PREPARING FOR: Exams/Quizzes

CHAPTER SUMMARY
by Learning Outcomes
LEARNING 8.1 Define the nature and purposes of planning.
OUTCOME
Planning involves defining the organization’s goals, establishing an overall strategy for
achieving those goals, and developing plans for organizational work activities. The four
purposes of planning include providing direction, reducing uncertainty, minimizing waste
and redundancy, and establishing the goals or standards used in controlling. Studies of the
planning-performance relationship have concluded that formal planning is associated
with positive financial performance, for the most part; it’s more important to do a good
job of planning and implementing the plans than doing more extensive planning; the
external environment is usually the reason why companies that plan don’t achieve high
levels of performance; and the planning-performance relationship seems to be influenced
by the planning time frame.
LEARNING
OUTCOME
8.2 Classify the types of goals organizations might have
and the plans they use.
Goals are desired outcomes. Plans are documents that outline how goals are going to be
met. Goals might be strategic or financial and they might be stated or real. Strategic plans
apply to the entire organization while operational plans encompass a particular functional
area. Long-term plans are those with a time frame beyond three years. Short-term plans
cover one year or less. Specific plans are clearly defined and leave no room for interpre-
tation. Directional plans are flexible and set out general guidelines. A single-use plan is a
one-time plan designed to meet the needs of a unique situation. Standing plans are ongo-
ing plans that provide guidance for activities performed repeatedly.
LEARNING
OUTCOME
8.3 Compare and contrast approaches to goal setting and planning.
In traditional goal setting, goals are set at the top of the organization and then become
subgoals for each organizational area. MBO (management by objectives) is a process
of setting mutually agreed-upon goals and using those goals to evaluate employee per-
formance. Well-written goals have six characteristics: (1) written in terms of outcomes,
(2) measurable and quantifiable, (3) clear as to time frame, (4) challenging but attain-
able, (5) written down, and (6) communicated to all organizational members who need
to know them. Goal setting involves these steps: review the organization’s mission; eval-
uate available resources; determine the goals individually or with input from others;
write down the goals and communicate them to all who need to know them; and review
results and change goals as needed. The contingency factors that affect planning include
the manager’s level in the organization, the degree of environmental uncertainty, and the
length of future commitments. The two main approaches to planning include the tradi-
tional approach, which has plans developed by top managers that flow down through
other organizational levels and which may use a formal planning department. The other
approach is to involve more organizational members in the planning process.
LEARNING
OUTCOME
8.4 Discuss contemporary issues in planning.
One contemporary planning issue is planning in dynamic environments, which usually
means developing plans that are specific but flexible. Also, it’s important to continue
planning even when the environment is highly uncertain. Finally, because there’s little
time in a dynamic environment for goals and plans to flow down from the top, lower
organizational levels should be allowed to set goals and develop plans. Another contem-
porary planning issue involves using environmental scanning to help do a better analysis
of the external environment. One form of environmental scanning, competitive intelli-
gence, can be especially helpful in finding out what competitors are doing.

216
 CHAPTER 8 | FOUNDATIONS OF PLANNING 217

8.1 8.4

REVIEW AND DISCUSSION QUESTIONS

1. Explain what studies have shown about the relationship 8. What types of planning do you do in your personal
between planning and performance. life? Describe these plans in terms of being (a) strategic
2. Discuss the contingency factors that affect planning. or operational, (b) short term or long term, and (c) spe-
3. Describe how managers can effectively plan in today’s cific or directional.
dynamic environment. 9. The late Peter Drucker, an eminent management author,
4. Will planning become more or less important to coined the SMART format for setting goals back in
managers in the future? Why? 1954: S (specific), M (measurable), A (attainable),
R (relevant), and T (time-bound). Are these still rele-
5. If planning is so crucial, why do some managers
vant today? Discuss.
choose not to do it? What would you tell these
managers? 10. Many companies have a goal of becoming more environ-
mentally sustainable. One of the most important steps
6. Explain how planning involves making decisions today
they can take is controlling paper waste. Choose a com-
that will have an impact later.
pany—any type, any size. You’ve been put in charge of
7. How might planning in a not-for-profit organization creating a program to do this for your company. Set
such as the American Cancer Society differ from goals and develop plans. Prepare a report for your boss
planning in a for-profit organization such as (that is, your professor) outlining these goals and plans.
Coca-Cola?

ETHICS DILEMMA Procter & Gamble, executives asked company doctors

whether it should try to secure a private stash of Tamiflu
As companies prepared plans to keep their businesses for its staff. One of the company’s medical leaders
operating if the H1N1 (swine) flu pandemic materialized, responded, “How ethical would it be if we were holding
thorny issues arose. At one small business, for example, supplies that the general public didn’t have access to but
the boss sent two employees home on “indefinite leave” badly needed?”36 What do you think? Is it ethical for a
after the employees’ children’s school was closed down business to be overly cautious in protecting employees? Is
because of an H1N1 outbreak there. Neither of their chil- it ethical for a company to protect its own employees at the
dren had flu symptoms, nor did the employees. Now expense of public protection? What would you do in this
they’re out of paid sick day leaves and are losing pay. At situation?

SKILLS EXERCISE Steps in Practicing the Skill

You can be more effective at setting goals if you use the
Developing Your following eight suggestions.
Goal Setting Skill 1. Identify an employee’s key job tasks. Goal setting begins
by defining what it is that you want your employees to
About the Skill accomplish. The best source for this information is each
Employees should have a clear understanding of what employee’s job description.
they’re attempting to accomplish. In addition, managers 2. Establish specific and challenging goals for each key
have the responsibility for seeing that this is done by help- task. Identify the level of performance expected of each
ing employees set work goals. Setting goals is a skill every employee. Specify the target toward which the
manager needs to develop. employee is working.
218 PART THREE | PLANNING

3. Specify the deadlines for each goal. Putting deadlines 7. Build in feedback mechanisms to assess goal
on each goal reduces ambiguity. Deadlines, however, progress. Feedback lets employees know whether
should not be set arbitrarily. Rather, they need to be their level of effort is sufficient to attain the goal.
realistic given the tasks to be completed. Feedback should be both self-generated and supervi-
4. Allow the employee to actively participate. When sor generated. In either case, feedback should be
employees participate in goal setting, they’re more likely frequent and recurring.
to accept the goals. However, it must be sincere participa- 8. Link rewards to goal attainment. It’s natural for
tion. That is, employees must perceive that you are truly employees to ask, “What’s in it for me?” Linking
seeking their input, not just going through the motions. rewards to the achievement of goals will help
5. Prioritize goals. When you give someone more than answer that question.
one goal, it’s important for you to rank the goals in
Practicing the Skill
order of importance. The purpose of prioritizing is to
encourage the employee to take action and expend 1. Where do you want to be in five years? Do you have
effort on each goal in proportion to its importance. specific five-year goals? Establish three goals you want
6. Rate goals for difficulty and importance. Goal setting to achieve in five years. Make sure these goals are spe-
should not encourage people to choose easy goals. cific, challenging, and measurable.
Instead, goals should be rated for their difficulty and 2. Set personal and academic goals you want to achieve by
importance. When goals are rated, individuals can be the end of this college term. Prioritize and rate them for
given credit for trying difficult goals, even if they don’t difficulty.
fully achieve them.

WORKING TOGETHER to the four-day system.37 Suppose that you are employed by
a school district in San Antonio, Texas, that is going to
Team Exercise move to a four-day week by the start of the next school
Form small groups of three to four individuals and read year. What type of planning would need to be done as your
through the following scenario. Complete the work that’s school district embarked on this process? Identify three or
called for. Be sure that your goals are well designed and four primary goals for accomplishing this action. Then,
that your plans are descriptive. describe what plans would be needed to ensure that those
Scenario
goals are met.
Facing dire budget predictions, many school districts are
moving to a four-day week. Of nearly 15,000-plus districts
nationwide, more than 100 in at least 17 states have moved

MY TURN TO BE A MANAGER
 Practice setting goals for various aspects of your per- you’d like to live. Start by doing some research on per-
sonal life such as academics, career preparation, family, sonal mission statements. There are some wonderful
hobbies, and so forth. Set at least two short-term goals Web resources that can guide you. Good luck!
and at least two long-term goals for each area.  Interview three managers about the types of planning
 For these goals that you have set, write out plans for they do. Ask them for suggestions on how to be a better
achieving those goals. Think in terms of what you will planner. Write a report describing and comparing your
have to do to accomplish each. For instance, if one of findings.
your academic goals is to improve your grade-point  Choose two companies, preferably in different
average, what will you have to do to reach it? industries. Research the companies’ Web sites and
 Write a personal mission statement. Although this may find examples of goals that they have stated.
sound simple to do, it’s not going to be simple or easy. (Hint: A company’s annual report is often a good
Our hope is that it will be something that you’ll want to place to start.) Evaluate these goals. Are they
keep, use, and revise when necessary, and that it will well-written? Rewrite those that don’t exhibit the
help you be the person you’d like to be and live the life characteristics of well-written goals so that they do.
 CHAPTER 8 | FOUNDATIONS OF PLANNING 219

 Steve’s and Mary’s suggested readings: Atul Gawande,  In your own words, write down three things you learned
The Checklist Manifesto: How to Get Things Right in this chapter about being a good manager.
(Metropolitan Books, 2009); Peter F. Drucker,  Self-knowledge can be a powerful learning tool.
Management: Tasks, Responsibilities, Practices (Harper Go to mymanagementlab.com and complete these
Business, 1974); Peter F. Drucker, The Executive in self-assessment exercises: What’s My Attitude Toward
Action; Managing for Results (Harper Business, 1967); Achievement? What Are My Course Performance
and Peter F. Drucker, The Practice of Management Goals? What Time of Day Am I Most Productive? and
(HarperCollins, 1954). How Good Am I at Personal Planning? Using the results
 What does it take to be a good planner? Do some of your assessments, identify personal strengths and
research on this issue. As part of your research, talk to weaknesses. What will you do to reinforce your
professors and other professionals. Make a bulleted list strengths and improve your weaknesses?
of suggestions. Be sure to cite your sources.

CASE APPLICATION
Icelandic Volcano, 1;
Global Commerce, 0
his volcano has a funny name—Eyjafjallajokull—but its impact

T was not so funny to global businesses, both large and small.38

When it erupted on April 14, 2010, the plume of volcanic ash
that spread across thousands of miles disrupted air travel and
global commerce for a number of days.
As thousands of flights were canceled across Europe, tens of
thousands of air travelers couldn’t get to their destination. For
example, Marthin De Beer, vice president of emerging technolo-
gies at Cisco Systems, was headed to Oslo to discuss the final
aspects of its acquisition of Tandberg, a Norwegian teleconfer-
encing company. However, when his flight was canceled, he and
Tandberg’s CEO, Fredrik Halvorsen, used their merged companies’ A flight information screen at an air-
port outside of Paris lists commercial
equipment to hold a virtual press conference. Other businesses airline cancellations in cities across
weren’t as lucky, especially those with high-value, highly perishable northern Europe as a result of the
drifting plume of ash that spread
products such as berries, fresh fish and flowers, and medicines and thousands of miles from the Icelandic
pharmaceuticals. African farmers, European fresh-produce importers, volcano eruption, disrupting air
travel and global commerce.
and flower traders from Kenya to the Netherlands found their busi-
nesses threatened by the air traffic shutdown. Even manufacturers were
affected. For instance, BMW had to scale back work hours and had even prepared for possibly shutting down
production at its Spartanburg, South Carolina, plant because it depended on trans-Atlantic flights to bring
transmissions and other components from German factories by air. A spokesperson at another automobile
company, Mercedes-Benz, said, “There has been disruption in our parts supply. We expect that there may be
shortages of some parts or delays in some instances.”