5-1

Organizational Goal Setting and Planning

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Chapter 5

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Learning Objectives1. Define goals and plans and explain the relationship between

them.

2. Explain the concept of organizational mission and how it influences goal setting and planning.

3. Describe the goals an organization should have and why they resemble a hierarchy.

4. Define the characteristics of effective goals.

5. Describe the four essential steps in the MBO process.

6. Explain the difference between single-use plans and standing plans.

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Learning Objectives (contd.)

7. Describe and explain the importance of the three stages of crisis management planning.

8. Discuss how planning in a turbulent environment differs from traditional approaches to planning.

9. Define the components of strategic management.

10. Describe the strategic planning process and SWOT analysis.

11. Describe business-level strategies, including Michael E. Porter’s competitive forces and strategies and partnership strategies.

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Learning Objectives (contd.)

12. Explain the major considerations in formulating functional strategies.

13. Discuss the organizational dimensions used for implementing strategy.

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Goals and Plans

A blueprint specifying the resource allocation, schedules, and other actions necessary for attaining goals.

Plan

GoalA desired future state that the organization attempts to

realize.

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Ex. 5.1 Levels of Goals/Plans and Their Importance

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Purposes of Goals and Plans Legitimacy/mission statement Source of motivation and commitment Rationale for decisions Guides to action Resource allocation Standard of performance

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Goals and Plans

Strategic Goals Where the organization wants to be in the future.

Pertain to the organization as a whole.

Strategic Plans Action Steps. Blueprint that defines the organizational activities and

resource allocations.

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Tactical Goals and Plans

Tactical Goals

Goals that define the outcomes that major divisions and departments must achieve.

Tactical Plans

Plans designed to help execute major strategic plans.

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Operational Goals and Plans

Operational GoalsSpecific, measurable results expected from

departments, work groups, and individuals.

Operational Plans

Organization’s lower levels that specify action steps toward achieving operational goals.

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Ex. 5.3 Characteristics of Effective Goal Setting

Goal Characteristics

Specific and measurable.

Cover key result areas.

Challenging but realistic.

Defined time period.

Linked to rewards.

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Ex. 5.4 Model of the MBO ProcessStep 1: Setting Goals Step 2: Developing Action Plans

Step 3: Reviewing Progress

Corporate Strategic Goals Departmental Goals Individual Goals

Step 4: Appraising Overall Performance

Appraise Performance

Take Corrective Action

Review Progress

Action Plans

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Ex. 5.5 MBO Benefits and ProblemsBenefits Manager and employee efforts are focused on

activities that will lead to goal attainment. Performance can be improved at all company levels. Employees are motivated. Departmental and individual goals are aligned with

company goals.

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Ex. 5.5 MBO Benefits and Problems (contd.)

Problems Constant change prevents MBO from taking hold. An environment of poor employer-employee

relations reduces MBO effectiveness. Strategic goals may be displaced by operational

goals. Mechanistic organizations and values that

discourage participation can harm the MBO process. Too much paperwork saps MBO energy.

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Plans

Single-Use Standing Contingency

Crisis ManagementThree Stages

Prevention Preparation Containment

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Strategic Management

Set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

Set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

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Ex. 5.9 The Strategic Management Process

Identify Strategic Factors•Strengths

•Weaknesses

Scan Internal Environment

•Core Competence

•Synergy

•Value Creation

Identify

Strategic:•Corporate

•Business

•Functional

Define New:•Mission

•Goals

•Grand Strategy

Evaluate Current:•Mission

•Goals

•Strategies

Scan External Environment•National

•Global

•Opportunities

•Threats

Identify Strategic Factors

SWOT

Implementing Strategy via Changes in:•Structure

•Human resources

•Information & control systems

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Porter’s Competitive Forces

Potential new entrants

Bargaining power of buyers

Bargaining power of suppliers

Threat of substitute products

Rivalry among competitors

Beware

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Ex. 5.11 The Five Forces Affecting Industry Competition

SOURCES: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980); and Michael E. Porter, “Strategy and the Internet,” Harvard Business Review (March, 2001), 63-78.

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Competitive Strategies

1. Differentiation

2. Cost Leadership

3. Focus

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Ex. 5.13 A Continuum of Partnership Strategies

High

Low

Organizational

Combination

Strategic

Alliance

Degree of Collaboration

Preferred Supplier Arrangements

Strategic Business Partnering

Joint Ventures

Mergers

Acquisitions

Source: Adapted from Roberta Maynard. “Striking the Right March,” Nation’s Business (May 1996), 18-28.

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Ex. 5.14 Tools for Putting Strategy into Action

SOURCE: Adapted from Jay R. Galbraith and Robert K. Kazanjian, Strategy Implementation: Structure, Systems, and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115. Used with permission.