1. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 1 CHAPTER FOUR CHAPTER FOUR Management 3rd Edition Chuck Williams Planning Prepared by Deborah Baker Texas Christian University

2. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 2 CHAPTER FOUR What Would You Do? You are in charge of planning and product development at Google…  Google is today’s leading Internet search site  But, competition is increasing and it’s difficult to break into the corporate market  It’s your job to make sure customers choose Google What is Google’s long-range planning vision? What new products do you need? How can Google remain flexible?

3. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 3 CHAPTER FOUR Planning After reading the next two sections, you should be able to: 1.discuss the costs and benefits of planning. 2.describe how to make a plan that works.

4. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 4 CHAPTER FOUR Planning 1 Planning is choosing a goal and developing a strategy to achieve that goal

5. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 5 CHAPTER FOUR Benefits of Planning 1.1 Benefits of Planning Creation of Task Strategies Creation of Task Strategies Intensified Effort Direction Persistence

6. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 6 CHAPTER FOUR Pitfalls of Planning 1.2 Pitfalls of Planning Detachment of Planners Impedes Change and Adaptation False Sense of Certainty

7. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 7 CHAPTER FOUR Blast From The Past Pericles and Planning  Leaders must have a vision  Planners must be close to events  Plans must be flexible  “Opportunity waits for no man.” Vision Nondetachment Flexibility

8. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 8 CHAPTER FOUR How to Make a Plan That Works 2 Set Goals Maintain Flexibility in Planning Track Progress Toward Goal Achievement Develop Effective Action Plans Develop Commitment to Goals

9. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 9 CHAPTER FOUR Specific Measurable Attainable Realistic Timely Setting Goals 2.1 S.M.A.R.T.S.M.A.R.T.

10. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 10 CHAPTER FOUR Developing Commitment to Goals 2.2  The determination to achieve a goal  Increased by:  Setting goals through participation  Making goals reasonable  Making goals public  Obtaining top management support

11. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 11 CHAPTER FOUR Developing Effective Action Plans 2.3 An Action Plan Lists: An Action Plan Lists: Specific Steps People Resources Time Period

12. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 12 CHAPTER FOUR Tracking Progress 2.4 Setting… Proximal Goals Distal Goals Gather and provide… Performance Feedback

13. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 13 CHAPTER FOUR Maintaining Flexibility 2.5  Option-based planning  keep options open through simultaneous investment  invest more in promising options  maintains slack resources  Learning-based planning  plans need to be continuously adjusted  encourages flexibility, frequent reassessment, and revision of goals

14. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 14 CHAPTER FOUR Kinds of Plans After reading the next two sections, you should be able to: 3.discuss how companies can use plans at all management levels, from top to bottom. 4.describe the different kinds of special-purpose plans that companies use to plan for change, contingencies, and product development.

15. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 15 CHAPTER FOUR Planning from Top to Bottom Vision Mission Tactical Plans, MBO Standing Plans Operational Plans Single-Use Plans 3 Adapted from Exhibit 4.5 Vision Mission Tactical Plans, MBO Operational, Standing, Single- Use Top Managers Middle First-Level Managers

16. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 16 CHAPTER FOUR Starting at the Top 3.1 Strategic Plans Clarify how the company will serve customers and position itself against competitors (2-5 years) Vision An inspirational statement of an organization’s enduring purpose (2 sentences) Mission Overall goal that unifies efforts toward its vision, stretches and challenges, and possesses a finish line and time frame. Flows from vision.

17. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 17 CHAPTER FOUR Merck Corporation’s Vision and Value 3.1 http://www.merck.com/about/mission.html http://www.merck.com/about/mission.html Exhibit 4.7 Source: “The Merck Corporate Philosophy,” 1 April 2003. ©Merck & Co, Inc., All rights reserved. Merck’s Vision … to provide society with superior products and services by developing innovations and solutions that improve the quality of life and satisfy customer needs, and to provide employees with meaningful work and advancement opportunities, and investors with a superior rate of return. Merck’s Values Our business is preserving and improving human life. We are committed to the highest standards of ethics and integrity. We are dedicated to the highest level of scientific excellence and commit our research to improving human and animal health and the quality of life. We expect profits, but only from work that satisfies customer needs and benefits humanity. We recognize that the ability to excel -- to most competitively meet society's and customers' needs -- depends on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees, and we value these qualities most highly.

18. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 18 CHAPTER FOUR Setting Missions 3.1 Set a clear, specific target Vow to defeat a rival Emulate a successful company Strive to dramatically change the company Targeting Common-Enemy Mission Role-Model Mission Role-Model Mission Internal-Transformation Mission

19. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 19 CHAPTER FOUR Bending in the Middle 3.2 Tactical Plans Specify how a company will use resources, budgets, and people to accomplish goals within its mission. (6 months to 2 years) Management by Objectives Develop and carry out tactical plans 1.Discuss possible goals 2.Participatively select goals consistent with overall goals 3.Jointly develop tactical plans 4.Meet to review progress

20. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 20 CHAPTER FOUR What Really Works Management by Objectives 3.2 MBO 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success97%  MBO is based on goals, participation and feedback  Companies that use MBO are 97% more likely to outperform companies that don’t!

21. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 21 CHAPTER FOUR Finishing at the Bottom 3.3 Operational Plans Day-to-day plans for producing or delivering products and services over a 30-day to six-month period

22. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 22 CHAPTER FOUR Kinds of Operational Plans 3.3 Single-Use Plans Plans that cover unique, one-time-only events Standing Plans Plans used repeatedly to handle frequently recurring events. Three kinds are: policies, procedures, and rules and regulations. Plans used repeatedly to handle frequently recurring events. Three kinds are: policies, procedures, and rules and regulations. Budgeting Quantitative planning to decide how to allocate money to accomplish company goals

23. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 23 CHAPTER FOUR Special-Purpose Plans 4 Change Contingencies Product Development

24. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 24 CHAPTER FOUR Planning for Change 4.1  Stretch goals  ambitious goals to achieve extraordinary improvements in company performance  Benchmarking  identify outstanding practices in other companies  adapt them to your company

25. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 25 CHAPTER FOUR Been There Done That 4.2  Stretch goals are more than just demanding more from employees  Give employees the tools to succeed  Don’t punish failure Steve Kerr, former “chief learning officer” of General Electric…

26. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 26 CHAPTER FOUR 1.Define the scope of the scenario 2.Identify the major stakeholders 3.Identify environmental trends 4.Identify key uncertainties and the likely outcomes 5.Using Steps 1-4, put together initial scenarios 6.Check for consistency and plausibility of facts 7.Write the final scenarios and conduct planning sessions 8.Develop measures for each scenario 1.Define the scope of the scenario 2.Identify the major stakeholders 3.Identify environmental trends 4.Identify key uncertainties and the likely outcomes 5.Using Steps 1-4, put together initial scenarios 6.Check for consistency and plausibility of facts 7.Write the final scenarios and conduct planning sessions 8.Develop measures for each scenario Planning for Contingencies 4.2 Scenario Planning

27. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 27 CHAPTER FOUR 4.3 1.Create an aggregate product plan.  Indicate the resources and the product’s place within the mission  Avoid the mistake of having too many products in development  Indicate the resources and the product’s place within the mission  Avoid the mistake of having too many products in development 2.Manage the product- development process.  Use cross-functional teams  Increase information through internal and external communication  Overlap development phases  Test product prototypes frequently  Use cross-functional teams  Increase information through internal and external communication  Overlap development phases  Test product prototypes frequently Planning for Product Development

28. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 28 CHAPTER FOUR What Would You Do—II? Avon Products has lost its appeal to modern women…  A “Business Transformation Plan” is created  A new line of upscale specialty products is not succeeding.  There are critical operations areas to change. How can you develop a “new plan”? How can you distill your plan into a single mission statement? What would you do?