STRATEGIC MANAGEMENT

LESSON NO. 1
The complexity of today’s environment and uncertainty about the
future overwhelm many managers and lead them to FOCUS on
operational issues and short-term results rather than long-term goals
and plans. In addition to improving Financial and Operational
performance, developing explicit goals and plans at each level
illustrated in Exhibit 7.1 is important because of the External and
Internal messages they send. These messages GO to both external and
internal audiences and provide BENEFITS for the organization.

1. LEGITIMACY – it symbolizes what the organization stands for and

It’s REASON for EXISTENCE to investors, customers and suppliers.
The organization’s mission is accepted by the local community in a
favorable light, has an impact on employees, enabling them to
become committed to the organization because they can identify
with its OVERALL purpose and reason for existence.
Example: Medtronic Company USA, a medical products company.
Employees are inspired by the mission to “ALLEVIATE PAIN,
RESTORE HEALTH and EXTEND LIFE.”
2. SOURCE OF MOTIVATION AND COMMITMENT. Goals and plans
facilitate employees’ identification with the organization and help
motivate them by reducing UNCERTAINTY and CLARIFYING WHAT
they should accomplish. Lack of a clear goal can damage
employee motivation and commitment.
Example: Main Street Muffins lost sight of its goal and began
branching into new lines of business, morale sank so low that
bakers were calling in sick at 3 AM or walking off the job with NO
NOTICE. The company took a nosedive toward bankruptcy before
the owners developed a statement to remind everyone that the
primary goal of Main Street Muffin was “to profitably improve an
organization that overwhelms the food industry with its devotion
to high-quality products and services.” With the new goal
statement as a guide, employee commitment and motivation
gradually improved and made the company became profitable
again within three months. A goal provides the “WHY” of an
organizations existence, a plan tells the “HOW” – action plan to
undertake to achieve the goal.

3. GUIDES TO ACTION. Goals and plans provide a SOURCE of

DIRECTION. They focus attention on Specific Targets and Direct
Employee Efforts toward important outcomes.
Example: Hartford Technology Services Company set goals to
establish a customer profile database, survey customer
satisfaction and secure service agreements with the ten new
customers.

4. RATIONALE FOR DECISIONS. Through goal setting and planning,

managers learn what the organization is trying to accomplish.
They ensure that internal policies, roles, performance, structure,
 products and expenditures will be made in accordance with
desired outcomes. Decisions throughout the organization will be
in alignment with the plan.

5. STANDARD OF PERFORMANCE. Goals define desired customers

for the organization. They also serve as performance criteria. They
provide a standard of assessment.
Example: If an organization wishes to grow by 15 percent, an
actual growth is 17 percent, managers will have exceeded their
prescribed standard.
The overall planning process prevents managers from thinking
merely in terms of day-to-day activities. When organizations drift
away from goals and plans, they typically get into to trouble.
Example: Boeing’s strategic goal is “TO REMAIN AN AEROSPACE”
industry giant despite a drop in air travel and resulting DECREASE in
demand for airplanes. To meet this challenge, the strategic plan
includes cutting production in its airplane manufacturing division
and reassigning financial resources. Boeing is slicing its commercial
aircraft business by 15 percent, cutting 10,000 to 15,000
manufacturing jobs. The change meant closing of one of the three
assembly lines for 737 jets at the company’s Renton, Washington
plant.

GOALS AND PLANS

STRATEGIC GOALS- broad statements describing where the

organization wants to be in the future. They pertain to the
organization as a whole rather than to specific divisions or
departments. They are often called OFFICIAL GOALS because they
are the stated intentions of WHAT the organization wants to
achieve.
 Example: Pat Kelley set a strategic goal for Physician Sales and
Service to become the first national physician supply chain and now
Kelley wants the company to become a world distributor of medical
products.

STRATEGIC PLANS- define the ACTION STEPS by which the company

intends to attain strategic goals. It 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 (2) to five(5) years in the
future. The purpose strategic plans is to turn organizational goals
into REALITIES within that time period.
Example: A small company wanted to improve its market share from
15 percent to 20 percent over the next three years.
Plan of action:
(1) Allocate resources for the development of NEW competitive
products with high growth potential;
(2) Improve production methods to achieve higher output at lower
costs; and,
(3) Conduct research to develop alternative uses for current
products and services.
TACTICAL PLANS- are designed to help execute major strategic plans
and to accomplish a specific part of the company’s strategy.
TACTICAL GOALS- goals that define the outcomes that major divisions
and departments must achieve in order for the organization to reach its
overall goals.
Tactical plans typically have shorter time horizon than the Strategic
plans- over the next year or so.
The word TACTICAL originally comes from the military. In a business
organization, tactical plans define WHAT MAJOR DEPARTMENTS and
organizational sub-units WILL DO to implement the organization’s
strategic plan.
Example: A florist such as 1-800 Flowers has an overall strategic plan to
become a leading telephone and internal-based supplies of flowers
which requires high-volume sales during peak seasons (Valentine’s Day,
Mother’s Day). HRM managers at 1-800 Flowers developed tactical
plans to ensure that the company has the dedicated order takers and
customer service representatives it needs during this critical period.
Tactical plans include cross-training employees so they can switch to
different jobs as departmental needs change, allowing order takers to
transfer to jobs at headquarters during off-peak times to prevent
burnout, and using regular order takers to train and supervise
temporary workers during peak seasons. These actions help top
managers implement their overall strategic plan.
The specific results expected from departments, work groups and
individuals are the OPERATIONAL GOALS. They are precise and
measurable- “Process 150 sales applications for each week”, “Achieve
90 percent of deliveries on time”, “REDUCE overtime by 10 percent
next month” and “develop two(2) new elective courses in accounting”
are examples of operational goals.
OPERATIONAL PLANS- plans developed as the organization’s lower
levels that specify action steps toward achieving operational goals and
that support tactical planning activities. 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
supervisors, department managers and individual employees.
Schedules are an important component of operational planning as it
define precise time frames for the completion of each operational goal
required for the organization’s tactical and strategic goals. Strategic
goals are traditionally considered the responsibility of TOP
Management; TACTICAL goals that of middle management.
Operational planning also must be coordinated with the budget,
because resources must be allocated for desired activities.
Goal Characteristics
1) Specific and measurable
2) Cover key result areas
3) Challenging but realistic
4) Defined time period
5) Linked to rewards
Explanation:
1) Specific and measurable. Goals must be expressed in
QUANTITATIVE terms- increasing profits by 2 percent, decreasing
scrap by 1 percent, increasing teacher effectiveness ratings from
3.5 to 4.0. Not all goals can be expressed in numerical terms but
must be PRECISELY defined and ALLOW for measurable progress.
Example: Chairman Lissa Joronen of SOL Cleaning Service believes
in giving teams the right to SET their own performance goals but
she required accountability. Every month, customers rate the
team’s performance based on the goals. “The more we free our
people from rules, the more we need goodmeasurements.”

2) Cover key result areas. Goals cannot be set for every aspect of
employee behavior or organizational performance, if they were,
their sheer member would render them meaningless. Instead,
 managers should identify a few key result areas- perhaps up to
four or five for any organizational department or job key result
areas are those activities that contribute most to company
performance. Most companies use a balanced approach to goal
setting.
Example: Northern States Power Company tracks measurements
in four (4) key areas, such as, (1) financial performance, (2)
customer service and satisfaction, (3) internal processes, and (4)
innovation and learning.
3) Challenging but realistic. Goals should be challenging but not
unreasonably difficult. A newly hired manager discovered that his
staff would have to work 100-hour weeks to accomplish
everything expected of them. When goals are unrealistic, they SET
employees up for failure and lead to decreasing employee morale.
However, if goals are too easy, employees may not feel
motivated. Stretch goals are extremely ambitious but realistic
goals that challenge employees to meet high standards.
Example: Top managers at 3M set a goal that 30 percent of sales
must come from products introduced in the past four years; the
old standard was 25 percent. Setting ambitious goals help to keep
3M churning out innovative new products- more than 500 in one
recent year alone- and has entrenched the company as a leader I
n some today’s most dynamic markets. The key to effective
stretch goals is ENSURING that goals are set within the existing
RESOURCES BASE, not beyond departments time, equipment or
financial resources.

4) DEFINED TIME PERIOD: Goals should SPECIFY THE TIME PERIOD

over which they will be achieved. A time period is a DEADLINE
stating the DATE on which goal attainment will be measured.
 Example: Company A launched as an intranet company, has a
deadline of 30 June 2021. If a strategic goal involves a two or
three year, time horizon, specific dates for achieving parts of it
can be set up. Strategic sales goals could be established on a
three- year, with a Php 100 million target in a year one, a Php 129
million in a year two and Php 150 million target in year three.

5) LINKED TO REWARDS: The ultimate impact of goals depends on

the extent to which salary increases, promotions and awards are
based on goals achievement. People who attain goals should be
rewarded. Rewards give meaning and significance to goals and
help commit employees to achieving goals. Failure to attain goals
often is due to factors outside employee’s control.
Example: Failure to achieve a financial goal may be associated
with a drop in market demand due to industry recession, Thus, an
employee could not be expected to reach it. Nevertheless, a
reward may be appropriate if the employee partially achieved
goals under different circumstances.

FOOD for THOUGHT

1) There are obviously two educations,

One should teach us HOW TO MAKE a LIVING and the other is
HOW TO ….LIVE.

2) WITHOUT REALISTIC goals and positive behavior positive

thinking alone is not enough.