Management Chapter 5

Cascading Goals: Making Lower-Level Goals Align with Top Goals For goal setting to be successful, the following three things have to happen.

1. Top Management Must Be Committed 2. The Goals Must Be Applied Organizationwide 3. Goals Must "Cascade"—Be Linked Consistently Down through the Organization

Peter Drucker

Management by objectives (MBO)

Improvement Objectives

Purpose Express performance to be accomplished in a specific way for a specific area Examples "Increase sport utility sales by 10%." "Reduce food spoilage by 15%."

Personal Development Objectives

Purpose Express personal goals to be realized Examples "Attend five days of leadership training." "Learn basics of Microsoft Office software by June 1."

Maintenance Objectives

Purpose Express the intention to maintain performance at previously established levels Examples "Continue to meet the increased sales goals specified last quarter." "Produce another 60,000 cases of wine this month."

organization should adopt planning and strategic management for three reasons:

They can (1) provide direction and momentum, (2) encourage new ideas, and above all (3) develop a sustainable competitive advantage

business plan

a document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success.

The planning process begins with three attributes:

a mission statement (which answers the question "What is our reason for being?"), a vision statement (which answers the question "What do we want to become?"), and a values statement (which answers the question "What values do we want to emphasize?").

Long-term goals

are generally referred to as strategic goals. They tend to span 1 to 5 years and focus on achieving the strategies identified in a company's strategic plan.

Single-use plans

are plans developed for activities that are not likely to be repeated in the future. Such plans can be programs or projects.

Standing plans

are plans developed for activities that occur repeatedly over a period of time. consist of policies, procedures, and rules.

Short-term goals

are sometimes referred to as tactical or operational goals, or just plain goals. They generally span 12 months and are connected to strategic goals in a hierarchy known as a means-end chain.

operating plan

as a plan that "breaks long-term output into short-term targets" or goals. In other words, operating plans turn strategic plans into actionable short-term goals and action plans

action plan

defines the course of action needed to achieve a stated goal.

The planning/control cycle

has two planning steps (1 and 2) and two control steps (3 and 4), as follows: (1) Make the plan. (2) Carry out the plan. (3) Control the direction by comparing results with the plan. (4) Control the direction by taking corrective action in two ways—namely (a) by correcting deviations in the plan being carried out or (b) by improving future plans.

Three Types of Objectives Used in MBO:

improvement, personal development, and maintenance

Management by objectives (MBO)

is a four-step process in which (1) managers and employees jointly set objectives for the employee, (2) managers develop action plans (Action plans may be prepared for both individuals and work units, such as departments.), (3) managers and employees periodically review the employee's performance (either informally as needed or formally every three months), and (4) the manager makes a performance appraisal and rewards the employee according to results. The purpose of MBO is to motivate rather than to control subordinates.

VRIO (pronounced by its letters, "V-R-I-O")

is a framework for analyzing a resource or capability to determine its competitive strategic potential by answering four questions about its Value, Rarity, Imitability, and Organization

vision

is a long-term goal describing "what" an organization wants to become. It is a clear sense of the future and the actions needed to get there. should describe what's happening to the world you compete in and what you want to do about it," "It should guide decisions.

Strategic management

is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals. involves managers from all parts of the organization—top managers, middle managers, and first-line managers Thus, planning covers not only strategic planning (done by top managers) but also tactical planning (done by middle managers) and operational planning (done by first-line managers).

program

is a single-use plan encompassing a range of projects or activities.

project

is a single-use plan of less scope and complexity than a program. Example: The space shuttle project, one of several projects in the government's space program

goal, also known as an objective,

is a specific commitment to achieve a measurable result within a stated period of time.

rule

is a standing plan that designates specific required action. Example: "No smoking is allowed anywhere in the building."

policy

is a standing plan that outlines the general response to a designated problem or situation. Example: "This workplace does not condone swearing."

planning

is defined as setting goals and deciding how to achieve them. Another definition: is coping with uncertainty by formulating future courses of action to achieve specified results. is a document that outlines how goals are going to be met.

An organization's mission

is its purpose or reason for being. Determining this is the responsibility of top management and the board of directors

SMART goal

is one that is Specific, Measurable, Attainable, Results-oriented, and has Target dates.

Cascading goals

is the process of ensuring that the strategic goals set at the top level align, or "cascade," downward with more specific short-term goals at lower levels within an organization, including employees' objectives and activities. Top managers set strategic goals, which are translated into divisional goals, which are translated into departmental goals, which are translated into individual goals. The cascading process ends when all individuals have a set of goals that support the overall strategic goals. This process helps employees understand how their work contributes to overall corporate success

procedure (or standard operating procedure)

s a standing plan that outlines the response to particular problems or circumstances. Example: McDonald's specifies exactly how a hamburger should be dressed,

A strategy, or strategic plan

sets the long-term goals and direction for an organization. "educated guess"

means-end chain

shows how goals are connected or linked across an organization For example, a low-level goal such as responding to customer inquiries in less than 24 hours is the means to accomplishing a higher-level goal of achieving 90% customer satisfaction.

Plans are of two types

standing plans and single-use plans.

values statement also called a core values

statement, which expresses what the company stands for, its core priorities, the values its employees embody, and what its products contribute to the world "become the deeply ingrained principle and fabric that guide employee behavior and company decisions and actions—the behaviors the company and employees expect of themselves," top managers need to develop this

operational planning

that is, they determine how to accomplish specific tasks with available resources within the next 1-52 weeks. passed down to first line managers

tactical planning

that is, they determine what contributions their departments or similar work units can make with their given resources during the next 6-24 months. passed down to middle managers

strategic planning

they determine what the organization's long-term goals should be for the next one to five years with the resources they expect to have available. Top managers do this

mission statement

which expresses the purpose of the organization.

vision statement

which expresses what the organization should become, where it wants to go strategically top managers need to develop this

business model

which outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses. things included: How the firm will market to customers, A descriptionof the industry the firm is entering, THe firms expected revenues and expenses