Lecture # 7

Chapter 6 – Establishing Organizational Goals & Plans

Components of Planning

Goal: future target or end result an organization wishes to achieve.

Plan: is the means for trying to reach the goal. Mission: an organization’s purpose for

existence. Mission statement: is a broad declaration,

unique purpose and scope of operations distinguishing the organization from others of its type.

Mission Statement Components Customers Products or services Location Technology Concern for survival Philosophy Self-concept (major strengths and CA) Concern for public image Concern for employees

Levels of Goals

Strategic goals: broadly defined targets or future results set by top management.

Tactical goals: targets or future results set by middle management.

Operational goals: targets or future results set by lower management.

8 major areas for Strategic goals

Market standing Innovation Human resources Financial resources Physical resources Productivity Social responsibility Profit requirements

Setting Goals1. Specify the goal to be reached

2. Specify how performance will be measured Physical units - (quantity of production,

market share, number of rejects) Time – (meeting deadlines) Money – (profits, sales, costs, debts)

3. Specify the standard or target to be reached

4. Specify the time span

5. Prioritize the goals

6. Determine co-ordination requirements

Problems with Goals

Excessive risk taking Increased stress Self-confidence can be destroyed Excessive short-run thinking Dishonesty and cheating

Levels of Plans

Strategic plans: detailed action steps mapped out to reach strategic goals, time horizon of 3 – 5 years or more.

Tactical plans: support strategic plan implementation and tactical goal achievement, time horizon of 1 – 3 years.

Operational plans: support the implementation of tactical plans and operational goal achievement, time frame of below a year, such as few months, weeks or even days.

MBO

MBO is a process by which specific goals are set collaboratively for the entire organization and every unit and individual within it, these goals are then used for planning, managing organizational activities and assessing and rewarding contributions.

Steps in MBO process

1. Develop overall organizational goals

2. Establish specific goals for various departments, subunits and individuals.

3. Formulate action plans

4. Implement plans

5. Review progress

6. Appraise performance

Strengths of MBO

Helps in the co-ordination of goals and plans from top management

Helps clarify priorities Facilitates vertical and horizontal

communication Fosters employee motivation

Weaknesses of MBO

Tends to be ineffective without strong, continual commitment

Necessitates considerable training of managers May cause overemphasis on quantitative goals