Planning
 CONTINGENCY PLANS

• Contingency plans define company responses to be taken in the

case of emergencies, setbacks, or unexpected conditions.
• To develop contingency plans, managers identify important
factors in the environment, such as possible economic
downturns, declining markets, increases in cost of supplies, new
technological developments, or safety accidents.
• Managers then forecast a range of alternative responses to the
most likely high-impact contingencies, focusing on the worst
case.
 BUILDING SCENARIOS

• An extension of contingency planning is a forecasting technique known as

scenario building.
• Rather than looking only at history, managers think about what could be in
future by looking at current trends and discontinuities and visualizing future
possibilities.
• Managers are unable to predict the exact future. But they could rehearse a
framework within which future events can be managed. Therefore, a broad base
of managers mentally rehearses different scenarios based on anticipating varied
changes that could affect the organization.
• Scenarios are like stories that offer alternative vivid pictures of what the future
will be like and how managers will respond.
• Typically, two to five scenarios are developed for each set of factors, ranging
CRISIS PLANNING

• Some firms engage in crisis planning after the September 11 terrorist attack in
USA , in order to response towards continuously growing emphasis is on
managing uncertainty.
• Sudden unexpected events have the potential to destroy the organization if
managers ARE NOT prepared with a quick and appropriate response.
Crisis Prevention
 Build Relationships
 Detect Signals from Environment

Crisis Preparation
 Designate crisis management team and
spokesperson.
 Create detailed crisis management plan.
 Set up effective communications system.
 TRADITIONAL APPROACH TO PLANNING

• Traditionally corporate planning and strategy and planning have been the domain of top
managers and been done by consulting firms or by central planning departments.

Centralized
Planning
• This approach was top down because goals and plans were assigned to major divisions and
departments from the planning department after approval by the president.
• This worked well in many applications and is still popular with some companies.
• Central planning departments may be out of touch with the constantly changing realities
faced by front-line managers and employees, which may leave people struggling to follow a
plan that no longer fits the environment and customer needs.
• In addition, formal plans dictated by top managers and central planning departments can
inhibit employee innovation and learning.
HIGH-PERFORMANCE APPROACHES TO PLANNING
A fresh approach to planning is to involve everyone in the organization, and sometimes outside
stakeholders as well.

Decentralization

• Strategic thinking and execution become the expectation of every employee in a

complex and competitive business environment.
• Planning experts work with managers in major divisions or departments to develop
their own goals and plans. Managers come up with their own creative solutions to
problems and become more committed to towards the plans.
• As environment gets more volatile and top management is benefited decentralized is
further pushed down to front-line managers working directly with planning experts to
develop dynamic plans that meet fast-changing needs.
• Planning comes alive when employees are involved in setting goals and determining
the means to reach them.