LECTURE 7 – BASIC ELEMENTS OF PLANNING & DECISION MAKING UNIT LECTURER: MS REEM QUASHEM Fundamentals of Management

Organization Goals Purposes of Goals  Provides guidance and a unified direction for people in the organization  Example: P&G’s goal of Doubling revenues by the year 2006 helps everyone in the firm recognize the strong emphasis on growth and expansion  Have a strong affect on the quality of other aspects of planning. Effective goal setting promotes good planning and facilitates future goal setting.  Example P&G’s strong growth goal encourages managers to plan for expansion in to new market opportunities.

Organizations Goals Purposes of Goals  Serves as a source of motivation for employees of the organization. Goals that are specific and moderately difficult can motivate people to work harder.  Example: Italian furniture manufacturer Industrie Natuzzi Spa rewards its employees with bonuses when they get a certain job done (sewing leather sheets to make a sofa cushion) faster than their initial goal  Provides an effective mechanism for evaluation and control of the organization. Performance of the organization can be assessed in the future in terms of how successfully today’s goals are acomplished.

Kinds of Goals By level  Mission statement of an organization determines the fundamental purpose that sets a business apart from other firms of its type and identifies the scope of the business’s operations in product and market terms. At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.

Kinds of Goals  Strategic goals are set by the top management of the organization that addresses the broad and general issue.  For example: P&G’s goal of doubling sales revenues is a strategic goal.  Tactical goals are set by the middle managers; their focus is on how to operationalize actions necessary to achieve strategic goals  Example: tactical goals at P&G might center on which new products to launch, which existing products to revise etc.  Operational goals are set by lower-level managers to address issues associated with tactical goals  Example: operational goal for P&G might be a target number of new products to launch each of the next 5 years

Kinds of Goals By Area  Goals set for the different functional areas of the organization  Example: Hewlett-Packard (HP) sets productive goals for quality, productivity etc. They may also set goals for human resource which may be set for employee turnover and absenteeism. By Time Frame  Goals may be set for long-term (10 years or longer), intermediate-term (5 years or so), or short-term time (around one year) frames and for explicit time frames or open-ended (maintain 10% annual growth). Different time level varies with different levels whether its at strategic or operational.

Responsibilities of Setting Goals Who Sets Goals?  All managers should be involved in the goal –setting process  Managerial responsibility for goal setting should correspond to the manager’s level in the organization  The mission and strategic goals are set by top managers. Top and middle managers work together to establish tactical goals. Middle and lower level managers are jointly responsible for operational goals Managing Multiple Goals  Optimizing allows managers to balance and reconcile inconsistent or conflicting goals  Managers can choose to pursue one goal and exclude all others or to seek a mid-range goal.

Kinds of Organizational Plans Strategic Plans  A general plan outlining resource allocation, priorities and action steps to achieve strategic goals. The plans are set by and for top management. They generally have an extended time horizon and deals with resource deployment, competitive advantages and synergy. Tactical Plans  A plan aimed at achieving the tactical goals, developed to implement specific parts of a strategic plan. It is set by and for middle management. Involves getting things done instead of planning what to do. Operational Plans  Plans that have a short-term focus. These plans are set by and for lower –level managers. Focuses on carrying out tactical plans to achieve operational goals

Time Frames for Planning The time dimension of planning  Based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved. Long-range Plans  Cover present and future strategic issues; normally extend beyond five years in the future Intermediate Plans  Usually cover 1-5 years and parallel tactical plans  Are the principle focus of organizational planning efforts Short-range Plans  Time frame of one year or less.  Includes action plan and reaction (contingency) plans

Responsibilities For Planning Planning Staff  Planning staff personnel gather information, coordinate planning activities, and take a broader view than individual managers. It reduces the workload of individual managers.  Example : GM, Disney and Boeing Planning Task Force  Created when the organization wants a special circumstance addressed. Consists of line managers with special interest in relevant area of planning. Board of Directors  Establishes corporate mission and strategy. May engage appropriate strategic planning Chief Executive Officer  Usually serves as president or chair of the board of directors. Has a major role in the planning process and implements the strategy.

Responsibilities For Planning Executive Committee  Composed of top executives within the organization. Meet regularly for input to the CEO and review strategic plans Line Management  Persons with formal authority and responsibility for management of the organization. Help to formulate strategy by providing information.. Responsible for executing the plans developed by top management. They develop budgets, recommends alternatives, submits for approval and sets the plan in motion.

Tactical Planning Top managers at Coca-Cola developed a strategic plan for cementing the firm’s dominance of the soft drink industry. As part of the developing plan, they identified a critical environment threat- unrest and uncertainty among independent bottlers that packaged and distributed Coca-Cola’s products. To simultaneously counter this threat and strengthen the company’s position, the company bought several large independent bottlers and combined them in to a new organization “Coca-Cola Enterprises” – This creation of new business was a tactical plan developed to contribute to the achievement of the strategic goal.