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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Planning is Fundamental • All of the other management functions stem from planning • How do you plan for an undefined future? • No plan is perfect • Without plans and goals, organizations flounder • DQ: Do you agree with a speaker saying “Planning is a bs, wasting of time.” 2 Goals, Plans, Planning A goal is a desired future state that the organization attempts to realize A plan is a blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions PLANNING incorporates both ideas & means determining the goals and defining the means for achieving them. 3 Spin vs. Truth • Spin – Make other people believe what you want them to believe • Truth – Where your money goes; where company resources are allocated • Follow the money – see the company’s accounting books if what they say (mission, goals, strategic/tactical plans) is a spin or truth. 4 Goal Setting in Organizations • Organizational Mission – the organization’s reason for existence • Strategic goals – official goals, broad statements describing the organization’s future; Long-term (5 or 10 years) • Strategic plans – define the action steps the company will take (Action Plans) • Goals should be aligned 5 Strategic Goals, Plan, Planning • Strategic goals - broad statements describing where the organization wants to be in the future. official goals; whole organization • Strategic plans define the action steps by which the company intends to attain strategic goals. A strategic plan is a blueprint that defines organizational activities and resource allocations. • Strategic planning tends to be long-term. 7.2 The Organizational Planning Process Tactical Goals, Plans • Tactical goals are the results that major divisions and departments within the organization intend to achieve; middle management; describe what major subunits must do in order for the organization to achieve strategic goals. • Tactical plans define what major departments and organizational subunits will do to implement the organization’s strategic plan. They tend to be for a shorter time period. Operational Goals, Plans • Operational goals are the specific results expected from departments, work groups, and individuals. • Operational plans are developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans. 7.1 Levels of Goals and Plans Why Aligning Goals? • Effectively designed organizational goals are aligned into a hierarchy in which the achievement of goals at lower levels permits the attainment of higher-level goals. • Operational goals lead to the achievement of tactical goals, which lead to the attainment of strategic goals. • Organizational performance is an outcome of how well these interdependent elements are aligned, so that individuals, teams, departments, and so forth are working in concert to attain specific goals that ultimately help the organization fulfill its mission. Aligning Goals with Strategy Map Strategy maps are visual representations of • The key drivers of an organization’s success and • Show how specific goals and plans in each area are linked. • They provide a powerful way for managers to see the cause-and-effect relationships among goals and plans. • Help align operational goals with tactical goals; • Help align tactical goals with strategic goals. 7.4 Example of A Strategy Map Operational Planning • Use operational goals to direct employees and resources • Guide efficient and effective performance to achieve specific outcomes • Includes planning approaches such as: – Management by Objectives (MBO) – Single-Use Plans – Standing Plans 14 Mission, Goal, Strategic Planning, Strategy & Competitive Advantage [Lee, 2014] • Mission – the organization’s reason for existence • Goal – the organization’s future • Strategic Planning – process of achieving the goal by developing a strategy • Strategy – creating opportunities to gain competitive advantages • Competitive Advantage – your strength over competitors 7.5 Criteria for Effective Goal Setting Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 16 7.6 Model of the MBO Process • Defined in 1954 by Peter Drucker • Method for defining and monitoring goals 7.7 MBO Benefits Single-Use Plans vs. Standing Plans Single-Use Plans – Achieve one-time goal – Program/Project: building a headquarters, converting paper files to digital, renovating the office, setting up a new company intranet Standing Plans – Ongoing plans – Policies, rules, procedures Benefits and Limitations of Planning • Goals and plans provide a source of motivation and commitment • Goals and plans guide resource allocation (budgeting) • Goals and plans are a guide to action (specific targets) • Goals and plans set a standard of performance • Goals and plans can create a false sense of certainty • Goals and plans may cause rigidity in a turbulent environment • Goals and plans can get in the way of intuition and creativity 20 Planning for a Turbulent Environment • Contingency Planning – Planning for emergencies, setbacks, or unexpected conditions • Building Scenarios – A forecasting technique to look at current trends and visualize future possibilities • Crisis Planning – Sudden, devastating, unexpected events Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 21 7.9 Essentials Stages of Crisis Planning Innovative Approaches to Planning - (1) Set Stretch Goals for Excellence • • • • • Stretch goals are highly ambitious Clear, compelling, and imaginative Require innovation Goals must be seen as achievable Like Big Hairy Audacious Goals (BHAG) from 1996 article on building your vision • As times move faster and become more turbulent, these are important Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 23 Innovative Approaches to Planning – (2)Performance Dashboard for Planning Innovative Approaches to Planning – (3) Deploy Intelligence Teams • • An intelligence team is a cross-functional group of managers and employees, usually led by a competitive intelligence professional • Work together to gain a deep understanding of specific business issue, with the aim of presenting insights, possibilities and recommendations about goals and plans related to that issue. • Useful when the organization confronts a major intelligence challenge. Concluding Remarks [Lee, 2014] • Strategic Planning serves a good starting point: – Strategic Planning such as MBO, etc. may not be perfect in the real world. – However, we have to get started with something. • A manager must be flexible: 1. Be willing to adapt the strategic plan to new environment: new competition, new law, new customers, new technologies, etc. 2. Strategic planning must not discourage employees’ creativity and imagination. 3. A manager must develop a contingency plan in conjunction with the strategic plan; expect the unexpected outcome; be willing to admit a possibility of failure. Chapter 7 – Discussion Questions • • • • • • • • • • No plan is perfect. Explain briefly why a firm still need a plan. (class discussion) Explain briefly the differences between spin & truth. (class discussion) Explain briefly how we can easily find out if a firm's strategic planning is a spin or truth. (class discussion) Explain briefly the differences between a plan and planning. Explain briefly the differences between mission and goal. There are two kinds of goals: (1) measurable goal (2) unmeasurable goal. Which kind of goal would a bad manager choose? Explain why the bad manager choose such goal. Explain briefly the differences between strategic plan and tactical plan. Explain briefly the relation between a strategy and competitive advantages – that is, define “strategy” with a focus on “competitive advantages.” (class discussion) Explain briefly what a strategy map is. Explain briefly what two major benefits an organization can gain from alignment in a strategy map. Chapter 7 – Discussion Questions (continued) • • • • • • • • Explain briefly what MBO is. List five characteristics of effective goal setting. Explain four major activities in MBO. Explain four major benefits from MBO. Explain four major benefits from planning. Explain three major limitations from planning. Explain why a firm needs contingency planning. Discuss why a manager must be flexible in implementing strategic planning. Give three reasons. (class discussion)