Decision Making and the Planning Process

• Understanding the environments in which a company operates is the first step in planning.

• What is the organization’s mission? The organization’s purpose, premises, values and directions.

Decision Making and the Planning Process. . . (continued)

The Mission allows the creation of strategic goals – which, along with the mission, create strategic plans.Strategic goals and plans are the primary inputs for developing tactical goals.Tactical goals, and the original strategic plans, help shape tactical plans.Tactical plans combine with the tactical goals to shape operational goals.Operational goals, combined with tactical plans, determine operational plans.

See Figure 7.1, page 207

Building Blocks

Organizational Goals

Four important purposes of goals:

Goals provide guidance and direction for people in the organization.

Where is the organization going and why?

Goal-setting practices strongly affect other aspects of planning.

Effective goal setting promotes good planning which facilitates future goal setting, etc.

Organizational Goals

Goals may serve as a source of motivation for employees.

Goals that are specific can motivate people to work harder - especially if achieving these goals results in rewards of some type.

Goals provide an effective mechanism for evaluation and control

Performance is measured against the goals set – how successfully were the goals reached?

Kinds of Goals. . . (continued)

Mission is a statement of the organization’s fundamental unique purpose that sets it apart from other firms of its type and identifies the scope of the business’s operations in product and market terms.

Kinds of Goals. . . (continued)

Strategic Goals are set by and for top management of the organization. [BoD members and President/CEO]

Focus is on broad, general issues

Tactical Goals are set by and for middle

managers. [Vice Presidents, etc]

Focus on how to achieve goals at the operational level to achieve the strategic goals.

Operational Goals are set by and for lower-level managers.

Focus on shorter-term issues associated with achieving tactical goals.See Figure 7.2, page 209

Kinds of Goals. . . (continued)

Goals Set by AreaMarketing, Finance, HR, Production, etc.

Goals Set by Time FrameLong-Term, Intermediate-Term and Short-Term

Time Frames may vary by levelStrategic Level: long-term may mean 10 years; intermediate-term level, 5 years; and short-term, 1 year.

Whereas at the Operational level, long-term may mean 2-3 years and short-term, a matter of weeks or even days.

Kinds of Goals. . . (continued)

Responsibilities for Setting Goals:

• All managers should be involved in the goal-setting process.

• These goals correspond to the level of the organization in which the manager is working.

Kinds of Goals. . . (continued)

Managing Multiple Goals:Sometimes organizational goals between departments may be in conflict with each other.

Production vs Marketing

Optimizing – balancing and reconciling possible conflicts among goals.Managers have to decide to pursue one goal to the exclusion of the other or to try to find a middle ground where both goals can be met over a period of time.

Organizational Planning

Generally, organizations work from three different types of plans:

Strategic Plans

Tactical Plans

Operational Plans

Organizational Planning. . .(continued)

Strategic Plan is a general plan outlining decisions of resource allocation, priorities and action steps necessary to reach strategic goals. [deciding what to do]

Tactical Plan is aimed at achieving tactical goals and is developed to implement parts of a strategic plan. [more concerned with getting things done than with what to do]

Operational Plan focuses on carrying out tactical plans to achieve operational goals. [short-term focus and narrow in scope]

Time Frames For Planning

█Strategic Plans tend to have a long-term focus.

█Tactical Plans, an intermediate-term focus.

█Operational Plans, a short-term focus.

Time Frames For Planning

Long-Range Plans

Cover many years – even decadesGenerally vary from one organization to anotherFive years or longer is generally considered a long-range planOrganizations in complex, volatile environments need a longer planning time; however, managers is these organizations must constantly monitor their environment for changes.

Time Frames For Planning. . .(continued)

Intermediate Plans

• Usually cover period of 1-5 years.• Generally parallel tactical plans.• Central focus of planning activities.

Time Frames For Planning. . .(continued)

Short-Range Plans

Usually cover period of 1 year or less.

Generally affect the manager’s day-to-day activities.

Action Plan is designed to put into operation any other kind of plan.

Reaction Plan is developed to react to some unforeseen circumstance.

Responsibilities For Planning

The larger an organization becomes, the more likely the primary planning is done by groups of managers rather than by individual managers.

Responsibilities For Planning. . . (continued)

Planning Staff

• Professionals, on permanent staff, who reduce the workload of individual managers. [used by Disney, GM, Ford, Boeing]

• Help coordinate the planning activities of individual managers.

• Bring to a particular problem many different tools and techniques.

• Take a broader view than individual managers.• Go beyond ‘pet projects’ and particular

departments.

Responsibilities For Planning. . . (continued)

Planning Task Force

• Most often created when the organization has a special circumstance (problem) to handle.

• Usually line managers with a special interest in the relevant area of planning – may include members of the Planning Staff - if an organization has one.

• Not a permanent body – dissolved when the circumstance (problem) has been handled.

Responsibilities For Planning. . . (continued)

Board of Directors

Develop the ‘mission’ and strategy.

Can take an active role in the planning process.

Can delegate the planning activities to the CEO selected by the Board.

Responsibilities For Planning. . . (continued)

Chief Executive Officer

Usually the President or the Chairperson of the Board of Directors.Single most important individual in any organization’s planning process.Plays a major role in the complete planning process and is responsible for implementing the strategy.Assumes, along with the BoD, a direct role in planning.Other organizational players involved in the planning process have more of an advisory or consulting role.

Responsibilities For Planning. . . (continued)

Executive Committee

Usually made up of the top executives in the organization working as a group.Provide input to the CEO on the proposals that affect their own units (departments) and review the strategic plans that may develop from their input.Usually appointed to various staff committees, subcommittees or task forces to concentrate on specific projects or problems that might affect the entire organization in the future.

Responsibilities For Planning. . . (continued)

Line Management

Line managers are a valuable source of inside information for other managers as plans are formed and put into action.Line managers at the middle and lower levels usually must execute the plan developed by top management.Line managers identify, analyze and recommend program changes, develop budgets and submit them for approval and set the plans in motion.

Contingency Planning

Contingency Planning

• The determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate.

• Bankruptcy of a supplier or the ‘Y2K bug’ crisis in 1999.

See Figure 7.3, page 217

Crisis Management

Crisis Management

The set of procedures the organization uses in the event of a disaster or other unexpected calamity.

9/11 crisis in NYC prompted immediate crisis management on the part of police and fire departments, airlines, hotels and organizations which had offices in the buildings destroyed.

Tactical Planning

Tactical Plan

A plan aimed at achieving tactical goals and developed to implement specific parts of a strategic plan.

Strategy focuses on resources, environment and mission.

Tactics focus primarily on people and action.

Tactical Planning. . . (continued)

Developing Tactical Plans

Manager needs to recognize that tactical planning must be concerned with a number of tactical goals determined by a broad strategic goal. [Coke bottlers]

Strategies are often stated in general terms. Tactics must specify resources and time frames and specify what activities will be performed to achieve that strategic goal. [Increasing world-wide market share – Coke builds plants in India and France – funds to build plants and a target date for completion of each]

Tactical plans require the use of human resources to process information and pass it on to others who may be able to use it.

Tactical Planning. . . (continued)

Executing Tactical PlansSuccessful implementation depends on the proper use of resources, effective decision making and ensuring that the right things are done at the right times and in the right ways.Manager needs to evaluate every possible course of action in light of the goal it is intended to reach.Needs to make sure that every decision maker has the information and resources necessary to get the job done. [Vertical and horizontal communication and integration of activities critical]

Must monitor ongoing activities to make sure desired results are achieved using the organization’s control systems. [Disney plan to bring about growth in foreign markets – expand Disney cable channel and build new theme park in Hong Kong by early 2006]

Operational Planning

Single-Use Plans

Single-use Plan is developed to carry out a course of action not likely to be repeated in the future.

Program is a single-use plan for a large set of activities. [Disney plans for individual rides, attractions and hotels in Hong Kong or Black & Decker switching 150 products from GE to B&D]

Project is a single-use plan of less scope and complexity than a program. [B&D conversion of each GE product or adding a new benefit option to an existing salary package, etc]

Operational Planning. . . (continued)

Standing Plans

Standing Plans are developed for activities that occur regularly over a period of time.

Policy – a standing plan that specifies the organization’s general response to a designated problem or situation. Usually describes how ’exceptions’ are to be handled. [SAT score requirement]

Standard Operating Procedure [SOP] – a standing plan that outlines the steps to be followed in particular circumstances. [focuses on a sequence of activities]

Rules and Regulations – describe exactly how specific activities are to be carried out. [focus on one activity]

See Table 7.1, page 221.