Managerial Planning and

Goal Setting

Chapter 7
 Learning Outcomes

1. Define goals and plans and explain the relationship between them.
2. Explain the concept of organizational mission and how it influences
goal setting and planning.
3. Describe the types of goals an organization should have and how
managers use strategy maps to align goals.
4. Define the characteristics of effective goals.
5. Describe the four essential steps in the management by objectives
(MBO) process.
6. Explain the difference between single-use plans and standing plans.
7. Describe and explain the importance of contingency planning, scenario
building, and crisis planning in today’s environment.
8. Summarize the guidelines for high-performance planning in a fast
changing environment.
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Chapter Outline
 Overview of Goals and Plans
 Levels of Goals and Plans
 Purposes of Goals and Plans
 The Organizational Planning Process

 Goals in Organizations
 Organizational Mission -Goals and Plans
 Aligning Goals with Strategy Maps

 Operational Planning
 Criteria for Effective Goals
 Management by Objectives
 Single-Use and Standing Plans
 Planning for a Turbulent Environment
 Contingency Planning Building Scenarios Crisis Planning
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 Overview Goals and Plans
 Goal - A desired future state that the organization
attempts to realize.
– Example : Proctor and Gamble set a goal of doubling its
revenues over a 10 year period
 Plan - A blueprint specifying the resource allocations,
schedules, and other actions necessary for attaining
goals
 Planning – The concept of planning usually
 incorporates both ideas; it means determining the
organization’s goals and means for achieving them
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 Levels of Goals/Plans & Their Importance

External Message
Legitimacy for
Mission
investors, customers,
Statement suppliers, community

Strategic Goals/Plans
Senior Management
(Organization as a whole)
Internal Message
Legitimacy,
Tactical Goals/Plans motivation,
Middle Management guides,
(Major divisions, functions) rationale,
standards

Operational Goals/Plans
Lower Management
(Departments, individuals)

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 LEVELS OF GOALS AND PLANS

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,
which in turn shapes the tactical (divisional) level and the operational
(departmental) level.
Top managers are typically responsible for establishing strategic goals and plans
that reflect a commitment to both organizational efficiency and effectiveness.
Tactical goals and plans are the responsibility of middle managers, such as the
heads of major divisions or functional units. A division manager will formulate
tactical plans that focus on the major actions the division must take to fulfil its
part in the strategic plan set by top management.
• 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 that focus on specific
tasks and processes and that help meet tactical ands trategic goals. Planning at
each level supports the other levels.
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 Goals in Organizations

 Setting goals starts with top managers

 The overall planning process begins with
mission statement and goals for the
organization as a whole.

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 Organizational Mission
 Mission = organization’s reason for existing
 Mission Statement
– Broadly states the basic business scope and
operations that distinguishes it from similar types of
organizations
– May include the market and customers
– Some may describe company values, product quality,
attitudes toward employees
– Crux: describe basic business activities & purposes as
well as the values that guide the company
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Kinds of Organizational Goals for a Regional Fast Food Chain (McDonald’s- Burger king)
Mission Statement
Our mission is to operate a chain of
restaurants that will prepare &
serve high quality food on timely
Strategic Goals basis & at reasonable prices

(President & CEO)

• Start or purchase new
restaurant
• Chain of restaurants within few
years
• Provide 14% return to
investors for at least 10 years
VP-Operations VP-Marketing VP- Finance
 Open 150 new restaurants  Increase per store sales 5% per  Keep corporate debt to no
during next five years year for 10 years more than 20% of liquid
 Decrease average  Target & attract two new market assets for next ten years
customer wait by 30 segments during next 5 years  Revise computerized
seconds this year  Develop new promotional accounting system with in
strategy for next year five years
Restaurant Manager Advertising Director Accounting Manager
 Hire & train new  Implement this year’s
assistant manager promotional strategy  Competitive payroll system for
 Decrease waste by 5%  Develop regional advertising each restaurant this year
this year campaigns with in 1 year  Pay all invoices within thirty
 Implement incentive  Negotiate 5 % lower days
systemCopyright
within© 2005
1 year advertising
by South-Western, a division rates next
of Thomson Learning. year
All rights reserved.
 IMSciences Vision Statement

To be a premier institution of higher education

by achieving excellence in teaching, research,
entrepreneurship, and service to the society.

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 IMSciences ‘Mission Statement’
To provide quality education in management, information
technology and allied disciplines. We are committed
towards knowledge creation and its exchange with the
society through teaching, learning, and research. We aim
at enhancing the potential of our students and employees
by adhering to our core values.
 Core Values
– character and discipline
– Meritocracy - open doors for all
– diversity and equality - ownership and commitment
– dynamism and -responsible citizenship
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 Bristol-Myers Squibb
Mission Statement

Our company’s mission is to

extend and enhance human life
by providing the highest-quality
pharmaceutical and related
health care products.

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 Strategic Goals and Plans

Strategic Goals
 Where the organization wants to be in the future
 Pertain to the organization as a whole
Strategic Plans
 Action Steps used to attain strategic goals
 Blueprint that defines the organizational
activities and resource allocations
 Tends to be long term

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 Example

 Consider the new strategic goals and plans

at Borders, the number two book retailer in
the United States
 Why would Borders end its alliance with
Amazon and opening its own branded e-
commerce site?????????

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 Tactical Goals and Plans

Tactical Goals
- Apply to middle management
- Goals that define the outcomes that major
divisions and departments must achieve

Tactical Plans
- Plans designed to help execute major strategic plans
- Shorter than time frame than strategic plans

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 For Example

 ..the overall strategic plan of a large florist might

involve becoming the number one telephone and
Internet-based purveyor of flowers, which requires
high-volume sales during peak seasons such as
Valentine’s Day and Mother’s Day. Human
resource managers will develop tactical plans to
ensure that the company has the dedicated order
takers and customer service representatives it
needs during these critical periods.
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 Operational Goals and Plans
Operational Goals

- Specific, measurable results

- Expected from departments, work groups, and
individuals
- Goals are stated in quantitative terms, and the
department plan describes how goals will be
achieved
Operational
- Plans
- Organization’s lower levels that specify action steps
toward achieving operational goals
- Tool for daily and weekly operations
-Copyright
Schedules are
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 Examples: Operational Goals

• “Process 150 sales applications each week,”

• “achieve 90 percent of deliveries on time,”
• “reduce overtime by 10 percent next month,”
• “develop two new online courses in
accounting”
• Managers at the Internal Revenue Service
(IRS) set an operational goal of providing
accurate responses to 85 percent of taxpayer
questions
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 Examples: Operational Plans

 Schedules 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.
 Operational planning also must be
coordinated with the budget, because
resources must be allocated for desired
19 activities.
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 Goal Attainment

Means-end Chain
 Attainment of goals at lower levels permits
the attainment of high-level goals
 Traditional organizational responsibility
– Strategic = top management
– Tactical – middle management
– Operational = 1st line management & workers

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 Hierarchy of Goals
Traditional Responsibility Today
Mission

Top Strategic
Management Goals • Shrinking
middle
Middle Tactical management
Management Goals • Employee
1st-line empowerment
Management Operational
& Workers Goals Employees

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 Operational Planning

 Managers use operational goals to direct

employees and resources toward achieving
specific outcomes that enable the organization to
perform efficiently and effectively.
 One consideration is how to establish effective
goals. Then managers use a number of planning
approaches, including management by objectives,
single-use plans, and standing plans.

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 Characteristics of Effective
Goal Setting

 Specific and measurable

 Cover key result areas
 Challenging but realistic

● Defined time period

● Linked to rewards

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Specific & Measurable
 Goals should be expressed in
quantitative terms such as increasing
profits by 2%, decreasing scrap by 1%
 Not all goals can be expressed in
numerical terms but vague goals have
little motivating power for employees
 At the Top Org, goals often are
qualitative as well as quantitative

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 Cover Key Result Areas

Goals cannot be set for every aspect of employee

behavior or Organizational performance
 Managers should identify a few key result areas—
4 or 5 for any Organizational department or Job
 Example: Marketing department for Alltel

key result areas for which goals were specified:

1. Identify emerging areas of service opportunities
2. Improve marketing of existing products
3. develop a strategic market plan based on customer needs

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Challenging but realistic
 Goals should be challenging but not unreasonably
difficult
 When goals are unrealistic, they set employees up for
failure and lead to decreasing employee morale
 For example : Staff working 100 hours per week to accomplish
everything expected of them How ever if goals are too easy,
employee may not feel motivated
 Managers should, however make sure that goals are set
within the existing resource base, not beyond
deptartments time, equipment & financial resources
– Kmart set a goal to have more revenues than Wal-mart next
year
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Defined time period
 Goals should specify the time period over
which the will be achieved
 A time period is a deadline specifying the date
on which goal attainment will be measured
 Example: Strategic sales goals could be
established on a three-year time horizon

 1st year target $100 million

 2nd year target $129 million
 3rd year target $165 million
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Linked to rewards
 The ultimate impact of goals depends on the extent to which
salary increases, promotions and awards are based on goal
achievement
 People who attain goals should be rewarded
 Rewards give meaning & significance to goals and help commit
employee to achieving goals
 Failure to attain goals often is due to factors outside employees
control…….. Is it most of the time or is it individuals fault..
 Example: Federal Express stated goal of encouraging risk
 Lost $233 Million on an unsuccessful service called
‘Zapmail’, no one was punished

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 Management by Objectives

 Management by objectives (MBO) is a

system whereby managers and employees
define goals for every department, project,
and person and use them to monitor
subsequent performance.
 Case attached (Siemens-improve its overall
financial performance)

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 Model of the MBO Process
Step 1: Set Goals Step 2: Develop Action Plans
Corporate Strategic Goals
Departmental goals
Action Plans
Individual goals

Review Progress

Step 3:
Review Progress

Take Corrective Action

Appraise Performance
Step 4: Appraise Overall
Performance
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 MBO Benefits and Problems
Benefits of MBO Problems with MBO
 Manager and employee  Constant change prevents
efforts are focused on MBO from taking hold
activities that will lead to  An environment of poor
goal attainment employer-employee relations
 Performance can be reduces MBO effectiveness
improved at all company  Strategic goals may be
levels displaced by operational goals
 Employees are motivated  Mechanistic organizations and
 Departmental and values that discourage
individual goals are participation can harm the
aligned with company MBO process
goals  Too much paperwork saps
MBO energy
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 Single-Use Plans
For Goals Not Likely To Be Repeated

● A program is a complex set of objectives and

plans to achieve an important, one-time
organizational goal
● A project is similar to a program, but
generally smaller in scope and complexity
● Refer to Exhibit 6.8

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Program
Plans for attaining a one-time
organizational goal Major undertaking that
may take several years to complete
Large in scope; may be associated with
several projects
Examples: Building a new headquarters
Converting all paper fi les to digital
Project
 Also a set of plans for attaining a one-
time goal
 Smaller in scope and complexity than a
program; shorter in horizon Often one
part of a larger program
Examples: Renovating the office
Setting up a company intranet
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Policy
• Broad in scope—general guide to action
• Based on organization’s overall goals/strategic
plan
Defines boundaries within which to make decisions
Examples: Sexual harassment policies Internet and
e-mail usage policies
Rule
 Narrow in scope
 Describes how a specific action is to be
performed
 May apply to specific setting
Examples: No eating rule in areas of company
where employees are visible to the public
Procedure
• Sometimes called a standard operating procedure
• Defines a precise series of steps to attain certain
goals
Examples: Procedures for issuing refunds
Procedures for handling employee grievances
 Single use plans
Programs Projects

 A single use plan for a  similar to projects but is

large set of activities generally of less scope
 For example: Black & and complexity
Decker brought GE small  Project may be a part of
appliance business: broader program
largest brand name  Conversion of each of
switch in history the 150 product was a
140 steps were used for separate project
each product…….

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 Standing Plans
..ongoing plans that are used to provide
guidance for Tasks Performed Repeatedly

● A policy is a general guide to action and

provides direction for people within the
organization
● Rules describe how a specific action is to be
performed
● Standard Operating Procedures (SOPs)
define a precise series of steps to be used
in achieving a specific job
Experiential Expercise: Company Crise Wave

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35
Policy: Organizations general response to a designated problem or
situation
McDonald’s will not grant a franchise to an individual who
already owns another fast-food restaurant
University admission will be granted only to
applicants with a min SAT score
Standing Operating Procedures: More specific than policy, in that it
outlines the steps to be followed in particular circumstances
McDonald’s has SOP’s explaining how Big Macs are to be
cooked, how long they can stay in the warming rack and so forth
Rules & Regulations : Narrowest of the standing plans,
describe exactly how specific activities are to be carried
out
McDonald’s prohibiting customers from using it telephones
 Contingency Plans
Specific Situations - unexpected conditions

 Identify Uncontrollable Factors

– Economic turndowns
– Declining markets
– Increases in costs of supplies
– Technological developments
– Safety accidents
 Minimize Impact of Uncontrollable Factors
– Forecast a range of alternative responses to
most-likely high-impact contingencies

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 Building Scenarios

 Looking at trends and

discontinuities and imagining
possible alternative futures to
build a framework within which
unexpected future events can be
managed

Forces managers to rehearse mentally what they

would do if their best-laid plans were to collapse
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 Crisis Management Planning
Sudden - Devastating –Require Immediate Response

 Prevention
– Build trusting relationship with key stakeholders
– Open communication
 Preparation
– Crisis Management Team
– Crisis Management Plan
– Establish an Effective Communications system
 Containment
Ethical Dilemma: Completing Project WebFirst

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39
 Planning for High Performance

 Central Planning = Traditional Department

Group of planning specialists who develop plans for
the organization as a whole and its major divisions and
departments and typically report directly to the
president or CEO

 Decentralized Planning = High-Performance

Managers work with planning experts to develop their
own goals and plans

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 Planning In The New Workplace
 Have a strong mission statement and vision
 Set stretch goals for excellence
 Establish a culture that encourages learning
 Embrace event-driven planning
 Utilize temporary task forces
 Planning still starts and stops at the top
Planning comes alive when employees are involved in
setting goals and determining the means to reach them
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