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Chapter Outline
1. Define goals and plans and explain the relationship between them.
A goal is a desired future state that the organization attempts to realize. A plan is a
blueprint for goal achievement and specifies the necessary resource allocations,
schedules, tasks, and other actions. The term planning usually incorporates both
ideas and means determining the organization’s goals and defining the means for
achieving them.
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CHAPTER 7 Managerial Planning and Goal Setting • 171
2. Explain the concept of organizational mission and how it influences goal setting and
planning.
The overall planning process begins with a mission statement, which describes the
organization’s reasons for existence. The mission describes the organization’s
values and aspirations. A well-defined mission is the basis for development of all
subsequent goals and plans.
Without a clear mission, goals and plans may be developed haphazardly and not take
the organization in the direction it needs to go. Because of mission statements
employees, customers, suppliers, and stockholders know the company’s stated
purpose and values.
3. Describe the types of goals an organization should have and why they resemble a
hierarchy.
Within the organization there are three levels of goals: strategic, tactical, and
operational.
• Strategic goals are broad statements of where the organization wants to be in the
future. Strategic goals pertain to the organization as a whole and are the stated
intentions of what the organization wants to achieve.
• Tactical goals define the results that major divisions and departments within the
organization intend to achieve. Tactical goals apply to middle management and
describe what major subunits must do in order for the organization to achieve its
overall goals.
• Operational goals describe specific results expected from departments, work
groups, and individuals. Operational goals are precise and measurable.
Goals fit into a hierarchy. The achievement of goals at lower levels permits the
attainment of higher-level goals. This is called a means-ends chain because lower-
level goals lead to accomplishment of higher-level goals.
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172 • PART 3 Planning
7. Describe and explain the importance of the three stages of crisis management
planning.
The three stages of crisis management planning include prevention, preparation, and
containment. The prevention stage involves activities managers undertake to try to
prevent crises from occurring and to detect warning signs of potential crises. One
critical part of the prevention stage is building relationships with key stakeholders
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CHAPTER 7 Managerial Planning and Goal Setting • 173
Some crises are inevitable no matter how well prepared an organization is. When a
crisis hits, a rapid response is crucial. The team should be able to immediately
implement the crisis management plan, so training and practice are important. This
is the stage where it becomes critical for the organization to speak with one voice so
that employees, customers, and the public do not get conflicting stories about what
happened and what the organization is doing about it. After ensuring the physical
safety of people the next focus should be on responding to the emotional needs of
employees, customers, and the public. Organizations also strive to give people a
sense of security and belonging.
8. Discuss how planning in the new workplace differs from traditional approaches to
planning.
The process of planning is changing. Traditionally, strategy and planning has been
the domain of top managers. However, in today’s workplace, top managers no
longer control the planning process; everyone becomes involved. In some
companies, planning is being taken out of the executive boardroom and central
planning department to become a part of everyday work throughout the organization.
Traditionally, corporate planning has been done entirely by top executives, by
consulting firms, or most commonly, by central planning departments. Central
planning departments are groups of planning specialists who report directly to the
CEO or president. This planning approach was top down because goals and plans
were assigned to major divisions and departments from the planning department
after approval by the president. Although traditional approaches to planning still are
popular with some companies, formal planning increasingly is being criticized as
inappropriate for today’s fast-paced environment.
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174 • PART 3 Planning
means that planning experts work with managers in major divisions or departments to
develop their own goals and plans. This enables managers throughout the
company to come up with their own creative solutions to problems and become more
committed to following through on the plans. Some guidelines for planning in the new
workplace are to start with a strong mission, set stretch goals, create a culture that
encourages learning, design new roles for planning staff, use temporary task forces, and
planning still starts and stops at the top.
Lecture Outline
Suggested Opening Remarks
The Europa Hotel provides an excellent example of crisis management planning. The
Europa, like most major hotels, has long had clear procedures for evacuation and dealing
with disasters, and the hotel has a good record of getting people out fast. Amazingly, no
one has ever been killed by a bomb at the Europa. Because the Europa has had so much
experience dealing with crises, managers and employees have become ever alert to even
the smallest signals that something is amiss, so they have been able to take quick action
and prevent even greater damage or loss of life.
The Europa is highly skilled at handling the containment stage of crisis. After one bomb
that ripped a huge hole in the side of the hotel and injured 13 people, everyone was back
to work as usual by lunchtime. Hotel manager John Toner uses every crisis as a way to
learn more, be better prepared, and make the company better and stronger. He believes
the tendency to immediately look for ways to cut costs and lay people off following a
crisis is dangerous. “I don’t look for cost savings. I don’t look at the bottom line—it’ll
look after itself,” he says. Instead Toner focuses on taking care of employees and guests
and finding ways to make the business better. Because of that attention, hotel staff and
guests have remained resolutely loyal to the Europa.
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The planning process starts with a formal mission that defines the basic purpose of
the organization, especially for external audiences.
Top managers are responsible for establishing strategic goals and plans that reflect a
commitment to both organizational efficiency and effectiveness.
Tactical goals and plans are the responsibility of middle managers.
Operational plans identify the specific procedures or processes needed at lower levels
of the organization.
Front-line managers and supervisors develop operational plans that focus on specific
tasks and processes and that help to meet tactical and strategic goals.
Planning at each level supports the other levels.
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Discussion Question #1: To what extent would planning have helped the U.S. Postal
Service respond more quickly and effectively to the crisis of anthrax-tainted letters being
sent through the mail? What types of planning would be appropriate for unexpected
events?
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Discussion Question #2: Write a brief mission statement for a local business with which
you are familiar. How might having a clear, written mission statement benefit a small
organization?
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CHAPTER 7 Managerial Planning and Goal Setting • 177
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Discussion Question #3: What strategic plans could the college or university at which
you are taking this management course adopt to compete for students in the
marketplace? Would these strategies depend on the school’s goals?
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CHAPTER 7 Managerial Planning and Goal Setting • 179
Discussion Question #6: What are the characteristics of effective goals? Would it be
better to have no goals at all than to have goals that do not meet these criteria?
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Discussion Question #4: If you were a top manager of a medium sized real estate sales
agency, would you use MBO? If so, give examples of goals you might set for managers
and sales agents.
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CHAPTER 7 Managerial Planning and Goal Setting • 181
MANAGER’S SHOPTALK
Regulating E-Mail in the Workplace
Top executives around the globe are discovering that casual e-mail messages can
come back to haunt them---in court. Of the 1,100 companies surveyed 14 percent
had been ordered to disclose e-mail messages. A written formal policy is the best
way for companies to protect themselves.
• Make clear that all e-mail and its contents are the property of the company.
• Tie the policy to the company’s sexual harassment policy or other policies
governing employee behavior on the job.
• Establish clear guidelines on matters such as the use of e-mail for jokes and
other non-work related communication, the sending of confidential messages,
and how to handle junk e-mail.
• Establish guidelines for deleting or retaining messages.
• Consider having policies pop up on users’ screens when they log on.
Discussion Question #8: Assume Southern University decides to (1) raise its admission
standards and (2) initiate a business fair to which local townspeople will be invited.
What types of plans would it use to carry out these two activities?
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182 • PART 3 Planning
Two recent extensions of contingency planning are building scenarios and crisis
management planning.
A. Building Scenarios
Scenario building is looking at trends and discontinuities and imagining possible
alternative futures to build a framework within which unexpected future events
can be managed.
With scenario building a broad base of managers mentally rehearse different
scenarios based on anticipating varied changes that could impact the organization.
Scenarios are like stories that offer alternative vivid pictures of what the future
will look like and how managers will respond.
Typically, two to five scenarios are developed for each set of factors, ranging
from the most optimistic to the most pessimistic view.
Scenario building forces managers to mentally rehearse what they would do if their
best-laid plans collapse; Royal Dutch /Shell has long used scenarios for the oil
industry.
By rehearsing a scenario in which oil supplies were disrupted and prices rose,
Shell was prepared for the 1973 oil embargo and moved from number 8 to being
the second largest oil company in the world. .
Discussion Question #10: How does scenario building differ from contingency
planning?
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CHAPTER 7 Managerial Planning and Goal Setting • 183
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184 • PART 3 Planning
After ensuring people’s safety, the next focus is on responding to the emotional
needs of employees, customers, and the public.
Giving facts and statistics to downplay the disaster always backfires because it
does not meet emotional needs; people need to feel that someone cares about
the effects of this disaster.
Organizations should strive to give a sense of security and hope by getting back
to business quickly; people want to feel that they have a job and can care for
their families.
A crisis is an important time for companies to strengthen their stakeholder
relationships.
Discussion Question #7: How is planning changing in the new workplace? Do you think
planning becomes more important or less important in a world where everything is
changing so fast and crises have become a regular part of organizational life? Why?
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CHAPTER 7 Managerial Planning and Goal Setting • 185
This enables managers throughout the company to come up with their own creative
solutions to problems and become more committed to following through on plans.
Top executives saw the benefits of pushing decentralized planning further, by having
planning experts work directly with line managers and front-line employees to plan.
Planning comes alive when employees are involved in setting goals and determining
the means to reach them.
Some guidelines for planning in the new workplace:
1. Start with a Strong Mission and Vision
Planning in the new workplace requires flexibility to meet ever-changing
demands from the environment.
During times of turbulence or uncertainty, a powerful sense of purpose
(mission) and direction (vision) becomes even more important.
Without guidelines for thinking and behavior, the resources of a fast-moving
company can become uncoordinated, with employees pursing different plans.
A compelling mission and vision can serve to increase employee commitment
and motivation, which are critical to compete in a fast-shifting environment.
2. Set Stretch Goals.
Stretch goals are highly ambitious goals that are so clear, compelling, and
imaginative that they fire up employees and fuel progress.
A company that focuses on gradual, incremental improvements to products,
processes, or systems will get left behind.
Managers use stretch goals to achieve six sigma quality, by first setting a goal
which, once reached, is stretched to a far higher level.
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186 • PART 3 Planning
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CHAPTER 7 Managerial Planning and Goal Setting • 187
Nokia is planning to introduce a new product that will penetrate and serve a new target
market. The introduction of a new range of handcrafted mobile telephones, some
adorned with precious stones, as the world's largest mobile phone maker steps up efforts
to tap the luxury goods market.
A new Nokia subsidiary, called Vertu, will start operations later this month to produce
status-symbol mobiles and other personal communications devices for the seriously rich.
The move comes at a time that mobile phone makers are looking to find new growth
areas as sales stall in saturated markets following several years of runaway growth.
Nokia's rivals have for years produced limited editions of expensive phones or built
custom-made ones.
A few years ago Sweden's Ericsson made gold-plated phones for several customers in the
Middle East. U.S wireless company Motorola has added gold and black and white
diamond elements to its phones, popular with oil sheiks, and works with the Dubai agent
of luxury jeweler Tiffany & Co.
The only luxury phone Nokia produces is a gold version of the tiny 8850-fashion phone
for the Asian Pacific market.
The new division is a marked shift by Nokia, which makes one in three of all phones,
sold globally and has built its brand through its strong designs, user-friendly phones and
ability to adapt quickly to consumer demand.
Management has developed this new set of strategies to create a competitive edge to
serve a market segment that has been ignored in the past. To be successful, these
strategies must be in place, restructuring of division must be forth coming, and
reengineering of existing jobs must be changed to reflect the shifts occurring in the
marketplace.
1. What types of planning would have helped Exxon respond more quickly to the oil
spill from the Exxon Valdez near Alaska?
If Exxon had developed detailed contingency plans, it could have responded more
quickly. Contingency planning is done to prepare for uncontrollable factors
including accidents.
2. Write a brief mission statement for a local business. Can the purpose and values of a
small organization be captured in a written statement?
3. What strategies could the college or university at which you are taking this
management course adopt to compete for students in the marketplace? Would these
strategies depend on the school’s goal?
Yes, strategies will depend on the school’s goal. For example, if a university adopted
a goal of increasing the number of merit scholars who enroll each year from 50 to
60, then strategies could be to send letters to merit scholars, schedule visits of
university representatives at the schools, or offer scholarships to entice the students
to attend the university. If the goal is simply to increase the number of students,
administrators could determine what attracts students to the university and attempt to
adopt strategies related to them. The strategies might include the implementation of
highly visible programs such as changing tuition rates, building additional
dormitories, or striving to field a winning football team.
4. If you were a top manager of a medium sized real estate sales agency, would you use
MBO? If so, give examples of goals you might set for managers and sales agents.
No, it was not a waste of time for these companies. Developing a business plan also
helps a company consider all aspects of the business. For example, an inventor may
come up with a neat new product and not consider where or how to market it. He
may not consider financing either. Developing a business plan helps the company
devise options not previously considered. Even if the plan is not followed exactly, it
provides many other benefits.
6. A famous management theorist proposed that the time horizons for all strategic
plans are becoming shorter because of the rapid changes occurring in organizations
‘ external environments. Do you agree? Would the planning time horizon for IBM or
Ford Motor Company be shorter than it was 20 years ago?
This question is designed to stimulate student thinking, and there is no single correct
answer. Generally, researchers and managers believe that the rate of change in the
external environment is faster than it was 20 or more years ago. The question is how
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CHAPTER 7 Managerial Planning and Goal Setting • 189
7. What are the characteristics of effective goals? Would it be better to have no goals
at all than to have goals that do not meet these criteria?
The goal setting process, whether for the individual, division, or the organization, is
enhanced by following specific guidelines, as described in the chapter. First, goals
should be clearly defined and measurable in quantitative terms. For example,
decreasing production costs 3 percent, or increasing profits by 2 percent. Managers
should identify a few areas, which are important to overall company performance.
Concentration of goals in these key result areas increases the possibility of success.
Once key areas have been identified, managers should establish goals that challenge
the organization, but which can be realistically achieved. Goals should not be
open-ended, but should include a specific deadline for achievement, at which point
goal attainment can be measured. Goal achievement should be tied to some reward
through salary increases, individual awards, promotions, etc. The attainment of goals
and setting of new goals is a measure of constant improvement, and it is never in the
best interest of an individual or organization to forego goal-setting because some
element, such as the link to rewards, is not included.
8. What do you think are the advantages and disadvantages of having a centralized
planning department to do an organization’s planning compared with having
decentralized planning groups provide planning support to line managers?
The centralized planning department can hire staff experts who are skilled and
trained in the planning process. These experts gather data on the environment and
the organization; they use sophisticated statistical tools to help analyze trends and
develop plans for the future. The disadvantage is that they tend to be too far removed
from the day-to-day activities and markets of the organization. Planning thus
becomes an abstract set of statistical computations rather than a realistic set of
activities that meets the organization’s needs. A related disadvantage is that line
managers, who know the most about an organization and are responsible for
implementing the plan, are less likely to be involved when planning is done by a
centralized department. A decentralized planning staff, on the other hand, provides
support and training to the line managers, who assume responsibility for the plan.
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190 • PART 3 Planning
9. Assume Southern University decides to (1) raise its admission standards and (2)
initiate a business fair to which local townspeople will be invited. What types of
plans would it use to carry out these two activities?
Raising admission standards would require a standing plan to provide guidance for
admissions performed repeatedly over the next several semesters. Within the concept
of a standing plan, the university may use policies, procedures, or rules to enforce
the new admission standards. A policy would define admission standards, in general,
and procedures would describe how to admit students under the new policy. Specific
rules might also be established for specifying exactly what action to take in specific
admission situations.
Initiating a business fair would probably require a single-use plan. The single-use
plan develops a set of objectives that will not be repeated in the future. The business
fair would probably be considered a project, for which participants would develop a
set of short-term objectives and plans to achieve the one-time goal.
This short exercise provides an excellent opportunity to review and reinforce the material
on ethics from Chapter 5. The discussion of whether the listed behaviors are theft,
acceptable behavior, or somewhere in between can be done individually or in small
discussion groups. Once consensus is reached on how the items should be categorized,
break the class into small discussion groups. Each group should develop its own ethics
policy. You should allow 20 to 30 minutes for this activity. Then bring the class back
together. Have each group read its ethics policy to the class, then lead a discussion on the
strong and weak points of each policy. Close the exercise with identifying the elements
of an ethics policy that most groups included or now feel is important as a result of
hearing other groups’ policies.
Repair or Replace?
Gambling on the service department to fix Ross & Lindsey’s current hodgepodge system
is a gamble Nolan and ComputerSource can’t afford to take. For one thing, Nolan
realizes ComputerSource cannot afford the amount of time and work needed to really
correct the problems with the client’s current system—and indeed, completely correcting
those problems is likely impossible. To take money from the client and fix the problem
only half-way would not only be unethical but also bad for future business. “If it doesn’t
work, it is their problem,” is an attitude no service business can afford to take. The best
option here is Number 3—to be open and honest with the client, give them as much
information as possible, and allow them to make an informed choice. It’s true that Nolan
is risking having Ross & Lindsey take their business elsewhere, but he is pretty sure they
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CHAPTER 7 Managerial Planning and Goal Setting • 191
will face the same problem with other companies. In addition, he can still offer to take
the patchwork approach, as long as the client is aware of the possible problems with such
an approach.
2. Schedules. On the Free Download site, the software offered will of course change
from month to month. But at the time of this publication, students should download
the more generic business software such as Task Plus Professional 4.2.5, JobPro
Central Scheduling Task and Job Management 2.6 and Appointment Book Network
Version 3.6.
H.l.D.
1. What is H.I.D.’s mission at the present time? How may this mission change?
2. What do you think H.I.D.’s mission, strategic goals, and strategic plans are likely to
be at the end of this planning session? Why?
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192 • PART 3 Planning
What the new mission and goals will be is hard to predict exactly. Dave Collins, who
is H.I.D.’s president, proposes the most ambitious goals including 50 hotels in 10
years. If Collins’ mission is adopted, the strategic goals will be to build 26 or 27
hotels over the next five years in new locations. Strategic planning will be focused
on identifying locations for these hotels and obtaining financing and construction.
However, the opinions of other executives will carry weight in the discussion. They
too are knowledgeable, and they do not feel that such rapid growth is appropriate.
Collins may give in to them and accept a more moderate goal of 20 hotels in 10
years, with about 15 over the next 5 years. One possible outcome is that, after fully
discussing the issue, the executives will compromise on some middle ground. The
compromise will be less growth than Collins wants, but more growth than is desired
by the other executives.
3. What goal-setting behavior is being used here to reach agreement among H.I.D.’s
managers? Do managers typically disagree about the direction of their
organization?
The behavior in this case is coalition building. As managers offer different points of
view, they arrive at an understanding of the range of goal possibilities and begin to
form alliances. After the initial discussion, Dave Collins had different goals from the
others, who might be considered to have a tentative coalition. However, through
additional discussion, Dave Collins and the others will probably reach agreement
and pursue the new goals with a single mind. This kind of discussion, disagreement,
and negotiation is typical for top managers trying to agree on the direction of the
organization. People working at lower levels may take goals for granted, but top
managers have to select goals from among conflicting alternatives.
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