Chapter 5: Planning

The Mission Statement

"What Is Our Reason for Being?" a. An organization's mission is its purpose or reason for being—mission statement, which expresses the purpose of the organization.

Cascading Objective a) Top Management Must Be Committed:

"When top-management commitment [to MBO] was high," said one review, "the average gain in productivity was 56%. When commitment was low, the average gain in productivity was only 6%."67

Why Planning & Strategic Management Are Important

(1) provide direction and momentum (2) encourage new ideas (3) develop a sustainable competitive advantage.

MBO Step (1) Jointly Set Objectives—Three types of objectives used in MBO

1) Improvement Objectives 2) Personal Development Objectives 3) Maintenance Objectives

Two Types of Plans:

1) Standing Plans; & 2) Single-Use Plans

MBO Joint Objective 1) Improvement Objectives

1. Purpose Express performance to be accomplished in a specific way for a specific area 2. Examples "Increase sport utility sales by 10%." "Reduce food spoilage by 15%."

***SMART Goals (5)

A SMART goal is one that is 1) Specific 2) Measurable 3) Attainable 4) Results-oriented 5) Target dates

The Planning/Control Cycle—two control steps (3 and 4):

Planning/Control Cycle: Control Steps (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 Goals:

Strategic, Tactical, & Operational

Cascading Objective b) It Must Be Applied Organizationwide

The program has to be put in place throughout the entire organization. That is, it cannot be applied in just some divisions and departments; it has to be done in all of them.

Business Plan

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

A goal

also known as an objective—is a specific commitment to achieve a measurable result within a stated period of time.

means-end chain

because in the chain of management (operational, tactical, strategic) the accomplishment of low-level goals is the means leading to the accomplishment of high-level goals or ends.

Tactical planning:

done by middle managers for the next 6-24 months. i. The strategic priorities and policies are then passed down to middle managers, who must do 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.

MBO Step (4) the manager makes a performance appraisal and rewards the employee according to results

i. At the end of 6 or 12 months, you and your subordinate should meet to discuss results, comparing performance with initial objectives. Deal with results, not personalities, emotional issues, or excuses. ii. Because the purpose of MBO is to motivate employees, performance that meets the objectives should be rewarded—with compliments, raises, bonuses, promotions, or other suitable benefits.

*Management Process: The four management functions

planning, organizing, leading, and controlling

Cascading Objective c) Objectives Must "Cascade"

MBO works by cascading objectives down through the organization; that is, objectives are structured in a unified hierarchy, becoming more specific at lower levels of the organization.

The Planning/Control Cycle—two planning steps (1 and 2):

Planning/Control Cycle: Planning Steps (1) Make the plan. (2) Carry out the plan.

Planning: Coping with uncertainty

a. Planning—setting goals and deciding how to achieve them b. Planning—coping with uncertainty by formulating future courses of action to achieve specified results

MBO Joint Objective 2) Personal Development Objectives

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

MBO Joint Objective 3) Maintenance Objectives

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

****(3) Developing a Sustainable Competitive Advantage

a. Strategic management provides a sustainable competitive advantage—is the ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them ***** Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas: i. (1) in being responsive to customers, ii. (2) in innovating iii. (3) in quality iv. (4) in effectiveness.

Strategic Management: Involving All Managers in Strategy

a. 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.

The Action Plan

which defines the course of action needed to achieve the stated goal, such as a marketing plan or sales plan

the Operating Plan

which is typically designed for a one-year period, defines how you will conduct your business based on the action plan; it identifies clear targets such as revenues, cash flow, and market share.

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

3) Attainable

—Goals should be challenging, of course, but above all they should be realistic and attainable. It may be best to set goals that are quite ambitious so as to challenge people to meet high standards. Always, however, the goals should be achievable within the scope of the time, equipment, and financial support available.

5) Target Dates

—Goals should specify the target dates or deadline dates when they are to be attained. For example, it's unrealistic to expect an airline to improve its on-time arrivals by 10% overnight. However, you could set a target date—3 to 6 months away, say—by which this goal is to be achieved. That allows enough time for lower-level managers and employees to revamp their systems and work habits and gives them a clear time frame in which they know what they are expected to do.

4) Results-Oriented

—Only a few goals should be chosen—say, five for any work unit. And they should be results-oriented—they should support the organization's vision. i. Some verbs should not be used in your goal statement because they imply activities—the tactics used to accomplish goals (such as having baggage handlers waiting). For example, you should not use "to develop," "to conduct," "to implement."

Operational goals

—set by and for first-line managers and are concerned with short-term matters associated with realizing tactical goals.

Tactical goals

—set by and for middle managers and focus on the actions needed to achieve strategic goals.

Strategic goals

—set by and for top management and focus on objectives for the organization as a whole.

The Vision Statement

"What Do We Want to Become?" a. A 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 b. vision statement—which expresses what the organization should become, where it wants to go strategically

*****Management by Objectives: The Four-Step Process for Motivating Employees

(1) managers and employees jointly set objectives for the employee (2) managers develop action plans (3) managers and employees periodically review the employee's performance (4) the manager makes a performance appraisal and rewards the employee according to results.

MBO Step (2) managers develop action plans.

Develop Action Plan Once objectives are set, managers at each level should prepare an action plan for attaining them. Action plans may be prepared for both individuals and for work units, such as departments

Operational Planning:

Done by first-line managers for the next 1-52 weeks i. Middle managers then pass these plans along to first-line managers to do operational planning—that is, they determine how to accomplish specific tasks with available resources within the next 1-52 weeks.

1) Specific

Goals should be stated in specific rather than vague terms. The goal "As many planes as possible should arrive on time" is too general. The goal that "Ninety percent of planes should arrive within 15 minutes of the scheduled arrival time" is specific.

1) Standing Plans

Policies, Procedures, & Rules-----Standing plans are plans developed for activities that occur repeatedly over a period of time i. Policy--is a standing plan that outlines the general response to a designated problem or situation. Example: "This workplace does not condone swearing." This policy is a broad statement that gives managers a general idea about what is allowable for employees who use bad language, but gives no specifics. ii. Procedure (or standard operating procedure)--is a standing plan that outlines the response to particular problems or circumstances. Example: McDonald's specifies exactly how a hamburger should be dressed, including the order in which the mustard, ketchup, and pickles are applied. iii. Rule--is a standing plan that designates specific required action. Example: "No smoking is allowed anywhere in the building." This allows no room for interpretation.

2) Single-Use Plans

Programs & Projects---------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. i. Program--is a single-use plan encompassing a range of projects or activities. Example: The U.S. government space program has had several projects, including the Challenger project, the Hubble Telescope project, and the space shuttle project. ii. 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, consisted of three shuttles: Discovery, Endeavour, and Atlantis.

2) Measurable

Whenever possible, goals should be measurable, or quantifiable (as in "90% of planes should arrive within 15 minutes..."). That is, there should be some way to measure the degree to which a goal has been reached. i. Of course, some goals—such as those concerned with improving quality—are not precisely quantifiable. In that case, something on the order of "Improve the quality of customer relations by instituting 10 follow-up telephone calls every week" will do. You can certainly quantify how many follow-up phone calls were made.

The Importance of Deadlines

a. "T" (for "has Target dates") in SMART goals, deadlines are as essential to goal setting in business as they are to your college career. Because the whole purpose of planning and goals is to deliver to a client specified results within a specified period of time, deadlines become a great motivator, both for you and for the people working for you

Strategy: Large-Scale Action Plan

a. A strategy is a large-scale action plan that sets the direction for an organization. It represents an "educated guess" about what must be done in the long term for the survival or the prosperity of the organization

*Details/Steps of Planning and Strategic Management

a. Establish the mission and vision - "what is our reason for being" & "what do we want to become" b. Assess the current reality - c. Formulate the grand strategy and strategic, tactical, and operational plans d. Implement strategy e. Maintain strategic control

(1) Providing Direction & Momentum

a. If a broad group of employees is involved in the process, that can foster teamwork, promote learning, and build commitment across the organization. b. Unless a plan is in place, managers may well focus on just whatever is in front of them, putting out fires—until they get an unpleasant jolt when a competitor moves out in front because it has been able to take a long-range view of things and act more quickly.

Cascading Objectives: MBO from the Top Down

a. Top Management Must Be Committed: b. It Must Be Applied Organizationwide: c. Objectives Must "Cascade"

(2) Encouraging New Ideas

a. strategic planning can help encourage them by stressing the importance of innovation in achieving long-range success. Management scholar Gary Hamel says that companies such as Apple have been successful because they have been able to unleash the spirit of "strategy innovation." Strategy innovation, he says, is the ability to reinvent the basis of competition within existing industries—"bold new business models that put incumbents on the defensive

Strategic planning:

done by top managers for next 1-5 years a. Strategic planning by top management i. Using their mission and vision statements, top managers do strategic planning—they determine what the organization's long-term goals should be for the next 1-5 years with the resources they expect to have available ii. "Strategic planning requires visionary and directional thinking," says one authority

MBO Step (3) managers and employees periodically review the employee's performance

i. You and your manager should meet reasonably often—either informally as needed or formally every three months—to review progress, as should you and your subordinates. Indeed, frequent communication is necessary so that everyone will know how well he or she is doing in meeting the objectives.