Management 11th Edition Griffin Solutions Manual 1

MANAGEMENT 11TH EDITION GRIFFIN
SOLUTIONS MANUAL
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CHAPTER 7
Basic Elements of Planning and Decision Making
Part III of this book is entitled PLANNING AND DECISION MAKING. Its fundamental purpose is to
discuss the first basic management function—planning and decision making.
Part III has four chapters. Chapter 7 introduces the basic elements of planning and decision making.
Chapter 8 focuses on strategy and strategic planning. Chapter 9 addresses the management of decision
making. Entrepreneurship is the focus of Chapter 10.
Teaching Tip: Some instructors prefer to cover the material in Chapter 10 separately at the end of the
course. If you prefer this method, the chapter is written so that it can be covered “out of sequence.”
CHAPTER SUMMARY
Chapter 7 is the first of four devoted to planning and decision making. Its purpose, therefore, is to
introduce the basic elements of this management function and to build a foundation for the more detailed
coverage of the material that follows in the remaining chapters of the part.
LEARNING OBJECTIVES
After covering this chapter, students should be able to:
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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 72
Chapter 7: Basic Elements of Planning and Decision Making
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.
American International Group (AIG) benefitted financially by acting as the insurer for insurance
companies. In effect, it mitigated the risks for insurance companies by taking on those risks itself. When
the bottom fell out of the housing market in 2007, AIG lost billions of dollars and showed how risks its
strategy was.
Teaching Tip: Take a couple of insurance and investment banking companies as examples – say,
Travelers and Goldman Sachs – and examine how these companies managed their risks.
LECTURE OUTLINE
I. DECISION MAKING AND THE PLANNING PROCESS
Teaching Tip: Stress for students that the planning process portrayed in Figure 7.1 reflects an orderly
and logical sequence of steps. In reality, of course, the actual planning process used in any given
situation will likely reflect some variation in this process.
Decision making drives planning. Decisions underlie the establishment of organizational goals, for
example, and the formulation and implementation of all plans.
In order to plan effectively, managers must understand the environmental context in which the
organization exists. They must establish a mission that includes the organization’s purpose,
premises, values, and directions. Strategic goals and plans are devised from the mission statement;
tactical goals and plans are generated from the strategic goals and plans; and operational goals and
plans are devised from the tactical goals and plans.
Cross-Reference: Note for students that we are simply introducing decision making here. It is covered
much more thoroughly in Chapter 9.
II. ORGANIZATIONAL GOALS

A. Purposes of Goals
Goals help to achieve four purposes.
1. Goals provide guidance and a unified direction for people in the organization.
2. Goals promote good planning.
3. Goals motivate employees.
4. Goals provide an effective mechanism for evaluation and control.
Discussion Starter: Ask students to think about their own personal goals. Then ask them to evaluate
each of those goals in terms of the purpose it serves.
B. Kinds of Goals
1. There are four basic levels of goals.
An organization’s mission is a statement of its fundamental, unique purpose that sets it
apart from other firms of the same type. The mission also identifies the scope of the
business’s operations in product and market terms.
Strategic goals are set by and for the top managers of the organization who focus on
broad, general issues.
Tactical goals are set by and for middle managers who focus on how to operationalize
actions necessary to achieve the strategic goals.
Operational goals are set by and for lower-level managers who focus on shorter-term
issues associated with the tactical goals.
2. Goals are set for different areas such as finance, marketing, or human resources.
3. Goals are set across different time frames (long-term, intermediate-term, and short-term).
The length of each time frame differs by level.
C. Responsibilities for Setting Goals
All managers should be involved, but each manager generally is responsible for setting goals
that correspond to his or her level in the organization.
Teaching Tip: Figure 7.2 illustrates the kinds of organizational goals that might be set for a regional
fast-food restaurant chain.
Group Exercise: After discussing the material in the section titled “Kinds of Goals”, have students
construct a hypothetical hierarchy of goals like those shown in Figure 7.2 for different kinds of
organizations such as a retailer, a manufacturer, a college or university, and so forth.
D. Managing Multiple Goals
Goals set by different areas or at different levels may conflict. Optimizing involves balancing
and reconciling possible conflicts between goals.
Discussion Starter: Ask students to identify situations in which they have had to optimize multiple
goals. A very relevant example for students is the trade-off between socializing and studying for a test
or between studying for multiple tests during final exam periods.
III. ORGANIZATIONAL PLANNING

A. Kinds of Organizational Plans
1. Strategic plans—general plans that outline the decisions of resource allocation, priorities,
and action steps necessary to reach strategic goals, which are set by the board of directors
and top management and have an extended time frame.
Cross-Reference: Note that strategic plans are discussed in detail in Chapter 8.
2. Tactical plans—developed to implement specific parts of a strategic plan. Typically, a
tactical plan involves upper and middle managers and has a shorter time frame than the
strategic plan.
3. Operational plans—focus on carrying out the tactical plans in order to achieve
operational goals. They are developed by middle and lower-level managers and have a
short-term focus.
B. Time Frames for Planning
1. Long-range plans cover many years and vary in length from organization to
organization. For our purposes, any plan that extends beyond five years is considered a
long-range plan.
2. Intermediate plans cover periods from one to five years and parallel tactical plans.
3. Short-range plans—have a time frame of one year or less and affect a manager’s day-to-
day activities.
74 © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
An action plan serves to operationalize any other kind of plan.

A reaction plan is a plan designed to allow the company to react to an unforeseen
circumstance.
C. Responsibilities for Planning
1. Planning staff—The planning staff is a group of planning professionals who help reduce
the planning workload of individual managers, help coordinate the planning activities of
individual managers, and provide tools and techniques needed to solve problems.
Management Update: Planning staffs were once very popular and used by virtually all large
organizations. In recent years, however, many firms have cut back or eliminated their planning staffs.
This was done to save money and with the idea that operating managers are really more qualified to
develop plans. A few experts are still kept on staff, however, to provide support and technical advice.
Management Update: As a corollary to the point noted above, planning task forces have become more
popular in recent years as firms have attempted to get their operating managers more involved in
planning.
Extra Example: Tenneco is a good example of a firm that has taken this approach. While Tenneco still
has a planning staff, it is much smaller than it was a few years ago. Its members usually provide
support for planning task forces composed of operating managers.
2. Planning task force—A planning task force is a group of line managers with a special
interest in the area of planning who are grouped together to address a particular issue.
Members of the planning staff also may be included in the task force.
Management Update: As the role of planning task forces has increased, so too has the role of
executive committees. These committees provide a natural analog to a planning task force. That is, the
executive committee can represent senior management, and a planning task force can represent line
management. The two groups can then work together to effectively develop plans.
3. Board of directors—The board of directors establishes the corporate mission and
strategy.
4. Chief executive officer—The CEO plays a major role in the complete planning process
and is responsible for implementing the strategy.
5. Executive committee—The executive committee provides input to the CEO on the
proposals that affect their own units and reviews the various strategic plans that develop
from this input.
Extra Example: Again, this closely mirrors the approach used at Tenneco today. The firm’s executive
committee works with planning task forces, with the efforts of both supported and assisted by a small
planning staff.
6. Line management—Line managers are individuals with formal authority and
responsibility for the management of the organization. They provide valuable inside
information as plans are formulated and implemented, and they execute the plans
developed by top management.
D. Contingency Planning
Contingency planning is the determination of alternative courses of action to be taken if an
intended plan of action is unexpectedly disrupted or rendered inappropriate.
Contingency planning usually involves various action points that are used to identify the need
to implement alternative plans.
Extra Example: Starbucks recently developed a contingency plan. Recent frosts in Brazil drove up the
price of coffee beans to the point that Starbucks increased its own prices by 10 percent. It then
developed a contingency plan for dealing with future pricing alternatives. If the price of beans drops to
previous levels, Starbucks will lower its own prices back to previous levels as well. If bean prices
remain high, however, Starbucks will also keep its own prices high.
Discussion Starter: Ask students to recall examples of times when they have engaged in contingency
planning.
A closely related concept is crisis management—the set of procedures the organization uses in
the event of a disaster or other unexpected calamity.
IV. TACTICAL PLANNING
Tactical plans are an organized sequence of steps designed to execute strategic plans.
A. Developing Tactical Plans
Tactical plans must address a number of tactical goals derived from a broader strategic goal,
must deal with specific resource and time issues, and require the use of human resources.
B. Executing Tactical Plans
For proper execution of tactical plans, a manager must evaluate possible courses of action in
light of the goal, make sure each decision maker has the information and resources necessary
to get the job done, ensure vertical and horizontal communication to minimize conflicts and
inconsistent activities, and monitor ongoing activities derived from the plans to make sure the
desired end results are achieved.
V. OPERATIONAL PLANNING
A. Single-Use Plans
A single-use plan is developed to carry out a course of action that is not likely to be repeated
in the future.
1. Program—a single-use plan for a large set of activities
Extra Example: In 2009, Disney acquired Marvel Comics. The process of integrating the two
companies was a program.
2. Project—similar to a program, but generally of less scope and complexity
B. Standing Plans
A standing plan is used for activities that recur regularly over a period of time.
1. Policy—specify the organization’s general response to a designated problem or situation.
Discussion Starter: Give students several examples of policies at your college or university, for
example, the school’s policy regarding scholastic honesty or sexual harassment. Ask the students to
describe why that policy was developed. In the students’ opinion, is the policy adequately addressing
the problem?
2. Standing operating procedure (SOP)—outlines the steps to be followed in particular
circumstances.
3. Rules and regulations—describe exactly how specific activities are to be carried out.
Interesting Quote: McDonald’s is famed for its SOPs and rules and regulations. To see where this
mentality comes from, consider this quote from Ray Kroc, founder of McDonald’s: “The French Fry
has become almost sacrosanct for me. Its preparation is a ritual to be followed religiously.” (Fortune,
July 3, 1989, 80.)
Discussion Starter: Ask students for examples of rules and regulations they have encountered that they
did not understand.
Group Exercise: Form students into small groups of four or five members each. Have each group
identify a rule or regulation. Then have them attempt to find out when and why that rule or regulation
was adopted, and how many exceptions are made to it.
VI. MANAGING GOAL-SETTING AND PLANNING PROCESSES

A. Barriers to Goal Setting and Planning
Cross-Reference: Note that Table 7.2 summarizes the barriers to effective goal setting and planning
and also lists the methods for overcoming those barriers.
1. Goals may be inappropriate if they are unattainable, if achieving them will mean a
setback in another area, and if they place too much emphasis on either quantitative or
qualitative measures of success.
Extra Example: Athletic departments are sometimes guilty of having inappropriate goals. That is, they
may put so much emphasis on winning that they break rules in order to gain a competitive advantage.
2. Improper reward systems can act as a barrier to goal setting and planning.
Extra Example: Following from the boxed insert above, reward systems may also encourage this
behavior in athletic departments. That is, coaches may be rewarded only for winning even though they
may make other contributions and may be doing other parts of their jobs well. Similarly, coaches have
been fired for not winning, even though they are performing the rest of their job effectively.
3. How quickly the organization’s environment changes (how dynamic and complex the
environment is) can be a barrier to effective goal setting.
4. Some managers are reluctant to establish goals for themselves and their units and act as a
barrier to effective planning.
5. People resist change, and because they do, they may become a barrier to goal setting and
planning.
Cross-Reference: Note that resistance to change is discussed more fully in Chapter 13.
6. Constraints or limits on what an organization can do or is allowed to do can act as a
barrier to goal setting and planning.
B. Overcoming the Barriers
1. Managers must recognize the purpose and limits of goal setting and planning.
2. People responsible for achieving the goals and implementing the plans should be
involved in the process from the beginning. Further, it is important to communicate to
everyone involved in the process the overriding organizational and functional strategies
and how they will be integrated.
3. Goals should be consistent horizontally, across the organization, and vertically, up and
down the organization. Goals and plans need to be revised and updated regularly.
4. People should be rewarded for establishing effective goals and plans and for successfully
achieving them.
C. Using Goals to Implement Plans
Formal goal setting, sometimes called management by objectives or MBO, is a widely used
method for managing the goal-setting and planning processes concurrently to make sure that
both are done effectively.
1. The purpose of formal goal setting is to give subordinates a voice in the goal-setting and
planning processes and to clarify for them exactly what they are expected to accomplish
in a given time span.
Discussion Starter: Ask students if they have ever worked under a formal goal-setting system.
Extra Example: Managers at Cypress Semiconductor use a comprehensive form of MBO to guide
virtually all performance. Each employee has dozens of goals, all of which are stored and continually
updated in a central computer network.
2. The process of formal goal setting must start at the top. Top managers must communicate
why they adopted the process, what it will accomplish, and that they are committed to it.
Employees must be educated about formal goal setting and it must be implemented in a
consistent manner. The process begins with collaborative goal setting between a manager
and a subordinate as the goals are clarified and written down. The resources needed to
achieve the goals are discussed and periodic reviews are held to ensure the subordinate is
on track in achieving the goals.
3. Formal goal setting can be effective in improving employee motivation, enhancing
communication, and making performance appraisals more objective. The process can be
ineffective if top management does not support it, if lower-level managers and
employees do not accept the goals of the organization, or if there is an overemphasis on
quantitative goals and plans.
Group Exercise: Have students develop a formal goal-setting system that could be used in teaching a
class such as this one.
END OF CHAPTER QUESTIONS
Questions for Review

1. Describe the nature of organizational goals. Be certain to include both the purposes and the kinds of
goals.
The four purposes of goals are to: (1) provide guidance and direction, (2) facilitate planning,
(3) serve as a source of motivation and inspiration, and (4) be used to evaluate and control.
Businesses that move aimlessly cannot survive in today’s economy. Goal development is essential
because it helps guide the planning process. When employees know and understand the direction
of the business, they are more motivated to accomplish the goals of the organization. Finally, the
goals can be monitored as a control device. There are several kinds of goals: organizational goals,
goals for different areas of the organization, and goals that span different time frames.
2. Describe the scope, responsible personnel, and time frames for each kind of organizational plan.
How are plans of different kinds related?
Strategic plans are long-range and broad plans that will impact the entire organization. They are
typically made by the board of directors and top managers. Tactical plans are mid-range plans with
somewhat less impact than strategic plans and are often made by upper and middle managers.
Operations plans are short-range and limited in scope and are made by middle and lower-level
managers.
3. Explain the various types of operational plans. Give a real or hypothetical business example for each
type. Do not use examples from the text.
A program is a single-use plan that directs a large set of activities, such as Wal-Mart’s acquisition
and integration of the British grocer, ASDA. A project is a single-use plan that is more limited in
scope than a program, such as GM’s project to update the design of its Saturn automobiles. A policy
is a standing plan that is stated very generally. Most universities, for example, have a policy
forbidding discrimination or harassment. A standard operating procedure is a standing plan that
describes the tasks that must be done under certain circumstances. The U.S. Navy uses SOPs to tell
its sailors how to maintain equipment, for example. Rules and regulations are the narrowest type of
standing plans and can substitute for decision-making. Many airlines have a rule, for example, that a
flight attendant must smile at each passenger who addresses him or her.
4. List the steps in the formal goal-setting process. What are some of the advantages for companies
that use this approach? What are some of the problems that may arise from use of this approach?
Formal goal setting can increase employee motivation towards the accomplishment of specific
goals. It can also enhance communication and make decision making more objective. Formal goal
setting facilitates control too. Problems of formal goal setting include poor implementation, lack of
top management support, the burdensome paperwork that formal goal setting can encourage, and the
rigidity that can result.
Questions for Analysis

5. Managers are frequently criticized for focusing too much attention on the achievement of short-term
goals. In your opinion, how much attention should be given to long-term versus short-term goals? In
the event of a conflict, which should be given priority? Explain your answers.
Clearly, managers must continually balance short-term and long-term interests. Too much attention
to one or the other can result in ineffectiveness. Students’ opinions will, of course, vary.
6. What types of plans and decisions most likely require board of director involvement, and why?
What types of decisions and plans are not appropriate for board involvement, and why?
Board should oversee any important strategic decisions, and they should also carefully supervise
financial and other types of reporting in order to assure ethical and legal behavior. They should
make decisions related to the CEO’s compensation and activities. In short, they should make any
decisions that the owners of the firm (the stockholders) feel needs oversight. Boards should not
become overly involved in every management decision, which would create difficulties for
managers. Nor should they counter-act every move by the CEO, but they should work to support
and help the CEO grow in his or her management ability.
7. Standing plans help make an organization more effective. However, they may inhibit
experimentation and organizational learning. Under what conditions, if any, should organizations
ignore their own standing plans? In the area of planning, how can an organization balance the need
for effectiveness against the need for creativity?
Standing plans should be abandoned if circumstances change radically, forcing the alteration. Firms
that are more interested in innovation than in efficiency should minimize their use of standing plans.
Managers are constantly balancing the need for creativity with the need for efficiency. One
approach that has met with success at many firms is the development of standing plans—but with a
built-in trigger for re-examination of the plans if circumstances warrant.
Questions for Application

8. Interview the head of the department in which your major exists. What kinds of goals exist for the
department and for the members of the department? Share your findings with the rest of the class.
The students of many departments will find that there are generally goals in three areas: teaching,
research, and service. Discuss the three areas with the students and try to discover why one is given
more importance than the other two by a given department. It may be interesting to discuss the
inclusion of research because many students do not see the rationale for including or emphasizing
research as a goal of an academic department.
9. Tell about a time when an organization was not able to fully achieve all of its goals simultaneously.
Why did this occur? Is complete realization of all goals impossible for an organization? Why or
why not?
Students’ answers will vary, but here is one example: “At my workplace, we seek to hire
experienced personnel who will be able to offer great customer service, but our budget is limited, so
instead we usually hire entry-level workers, whose customer-service skills are weaker.” Other
reasons for the inability to achieve goals simultaneously might be related to a constraint in other
resources, such as insufficient labor, raw materials, or time. In theory, organizations should be able
to find creative ways to satisfy many or all goals simultaneously. In practice, organizations with
complex sets of stakeholders must try to assure that each group has at least some of its needs met
but is unlikely to be able to fully satisfy all groups.
10. From your library or the Internet, find information about a company’s mission statement and goals.
List its mission and some of its strategic, tactical, and operational goals. Explain the relationship
you see among the goals at different levels.
Answers will vary. For example, if students investigated the mission statement of the IRS, they
would find: “to provide America’s taxpayers with top quality service by helping them understand
and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.”
Among their strategic initiatives are the ability for all taxpayers to file their returns electronically. A
tactical plan that builds on that strategy is the development of relationships with third-party
providers of tax services, such as H&R Block. An operational plan that builds on that tactic is the
development of an IRS web site, which offers specific help and instructions online for every tax
form, to aid online filers. In general, students should find that the mission, strategy, tactics, and
operations build on plans at the previous level.
END OF CHAPTER EXERCISES
Building Effective Decision-Making Skills

I. Purpose
This exercise allows students to apply their decision-making skills to a specific business situation.
II. Format
This exercise calls for reading the case scenario and dividing the class into groups of three or four.
Each group will meet as a management team responsible for deciding the fate of the company’s
Smallville plant.
Teaching Tip: An optional approach would be to square off teams in a debate format with one team
representing management and the other an affected stakeholder group.
III. Follow-Up
A. Your instructor will divide the class into groups of three or four people each. Each group will
meet as a management team responsible for deciding the fate of the Smallville plant.
B. The team may decide to close the plant or keep it open, but the goal of the decision-making
process is twofold: (1) to keep the company viable and (2) to reflect the team’s individual and
group values.
C. If the team decides to close the plant, it must draw up a list of the factors on which it based its
decision and be prepared to justify it.
D. If the team decides to keep the plant open, it must draw up a plan explaining how the company
can still remain competitive.
The team has to keep cost as well as quality issues in mind. The Italian competitors are
currently beating them on both fronts.
E. Each member of each team should be prepared to explain the choices that he or she made in
helping the group reach its decision.
Building Effective Time Management Skills

I. Purpose
This exercise should aid students in learning about the complexity of priority setting within an
organization.
II. Format
This time-management skills exercise includes both individual and group components, and should
take about 15 minutes.
III. Follow-Up
A. Develop a schedule listing the sequence in which you need to meet with the eight parties that
you’ve listed above. Do the best that you can to minimize backtracking (seeing one party and
then having to see him or her again after seeing someone else).
B. Compare your schedule with that of a classmate and discuss the differences.
Students’ answers will vary for the above questions.
C. Do you find that it’s possible to draw up different schedules which are nevertheless equally
valid? If so, why? If not, why not?
Yes, students will be able to develop different schedules that meet the requirements. Some of
the steps are relatively independent of the others. For example, advertising design can begin
without interacting with the others. Therefore, students are free to place this task wherever
they feel it is most appropriate. Other tasks are interconnected. For example, the physical
layout of the store cannot be planned until a space has been leased.
MANAGEMENT AT WORK
HOW TO SUCCEED IN BUSINESS

Steve Jobs’s ongoing health problems has caused him to step down temporarily as the CEO of Apple
twice in the last two years. In both cases, the company announced that Tim Cook, the company’s chief
operating officer, would take over Jobs’s responsibilities. The vignette focuses on succession planning in
general and suggests several best practices in this area.
Management Update: In August 2011, Steve Jobs announced that he was resigning as Apple’s chief
executive officer due to deteriorating health. The company’s board named Tim Cook Apple’s CEO.
1. Case Question 1: In what ways can succession planning be regarded as a type of contingency
planning? Under what circumstances might it be necessary for a company to treat its succession-
planning process as a crisis management process?
The chapter defines contingency planning as the determination of alternative courses of action to be
taken if an intended plan is unexpectedly disrupted or rendered inappropriate. Succession planning
can be regarded as a type of contingency planning because it prepares the organization for a
situation in which its current CEO has to step down for whatever reason. It can regarded as a crisis
management process if the stepping down of the current CEO is sudden, which may happen due to
health or other reasons.
2. Case Question 2: How might a company use the process of goal setting to help it implement its
succession plan? Be sure to consider the barriers to successful implementation that it might
encounter.
The company can frame its long-term goals and find a person whose skills are best suited to lead the
organization toward those goals. Of course, such a process may be difficult to implement because
the goals may not be agreed upon and the suitability of various candidates may be debated.
3. Case Question 3: When asked if Apple would provide more details about Jobs’s second leave of
absence, a company spokeswoman responded ‘we’ve said all we’re going to say.” Is Apple
obligated to offer any more details, particularly about the health of its CEO? One lawyer who
advises corporate boards on such questions says that such details are material to investment
decisions only “if you’re asking shareholders to make decision based on [that] information …. You
can’t expect the company,” he adds, “to give a blow-by-blow account of Steve Jobs’s health.” What
do you think? If you were an Apple investor, what information would you regard as “material” to
your decisions? What would you want to know in deciding whether to keep or sell your shares of
Apple?
Not all companies are like Apple in that Steve Jobs is so closely identified with the company’s
amazing success that there is palpable fear that without him the company’s stream of innovative hit
products could very well come to an end. In fact, much like in the case of Peyton Manning and the
Indianapolis Colts (where most do not know who the back-up quarterback is), the public is unaware
of the other top managers at Apple, such is Jobs’s “larger-than-life” persona. Therefore, it is
important for Apple to keep the investment company appraised of Steve Jobs’s health. Of course,
student opinions may vary on this topic.

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MANAGEMENT 11TH EDITION GRIFFIN

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II. ORGANIZATIONAL GOALS

III. ORGANIZATIONAL PLANNING

An action plan serves to operationalize any other kind of plan.

VI. MANAGING GOAL-SETTING AND PLANNING PROCESSES

END OF CHAPTER QUESTIONS

Questions for Review

Questions for Analysis

Questions for Application

END OF CHAPTER EXERCISES

Building Effective Decision-Making Skills

Building Effective Time Management Skills

HOW TO SUCCEED IN BUSINESS

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