ORGANIZATIONAL PLANNING ORGANIZATIONAL PLANNING AND GOAL SETTINGAND GOAL SETTING

Chapter 7: Chapter 7: MANAGEMENT 5MANAGEMENT 5thth Edition Edition By: Richard DaftBy: Richard Daft

Prepared by:Prepared by:Sarah . S. Khorsheede , MBASarah . S. Khorsheede , MBA

Objectives:Objectives: Define goals and plans and explain the relationship Define goals and plans and explain the relationship

between them.between them. Explain the concept of organizational mission and Explain the concept of organizational mission and

how it influences goal setting and planning.how it influences goal setting and planning. Describe the types of goals an organization should Describe the types of goals an organization should

have and why they resemble a hierarchy.have and why they resemble a hierarchy. Define the characteristics of effective goalsDefine the characteristics of effective goals Describe the four essential steps in the MBO Describe the four essential steps in the MBO

process.process. Explain the difference between single-use plans and Explain the difference between single-use plans and

standing plans.standing plans. Describe and explain the importance of the three Describe and explain the importance of the three

stages of crisis management planning.stages of crisis management planning. Discuss how planning in the new workplace differs Discuss how planning in the new workplace differs

from traditional approaches to planning.from traditional approaches to planning.

Overview of goals and plansOverview of goals and plans

GoalGoal a desired future state that the organization a desired future state that the organization

attempts to realizeattempts to realize

PlanPlan a blueprint specifying the resource a blueprint specifying the resource

allocations, schedules, and other actions allocations, schedules, and other actions necessary for attaining goals.necessary for attaining goals.

Mission Statement

Strategic Goals/PlansSenior Management

(organization as a whole)

Tactical Goals/PlansMiddle Management

(major divisions, functions)

Operational Goals/PlansLower Management

(departments, individuals)

External MessageLegitimacy for:investors,suppliers,customers,community

Internal Messagelegitimacy,motivation,guides,rationale,standards

Purposes of goals and plansPurposes of goals and plans Legitimacy.Legitimacy. An organization mission An organization mission

describes what the organization stands for describes what the organization stands for and its reason for existence. It symbolizes and its reason for existence. It symbolizes legitimacy to external audiences such as legitimacy to external audiences such as investors, suppliers, and customers.investors, suppliers, and customers.

Source of motivation and commitment.Source of motivation and commitment. Goals and plans facilitate employees’ Goals and plans facilitate employees’ identification with the organization and identification with the organization and help motivate them by reducing help motivate them by reducing uncertainty and clarifying what they uncertainty and clarifying what they should accomplish.should accomplish.

GoalGoal provides the provides the “why”“why” of an organization of an organization or subunit’s existence, a or subunit’s existence, a planplan tells the tells the “how”“how”..

Guides to action.Guides to action. Goals and plans provide Goals and plans provide a sense of direction. They focus attention a sense of direction. They focus attention on specific targets and direct employee on specific targets and direct employee efforts toward important outcomes.efforts toward important outcomes.

Rationale for decisions.Rationale for decisions. Through goal Through goal setting and planning, managers learn what setting and planning, managers learn what the organization is trying to accomplish.the organization is trying to accomplish.

Standard of performance.Standard of performance. Because goals Because goals define desired outcomes for the define desired outcomes for the organization, they also serve as organization, they also serve as performance criteria.performance criteria.

Mission Statement

Strategic Goals/PlansSenior Management (organization as a whole)

Tactical Goals/PlansMiddle Management

(major divisions, functions)

Operational Goals/PlansLower Management

(departments, individuals)

Example:Example:

The overall planning process prevents managers The overall planning process prevents managers from thinking merely in terms of day-to-day from thinking merely in terms of day-to-day activities. When organizations drift away from activities. When organizations drift away from goals and plans, they typically get into trouble. goals and plans, they typically get into trouble. This occurred at Amex Life Assurance, an This occurred at Amex Life Assurance, an American Express subsidiary based in San Rafael, American Express subsidiary based in San Rafael, California. A new president implemented a strong California. A new president implemented a strong planning system that illustrates the power of planning system that illustrates the power of planning to improve organizational performanceplanning to improve organizational performance

Sarah Nolan knew that the chairman of American Express was a Sarah Nolan knew that the chairman of American Express was a self-professed maniac on quality. But when Nolan arrived as the self-professed maniac on quality. But when Nolan arrived as the new president of Amex Life Assurance, she found a paperwork new president of Amex Life Assurance, she found a paperwork assembly line that served customers at a snail's pace. A simple assembly line that served customers at a snail's pace. A simple change of address took two days; sending out a new insurance change of address took two days; sending out a new insurance policy took at least ten. Nolan's primary goal was to get everyone policy took at least ten. Nolan's primary goal was to get everyone at Amex working together while keeping the focus on the at Amex working together while keeping the focus on the customer. She sent five managers representing different customer. She sent five managers representing different specialties to an empty office park and told them to imagine they specialties to an empty office park and told them to imagine they were setting up an entirely new business. Nolan gave the group were setting up an entirely new business. Nolan gave the group only three rules to follow in their task of planning a new operation:only three rules to follow in their task of planning a new operation:

A MEX LIFE ASSURANCEA MEX LIFE ASSURANCE 1.1. Put the customer first.Put the customer first. 2.2. Don't copy anything we do here.Don't copy anything we do here. 3.3. Be ready to process applications yourselves in six months.Be ready to process applications yourselves in six months. When the planning group returned, ten layers of personnel had When the planning group returned, ten layers of personnel had

been collapsed into three, each of which would deal directly with been collapsed into three, each of which would deal directly with the public. Fewer employees were needed, so more than one-third the public. Fewer employees were needed, so more than one-third were transferred to other divisions. Expenses were cut in half and were transferred to other divisions. Expenses were cut in half and profitability increased sixfold. Nolan used planning to help profitability increased sixfold. Nolan used planning to help managers break out of their focus on day-to-day activities and managers break out of their focus on day-to-day activities and reorient the company toward its strategic goal of customer reorient the company toward its strategic goal of customer satisfaction .12satisfaction .12

Goals in organizationsGoals in organizations

The overall planning process The overall planning process begins with a mission statement begins with a mission statement and strategic goals for the and strategic goals for the organization as a whole.organization as a whole.

MissionMission

The organization’s reason for existence.The organization’s reason for existence.

Mission statementMission statement

A broadly stated definition of the A broadly stated definition of the organization’s basic business scope and organization’s basic business scope and operations that distinguishes it from operations that distinguishes it from similar types of organizations.similar types of organizations.

Example:Example:

Mission Statement for Mail Boxes Etc.

Our Mission

Making Business Easier Worldwide Through Our Service and Distribution Network, Delivering Personalized and Convenient

Business Solutions With World-Class Customers Service.

Our Core Values

Caring العناية Honesty الصدق Fairnessاإلنصا ف

Commitment التزام

Integrity النزاهة Trust الثقة Respectاالحترام Accountabilityال مساءلة

Goals and plansGoals and plans Strategic goals.Strategic goals. Broad statements of Broad statements of

where the organization wants to be where the organization wants to be in the future; pertain to the in the future; pertain to the organization as a whole rather than organization as a whole rather than to specific divisions or departments.to specific divisions or departments.

Strategic plans.Strategic plans. The actions steps by The actions steps by which an organization intends to which an organization intends to attain it’s strategic goals.attain it’s strategic goals.

Tactical goals.Tactical goals. Goals that define the Goals that define the outcomes that major divisions and outcomes that major divisions and departments must achieve in order departments must achieve in order for the organization to reach it’s for the organization to reach it’s over-all goals.over-all goals.

Tactical plans.Tactical plans. Plans designed to help Plans designed to help execute major strategic plans and to execute major strategic plans and to accomplish a specific part of the accomplish a specific part of the company’s strategy.company’s strategy.

Operational goals.Operational goals. Specific, Specific, measurable results expected from measurable results expected from departments, work groups, and departments, work groups, and individuals within the organization.individuals within the organization.

Operational plans.Operational plans. Plans developed Plans developed at the organization’s lower levels at the organization’s lower levels that specify action steps toward that specify action steps toward achieving operational goals and that achieving operational goals and that support tactical planning activities.support tactical planning activities.

Hierarchy of GoalsHierarchy of Goals

Effectively designed organizational Effectively designed organizational goals fit into a hierarchy; that is, the goals fit into a hierarchy; that is, the achievement of goals at low levels achievement of goals at low levels permits the attainment of high-level permits the attainment of high-level goals . goals .

This is called a means-ends chain This is called a means-ends chain which in turn lead to the attainment which in turn lead to the attainment of strategic goals. Strate of strategic goals. Strate

Criteria of effective goalsCriteria of effective goals

Specific and measurable.Specific and measurable. When When possible, goals should be expressed possible, goals should be expressed in quantitative terms, such as in quantitative terms, such as increasing profits by 2 percent.increasing profits by 2 percent.

Cover key result areas.Cover key result areas. Goals cannot Goals cannot be set for every aspect of employee be set for every aspect of employee behavior or organizational behavior or organizational performance; if they were, their performance; if they were, their sheer number would render them sheer number would render them meaningless.meaningless.

Challenging but realistic.Challenging but realistic. Goals Goals should be challenging but not should be challenging but not unreasonably difficult.unreasonably difficult.

Defined time period.Defined time period. Goals should Goals should specify the time period over which specify the time period over which they will be achieved.they will be achieved.

Linked to rewards.Linked to rewards. The ultimate The ultimate impact of goals depends on the impact of goals depends on the extent to which salary increases, extent to which salary increases, promotions, and awards are based promotions, and awards are based on goal achievement.on goal achievement.

Planning types and models Planning types and models

Purpose of planning and goal Purpose of planning and goal setting is to help the organization setting is to help the organization achieve high performance.achieve high performance.

1.1. Management by Objectives (MBO)Management by Objectives (MBO)

2.2. Single-use PlansSingle-use Plans

3.3. Standing PlansStanding Plans

4.4. Contingency (or scenario) PlansContingency (or scenario) Plans

Management by Objectives (MBO)Management by Objectives (MBO) Is a method whereby managers and Is a method whereby managers and

employees define goals for every employees define goals for every department, project, and person and use department, project, and person and use them to monitor subsequent them to monitor subsequent performance.performance.

4 major activities4 major activities::

1.1. Set goalsSet goals

2.2. Develop action plansDevelop action plans

3.3. Review progressReview progress

4.4. Appraise overall performanceAppraise overall performance

Step 1: Set Goals

Take Corrective Action

Review Progress

Step 3: Review Progress

Appraise Performance

Step 4: Appraise Overall Performance

Action Plans

Step 2: Develop Action Plans

• Corporate Strategic Goals• Departmental Goals• Individual Goals

Benefits of MBO Problems with MBO

1. Manager and employee efforts are focused on activities that will lead to goal attainment.

1. Constant change prevents MBO from taking hold.

2. Performance can be improved at all company levels.

2. An environment of poor employer-employee relations reduces MBO effectiveness.

3. Employees are motivated. 3. Strategic goals may be displaced by operational goals.

4. Departmental and individual goals are aligned with company goals.

4. Mechanistic organizations and values that discourage participation can harm the MBO process.

5. Too much paperwork saps MBO energy.

Single-use PlansSingle-use Plans

Plans that are developed to achieve Plans that are developed to achieve a set of goals that are unlikely to be a set of goals that are unlikely to be repeated in the future.repeated in the future.

SINGLE-USE PLANS

Program

• Plans for attaining a one-time organizational goal

• Major undertaking that may take several years to complete

• Large in scope; may be associated with several projects

Examples:

• Building a new headquarters

• Converting all paper files to digital

Project

• Also a set of plans for attaining a one-time goal

• Smaller in scope and complexity than a program; shorter time horizon

• Often one part of a larger program

Examples:

• Renovating the office

• Setting up a company intranet

Standing PlansStanding Plans

Ongoing plans that are used to Ongoing plans that are used to provide guidance for tasks performed provide guidance for tasks performed repeatedly within the organization.repeatedly within the organization.

STANDING PLANS

Policy

• Broad in scope – a general guide to action

• Based on organization’s overall goals/strategic plan

• Defines boundaries within which to make decisions

Examples:

• Drug-free workplace policies

• Sexual harassment policies

Rule

• Narrow in scope

• Describes how a specific action is to be performed

• May apply to specific setting

Example:

• No-smoking rule in areas of plant where hazardous materials are stored

Procedure

• Sometimes called a standard operating procedure (SOP)

• Defines a precise series of steps to attain certain goals

Examples:

• Procedures for issuing refunds

• Procedures for handling employee grievances

Exhibit 7.8Exhibit 7.8The Shewhart Cycle of Continuous ImprovementThe Shewhart Cycle of Continuous Improvement

contingency plans Plans that define company responses to

specific situations, such as emergencies, setbacks, or unexpected conditions.

Planning Time HorizonPlanning Time Horizon

Organizational goals and plans are Organizational goals and plans are associated with specific time associated with specific time horizons. The time horizons are long horizons. The time horizons are long term, intermediate term, and short term, intermediate term, and short term.term.

Planning in Learning Planning in Learning OrganizationsOrganizations

1st. Traditional Approaches to 1st. Traditional Approaches to PlanningPlanning

2nd. Modern Approaches to Planning2nd. Modern Approaches to Planning

1st: Traditional Approaches to 1st: Traditional Approaches to PlanningPlanning

Planners may be out of touch Planners may be out of touch with day-to-day realitieswith day-to-day realities

Formal plans may inhibit Formal plans may inhibit flexibility.flexibility.

Formal plans may limit creativity Formal plans may limit creativity and learning.and learning.

2nd: Modern Approaches to Planning2nd: Modern Approaches to PlanningDecentralized planning staffDecentralized planning staff

Decentralized planning staffDecentralized planning staff

a group of planning specialists a group of planning specialists assigned to major departments and assigned to major departments and divisions to help Managers develop divisions to help Managers develop their own strategic planstheir own strategic plans

planning task forceplanning task force

A temporary group consisting of line A temporary group consisting of line managers responsible for developing managers responsible for developing strategic plans.strategic plans.

2nd: Modern Approaches to Planning2nd: Modern Approaches to PlanningDecentralized planning staffDecentralized planning staff

1)1) The new planning paradigm The new planning paradigm 2)2) Start with a strong mission Start with a strong mission 3)3) Set stretch goals Set stretch goals 4)4) Create an environment that Create an environment that

Encourages learning Encourages learning