Pom 3 04012009

OBJECTIVESOBJECTIVESSTRATEGIES STRATEGIES

&&PLANNING PREMISES PLANNING PREMISES

Objectives Objectives Important ends towards which Important ends towards which

organizational and individual activities organizational and individual activities are directedare directed

Objectives are desired outcomes for Objectives are desired outcomes for entire organizations or groups (as well entire organizations or groups (as well

as individuals)as individuals)

HIERARCHY OF OBJECTIVESHIERARCHY OF OBJECTIVES

1. Mission2. Overall objectives 3. Specific main objectives4. Division objectives5. Department objectives6. Unit objectives7. Individual objectives8. Personal development objectives

THE PROCESS OF SETTING OBJECTIVES

Mission: : Board Of Directors

Strategic Objectives : Top Level Management

Tactical Objectives : Middle level Management

Operational Objectives : Supervisory or Low Level Management

BOARD OF DIRECTORS----------------------------------

MISSION

Cont…..

STRATEGIC OBJECTIVES----------------------------------12% return on investment5% GrowthNo employee layoffsExcellent Service to customers

PRESIDENT / MD

TACTICAL

VP PRODUCTION

Manufacture 1,20,000 units @ 35Wastage is kept below 3%, Increaseproductivity 5%. Keep Inventory for 7 days. Resolve employee related problems in 3 days

VP FINANCEKeep borrowing below 10 millionKeep outstanding account below 2.5 millionProvide monthly budget statements for department of assets.Keep delinquent accounts no morethan 2% of total

VP MARKETING Sell 1,20,000 units @ 47Introduce 1 new product lineIncrease sales by 5% in new market areas. Open 2 new sales office. Attain market share of 19%

OPERATIONAL

Production Manager

Produce 2350 units daily with5% reject @ 29. Keep machinesdowntime less than 7%Keep scrape below 3%Response to employee grievance within 24 hrs

Accounts Manager

Issue invoice with in 5 days of saleCheck new customers creditwithin 1 working day. Allow no account to be over due more than 3 months. Update receivable/ payments daily

Sales Manager

Response to customer inquiries within 2hrs. Meetsale quota 1,20,000Sales people to visit 1 newcustomer/day. Call on eachmajor customer every 4 week . Call each small customer every 8 weeks

CRITERIA FOR EFFECTIVE CRITERIA FOR EFFECTIVE OBJECTIVESOBJECTIVES

• Specific & measurable • Cover key result areas• Challenging bet realistic• Defined time period • Linked to rewards

SETTING OBJECTIVES: GUIDELINESSETTING OBJECTIVES: GUIDELINES

Setting Objectives

• A difficult task• Requires intelligent briefing by

supervisors• Requires constant practice by sub-

ordinates.

Cont….

CHECK LISTCHECK LIST1. Do the objectives cover the main features of my job?

2. Is the list of objectives too long? If so, can I combine some objectives?

3. Are the objectives verifiable; that is, will I know at the end of the period whether or not they have been achieved?

4. Do the objectives indicate:1. Quantity (how much)?2. Quality (how well, or specific characteristics)?3. Time (When)?4. Cost (at what cost)?

Cont….

5. Are the objectives challenging, yet reasonable?

6. Are priorities assigned to the objectives (ranking, weighing, etc.)?

7. Does the set of objectives also include: Improvement objectives? Personal development objectives?

8. Are the objectives coordinated with those of other managers and organizational on it’s? Are they consistent with objectives of my superior, my department, the company?

Cont….

9. Have I communicated the objectives to all who need to be informed?

10. Are the short-term objectives consistent with long-term aims?

11. Are the assumptions underlying the objectives clearly identified?

12. Are the objectives expressed clearly, and are they in writing?

Cont….

13. Do objectives provide for timely feedback so that I can take any necessary corrective steps?

14. Are my resources and authority sufficient for achieving the objectives?

15. Have I given the individuals who are expected to accomplish objectives a chance to suggest their objectives?

16. Do my subordinates have control over aspects for which they are assigned responsibility?

MANAGEMENT BY OBJECTIVES MANAGEMENT BY OBJECTIVES MBOMBO

A method of management whereby managers and employees define objectives for every department, project and person and use them to monitor subsequent performance

MAJOR ACTIVITIESMAJOR ACTIVITIES MBO MBO

1. Setting objectives. 2. Developing action plans.3. Reviewing progress.4. Appraising overall performance.

STEPS IN MBO PROGRAMSTEPS IN MBO PROGRAM

1. The organizations’ overall objectives and strategies are formulated.

2. Major objectives are allocated among divisional and departmental units.

3. Unit manager collaboratively sets specific objectives for their units with their supervisors.

4. Specific objectives are jointly set for all departmental members.

5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and subordinates.

6. The action plans are implemented.7. Progress toward objectives is periodically reviewed

and feed-back is provided.8. Successful achievement of objectives is reinforced

by performance based rewards

BENEFITS OF BENEFITS OF MBOMBO

• Manager and employee efforts are focused on activities that will lead to attainment of objectives.

• Performance is improved at all levels of organization.• Employees are motivated.• Departmental and individual objectives are in line

with organizational objectives.• Organizational structure and roles are clarified.• Effective planning and effective control are

encouraged and generated.

WEAKNESSES OFWEAKNESSES OF MBO MBO

1. Constant change prevents MBO from taking hold.2. Poor employer-employee relationship reduces its

effectiveness.3. Operational objectives overtake strategic objectives.4. Setting objectives is difficult at lower levels.5. Emphasis on short-term objectives.6. Too much paper work harms efficiency.

STRATEGIC PLANNINGSTRATEGIC PLANNING

The set of decisions and actions used to formulate and implement strategies that will provide a competitive fit between the organization and its environment so as to achieve organizational objectives

STRATEGYSTRATEGY

The determination of the purpose ( or mission ) and basic long-term objectives of an organization and the adoption of courses of action and allocation of resources necessary to achieve these objectives

• Corporate level Strategy.• Business level Strategy.• Functional level Strategy.• Grand Strategy.

LEVELS OF STRATEGYLEVELS OF STRATEGY

GRAND STRATEGYGRAND STRATEGY

The general plan of major action by which an organization intends to achieve its long-term objectives.

CORPORATE LEVEL STRATEGYCORPORATE LEVEL STRATEGY

It seeks to determine what business an organization should It seeks to determine what business an organization should be doing.be doing.

BUSINESS LEVEL STRATEGYBUSINESS LEVEL STRATEGY

It seeks to determine how an organization should compete in each of business it does.

FUNCTION LEVEL STRATEGYFUNCTION LEVEL STRATEGY

It seeks to determine how to support the business level

strategy.

STRATEGIC PLANNING PROCESSSTRATEGIC PLANNING PROCESS

Key ElementsKey Elements• Inputs.• Organization Profile.• Orientation of Top Management.• Purpose and major objectives.• External environment.• Internal environment.• Development of alternative strategies.• Evaluation & choice of strategies. • Contingency plans.

INPUTS• Employees.• Managerial skills.• Technical knowledge and skills.• Capital.

INTERNAL• Employees.• Capital.• Technological.• Managerial.

EXTERNAL• Consumers.• Suppliers.• Stock holders.• Government.• Community.

ORGANIZATIONAL PROFILE ORGANIZATIONAL PROFILE

It is the starting point of determining where the organization is and where it should go.

• Basic purpose (or mission)• Competitive environment• Geographic orientation

ORIENTATION OF ORIENTATION OF TOP MANAGERS TOP MANAGERS

• Manager’s values, preferences and attitudes toward risk –taking have direct impact on strategy.

• Managers set organizational climate and determine the general direction for the organization.

PURPOSE & MAJOR OBJECTIVE PURPOSE & MAJOR OBJECTIVE

The purpose (or mission) and the major objective are the end points toward which the activities of organization are directed.

EXTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT

External environment must be assessed in terms of threats and opportunities:

• Economic• Social• Political• Legal• Demographic• Geographic

INTERNAL ENVIRONMENT INTERNAL ENVIRONMENT

Internal environment should be evaluated in respect to its resources and its weakness and strengths in:

• Research & development• Production• Procurement• Marketing• Services• Human Resources• Financial image, structure & Climate, planning &

control system• Relations with customers

DEVELOPMENT OF ALTERNATIVE DEVELOPMENT OF ALTERNATIVE STRATEGIES STRATEGIES

Alternative Strategies are developed on the basis of analysis of external and internal environment:

• Specialize or concentrate• Diversify• Joint venture , merger• Go international

EVALUATION & CHOICE OF EVALUATION & CHOICE OF STRATEGIESSTRATEGIES

Evaluation & choice of strategies are done in light of :

• Risks

• Timing

• Reaction of competition

CONTINGENCY PLANS CONTINGENCY PLANS

Contingency plans are prepared to cater for changes that may occur in the environment. These plans provide a degree of preparation for the un-expected change.

THREATSTHREATSNegative external environmentalFactors

OPPORTUNITIESOPPORTUNITIESPositive external environmental factors

WEAKNSSESWEAKNSSESActivities an organization does notdo well or resources it needs but does not have

STRENGTHSSTRENGTHSActivities an organization doeswell or resources it control 1

TOWS MATRIXTOWS MATRIXANALYSIS OF ENVIRONMENTANALYSIS OF ENVIRONMENT

S T R E N G T HS

W E A K N E S SW

OPPRTU ONITES

SO

MAXI-MAXI

WO

MINI-MAXI

THRE TAT

ST

MAXI-MINI

WT

MINI-MINI

Internal Factors

External Factors

Internal strengths (S) e.g., strengths in management, operations, finance, Marketing, R&D, Engineering

Internal weaknesses (W) e.g., weaknesses in areas shown in the box of “strengths”

External opportunities (O) (Consider risks also) e.g., current and future economic conditions, political and social changes, new products, services, and technology

SO Strategy:Maxi-MaxiPotentially the most successful strategy, utilizing the organization’s strengths to take advantage of opportunities

WO Strategy:Mini-Maxie.g., developmental strategy to overcome weaknesses in order to take advantage of opportunities

External threats (T):E.g., lack of energy, competition, and areas similar to those shown in the “opportunities” box above

ST Strategy:Maxi-MiniE.g., use of strengths to cope with threats or to avoid threats

WT Strategy:Mini-Manie.g., retrenchment, liquidation, or joint venture

THE TOWS MATRIX FOR THE TOWS MATRIX FOR STRATEGY FORMULATIONSSTRATEGY FORMULATIONS

PORTFOLIO MATRIXPORTFOLIO MATRIXTOOL FOR ALLOCATING RESOURCESTOOL FOR ALLOCATING RESOURCES

STARS (High – Weak)STARS (High – Weak)High growth, strong competitive position. Rising

QUESTION MARK (High – Strong)QUESTION MARK (High – Strong)A weak market share and high growth rate requiring cash Investment

CASH COWS (Low – Strong)CASH COWS (Low – Strong)Low growth rate with a strong competitive position, well established

DOGS (Low – Weak)DOGS (Low – Weak)Business with low growth rate and weak market share -not profitable

EFFECTIVE IMPLEMENTATION OFEFFECTIVE IMPLEMENTATION OFSTRATEGIESSTRATEGIES

FAILUREFAILURE• Managers are in-adequately prepared.• Information for preparing plans and their implementation

is insufficient. • Objectives are too vague to be of value.• Responsibilities of implementing plans are not clearly

defined.• Reviews of plan implementation are not done effectively.• Link between planning and control is weak

SUCCESSFUL IMPLEMENTATION SUCCESSFUL IMPLEMENTATION OF STRATEGIES OF STRATEGIES

• Communicating strategies to all key decision- making managers

• Proper development of planning premises• Ensuring action plans contribute to and reflect major

objectives and strategies• Reviewing strategies regularly• Developing contingency plans• Creating appropriate structure to fit planning needs

FORECASTING• An effort to spot trends that enable managers to predict

future events.

PREMISING Anticipating environment in which plans are expected to

operate.

They include assumptions or forecasts of the future and known conditions that will affect the operation of plan.

AREAS OF FORECASTING AREAS OF FORECASTING

• Economic• Social• Political• Legal• Technological

DELPHI TECHNIQUE FOR MAKING DELPHI TECHNIQUE FOR MAKING FORECASTS FORECASTS

• A panel of experts is selected-from both inside and outside the organization.

• Experts make their (anonymously) forecasts.• All individual forecasts are compiled. Composite

result are fed back to experts.• Based on composite information, further

estimates of future are made.• Above process (may be) repeated several times• As convergence of opinion begin to evolve,

results are finalized as acceptable forecasts.

Process of Effective Premising Process of Effective Premising

1. Selecting premises that bear materially on course of action.

2. Development of alternative premises for contingency planning.

3. Verification of consistency of premises at all levels.

4. Dissemination of selected premises to all planners.

Derivative or Supporting Plans Derivative or Supporting Plans

• Post – requisite step

• Required primarily to support basic plans

• Follow their own steps of planning

Contingency plansContingency plans

• When something (Planned) wrong

• External environment undergoes unexpected change

• Criticality of time for execution

• Follow their own steps of planning

Coordination of Various Plans Coordination of Various Plans

• Several Plans under implementation simultaneously

• Coordination amongst them critical

• Conserver resources avoid duplication cuts waste