1. Planning and Goal Setting

2. Chapter Outcomes and Learning Objectives
3-1. Define productivity Describe how plans should link from the top to the bottom of an organization Identify what is meant by the terms benchmarking, ISO 9000 series, and Six Sigma Contrast policies and rules Describe the Gantt chart.
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3. Chapter Outcomes and Learning Objectives
3-6. Explain the information needed to create a PERT chart Describe the four ingredients common to goal-setting programs Define entrepreneurship and how it affects supervision.
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Formal Planning
Productivity - Output per labor hour, best expressed by the formula Productivity = Output/(Labor + Capital + Materials)
Productivity measures can be applied to the individual, the group, and the total organization
In formal planning, specific goals are formulated, committed to writing, and made available to other organization members. Additionally, specific action programs exist in formal planning to define the path for the achievement of each goal.
In almost any discussion of performance in an organization, the focus will eventually turn to the topic of productivity. Productivity, in its simplest form, can be expressed by the formula Productivity = Output/(Labor + Capital + Materials). Productivity measures can be applied to the individual, the group, and the total organization. Output per labor hour is perhaps the most common partial measure of productivity. Industrial engineers, who conduct time-and-motion studies in factories, largely focus on generating increases in labor productivity.
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Productivity
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6. The Importance of Productivity
U.S. companies are increasing productivity by becoming more quality and customer oriented
Having increased productivity makes the U.S. economy stronger
Productivity creates jobs, enhances production dominance, encourages job security for employees, and affords research and development efforts
Productivity has become a major goal in virtually every organization. By productivity, we mean the overall output of goods and services produced divided by the inputs needed to generate that output. For countries, high productivity can lead to economic growth and development. Employees can receive higher wages, and company profits can increase without causing inflation. For individual organizations, increased productivity lowers costs and allows firms to offer more competitive prices. Increasing productivity is vital to global competitiveness. Organizations that hope to succeed globally are looking for ways to improve productivity. Because productivity is a composite of people and operations variables, to improve productivity, managers must focus on both.
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Breadth of Planning
Strategic planning - Organizational planning that includes the establishment of overall goals, and positioning an organization’s products or services against the competition
Tactical planning - Organizational planning that provides specific details on how overall goals are to be achieved
All supervisors, irrespective of their level in the organization, should plan. But the type of planning they do tends to vary with their level in the organization, and the planning they do will differ in several ways.
Strategic planning covers the entire organization; it includes establishing overall goals and positioning the organization’s products or services against the competition.
Tactical planning covers the specific details on how overall goals are to be achieved.
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Planning Time Frames
Short-term plan - A plan that covers a period of less than one year
Intermediate-term plan - A plan that covers a period of one to five years
Long-term plan - A plan that covers a period in excess of five years
Short-term plans are less than one year in length. Intermediate-term plans cover from one to five years. Long-term plans cover a period of more than five years. A supervisor’s planning horizon tends to emphasize the short term: preparing plans for the next month, week, or day. People in middle-level managerial jobs, such as regional sales directors, typically focus on one- to five-year plans. Long-term planning tends to be done by the top executives, such as vice-presidents and above.
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9. Continuous-Improvement Programs
Benchmarking - The search for the best practices among competitors or non-competitors that lead to their superior performance
In addition to continuous-improvement programs, three other quality elements can be useful in planning. These elements are benchmarking, ISO 9000 series, and Six Sigma. Let’s briefly look at each of these:
Benchmarking involves the search for the best practices among competitors or non-competitors that lead to their superior performance. The basic idea underlying benchmarking is that supervisors can improve quality by analyzing and then copying the methods of the leaders in various fields.
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10. Continuous-Improvement Programs continued…
ISO 9000 series - Standards designed by the International Organization for Standardization that reflect a process whereby independent auditors attest that a company’s factory, laboratory, or office has met quality management standards
The ISO 9000 series was designed by the International Organization for Standardization based in Geneva, Switzerland. The ISO standards reflect a process whereby “independent auditors attest that a company’s factory, laboratory, or office has met quality management requirements.” These standards, once met, assure customers that a company uses specific steps to test the products it sells; continuously trains its employees to ensure that they have up-to-date skills, knowledge, and abilities; maintains satisfactory records of its operations; and corrects problems when they occur.
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11. Continuous-Improvement Programs continued…
Six Sigma - A philosophy and measurement process that attempts to “design in” quality as a product is being made
Six Sigma is a philosophy and measurement process developed in the 1980s at Motorola. The premise behind Six Sigma is to “design, measure, analyze, and control the input side of a production process.” That is, rather than measuring the quality of a product after it is produced, Six Sigma attempts to “design in” quality as the product is being made. It uses statistical models coupled with specific quality tools, high levels of rigor, and know-how in understanding how to improve processes.
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Key Planning Guides
Standing plan - A plan that can be used over and over again by managers faced with recurring situations
Policies - Broad guidelines for supervisory action
Once an organization’s strategy and overall goals are in place, supervision in the company will design additional plans to help guide decision makers. Some of these will be standing plans that, once designed, can be used over and over again by managers faced with recurring activities. Others will be single-use plans, which are detailed courses of action used once or only occasionally to deal with problems that don’t occur repeatedly.
Standing plans allow supervisors to save time by handling similar situations in a predetermined and consistent manner. Policies are broad guidelines for supervisory action. Typically established by top management, they define the limits within which supervisors must stay as they make decisions.
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13. Key Planning Guides continued…
Procedure - A standardized way of responding to repetitive problems; a definition of the limits within which supervisors must stay as decisions are made
Rule - An explicit statement that tells employees what they ought or ought not to do
Procedures are a series of steps for resolving a recurring problem. Where procedures exist, supervisors only have to identify the problem. Once the problem is clear, so is the procedure to handle it. In contrast to policies, procedures are more specific; like policies, they provide consistency. By defining the steps that are to be taken and the order in which they are to be done, procedures provide a standardized way of responding to repetitive problems.
A rule is an explicit statement that tells employees what they ought or ought not to do. Rules are frequently used by supervisors to confront a recurring problem because they are simple to follow and ensure consistency. Rules about lateness and absenteeism permit supervisors to make discipline decisions rapidly and with a high degree of fairness.
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Single Use Plans
Single-use plan - A detailed course of action used once or only occasionally to deal with a problem that doesn’t occur repeatedly
Program - A single-use set of plans for a specific major undertaking within an organization’s overall goals; programs may be designed and overseen by top management or supervisors
In contrast to the previous discussions of standing plans, single-use plans are designed for a specific activity or time period. The most popular types of these plans are programs, budgets, and schedules. A program is a single-use set of plans for a specific major undertaking within the organization’s overall goals. It includes a list of the most expendable employees, plans for new equipment, plans for redesigning the handling area, and suggested options for jobs that could potentially be combined.
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15. Single Use Plans continued…
Budget - A numerical plan that expresses anticipated results in dollar terms for a specific time period; used as a planning guide as well as a control device
Budgets are numerical plans. They typically express anticipated results in dollar terms for a specific time period. Budgets may also be calculated in non-dollar terms—for example, employee hours, capacity utilization, or units of production. Budgets may cover daily, weekly, monthly, quarterly, semiannual, or annual periods. Budgets are covered here as part of the planning process; however, they are also control devices. The preparation of a budget involves planning because it gives direction. The creation of a budget tells which activities are important, and how resources should be allocated to each activity. A budget becomes a control mechanism when it provides standards against which resource consumption can be measured and compared.
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16. Exhibit 3-4, Department expense budget
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17. Single Use Plans continued…
Scheduling - Detailed planning of activities to be done, the order in which they are to be done, who is to do each activity, and when the activities are to be completed
If you were to observe a group of supervisors or department managers for a few days, you would see them regularly detailing what activities have to be done, the order in which the activities are to be done, who is to do each activity, and when the activities are to be completed. These supervisors are performing an activity called scheduling.
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18. Single Use Plans continued…
Gantt chart - A bar chart with time on the horizontal axis and activities to be scheduled on the vertical axis; shows when tasks are supposed to be done and compares actual progress on each task
The Gantt chart was developed early in the twentieth century by an industrial engineer named Henry Gantt. The idea was inherently simple, but has proved extremely helpful in scheduling work activities. The Gantt chart is essentially a bar graph with time on the horizontal axis and activities to be scheduled on the vertical axis. The bars show output, both planned and actual, over a period of time. The Gantt chart visually shows when tasks are supposed to be done, and compares that to the actual progress on each. As stated, it is a simple but important device that allows managers to detail easily what has yet to be done to complete a job or project and to assess whether it is ahead, behind, or on schedule.
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19. Exhibit 3-5, A sample Gantt chart
Exhibit 3-5 depicts a simplified Gantt chart that was developed for producing a book by a supervisor in the production department of a publishing firm. Time is expressed in months across the top of the chart. The major activities are listed down the left side. The planning comes in deciding which activities need to be done to get the book finished, the order in which they need to be done, and the time that should be allocated to each activity. Where a box sits within a time frame reflects its planned sequence. The shading represents actual progress. The chart also becomes a control device when the supervisor looks for deviations from the plan.
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20. Single Use Plans continued…
PERT chart - A diagram that depicts the sequence of activities needed to complete a project, and the time or costs associated with each activity
A PERT chart is a diagram that depicts the sequence of activities needed to complete a project, and the time or costs associated with each activity. The PERT chart was originally developed in the late 1950s for coordinating the more than 3,000 contractors and agencies working on the Polaris submarine weapon system. This project was incredibly complicated; with hundreds of thousands of activities that had to be coordinated. PERT is reported to have cut two years off the completion date for the Polaris project.
With a PERT chart, a supervisor must think through what has to be done, determine which events depend on one another, and identify potential trouble spots. A PERT chart makes it easy to compare what effect alternative actions will have on scheduling and costs. Thus, PERT allows supervisors to monitor a project’s progress, identify possible bottlenecks, and shift resources as necessary to keep the project on schedule.
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PERT Terminology
Events - Endpoints that represent completion of major activities
Activities - The time or resources required to progress from one event to another
Critical path - The longest or most time-consuming sequence of events and activities in a PERT chart
To understand how to construct a PERT chart, you need to know three terms: events, activities, and critical path. Let’s define these terms, outline the steps in the PERT process, and then work through an example. Events are endpoints that represent the completion of major activities. Activities represent the time or resources required to progress from one event to another. The critical path is the longest or most time-consuming sequence of events and activities in a PERT chart. Developing a PERT chart requires the supervisor to identify all key activities needed to complete a project, rank them in order of dependence, and estimate each activity’s completion time.
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22. Exhibit 3-7, PERT chart for the furnace modernization project
Exhibit 3-7 depicts the PERT chart based on the data in Exhibit 3-6. Your PERT chart tells you that if everything goes as planned, it will take twenty-one weeks to complete the modernization program. This is calculated by tracing the chart’s critical path: Start-A-C-D-G-H-J-K-Finish. Any delay in completing the events along this path will delay the completion of the entire project.
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Goal Setting
Goal setting - A system by which employees jointly determine specific performance goals with their supervisors
Progress toward goals is periodically reviewed, and rewards are allocated on the basis of this progress
Many supervisors are helping their employees set performance goals in an effort to achieve departmental and organizational goals. One means of doing this is through a process called goal setting, which is the next generation of the management practice called management by objectives (MBO).
Goal setting makes objectives operational by devising a process by which they cascade down through the organization. The organization’s overall goals are translated into specific goals for each succeeding level (e.g., divisional, departmental, individual) in the organization. Because lower-unit managers jointly participate in setting their own goals, goal setting works from the bottom up as well as from the top down. The result is a hierarchy that links goals at one level to those at the next level.
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24. Exhibit 3-8, What may happen in traditional goal setting
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Balanced Scorecard
Balanced scorecard - A strategic planning and management system used to translate and align business activities to the vision statement of a business after review of the company’s:
financial processes
customer processes
internal processes
innovation/growth processes
The balanced scorecard approach is a way to evaluate organizational performance from more than just the financial perspective. A balanced scorecard typically looks at four areas that contribute to a company’s performance: financial, customer, internal processes, and people/innovation/growth assets. According to this approach, supervisors should develop goals in each of the four areas and then measure whether the goals are being met. Although a balanced scorecard makes sense, supervisors will tend to focus on areas that drive their organization’s success, and use scorecards that reflect those strategies.
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26. The Entrepreneurial Supervisor
Entrepreneurial - Willing to use initiative and take risks to make a profit
Entrepreneurship - The process of initiating a business venture, organizing the necessary resources, and assuming the risks and rewards
The primary interest of many students is to not manage large and established organizations. That desire, coupled with changes in technology, the economy, and social conditions such as two-income families, has fostered an increase in entrepreneurial startup companies. Entrepreneurship is the process of starting new businesses, generally in response to opportunities. Many people think that entrepreneurial ventures and small businesses are the same, but they’re not. Entrepreneurs create entrepreneurial ventures—organizations that pursue new opportunities, are characterized by innovative practices, and have growth and profitability as their main goals. Even though entrepreneurial ventures may start small, they pursue growth, and entrepreneurship itself continues to be strong. “The Kauffman Index of Entrepreneurial Activity indicates that 476,000 new businesses were created each month during 2013.”
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27. The Entrepreneurial Supervisor continued…
Intrapreneurs - A supervisor within an organization who promotes innovative product development and marketing approaches, and behaves similarly to the risk-taking style of an entrepreneur
It is important not to confuse supervising in a small business with entrepreneurship. Why? Because not all small-business supervisors are entrepreneurs. Many do not innovate. A great many supervisors in small businesses are merely scaled-down versions of the conservative, conforming bureaucrats who staff many large corporations and public agencies. Those who do act like entrepreneurs—creating the intensity and entrepreneurial spirit—in larger organizations are sometimes called intrapreneurs.
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28. The Entrepreneurial Supervisor continued…
Business plan - A document that identifies the business founder’s vision, and describes the strategy and operations of that business
A business plan is a written document that summarizes a business opportunity, and defines and articulates how the identified opportunity is to be seized and exploited. A written business plan can range from basic to thorough. The most basic type of business plan would simply include an executive summary; sort of a mini business plan that’s no longer than two pages.
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Chapter Summary
3-1. Define productivity Describe how plans should link from the top to the bottom of an organization Identify what is meant by the terms benchmarking, ISO 9000 series, and Six Sigma Contrast policies and rules Describe the Gantt chart.
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30. Chapter Summary continued…
3-6. Explain the information needed to create a PERT chart Describe the four ingredients common to goal-setting programs Define entrepreneurship and how it affects supervision.
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