MCP-Lecture 2-2

Managerial Planning and
Goal Setting
CHAPTER 2-2
Overview of Goals and Plans
 A goal is a desired future state that the
organization attempts to realize
 A plan is a blueprint for goal achievement
 There are different levels of planning and
goals in an organization
 Goals at each level of the organization
guide the organization
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Overview of Plans
 Planning is deciding in advance what to do, how
to do it, when to do it, and who is to do it.
 A plan is a blueprint for goal achievement and
specify the necessary resource allocations,
schedules, tasks, and other actions necessary for
attaining goals
 Planning is a process of deciding what to do and
how to do it before action is required. or
 The act of determining the organizational goals
and the means for achieving them.
 Planning is a process of decision making.
 It is the primary mgt function.
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Levels of Goals/Plans and their Importance

Characteristics of Goals and Plans
 Legitimacy
 Source of motivation and commitment
 Resource allocation
 Guides to action
 Rationale for decisions
 Standards of performance

The Organizational Planning Process

Organizational Mission
 The mission statement is the reason the

organization exists
– Top of the goal hierarchy
– Describes the values, aspirations and reason for
being
– A well-defined mission is the basis for all other
goals
 Mission statements outline the stated
purpose and values to stakeholders

Organizational Vision
 Vision has become one of the most

overused and least understood word
 A well-conceived vision consists of two major

components:
– core ideology , and
– envisioned future

Core ideology
– defines a company’s timeless character.
– is something you discover —by looking inside and
not something you invent.
– should not change while its practices ,strategies,
markets , customers, and products etc... should
change continually
– has two parts: core Values and core Purpose

 Core values
– are the handful of guiding principles by which a company
navigates. ( e.g. imagination , Innovation, Empowerment,
Integrity, Passion , fun, diversity, team work, community)
– These values are nurtured for their own sake, not to
capitalize on business opportunities.
– A company’s market or strategy or product lines etc...
may change to remain true to its core values.
 Core purpose
– is an organization’s most fundamental reason for being. (
e.g. to make people happy )
– reflects the idealistic motivations for doing the company’s
work and should not be confused with the company’s
current product lines or customer segments.
– Company’s core purpose can never be completed
An envisioned future
 has two elements: BHAGs and vivid
descriptions
– Big, Hairy, Audacious Goals (BHAGs) which are
ambitious plans that rev up the entire organization
and require 10 to 30 years’ work to complete.
– Vivid descriptions paint a picture of what it will be
like to achieve the BHAGs. They make the goals
vibrant, engaging—and tangible.
 Don’t confuse
– a company’s core ideology with its envisioned future
– a BHAG with a core purpose. A BHAG is reachable
but core purpose can never be completed.
Examples of BHAG of some companies
 Amazon: Every book, ever printed, in any language, all
available in less than 60 seconds.
 Blackpool FC: Reach English Premier League.
 Disney: Be the best company in the world for all fields of
family entertainment.
 Ford: Democratize the automobile.
 Google: Organize the world's information and make it
universally accessible and useful.
 Hewlett-Packard: Be one of the best managed
corporations in the world.
 IBM: Commit to a $5 billion gamble on the 360
 Microsoft: A computer on every desk and in every home.
 Motorola: Sell 100,000 TVs at $179.95
 Nokia Siemens Networks: Connect 5 billion people by
2015.
Putting It All Together: Sony in the 1950s
Core Ideology
Core Values
• Elevationof the Japanese culture and national status
• Being a pioneer—not following others; doing the impossible
• Encouraging individual ability and creativity
Purpose
To experience the sheer joy of innovation and the application of technology for
the benefit and pleasure of the general public
Envisioned Future
BHAG
Become the company most known for changing the worldwide poor-quality
image of Japanese products
Vivid Description We will create products that become pervasive
around the world.... We will be the first Japanese company to go
into the U.S. market and distribute directly.... We will succeed with
innovations that U.S. companies have failed at—such as the
transistor radio.... Fifty years from now, our brand name will be as
well known as any in the world...and will signify innovation and
quality that rival the most innovative companies anywhere....
“Made in Japan” will mean something fine, not something shoddy.

Types of Goals and Plans
1 Scope/Breadth Dimension
 Strategic Goals – official goals, broad
statements about the organization
 Strategic plan
– Define the action steps the company intends to
attain
– The blueprint that defines activities
 Tactical plans – help execute major
strategic plans
– Specific part of the company’s strategy
– Plans of the divisions and departments
 Operational Plans– results expected
from departments, work groups, and
individuals
– Lower levels of the organization
– Specific action steps
 Operational goals should direct
employees and resources toward
outcomes

Cont…..
2. Time Dimension
 Long-range (five years or more),
 Medium-range (between one and five years)
and
 Short-range plans (one year or less).
– All strategic plans are long-range plans.
– All tactical plans are medium-range plans.
– All operational plans are short-range plans

3. Use Dimension
Single-Use and Standing
 Single use plans: plans that are developed to
achieve set of goals that are unlikely to be
repeated in the future
 Standing plan: ongoing plans that are used to

provide guidance for tasks performed
repeatedly within the organization

Single-Use and Standing Plans

Aligning Goals with Strategy Maps
 Goals should be consistent and mutually

supportive
 The achievement of goals at low levels
permits the attainment of high-level goals
 Individuals, teams, and departments should
be working in concert

Strategy Map for Aligning Goals
Goals
should be
consistent
and
mutually
supportive

Characteristics of Effective Goal Setting

Approaches of planning
Managers use a number of planning approaches. Among the most
popular are management by objectives, single-use plans, standing
plans, and contingency plans.
1 Management by Objective
Defined by management scholar Peter Drucker in his
1954 book, The Practice of Management
Process of defining goals and monitoring progress
•MBO is the technique in which managers and

their subordinates together set objectives for
subordinates ,periodically evaluate the
performance and reward effective workers etc
Elements of MBO
1. Top level goal setting: effective MBO
begins with the objective being set by
top managers which is open for
discussion by managers and
subordinates to reach up on the
common objectives.
2. individual targets:-in an effective MBO
each manager and subordinate has
clearly defined responsibilities or
expected results
3. Participation:- both managers and
subordinates are participating in
objective setting.
Elements of MBO…
4. Autonomous of individuals:-Once the

objective is set, subordinates have a right
to select methods of attaining the
objectives.
5.performance review:- managers and
subordinates periodically meet to review
progress toward the objectives
6. Reward:-those individuals who meet the
objectives in performance review are
rewarded. The rewords may be
recognition, praise, pay increase etc
Model of the MBO Process

MBO Benefits and Problems

Planning for a Turbulent Environment
 Contingency Planning – plans for

emergencies, setbacks or unexpected
conditions
 Building Scenarios – visualizing future
possibilities
 Crisis Planning – preparing to cope with
unexpected events

a. 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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b. 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

c. 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

Planning for High Performance
Traditional High-Performance
Approach: Approach:
 Done by top  Decentralized planning
executives (top  Managers plan
down) throughout the
 Central planning organization
departments  Now involves line-
 Planning managers and
specialist employees
 Dynamic plans for fast-
changing needs
Performance Dashboard for Planning
 Gauge
progress
toward goals
 Align and track

goals
 All employees
can track
progressCopyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Strategy Formulation and
Implementation
Strategy Basics
 Why has Apple been so successful with

the iPod, iTouch, iPhone?
 Why has McDonald’s healthier menu been
effective?
 Why is Ethiopia successful in aviation
industry?
 Finding ways to respond to competitors,
and cope with change is strategy.

Thinking Strategically
 The long-term view

 Seeing the big picture
How do
– The organization
these fit
– Competition together?
 Strategy are your competitive actions in

the market

What is Strategic Management?
 Plans and actions that lead to superior
competitive standing
 Who are our competitors and what are their
strengths and weaknesses?
 Who are our customers?
 What products or services should we offer?
 What does the future hold for our industry?
 How can we change the rules of the game?

Purpose of Strategy
 Strategy:
– Plan of action
– Resource allocation
– Activities for dealing with the environment
– Achieving competitive advantage
 Strategy should:
– Exploit Core Competence
– Build Synergy
– Deliver Value
Grand Strategy
 Grand strategy is the general plan of major action
by which a firm intends to achieve its long-term
goals.
 Grand strategies fall into three general categories:
– growth,
– stability,
– and retrenchment.
 In addition to the three preceding alternatives,
companies may pursue a separate grand strategy
as the focus of global business

Three Levels of Strategy in
Organizations

Strategy Formulation Versus Execution
 Strategy Formulation
– Assess environment and internal problems
– Planning
– Decision making
– Establishment of goals
 Strategy Execution
– Directing resources
– Accomplishing results
– Changes in structure
– Use managerial and organizational tools

The Strategic
Management Process

Formulating Corporate-Level Strategy
 Portfolio Strategy
– A diverse mix of business units
– Strategic Business Units (SBU) have different
products, mission, markets and competitors
 The BCG Matrix
– Organizes businesses along two dimensions—
growth and market share
 Diversification Strategy
– Movement into new lines of business

The BCG Matrix

Formulating Business-Level Strategy
 Porter’s Five Forces – analyzing a
company’s position in the industry
 Potential New Entrants
 Bargaining Power of Buyers
 Bargaining Power of Suppliers
 Threat of Substitute Products
 Rivalry Among Competitors

Porter’s Five Forces

Porter’s Competitive Strategies
 Porter suggests that a company can adopt one of
three strategies after analyzing the forces

New Trends in Strategy
 Mergers and acquisitions

 Enhancing organizational capacity
 Innovation from within
 Strategic partnerships
 Companies are focusing on internal
innovation as well as innovation through
strategic partnerships

Global Corporate Strategies

Strategy Execution
 How will the strategy be implemented—put

into action?
 The organization must be congruent with
the strategy
 Execution involves several tools:
– Leadership
– Structural Design
– Human Resources
– Information and Control Systems

Tools for Putting Strategy into Action

Managerial Decision Making
Decisions and Decision Making
 Decision = choice made from available

alternatives
 Decision Making = process of identifying

problems and opportunities and resolving
them

Categories of Decisions
 Programmed Decisions
–Situations occurred often enough to enable
decision rules to be developed and applied in
the future
– Made in response to recurring organizational
problems
 Nonprogrammed Decisions – in response to
unique, poorly defined and largely unstructured,
and have important consequences to the
organization

Decisions and Decision Making
 Many decisions that managers deal with

every day involve at least some degree
of uncertainty and require non-
programmed decision making
 May be difficult to make
 Made amid changing factors
 Information may be unclear
 May have to deal with conflicting points of view

Certainty, Risk, Uncertainty, Ambiguity
● Certainty
● Risk
● Uncertainty
● Ambiguity

1. Certainty
 Full knowledge of available alternatives

 Full knowledge of what outcome will
result from each alternative
 Few certain decisions in the real world.
2. Risk
 Knowledge of what the alternatives are
 Know the probabilities of outcomes
resulting from each alternative.

3. Uncertainty
 Goals are known, but information about
alternatives and future outcomes is
incomplete (probabilities unknown)
4. Ambiguity
 Objectives to be achieved are unclear
 Little, if any, knowledge of alternatives

Conditions that Affect the Possibility of
Decision Failure
Organizational
Problem
Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity
Programmed Nonprogrammed
Decisions Decisions
Problem
Solution

Selecting a Decision Making Model
 Depends on the manager’s personal

preference
 Whether the decision is programmed or
non-programmed
 Extent to which the decision is
characterized by risk, uncertainty, or
ambiguity

Three Decision-Making Models
 Classical Model
 Administrative Model
 Political Model

Classical Model
Logical decision in the organization’s best
economic interests
Assumptions
 Decision maker operates to accomplish goals
that are known and agreed upon
 Decision maker strives for condition of certainty –
gathers complete information
 Criteria for evaluating alternatives are known
 Decision maker is rational and uses logic
Normative = describes how a manager should
and provides guidelines for reaching an ideal
decision
Administrative Model
How non-programmed decisions are made--
uncertainty/ambiguity
 Two concepts are instrumental in shaping
the administrative model
● Bounded rationality: people have limits or
boundaries on how rational they can be
● Satisficing: means that decision makers

choose the first solution alternative that
satisfies minimal decision criteria

● Managers actually make decisions in difficult
situations characterized by non-programmed
decisions, uncertainty, and ambiguity
● Decision goals often are vague, conflicting and lack

consensus among managers;
● Rational procedures are not always used
● Managers’ searches for alternatives are limited
● Managers settle for a satisficing rather than a maximizing
solution
● intuition, looks to past experience
● Descriptive = how managers actually make

decisions--not how they should

Political Model
Closely resembles the real environment
● Closely resembles the real environment in which

most managers and decision makers operate
● Useful in making non-programmed decisions
● Decisions are complex
● Disagreement and conflict over problems and
solutions are normal
● Coalition = informal alliance among
manages who support a specific goal

Characteristics of Classical, Political, and
Administrative Decision Making Models
Classical Model Administrative Model Political Model
Clear-cut problem and goals Vague problem and goals Pluralistic; conflicting goals
Condition of certainty Condition of uncertainty Condition of uncertainty/ambiguity
Full information about Limited information about Inconsistent viewpoints; ambiguous
alternatives and their outcomes Alternatives and their outcomes information
Rational choice by individual Satisficing choice for resolving Bargaining and discussion among
for maximizing outcomes problem using intuition coalition members

Six Steps in the Managerial
Decision-Making Process
 
Evaluation Recognition of
and Decision
Feedback Requirement

Implementation Diagnosis
of Chosen Decision- and Analysis
Alternative Making of Causes
Process


Selection of Development of
Desired Alternatives
Alternative



Diagnosis and Analysis of Causes
 Diagnosis = analyze underlying causal

factors associated with the decision
situation
 Managers make a mistake if they jump

into generating alternatives without first
exploring the cause of the problem more
deeply

Underlying Causes - Kepner /Tregoe
 What is the state of disequilibrium affecting us?

 When did it occur?
 Where did it occur?
 How did it occur?
 To whom did it occur?
 What is the urgency of the problem?
 What is the interconnectedness of events?
 What result came from which activity?

Selection of Desired Alternatives
 Risk Propensity = willingness to

undertake risk with the opportunity of
gaining an increased payoff
 Implementation = using managerial,

administrative, and persuasive abilities
to translate the chosen alternative into
action

Decision Styles
 Differences among people with respect to

how they perceive problems and make
decisions
 Not all managers make decisions the same
– Directive style
– Analytical style
– Conceptual style
– Behavioral style

Personal Decision Framework
Situation: Personal Decision Decision Choice:

· Programmed/non- Style: ·Best Solution to
programmed ·Directive Problem
· Classical, ·Analytical
administrative, ·Conceptual
political ·Behavioral
· Decision steps

Directive Style
 People who prefer simple, clear-cut solutions
to problems
 Make decisions quickly
 May consider only one or two alternatives
 Efficient and rational
 Prefer rules or procedures

Analytical Style
 Complex solutions based on as much data
as they can gather
 Carefully consider alternatives
 Base decision on objective, rational data
from management control systems and other
sources
 Search for best possible decision based on
information available

Conceptual Style
 Consider a broad amount of information
 More socially oriented than analytical style
 Like to talk to others about the problem and
possible solutions
 Consider many broad alternatives
 Relay on information from people and systems
 Solve problems creatively

Behavioral Style
 Have a deep concern for others as individuals
 Like to talk to people one-on-one
 Understand their feelings about the problem and the
effect of a given decision upon them
 Concerned with the personal development of others
 May make decisions to help others achieve their
goals

Participation in Decision Making
Vroom-Jago Model
 Helps gauge the appropriate amount of

participation for subordinates in process
● Leader Participation Styles

 Five levels of subordinate participation in decision
making ranging from highly autocratic to highly
democratic

 Diagnostic Questions
 Decision participation depends on the
responses to seven diagnostic questions
about
● the problem
● the required level of decision quality
● the importance of having subordinates
commit to the decision

Seven Leader Diagnostic Questions
 How significant is the decision?
 How important is subordinate commitment?
 What is the level of the leader’s expertise?
 If the leader were to make the decision alone at
what level would subordinates be committed to the
decision?
 What level is the subordinate’s support for the team
or organization’s objectives?
 What is the member’s level of knowledge or
expertise relative to the problem?
 How skilled or committed are group members to
working together?

New Decision Approaches for Turbulent Times
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MCP-Lecture 2-2

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Managerial Planning and

Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

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 The mission statement is the reason the

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 Vision has become one of the most

 A well-conceived vision consists of two major

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 Standing plan: ongoing plans that are used to

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 Goals should be consistent and mutually

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•MBO is the technique in which managers and

4. Autonomous of individuals:-Once the

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 Contingency Planning – plans for

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Forces managers to rehearse mentally what they would

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 Align and track

 Why has Apple been so successful with

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 The long-term view

 Strategy are your competitive actions in

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Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

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Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

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 Mergers and acquisitions

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 How will the strategy be implemented—put

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 Decision = choice made from available

 Decision Making = process of identifying

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 Many decisions that managers deal with

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 Full knowledge of available alternatives

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