griffin chap07 the planning and decision making

CHAPTERCHAPTER

77

Basic Elements of Planning and Decision Making

Copyright Copyright © by Houghton Mifflin Company.© by Houghton Mifflin Company.All rights reserved.All rights reserved.

PowerPoint PresentationPowerPoint Presentation by Charlie Cook by Charlie Cook

Copyright © by Houghton Mifflin Company. All rights reserved. 7–2

Learning ObjectivesLearning ObjectivesAfter studying this chapter, you should be able to:

– Summarize the function of decision making and the planning process.

– Discuss the purpose of organizational goals, and identify different kinds of goals. Discuss who sets goals, and describe how to manage multiple goals.

– Identify different kinds of organizational plans, note the time frames for planning, discuss who plans, and describe contingency planning.

– Discuss how tactical plans are developed.– Describe the basic types of operational plans used by

organizations.– Identify the major barriers to goal setting and planning, how

organizations overcome those barriers, and how to use goals to implement plans.


Chapter OutlineChapter Outline• Decision Making and the

Planning Process• Organizational Goals

– Purposes of Goals– Kinds of Goals– Responsibilities for Goals– Managing Multiple Goals

• Organizational Planning– Kinds of Organizational

Planning– Time Frames for Planning– Responsibilities for Planning– Contingency Planning

• Tactical Planning– Developing Tactical Plans– Executing Tactical Plans

• Operational Planning– Single-Use Plans– Standing Plans

• Managing Goal-Setting and Planning Processes– Barriers to Goal Setting and

Planning– Overcoming the Barriers– Using Goals to Implement

Plans


Decision Making and the Planning Decision Making and the Planning ProcessProcess

• The Planning Process

Strategic goals Strategic plans

Tactical goals

Operational goals Operational plans

The organization’s mission

The Environmental Context

• Purpose • Premises • Values • Directions

Tactical plans

Figure 7.1


Organizational GoalsOrganizational Goals• Purposes of Goals

– Provide guidance and a unified direction for people in the organization.

– Have a strong affect on the quality of other aspects of planning.

– Serve as a source of motivation for employees of the organization.

– Provide an effective mechanism for evaluation and control of the organization.


Kinds of GoalsKinds of Goals• By Level

– Mission statement is a statement of an organization’s fundamental purpose.

– Strategic goals are goals set by and for top management of the organization that address broad, general issues.

– Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals.

– Operational goals are set by and for lower-level managers to address issues associated with tactical goals.

• By Area– Goals set for the different functional areas of the

organization.• By Time Frame

– Goals may be set for long-term, intermediate-term, or short-term time frames and for explicit time frames or open-ended.


Organizational Organizational GoalsGoals

(cont’d)(cont’d)• Kinds of Goals for

a Regional Fast-Food Chain

Accounting manager

ï Split accounts receivable/payable functions from other areas within two yearsï Computerize payroll system for each restaurant this yearï Pay all invoices within thirty days

Advertising director

ï Develop regional advertising campaigns within one yearï Negotiate 5 percent lower advertising rates next yearï Implement this yearís promotional strategy

Restaurant manager

ï Implement employee incentive system within one yearï Decrease waste by 5 percent this yearï Hire and train new assistant manager

Vice president ñfinance

ï Keep corporate debt to no more than 20 percent of liquid assets for next ten yearsï Revise computerized accounting system within five yearsï Earn 9 percent on excess cash this year

President and CEO

ï Provide 14 percent return to investors for at least ten yearsï Start or purchase new restaurant chain within five yearsï Negotiate new labor contract this year

Mission: Our mission is to operatea chain of restaurants that willprepare and serve high-qualityfood on a timely basis and atreasonable prices.

Vice president ñmarketing

ï Increase per store sales 5 percent per year for ten yearsï Target and attract two new market segments during next five yearsï Develop new promotional strategy for next year

Vice president ñoperations

ï Open 150 new restaurants during next ten yearsï Decrease food-container costs by 15 percent during next five yearsï Decrease average customer wait by thirty seconds this year

Strategic Goals

Tactical Goals

Operational Goals

Figure 7.2


Responsibilities of Setting GoalsResponsibilities of Setting Goals• Who Sets Goals?

– All managers should be involved in the goal-setting process.– Managerial responsibility for goal setting should correspond

to the manager’s level in the organization.

• Managing Multiple Goals– Optimizing allows managers to balance

and reconcile inconsistent or conflicting goals.

– Managers can choose to pursue one goal and exclude all others or to seek a mid-range goal.


Kinds of Organizational PlansKinds of Organizational Plans• Strategic Plans

– A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Plans– A plan aimed at achieving the tactical goals set by and for

middle management.

• Operational Plans– Plans that have a short-term focus.

These plans are set by and for lower-level managers.


Time Frames for PlanningTime Frames for Planning• The Time Dimension of Planning

– is based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved.

• Long-range Plans– cover present and future strategic issues; normally extend

beyond five years in the future.

• Intermediate Plans– usually cover from 1 to 5 years and parallel tactical plans.– are the principal focus of organizational planning efforts.

• Short-range Plans– have a time frame of one year or less.– include action plans and reaction (contingency) plans.


Responsibilities for PlanningResponsibilities for Planning• Planning Staff

– Planning staff personnel gather information, coordinate planning activities, and take a broader view than individual managers.

• Planning Task Force– Created when the organization wants

a special circumstance addressed. • Board of Directors

– Establishes corporate mission and strategy. May engage in strategic planning

• Chief Executive Officer– Usually serves as president or chair of the

board of directors. Has a major role in the planning process and implements the strategy.


Responsibilities for Planning Responsibilities for Planning (cont’d)(cont’d)

• Executive Committee– Composed of top executives within

the organization. Meet regularly for input to the CEO and review strategic plans.

• Line Management– Persons with formal authority and

responsibility for management of the organization. Help to formulate

strategy by providing information. Responsible for executing the plans

developed by top management.


Contingency PlanningContingency Planning• Contingency is the determination of alternative courses of action to

be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.

Ongoing planning process

Action point 1 Action point 2 Action point 3 Action point 4Develop plan,consideringcontingency events

Implement plan andformally identifycontingency events

Specify indicatorsfor the contingencyevents and developcontingency plans foreach possible event

Successfully completeplan or contingencyplan

Monitor contingency event indicators andimplement contingency plan if necessary

Figure 7.3


Tactical PlanningTactical Planning• Developing and Executing Tactical Plans

Developing tactical plans• Recognize and understand

overarching strategic plansand tactical goals

• Specify relevant resource andtime issues

• Recognize and identify humanresource commitments

Executing tactical plans• Evaluate each course of action

in light of its goal• Obtain and distribute

information and resources• Monitor horizontal and vertical

communication and integrationof activities

• Monitor ongoing activities forgoal achievement

Figure 7.4


Types of Operational PlansTypes of Operational Plans

Plan Description

Single-use plan Developed to carry out a course of action not likely to be repeated in the future

Program Single-use plan for a large set of activities Project Single-use plan of less scope and complexity than a

program

Standing plan Developed for activities that recur regularly over a pe-riod of time

Policy Standing plan specifying the organization’s general response to a designated problem or situation

Standard operating procedure Standing plan outlining steps to be followed in particu-lar circumstances

Rules and regulations Standing plans describing exactly how specific activi-ties are to be carried out

Table 7.1


Barriers to Goal Setting and Barriers to Goal Setting and PlanningPlanning

• As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them. Managers must also know how to overcome them.

Major Barriers Inappropriate goals Improper reward system Dynamic and complex environment Reluctance to establish goals Resistance to change Constraints

Overcoming the Barriers Understanding the purposes of goals and planning Communication and participation Consistency, revision, and updating Effective reward systems

Table 7.2


Using Goals to Implement PlansUsing Goals to Implement Plans• A formal goal-setting process such as management by objectives

(MBO) is an effective technique for integrating goal setting and planning by giving subordinates a voice and clarifying what they are expected to accomplish.

Startingthe formalgoal-settingprogram

Establishmentof organiza-tional goalsand plans

Collaborativegoal settingand planning

Communicat-ing organiza-tional goalsand plans

Meeting

Verifiablegoals andclear plans

Counseling

Resources

Periodicreview

Evaluation

Figure 7.5


Using Goals to Implement Plans:Using Goals to Implement Plans:The Effectiveness of Formal Goal The Effectiveness of Formal Goal

SettingSetting• Strengths (Success)

– Improved employee motivation– Enhances communication– Fosters more objective

performance appraisals– Focuses attention on

appropriate goals and plans– Helps identify managerial

talent– Provides a systematic

management philosophy– Facilitates control of the

organization

• Weaknesses (Failure)– Poor implementation of the

goal setting process– Lack of top-management

support for goal setting– Delegation of the goal-setting

process to lower levels– Overemphasis on quantitative

goals– Too much paperwork and

record keeping– Managerial resistance to goal

setting