Managerial Planning and Goal Setting Chapter 5 Managerial Planning and Goal Setting 1

The Importance of Goals and Plans What do an organization’s goals and plans communicate to external and internal audiences? Legitimacy to external audiences such as: Investors Customers Suppliers A source of motivation and guidance for internal audiences Help employees identify with the organization Reduce uncertainty and clarify what employees should accomplish Help minimize wasted resources 4

Common Criticisms of Planning Creates rigidity Doesn’t work in dynamic environment Can’t replace intuition and creativity So, Should Organizations Plan? Most orgs. do better by planning – Should match degree and frequency of planning to rate of change in the environment Andy Grove (CEO of INTEL) plans “like a fire department plans”

Organizational Mission Most general purposes, goals, plans Long run vision, values What distinguishes it from other organizations Focus on items such as: Market and customers Product quality Location of facilities Attitude toward employees 7

Mgmt. Levels and Planning Top Management “Strategic” Goals/Plans Whole Organization Plan for Several years Middle Management “Tactical” Goals/Plans Major Units of the Org. Plan for up to Two years Lower Management “Operational” Goals/Plans Departments, Individuals Plan mostly for under One year

Criteria for Effective Goals Specific Measurable Attainable (and challenging) Relevant (Key result areas) Time-based Rewards for achievement 12

Management by Objectives Setting goals Developing action plans Reviewing progress Appraising overall performance. 14

Benefits of MBO Clarity (goal known) Commitment (improves motivation) Coordination (people work toward same things) Fairness (objective evaluations) 15

Criticisms of MBO Difficulty choosing relevant, measurable goals Rigidity (sometimes need to change goals) Costs Involved People skills required Time required Paperwork Frequently sold as a cure-all Can stress goals at expense of ethics (cf. Mgmt. by Means) 16

PLANS ACCORDING TO USE Single-Use Plans Aim at achieving a specific, non-recurring goal (e.g., programs, projects) Standing Plans Provide ongoing guidance for recurring activities (e.g., policies, rules, procedures) 6 6 6

Contingency Plans Define company responses to be taken in case plan first implemented does not work as expected (i.e., go to “Plan B”) Usually, contingency plans are for crises, emergencies or setbacks, but could be for unexpected positive results, also. 20

SWOT Analysis and the World Football League Overestimated STRENGTHS (e.g., Time of Year, Locations) Underestimated WEAKNESSES (e.g., Lack of Talent, Finances) Overestimated OPPORTUNITIES (e.g., Demand for Product, NFL’s Weaknesses) Underestimated THREATS (e.g., NFL’s ability to compete, other activities of Summer and early Fall)

Levels of Strategic Planning CORPORATE Level What business(es) are we in? Growth, Retrenchment, or Stability? Portfolio Strategy BUSINESS Level How do we compete? Porter’s Competitive Forces and Strategies Partnership Strategies FUNCTIONAL Level How do we support the above? See “Putting Strategy into Action” in text

Boston Consulting Group (BCG Matrix) 1

Business-Level Strategy Porter’s Competitive Strategies Low Cost Differentiation Low-Cost Differentiation Many Number of market segments Focused Low-Cost Focused Differentiation Few

Porter’s Competitive Strategies Differentiation (Maytag, Mary Kay, Perdue, L.L. Bean, Nike) Cost Leadership(Wal-Mart, Southwest Air, Gallo Wine, Motel 6) Focused Differentiation (Stouffer’s Lean Cuisine, Mercedes, Rolex) Focused Cost Leadership (Ft. Howard Paper, ARCO Gasoline)