1. Managerial Planning and Goal Setting
Chapter 7
Managerial Planning and Goal Setting

2. Planning is Fundamental
All of the other management functions stem from planning
How do you plan for an undefined future?
No plan is perfect
Without plans and goals, organizations flounder
DQ: Do you agree with a speaker saying “Planning is a bs, wasting of time.”
Flounder = struggle

3. Goals, Plans, Planning
A goal is a desired future state that the organization attempts to realize
PLANNING incorporates both ideas & means determining the goals and defining the means for achieving them.
A plan is a blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions
A goal is defined as a desired future state that the organization attempts to realize. Goals are important because they define the purpose of an organization. A plan is a blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions. Goals specify future ends; plans specify today’s means. The word planning usually incorporates both ideas; it means determining the organization’s goals and defining the means for achieving them.

4. Spin vs. Truth
Spin – Make other people believe what you want them to believe
Truth – Where your money goes; where company resources are allocated
Follow the money – see the company’s accounting books if what they say (mission, goals, strategic/tactical plans) is a spin or truth.

5. Goal Setting in Organizations
Organizational Mission – the organization’s reason for existence
Strategic goals – official goals, broad statements describing the organization’s future; Long-term (5 or 10 years)
Strategic plans – define the action steps the company will take (Action Plans)
Goals should be aligned
GOAL-SETTING IN ORGANIZATIONS
Organizational Mission Exhibit 7.3
At the top of the goal hierarchy is the mission—the organization’s reason for existence—that describes the organization’s values, aspirations, and reason for being. The formal mission statement is a broadly stated definition of purpose that distinguishes the organization from others of a similar type. The content often focuses on the market and customers and identifies desired fields of endeavor. Some mission statements describe company characteristics such as corporate values, product quality, location of facilities, and attitude toward employees.

6. Strategic Goals, Plan, Planning
 Strategic goals - broad statements describing where the organization wants to be in the future. official goals; whole organization
Strategic plans define the action steps by which the company intends to attain strategic goals. A strategic plan is a blueprint that defines organizational activities and resource allocations.
Strategic planning tends to be long-term.
Goals and Plans
Strategic goals are broad statements describing where the organization wants to be in the future. Sometimes called official goals, they pertain to the entire organization rather than to specific divisions or departments.
Strategic plans define the action steps by which the company intends to attain strategic goals. A strategic plan is a blueprint that defines organizational activities and resource allocations.
Strategic planning tends to be long-term.

7. 7.2 The Organizational Planning Process
The overall planning process prevents managers from thinking merely in terms of day-to-day activities.
The planning process includes five steps: 1) develop the plan; 2) translate the plan into action; 3) lay out operational factors needed to achieve goals; 4) execute the plan; and 5) monitor and review plans to learn from results and shift plans as needed.

8. Tactical Goals, Plans
 Tactical goals are the results that major divisions and departments within the organization intend to achieve; middle management; describe what major subunits must do in order for the organization to achieve strategic goals.
Tactical plans define what major departments and organizational subunits will do to implement the organization’s strategic plan. They tend to be for a shorter time period. 
Tactical goals are the results that major divisions and departments within the organization intend to achieve. Tactical goals apply to middle management and describe what major subunits must do in order for the organization to achieve strategic goals.
Tactical plans define what major departments and organizational subunits will do to implement the organization’s strategic plan. They tend to be for a shorter time period.

9. Operational Goals, Plans
 Operational goals are the specific results expected from departments, work groups, and individuals.
Operational plans are developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans.
Operational goals are the specific results expected from departments, work groups, and individuals.
Operational plans are developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans.

10. 7.1 Levels of Goals and Plans
Top managers are responsible for establishing strategic goals and plans that reflect a commitment to both organizational efficiency and effectiveness.
Tactical goals and plans are the responsibility of middle managers.
Operational plans identify the specific procedures or processes needed at lower levels of the organization. Front-line managers and supervisors develop operational plans that focus on specific tasks and processes and that help to meet tactical and strategic goals.
Planning at each level supports the other levels.

11. Why Aligning Goals?
Effectively designed organizational goals are aligned into a hierarchy in which the achievement of goals at lower levels permits the attainment of higher-level goals.
Operational goals lead to the achievement of tactical goals, which lead to the attainment of strategic goals.
Organizational performance is an outcome of how well these interdependent elements are aligned, so that individuals, teams, departments, and so forth are working in concert to attain specific goals that ultimately help the organization fulfill its mission.
Aligning Goals with Strategy Maps Exhibit 7.4
Effectively designed organizational goals are aligned into a hierarchy in which the achievement of goals at lower levels permits the attainment of higher-level goals. Operational goals lead to the achievement of tactical goals, which lead to the attainment of strategic goals. Organizational performance is an outcome of how well these interdependent elements are aligned, so that individuals, teams, departments, and so forth are working in concert to attain specific goals that ultimately help the organization fulfill its mission.

12. Aligning Goals with Strategy Map
Strategy maps are visual representations of
The key drivers of an organization’s success and
Show how specific goals and plans in each area are linked.
They provide a powerful way for managers to see the cause-and-effect relationships among goals and plans.
Help align operational goals with tactical goals;
Help align tactical goals with strategic goals.
Strategy maps are visual representations of the key drivers of an organization’s success and show how specific goals and plans in each area are linked.
They provide a powerful way for managers to see the cause-and-effect relationships among goals and plans.
Managers use the strategy map to align operational goals with tactical goals and to align tactical goals with strategic goals.

13. 7.4 Example of A Strategy Map
Kaplan, “Balanced Score Card Model”
This example illustrates four key areas that contribute to a firm’s long-term success – learning and growth, internal processes, customer service, and financial performance = and how the various goals and plans in each area link to the other areas. The idea is that learning and growth goals serve as a foundation to help achieve goals for excellent internal business processes. Meeting business process goals, in turn, enables the organization to meet goals for customer service and satisfaction, which helps the organization achieve its financial goals and optimize its value to all stakeholders.
The organization has learning and growth goals that include developing employees, enabling continuous learning and knowledge sharing, and building a culture of innovation. Achieving these will help the organization build internal business processes that promote good relationships with suppliers and partners, improve the quality and flexibility of operations, and excel at developing innovative products and services. Accomplishing internal process goals, in turn, enables the organization to maintain strong relationships with customers, be a leader in quality and reliability, and provide innovation solutions to emerging customer needs. At the top of the strategy map, the accomplishment of these lower-level goals helps the organization increase revenues in existing markets, increase productivity and efficiency, and grow through selling new products and services and serving new market segments.
In a real-life organization, the strategy map would typically be more complex and would state concrete, specific goals relevant to the particular business. However, the generic map as shown in this slide gives and idea of how managers can map goals and plans so that they are mutually supportive. The strategy map is also a good way to communicate goals, because everyone in the organization can see what part they play in helping the organization accomplish its mission.

14. Operational Planning
Use operational goals to direct employees and resources
Guide efficient and effective performance to achieve specific outcomes
Includes planning approaches such as:
Management by Objectives (MBO)
Single-Use Plans
Standing Plans
Managers use operational goals 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 management by objectives (MBO), single-use plans, and standing plans.

15. Mission – the organization’s reason for existence
Mission, Goal, Strategic Planning, Strategy & Competitive Advantage [Lee, 2014]
Mission – the organization’s reason for existence
Goal – the organization’s future
Strategic Planning – process of achieving the goal by developing a strategy
Strategy – creating opportunities to gain competitive advantages
Competitive Advantage – your strength over competitors

16. 7.5 Criteria for Effective Goal Setting
Specific and measurable. When possible, goals should be expressed in quantitative terms. Vague goals tend not to motivate employees.
Defined time period. Goals should specify the time period over which they will be achieved. A time period is a deadline on which goal attainment will be measured.
Cover key result areas. Key result areas are those items that contribute most to company performance. Key result areas should include both internal and external customers.
Choice and clarity. A few carefully chosen, clear, and direct goals can more powerfully focus organizational attention, energy, and resources.
Challenging but realistic. The best quality programs start with extremely ambitious goals that challenge employees to meet high standards. When goals are unrealistic, they set employees up for failure and lead to decreasing employee morale. If goals are too easy, employees may not feel motivated. Stretch goals are extremely ambitious but realistic goals that challenge employees to meet high standards.
Linked to rewards. The impact of goals depends on the extent to which salary increases, promotions, and other rewards are based on goal achievement. People who attain goals should be rewarded.
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

17. 7.6 Model of the MBO Process
Defined in 1954 by Peter Drucker
Method for defining and monitoring goals
Management by Objectives Exhibit 7.5, Exhibit 7.6, Exhibit 7.7
Management by objectives (MBO) is a method whereby managers and employees define objectives for every department, project, and person and use them to monitor subsequent performance. Four major activities must occur in order for MBO to be successful.
Set goals. Setting goals is the most difficult step in MBO and should involve employees at all levels. A good goal should be concrete and realistic, provide a specific target and time frame, and assign responsibility. Mutual agreement between employee and supervisor creates the strongest commitment to achieving goals.
Develop action plans. An action plan defines the course of action needed to achieve the stated goals. Action plans are made for both individuals and departments.
Review progress. A periodic progress review is important to ensure action plans are working. This review allows managers and employees to see if they are on target and if corrective action is needed. The point of MBO is to achieve goals. The action plan can be changed whenever goals are not being met.
Appraise overall performance. The final step in MBO is to evaluate whether annual goals have been achieved for both individuals and departments. Success or failure to achieve goals can be part of the performance appraisal system and the designation of salary increases and other rewards.
The MBO cycle repeats itself on an annual basis. The specific application of MBO must fit the needs of each company.

18. 7.7 MBO Benefits
The benefits of the MBO process can be many. Corporate goals are more likely to be achieved when they focus on manager and employee efforts. Problems with MBO occur when the company faces rapid change. The environment and internal activities must have some stability for performance to be measured against goals.

19. Single-Use Plans vs. Standing Plans
Achieve one-time goal
Program/Project: building a headquarters, converting paper files to digital, renovating the office, setting up a new company intranet
Standing Plans
Ongoing plans
Policies, rules, procedures
Single‑Use and Standing Plans Exhibit 7.8
Single‑use plans are developed to achieve objectives that are not likely to be repeated in the future. Single‑use plans include both programs and projects.
Standing plans are used to provide guidance for tasks performed repeatedly within the organization. The primary standing plans are organizational policies, rules, and procedures. Many companies are discovering a need to develop standing plans regarding the use of .

20. Benefits and Limitations of Planning
Goals and plans provide a source of motivation and commitment
Goals and plans guide resource allocation (budgeting)
Goals and plans are a guide to action (specific targets)
Goals and plans set a standard of performance
Goals and plans can create a false sense of certainty
Goals and plans may cause rigidity in a turbulent environment
Goals and plans can get in the way of intuition and creativity
Benefits of Planning
Goals and plans provide a source of motivation and commitment. Planning can reduce uncertainty for employees and clarify what they should accomplish.
Goals and plans guide resource allocation. Planning helps managers decide where they need to allocate resources, such as employees, money, and equipment.
Goals and plans are a guide to action. Planning focuses attention on specific targets and directs employee efforts toward important outcomes.
Goals and plans set a standard of performance. Because planning and goal setting define desired outcomes, they also establish performance criteria so managers can measure whether things are on or off track.
Limitations of Planning
Goals and plans can create a false sense of certainty. Having a plan can give managers a false sense that they know what the future will be like.
Goals and plans may cause rigidity in a turbulent environment. A related problem is that planning can lock the organization into specific goals, plans, and time frames, which may no longer be appropriate.
Goals and plans can get in the way of intuition and creativity. Success often comes from creativity and intuition, which can be hampered by too much routine planning.

21. Planning for a Turbulent Environment
Contingency Planning
Planning for emergencies, setbacks, or unexpected conditions
Building Scenarios
A forecasting technique to look at current trends and visualize future possibilities
Crisis Planning
Sudden, devastating, unexpected events
PLANNING FOR A TURBULENT ENVIRONMENT
A. Contingency Planning
Contingency plans define company responses to be taken in case of emergencies or setbacks. Contingency plans cover such situations as catastrophic decreases in sales or prices, and loss of important managers.
B. Building Scenarios
Scenario building involves looking at trends and discontinuities and imagining possible alternative futures to build a framework within which unexpected future events can be managed.
With scenario building, a broad base of managers mentally rehearses different scenarios based on anticipating varied changes that could impact the organization. Scenarios are like stories that offer alternative vivid pictures of what the future will look like and how managers will respond. Typically, two to five scenarios are developed for each set of factors, ranging from the most optimistic to the most pessimistic view.
Crisis Planning
Some crises are inevitable no matter how well prepared an organization is. When a crisis hits, a rapid response is crucial. The team should be able to immediately implement the crisis management plan, so training and practice are important. At this point it becomes critical for the organization to speak with one voice so that employees, customers, and the public do not get conflicting stories about what happened and what the organization is doing about it. After ensuring the physical safety of people, the next focus should be on responding to the emotional needs of employees, customers, and the public. Organizations should also strive to give people a sense of security and belonging.
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

22. 7.9 Essentials Stages of Crisis Planning
C. Crisis Planning Exhibit 7.9
Crisis Prevention
Although unexpected events and disasters will happen, managers should do everything they can to prevent crises. A critical part of the prevention stage is building 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. Good communication helps managers identify problems early so they do not turn into major issues.
Crisis Preparation
Preparation includes designating a crisis management team and spokesperson, creating a detailed crisis management plan, and setting up an effective communications system. Some companies are setting up crisis management offices, with high-level leaders who report direction to the CEO.
The crisis management team is a cross-functional group of people who are designated to swing into action if a crisis occurs. They are closely involved in creating the crisis management plan they will implement if a crisis occurs. A spokesperson should be designated.
The crisis management plan is a detailed written plan that specifies the steps to be taken, and by whom, if a crisis occurs. The plan should include the steps for dealing with various types of crises, such as natural disasters like fires or earthquakes, normal accidents like economic crises or industrial accidents, and abnormal events such as product tampering or acts of terrorism. The plan should be a living, changing document that is regularly reviewed, practiced, and updated as needed.
A command center serves as a place for the crisis management team to meet, gather data and monitor incoming information, and disseminate information to the media.

23. Stretch goals are highly ambitious Clear, compelling, and imaginative
Innovative Approaches to Planning - (1) Set Stretch Goals for Excellence
Stretch goals are highly ambitious
Clear, compelling, and imaginative
Require innovation
Goals must be seen as achievable
Like Big Hairy Audacious Goals (BHAG) from 1996 article on building your vision
As times move faster and become more turbulent, these are important
INNOVATIVE APPROACHES TO PLANNING
Set Stretch Goals for Excellence
Stretch goals are 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.
An extension of the stretch goal is the big hairy audacious goal or BHAG. A BHAG is any goal that is so big, inspiring, and outside the prevailing paradigm that it hits people in the gut and shifts their thinking.
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

24. Innovative Approaches to Planning – (2)Performance Dashboard for Planning
Use Performance Dashboards Exhibit 7.10
A business performance dashboard is a visual display that helps executives keep track of key performance metrics, such as sales in relation to targets, number of products on back order, or percentage of customer service calls resolved within specified time periods.
Some dashboard systems incorporate software that lets users perform what-if scenarios to evaluate the impact of various alternatives for meeting goals.

25. Innovative Approaches to Planning – (3) Deploy Intelligence Teams
An intelligence team is a cross-functional group of managers and employees, usually led by a competitive intelligence professional
Work together to gain a deep understanding of specific business issue, with the aim of presenting insights, possibilities and recommendations about goals and plans related to that issue.
Useful when the organization confronts a major intelligence challenge.
Deploy Intelligence Teams
An intelligence team is a cross-functional group of managers and employees, usually led by a competitive intelligence professional, who work together to gain a deep understanding of specific business issue, with the aim of presenting insights, possibilities and recommendations about goals and plans related to that issue. Intelligence teams are useful when the organization confronts a major intelligence challenge.

26. Concluding Remarks [Lee, 2014]
Strategic Planning serves a good starting point:
Strategic Planning such as MBO, etc. may not be perfect in the real world.
However, we have to get started with something.
A manager must be flexible:
Be willing to adapt the strategic plan to new environment: new competition, new law, new customers, new technologies, etc.
Strategic planning must not discourage employees’ creativity and imagination.
A manager must develop a contingency plan in conjunction with the strategic plan; expect the unexpected outcome; be willing to admit a possibility of failure.

27. Chapter 7 – Discussion Questions
No plan is perfect.  Explain briefly why a firm still need a plan. (class discussion)
Explain briefly the differences between spin & truth. (class discussion)
Explain briefly how we can easily find out if a firm's strategic planning is a spin or truth. (class discussion)
Explain briefly the differences between a plan and planning.
Explain briefly the differences between mission and goal.
There are two kinds of goals: (1) measurable goal (2) unmeasurable goal. Which kind of goal would a bad manager choose? Explain why the bad manager choose such goal.
Explain briefly the differences between strategic plan and tactical plan.
Explain briefly the relation between a strategy and competitive advantages – that is, define “strategy” with a focus on “competitive advantages.” (class discussion)
Explain briefly what a strategy map is.
Explain briefly what two major benefits an organization can gain from alignment in a strategy map.

28. Chapter 7 – Discussion Questions (continued)
Explain briefly what MBO is. 
List five characteristics of effective goal setting.
Explain four major activities in MBO.
Explain four major benefits from MBO.
Explain four major benefits from planning.
Explain three major limitations from planning.
Explain why a firm needs contingency planning.
Discuss why a manager must be flexible in implementing strategic planning. Give three reasons. (class discussion)