Elements of Planning and Decision-Making A Brief Review

2 Key Concepts for Strategic Thinking 1.Vision 2.Mission 3.Strategy

3 Decision Making and the Planning Process §The Planning Process Strategic goalsStrategic plans Tactical goals Operational goalsOperational plans The organization’s mission The Environmental Context PurposePremisesValuesDirections Tactical plans

4 Organizational Goals §Purposes of Goals l Provide guidance and a unified direction for people in the organization. l Have a strong affect on the quality of other aspects of planning. l Serve as a source of motivation for employees of the organization. l Provide an effective mechanism for evaluation and control of the organization.

5 Kinds of Goals §By Level l Mission statement is a statement of an organization’s fundamental purpose. l Strategic goals are goals set by and for top management of the organization that address broad, general issues. l Tactical goals are generally set for middle managers; their focus is on how to operationalize actions to strategic goals. l Operational goals set for lower level managers. Concerned with shorter term issues associated with the tactical goals. §By Area l Goals set for the different functional areas of the organization. §By Time Frame l Goals may be set for long-term, intermediate-term, or short-term time frames and for explicit time frames or open-ended.

6 Organizational Goals §Kinds of Goals for a Regional Fast-Food Chain Accounting manager ï Split accounts receivable/payable functions from other areas within two years ï Computerize payroll system for each restaurant this year ï Pay all invoices within thirty days Advertising director ï Develop regional advertising campaigns within one year ï Negotiate 5 percent lower advertising rates next year ï Implement this yearís promotional strategy Restaurant manager ï Implement employee incentive system within one year ï Decrease waste by 5 percent this year ï Hire and train new assistant manager Vice presidentñfinance ï Keep corporate debt to no more than 20 percent of liquid assets for next ten years ï Revise computerized accounting system within five years ï Earn 9 percent on excess cash this year President and CEO ï Provide 14 percent return to investors for at least ten years ï Start or purchase new restaurant chain within five years ï Negotiate new labor contract this year Mission: Our mission is to operate a chain of restaurants that will prepare and serve high-quality food on a timely basis and at reasonable prices. Vice presidentñmarketing ï Increase per store sales 5 percent per year for ten years ï Target and attract two new market segments during next five years ï Develop new promotional strategy for next year Vice presidentñoperations ï Open 150 new restaurants during next ten years ï Decrease food-container costs by 15 percent during next five years ï Decrease average customer wait by thirty seconds this year Strategic Goals Tactical Goals Operational Goals Figure 7.2

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

8 Kinds of Organizational Plans §Strategic Plans l A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management. §Tactical Plans l A plan aimed at achieving the tactical goals set by and for middle management. §Operational Plans l Plans that have a short-term focus. These plans are set by and for lower-level managers.

9 Time Frames for Planning §The Time Dimension of Planning l is based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved. §Long-range Plans l cover present and future strategic issues; normally extend beyond five years in the future. §Intermediate Plans l usually cover from 1 to 5 years and parallel tactical plans. l are the principal focus of organizational planning efforts. §Short-range Plans l have a time frame of one year or less. l include action plans and reaction (contingency) plans. l Action Plan: A plan used to operationalize any other kind of plan. l Reaction plan: A plan developed to react to an unforeseen circumstances.

10 Responsibilities for Planning §Planning Staff (can be permanent or assigned) l Planning staff personnel gather information, coordinate planning activities, and help collect information for managerial review §Planning Task Force l Created when the organization wants a special circumstance addressed.

11 Responsibilities for Planning §Board of Directors l Establishes/confirms/approves the organization’s policy, such as the corporate mission and strategy. §Chief Executive Officer l Has the lead role in the planning process and oversees the implementation of strategy by supervising department directors.

12 Responsibilities for Planning (cont’d) §Executive Committee l Composed of top officers within the organization. Meet when the Board is not scheduled to meet to review progress of the strategic plans. l Line Management - Persons with formal authority and responsibility for management of the organization. Help to formulate strategy by providing information. Responsible for executing the plans developed by top management.

13 Contingency Planning §Contingency is 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. 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

14 Tactical Planning §Developing and Executing Tactical Plans Developing tactical plans Recognize and understand overarching strategic plans Specify relevant resources and time issues Recognize and identify human resource commitments Executing tactical plans Evaluate each course of action in light of its objective Obtain and distribute information and resources Monitor horizontal and vertical communication and integration of all activities/steps Evaluate ongoing activities

15 Types of Operational Plans

16 Barriers to Goal Setting and Planning §As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt implementation. Managers must collaborate to overcome the obstacles.

17 Using Goals to Implement Plans §A formal goal-setting process can be an effective technique for integrating the ideas and expertise of staff. It provides staff with a voice and promotes acceptance of what they are expected to accomplish. Starting the formal goal-setting program Establishment of organiza- tional goals and plans Collaborative goal setting and planning Communicat- ing organiza- tional goals and plans Meeting Verifiable goals and clear plans Counseling Resources Periodic review Evaluation

18 Using Goals to Implement Plans: The Effectiveness of Formal Goal Setting §Strengths for Success l Improved employee motivation l Enhances communication l Fosters more objective performance appraisals l Focuses attention on appropriate goals and plans l Helps identify managerial talent l Provides a systematic management philosophy l Facilitates control of the organization §Cause of Failure l Poor implementation of the goal setting process l Lack of top-management support for goal setting l Delegation of the goal- setting process to lower levels l Overemphasis on quantitative goals l Too much paperwork and record keeping l Managerial resistance to goal setting

19 The End