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ORGANIZATIONAL PLANNING ORGANIZATIONAL PLANNING AND GOAL SETTINGAND GOAL SETTING

Chapter 7: Chapter 7: MANAGEMENT 6MANAGEMENT 6thth Edition Edition By: Richard DaftBy: Richard Daft

Prepared by:Prepared by:GREGAR DONAVEN E. VALDEHUEZA, MBAGREGAR DONAVEN E. VALDEHUEZA, MBALourdes College InstructorLourdes College Instructor

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 Stateme

nt

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)

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 Honesty Fairness Commitment

Integrity Trust Respect Accountability

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 strategic goals.attain 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 its over-for the organization to reach its over-all goals.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.

MISSION

Finance V.P.Keep outstanding accounts below $500,000Keep borrowing below $2 millionProvide monthly budget statements for departmentsHave delinquent accounts of no more than 2% of total

Supervisor – Automatic MachinesProduce 150,000 standard units at average cost of $16Have machine downtime of less than 7%Respond to employee grievances within 24 hours

STRATEGIC GOALS

President12% return on investment; 5% growthNo employee layoff; Excellent service to customer

TACTICAL GOALS

Production V.P.Manufacture 1,200,000 products at average cost of $19Increase manufacturing productivity by 2%Resolve employee grievances within 3 working days

OPERATIONAL GOALS

Accounts Receivable ManagerIssue invoices within 5 days of saleCheck new customers’ credit within 1 working dayAllow no account to be overdue more than 5 monthsCall delinquent accounts weekly

Manufacture both standard and custom metal products for various applications in the machine tool industry

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 performancePlanning types and performance

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

Contingency PlansContingency Plans Plans that define company responses Plans that define company responses

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

Crisis Management PlanningCrisis Management Planning

A special type of contingency plan.A special type of contingency plan.

STAGES OF CRISIS MANAGEMENT

Prevention

• Build relationships

• Detect signals from environment.

Preparation

• Designate crisis management team and spokesperson.

• Create detailed crisis management plan.

• Set up effective communications system.

Containment

• Rapid response: Activate the crisis management plan.

• Get the awful truth out.

• Meet safely and emotional needs.

• Return to business.

Traditional approaches to planningTraditional approaches to planning

Top executivesTop executives Consulting firmsConsulting firms Central planning departmentCentral planning department

• A group of planning specialists who A group of planning specialists who develop plans for the organization as a develop plans for the organization as a whole and its major divisions and whole and its major divisions and departments and typically report directly departments and typically report directly to the president or CEO.to the president or CEO.

New workplace approaches to planningNew workplace approaches to planning

Involvement of everyone in the Involvement of everyone in the organizationorganization

Sometimes outside stakeholdersSometimes outside stakeholders

Decentralized planningDecentralized planning

• Managers work with planning experts to Managers work with planning experts to develop their own goals and plans.develop their own goals and plans.

Guidelines for planning in the new Guidelines for planning in the new workplaceworkplace

Start with a strong missionStart with a strong mission Set stretch goalsSet stretch goals Create a culture that encourages Create a culture that encourages

learninglearning Design new roles for planning staffDesign new roles for planning staff Use temporary task forcesUse temporary task forces Planning still starts and stops at the Planning still starts and stops at the

toptop