Performance Management

and Strategic Planning

Chapter 3
 Learning objectives
• Define strategic planning and its purposes
• Understand how to create an organization’s strategic plan, including an
environmental analysis resulting in a mission statement, vision statement, goals,
and strategies.
• Define the concept of a mission statement and describe the necessary components
of a good mission statement.
• Define the concept of a vision statement and understand its relationship to the
mission statement.
• Create organizational- and unit-level mission and vision statements.
• Understand the relationship between a unit’s vision, mission, goals, and strategies
and individual job descriptions.
• Understand how a strategic plan determines various choices regarding
performance management system design.
DEFINITION AND PURPOSES OF STRATEGIC
PLANNING

• Strategicplanning is a process that involves describing the

organization’s destination, assessing barriers that stand in the way of
that destination, and selecting approaches for moving forward.
• The main goal of strategic planning is to allocate resources in a way
that provides organizations with a competitive advantage and pursuit
of its goals.
DEFINITION AND PURPOSES OF STRATEGIC PLANNING
Specific goals of strategic planning
• First allows organizations to define their identities.
• Second, prepare for the future because it clarifies the desired destination.
• Third,analyze their environment, and adapt to environmental changes
and even anticipate future changes.
• Fourth, produce a culture of cooperation within the organization given
that a common set of goals is created
• Fifth, generates new options and opportunities to be considered
• Finally,
guide employees’ daily activities because it identifies the
behaviors and results that really matter.
 PROCESS OF LINKING PERFORMANCE
MANAGEMENT TO THE STRATEGIC PLAN
• The organization’s strategic plan includes a mission statement and a
vision statement as well as goals and strategies that will allow for the
fulfillment of the mission and vision.
PROCESS OF LINKING PERFORMANCE MANAGEMENT
TO THE STRATEGIC PLAN
This leads to:
Employees focusing on meeting important goals.
Employees have more decision-making power.
Lower-level managers have a better understanding of higher-level managers’
decisions.
Communication increase and improvement (among managers, between managers and
employees, etc.).
Strategic planning
• Thereare several steps that must be considered in the creation of
a successful strategic plan.
• These include:

(1) the conduct of an environmental analysis

(2) the creation of an organizational mission
(3) the creation of an organizational vision
(4) setting goals
(5) the creation of strategies that will allow the organization to fulfill its
mission and vision and achieve its goals
 Strategic planning
1. ENVIRONMENTAL ANALYSIS
• Identifies (A) external and (B) internal constraints with the purpose of
understanding broad issues related to the industry where the organization operates
(A) An examination of the external environment includes a consideration of
opportunities and threats.
1. Opportunities are characteristics of the environment that can help the
organization succeed
Examples of such opportunities might be markets not currently being served,
untapped labor pools, and new technological advances.

2. Threats are characteristics of the external environment that can prevent the
organization from being successful.
Examples of such threats range from economic recession to the innovative
products of competitors
Strategic planning
• ENVIRONMENTAL ANALYSIS
External factors that should be considered in any environmental analysis:
• Economic
• Political/legal
• Social.
• Technological.
• Competitors.
• Customers.
• Suppliers.
Strategic planning
ENVIRONMENTAL ANALYSIS
(B) An examination of the internal environment includes a consideration of
strengths and weaknesses.
1. Strengths are internal characteristics that the organization can use to its advantage.
For example, what are the organization’s assets and the staff’s key skills?
2. Weaknesses are internal characteristics that are likely to hinder the success of
the organization.
Strategic planning
ENVIRONMENTAL ANALYSIS
Internal factors that should be considered in any environmental analysis:
• Organizational structure.
• Organizational culture.
• Politics.
• Processes.
• Size.
Strategic planning
ENVIRONMENTAL ANALYSIS
Gap Analysis
• which analyzes the external environment in relation to the internal environment.
• The pairing of external opportunities and threats with internal strengths and
weaknesses leads to the following situations (ranked from most to least
competitive)
 Strategic planning
ENVIRONMENTAL ANALYSIS

Gap analysis
1. Opportunity + Strength = Leverage. The best combination of external and
internal factors occurs when there is an opportunity in the environment and a
matching strength within the organization to take advantage of that opportunity.
2. Opportunity + Weakness = Constraint. In a constraint situation, the external
opportunity is present; however, the internal situation is not conducive to taking
advantage of the external opportunity
3. Threat + Strength = Vulnerability. In this situation, there is an external threat,
but this threat can be contained because of the presence of internal strengths
4. Threat + Weakness = Problem. In the worst scenario, there is an external threat
and an accompanying internal weakness
• This information will then be incorporated into the organization’s mission
Mission
• In general, thorough mission statements include the following components:
1. Basic product or service to be offered (does what?)
2. Primary markets or customer groups to be served (to whom?)
3. Unique benefits and advantages of products or services (with what
benefits?)
4. Technology to be used in production or delivery
5. Fundamental concern for survival through growth and profitability
Mission
• Based on this mission statement, we have information about why the
company exists (i.e., “to refresh the world”) and the scope of the
organization’s activities (i.e., “to create value and make a difference”).
• Reason for existing, what company does the values received by
customer.
• Mission statements also typically include information about the
organization’s values and beliefs, including:
1. Managerial philosophy of the organization
2. Public image sought by the organization
VISION

• Description of what the organization would like to become in the future (about
10 years in the future).
• Vision statements are typically written after the mission statement is
completed because the organization needs to know what it is and what its
purpose is before they can figure out who they will be in the future.
Vision
Vision statement are:
• Brief. A vision statement should be brief so that employees can remember it.
• Verifiable. A good vision statement should be able to stand the reality test.
• Bound by a timeline. A good vision statement specifies a timeline for the
fulfillment of various aspirations.
• Current. Vision statements should be updated on an ongoing basis, ideally as
soon as the old vision is fulfilled.
Vision
vision statement are:
• Focused. but rather focuses on just a few aspects of an organization’s
performance that are important to future success.
• Understandable. Vision statements need to be written in a clear and
straightforward manner so that they are understood by all employees.
• Inspiring. Good vision statements make employees feel good about their
organization’s direction and motivate them to help achieve the vision.
• A stretch. The vision statement should be far reaching and as soon as it turns
to reality, it should be updated.
GOALS
• The purpose of setting such goals is to formalize statements about what the
organization hopes to achieve in the medium- to long-range period
• Goals provide more specific information regarding how the mission will be
implemented
• Goals can also be a source of motivation and provide employees with a more
tangible target for which to strive
• Goals provide the basis for performance measurement because they allow for a
comparison of what needs to be achieved versus what each unit, group, and
individual is achieving.
Strategies
• Creatingstrategies answers questions like, how to fulfill the mission
and vision? and how to achieve the stated goals?

• Strategiesdescription the “game plans” or “how-to” procedures to

reach the stated objectives.
• The strategies could address issues of growth, survival, turnaround,
stability, innovation, and leadership, among others.
 Strategies
HR department role in strategies implementation:
• The human resources (HR) function plays a critical role in creating and
implementing the strategies that will allow the organization to realize its
mission and vision.
• Specifically, the HR function can make the following contributions:
• Communicate knowledge of strategic plan. The HR function can be a good
conduit to communicate the various components of the strategic plan (e.g.,
mission, vision, and goals) to all the employees.
Strategies
HR department role in strategies implementation :
•Outline knowledge, skills, and abilities (KSAs) needed for strategy
implementation.
Provide information about whether the current workforce has the KSAs needed to
support the strategic plan and, if not, to offer suggestions about what types of
employees should be hired and what types of plans should be put in place to
develop the needed KSAs internally.
• Propose reward systems.
Provide useful information on what type of reward system should be implemented
to motivate employees to support the strategic plan.
 Job Descriptions

• Job analysis leads to the creation of job descriptions.

• Job descriptions also need to be congruent with the organization and unit
mission, vision, goals, and strategies.
• After the strategic plan is completed, some rewriting of the existing job
descriptions may be in order.
• How do the specific tasks contribute to the strategic priorities of the department
and the organization as a whole?
Job Descriptions
• This job description should clarify the link between the individual position and
the department’s goals.
• First, the description should include the department mission statement so that
individuals become aware of how their specific roles fit within the overall
mission of the department.
• Second, the job description should include the same terms language of the
department’s mission as well as the organization’s overall mission.
• Third, in the qualifications section, there should be a clear overlap between
those needed for this specific position and those mentioned in department as
well as the organizations’ overall mission.