Management Exam #2 Prep
The Organizational Planning Process
1. Develop the Plan 2. Translate the Plan 3. Plan Operations 4. Execute the Plan 5. Monitor and Learn
Plan
A blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions Specify today's needs
Decision
A choice made from available alternatives
Risk
A decision has clear-cut goals and that good information is available, but the future outcomes associated with each alternative are subject to some chance of loss or failure. However, enough information is available to estimate the probability of a successful outcome versus failure.
Certainty
All the information the decision maker needs is fully available.
The BCG Matrix
Organizes businesses along two dimensions—business growth rate and market share. Business growth rate pertains to how rapidly the entire industry is increasing. Market share defines whether a business unit has a larger or smaller share than competitors. The combinations of high and low market share and high and low business growth provide four categories for a corporate portfolio, stars, question marks, cash cows, and dogs.
Strategic Goals
Sometimes called official goals, are broad statements describing where the organization wants to be in the future. These goals pertain to the organization as a whole rather than to specific divisions or departments.
Strategy
The plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals. They should exploit core competencies, build synergy, deliver value, and target customers.
Decision Making
The process of identifying problems and opportunities and then resolving them, involves effort both before and after the actual choice.
Synergy
When organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone
The Crisis Prevention Stage
Involves activities that managers undertake to try to prevent crises from occurring and to detect warning signs of potential crises. A critical part of this is building open, trusting relationships with key stakeholders such as employees, customers, suppliers, governments, unions, and the community. By developing favorable relationships, managers can often prevent crises from happening and respond more effectively to those that cannot be avoided.
Goal
A desired future circumstance or condition that the organization attempts to realize Specify future ends Should be aligned using a strategy map
Building Scenarios
A forecasting technique to look at current trends and discontinuities and visualize future possibilities. Rather than looking only at history and thinking about what has been, managers think about what could be. The events that cause the most damage to companies are those that no one even conceived of.
Management By Means (MBM)
A recent approach that focuses people on the methods and processes used to attain results, rather than on the results themselves
Management by Objectives (MBO)
A system whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance.
Effective Goals
Are specific and memorable Have a defined time period Cover key result areas (Measurement (Key Performance Indicators (KPIs) (measures that reflect how well lower-level goals are helping the organization progress toward attaining its strategic goal)) and Clarity) Are challenging but realistic Are linked to rewards
Wicked Decisions
Associated with conflicts over goals and decision alternatives, rapidly changing circumstances, fuzzy information, unclear links among decision elements, and the inability to evaluate whether a proposed solution will work, there often is no "right" answer. Managers have a difficult time coming to grips with the issues and must conjure up reasonable scenarios in the absence of clear information.
The Classical Model of Decision Making
Based on rational economic assumptions and manager beliefs about what ideal decision making should be. This model has arisen within the management literature because managers are expected to make decisions that are economically sensible and in the organization's best economic interests. The four assumptions underlying this model are as follows: • The decision maker operates to accomplish goals that are known and agreed on. Problems are precisely formulated and defined. • The decision maker strives for conditions of certainty, gathering complete informa- tion. All alternatives and the potential results of each are calculated. • Criteria for evaluating alternatives are known. The decision maker selects the alter- native that will maximize the economic return to the organization. • The decision maker is rational and uses logic to assign values, order preferences, evaluate alternatives, and make the decision that will maximize the attainment of organizational goals. This is considered to be normative, which means that it defines how a decision maker should make decisions. It does not describe how managers actually make decisions so much as it provides guidelines on how to reach an ideal outcome for the organization. The ideal, rational approach is often unattainable by real people in real organizations, but the model has value because it helps decision makers be more rational and not rely entirely on personal preference in making decisions.
Strategic Plans
Define the action steps by which the company intends to attain strategic goals. They are the blueprint that defines the organizational activities and resource allocations—in the form of cash, personnel, space, and facilities—required for meeting these targets. This tends to be long-term and may define organizational action steps from two to five years in the future. The purpose of this is to turn organizational goals into realities within that time period.
Model of The MBO Process
Defined in 1954 by Peter Drucker A method for defining goals and monitoring performance 1. Set Goals (Strategic, Departmental, and Individual) 2. Develop Action Plans 3. Review Progress (Take Corrective Action) 4. Appraise Overall Performance
Tactical Plans
Designed to help execute the major strategic plans and to accomplish a specific part of the company's strategy. These typically have a shorter time horizon than strategic plans—that is, over the next year or so. These define what major departments and organizational subunits will do to implement the organization's strategic plan. These goals help top managers implement their overall strategic plan.
Porter's Five Forces' Three Strategies
Differentiation, cost leadership, or focus (Focused Differentiation or Focused Cost Leadership)
Crisis Planning
Enable firms to cope with unexpected events that are so sudden and devastating that they have the potential to destroy the organization if managers aren't prepared with a quick and appropriate response.
SWOT Analysis
Formulating strategy often begins with an audit of internal factors, strengths and weaknesses, and external factors, opportunities and threats. Information is acquired from reports, surveys, discussions, and meetings
The Crisis Preparation Stage
Includes all the detailed planning to handle a crisis when it occurs. Three steps in the preparation stage are 1. Designating a crisis management team and spokesperson 2. Creating a detailed crisis management plan 3. Setting up an effective communications system. The crisis management team, for example, is a cross-functional group of people who are designated to swing into action if a crisis occurs. The organization should also designate a spokesperson to be the voice of the company during the crisis. The crisis management plan (CMP) is a detailed, written plan that specifies the steps to be taken, and by whom, if a crisis occurs. The CMP should include the steps for dealing with various types of crises, such as natural disasters like fires or earthquakes; normal accidents like economic crises, industrial accidents, or product and service failures; and abnormal events such as product tampering or acts of terrorism. A key point is that a CMP should be a living, changing document that is regularly reviewed, practiced, and updated as needed.
Planning
Incorporates both goals and plans; it means determining the organization's goals and defining the means for achieving them Of the four management functions, this is considered the most fundamental (and controversial). Organizing, leading, and controlling all stem from this
Programmed Decisions
Made in response to recurring organizational problems. Once managers formulate decision rules, subordinates and others can make the decision, freeing managers for other tasks.
Nonprogrammed Decisions
Made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization.
Uncertainty
Managers know which goals they wish to achieve, but information about alternatives and future events is incomplete. Factors that may affect a decision, such as price, production costs, volume, or future interest rates, are difficult to analyze and predict. Managers may have to make assumptions from which to forge the decision, even though it will be wrong if the assumptions are incorrect.
Levels of Goals and Plans
Missions Statement Strategic Goals/Plans - Senior Management (Organization as a whole) Tactical Goals/Plans - Middle Management (Major divisions, functions) Operational Goals/Plans - Lower Management (Departments, individuals)
Contingency Planning
Planning for emergencies, setbacks, or unexpected conditions. Managers identify important factors in the environment, such as possible economic downturns, declining markets, increases in cost of supplies, new technological developments, or safety accidents. Managers then forecast a range of alternative responses to the most likely high-impact contingencies, focusing on the worst case.
Benefits and Limitations of Goals and Plans
Provide a source of motivation and commitment Guide resource allocation Are a guide to action Set a standard of performance Can create a false sense of certainty May cause rigidity in a turbulent environment Can get in the way of intuition and creativity
Stretch Goals
Reasonable yet highly ambitious goals that are so clear, compelling, and imaginative that they fire up employees and engender excellence. They are typically so far beyond the current levels that people have to be innovative to find ways to reach them. Like Big Hairy Audacious Goal (BHAG) from 1996 article on "Building Your Company's Vision" As times move faster and become more turbulent, these are important
Strategic Management
Refers to the set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals.
Competitive Advantage
Refers to what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace. The four elements are target customers, achieve synergy, create value, and exploit core competencies.
Ambiguity
The most difficult decision situation, means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable. In some situations, managers involved in a decision create this because they see things differently and disagree about what they want. Managers in different departments often have different priorities and goals for the decision, which can lead to conflicts over decision alternatives.
Organizational Mission
The organization's reason for existence The formal mission statement is a broadly stated definition of purpose that distinguishes the organization from others of a similar type.
Operational Goals
The results expected from departments, work groups, and individuals. They are precise and measurable. Managers use these 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 MBO, single-use plans, and standing plans.