1. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. PowerPoint Presentation by Charlie Cook The University of West Alabama Management: Principles and Practices 11e Ricky W. Griffin CHAPTER 7 Basic Elements of Planning and Decision Making PART 3 Planning and Decision Making

2. Learning Objectives 1.Summarize the function of decision making and the planning process. 2.Discuss the purpose of organizational goals, identify different kinds of goals, discuss who sets goals, and describe how to manage multiple goals. 3.Identify different kinds of organizational plans, note the time frames for planning, discuss who plans, and describe contingency planning. 4.Discuss how tactical plans are developed and executed. 5.Describe the basic types of operational plans used by organizations. 6.Identify the major barriers to goal setting and planning, how organizations overcome those barriers, and how to use goals to implement plans. 7–2 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3. Decision Making and the Planning Process Decision MakingDecision Making  Is the cornerstone of planning.  Is the catalyst that drives the planning process.  Underlies every aspect of setting goals and formulating plans. PlanningPlanning  All organizations plan, but not in the same fashion.  All planning occurs within an environmental context.  All goals require plans to guide in their achievement.  All goals are tied higher goals and plans. 7–3

4. 7–4 7.1 The Planning Process

5. Organizational Goals Guidance and unified direction Promotion of good planning Source of motivation Evaluation and control Purposes of Goals 7–5  Where the organization is going  Why getting there is important  Where the organization is going  Why getting there is important Every business will be either one or two in its industry  Facilitates future goal setting Ambitious revenue goal set Demonstrates how setting goals and develop plan to reach them  Specific and moderately difficult goals can motivate people to work hard if there is a reward also Job done faster than goal Bonus added automatically  Performance can be assessed in the future in terms of how successfully today’s goals are accomplished

6. Kinds of Goals By Level Mission statement Strategic goals Tactical goals Operational goals By Area Operations Marketing Finance Production Time Frame Long-term goals Intermediate goals Short-term goals Explicit goals Open-ended goals Setting Organizational Goals 7–6

7. Kinds of Goals 7–7 By Level MISSION STATEMENT STRATEGIC GOALS TACTICAL GOALS OPERATIONAL GOALS  State the fundamental, unique purpose that sets a business apart from other firms of its type  Identifies the scope of the business’s operations in product and market terms  Set by top management  Focus on broad and general issues  Set by and for middle managers  Focus on how to operationalize actions necessary to the strategic goals  Set by and for lower level managers  Concern on short term issues associated with tactical goals  Used instead of the term Objective

8. Kinds of Goals 7–8 By Level MISSION STATEMENT STRATEGIC GOALS TACTICAL GOALS OPERATIONAL GOALS The premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow Increasing the profitability of each of its coffee stores by 25 percent over the next five years Working on company-owned versus licensed versus licensed stores and global distribution of stores in different countries Boost the profitability of a certain number of stores in each of the next five years

9. Responsibilities of Setting Goals Who Sets Goals?Who Sets Goals?  All managers  Managerial responsibility for goal setting should correspond to the manager’s level in the organization. Managing Multiple GoalsManaging Multiple Goals  Optimizing allows managers to balance and reconcile inconsistent or conflicting goals.  Managers can pursue one goal and exclude all others or to seek a mid-range goal. 7–9

10. Kinds of Organizational Plans Strategic Plans (upper management) Tactical Plans (middle management) Operational Plans (lower-level managers) 7–10  Set by the board of director and top management  Have an extended time horizon and address questions of scope, resource deployment, and competitative advantage and synergy  Set by the upper & middle management  Compared with strategic plans, have a somewhat shorter time horizon and more specific and concrete focus  Set by the middle and lower-level managers  Relatively narrow in scope  Deals with a fairly small set of activities

11. Time Frames for Planning The Time Dimension of PlanningThe Time Dimension of Planning  Planning must provide sufficient time to fulfill the managerial commitments involved. Long-range (strategic) plans of 5 or more years Short-range (operational) action and reaction plans of 1 year or less Intermediate-range (tactical) plans of 1–5 years 1510 7–11

12. Responsibilities for Planning Planning StaffPlanning Staff  Gather information, coordinate planning activities, and take a broader view than individual managers. Planning Task ForcePlanning Task Force  Created when the organization wants a special circumstance addressed. Board of DirectorsBoard of Directors  Establishes corporate mission and strategy.  May engage in strategic planning. Chief Executive OfficerChief Executive Officer  May serve as president or board chair; has a major role in planning and implementing the strategy. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7–12

13. Responsibilities for Planning (cont’d) Executive CommitteeExecutive Committee  Is composed of top executives.  Meets regularly with the CEO to review strategic plans. Line ManagementLine Management  Have formal authority and responsibility for management of the organization.  Help to formulate strategy by providing information.  Are responsible for executing the plans of top management. 7–13

14. Contingency Planning and Crisis Management Contingency PlanningContingency Planning  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.  Contingency planning is a proactive strategy that emphasizes preparation over response. Crisis ManagementCrisis Management  The set of procedures the organization uses in the event of a disaster or other unexpected calamity.  Crisis management is the process of managing the response to a major incident after it has occurred. It is a reactive strategy. 7–14

15. Ongoing planning process Action point 1Action point 2Action point 3Action point 4 Develop plan, considering contingency events Implement plan and formally identify contingency events Specify indicators for the contingency events and develop contingency plans for each possible event Successfully complete plan or contingency plan Monitor contingency event indicators and implement contingency plan if necessary 7–15 7.3 Contingency Planning

16. Developing tactical plans Recognize and understand overarching strategic plans and tactical goals Specify relevant resource and time issues Recognize and identify human resource 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 integration of activities Monitor ongoing activities for goal achievement 7–16 7.4 Developing and Executing Tactical Plans

17. 7–17 Developing and Executing Tactical Plans Developing tactical plans Recognize and understand overarching strategic plans and tactical goals Specify relevant resource and time issues Recognize and identify human resource commitments Recognize that tactical planning must address a number of tactical goals Represent a concrete action involving measurable resources & a target date for completion  Managers must be in a position to receive information from others within and outside the organization  Process that information in the most effective way and pass it on to others  Each activity has required considerable time and effort from dozens of management

18. 7–18 Developing and Executing Tactical Plans 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 integration of activities Monitor ongoing activities for goal achievement Horizontal Communication Vertical Communication

19. Plan TypeDescription Single-use plans Developed to carry out a course of action not likely to be repeated in the future ProgramSingle-use plan for a large set of activities ProjectSingle-use plan of less scope and complexity than a program Standing plans Developed for activities that recur regularly over a period of time PolicyStanding plan specifying the organization’s general response to a designated problem or situation Standard operating procedure Standing plan outlining steps to be followed in particular circumstances Rules and regulationsStanding plans describing exactly how specific activities are to be carried out 7–19 7.1 Types of Operational Plans

20. Managing Goal-Setting and Planning Processes Barriers to Goal Setting and PlanningBarriers to Goal Setting and Planning  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. 7–20

21. Major barriersInappropriate 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 system 7–21 7.2 Barriers to Goal Setting and Planning

22. Using Goals to Implement Plans Management by Objectives (MBO)Management by Objectives (MBO)  Is a technique for integrating formal goal setting and planning by giving subordinates a voice and clarifying what they are expected to accomplish.  Is frequently tailored to the special circumstances of firms which may use a special term or name for it. 7–22

23. 7–23 7.5 The Formal Goal-setting Process

24. The Effectiveness of Formal Goal Setting Strengths (Success)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)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 7–24

25. KEY TERMS missionmission strategic goalstrategic goal tactical goaltactical goal operational goaloperational goal optimizingoptimizing strategic planstrategic plan tactical plantactical plan operational planoperational plan reaction planreaction plan long-range planlong-range plan intermediate planintermediate plan short-range planshort-range plan crisis managementcrisis management single-use plansingle-use plan programprogram projectproject standing planstanding plan policypolicy rules and regulationsrules and regulations management by objectives (MBO)management by objectives (MBO) 7–25