Chapter 7 Notes

Planning:
Planning involves defining the organization’s goals, establishing strategies for achieving those
goals, and developing plans to integrate and coordinate work activities. It’s concerned with both
ends (what) and means (how).
Formal planning:
➔ In formal planning, specific goals covering a specific time period are defined.
➔ These goals are written and shared with organizational members to reduce ambiguity and
create a common understanding about what needs to be done.
➔ Finally, specific plans exist for achieving these goals.

Why Do Managers Plan?

1. Planning provides direction to managers and nonmanagers alike. When employees know
what their organization is trying to accomplish and what they must contribute to reach goals,
they can coordinate their activities, cooperate with each other, and do what it takes to
accomplish those goals. Without planning, departments and individuals might work at
cross-purposes and prevent the organization from efficiently achieving its goals.
2. Planning reduces uncertainty by forcing managers to look ahead, anticipate change,
consider the impact of change, and develop appropriate responses. Although planning won’t
eliminate uncertainty, managers plan so they can respond effectively.
3. Planning minimizes waste and redundancy. When work activities are coordinated around
plans, inefficiencies become obvious and can be corrected or eliminated.
4. Planning establishes the goals or standards used in controlling. When managers plan, they
develop goals and plans. When they control, they see whether the plans have been carried out
and the goals met. Without planning, there would be no goals against which to measure work
effort.

Planning and Performance:

➔ Formal planning is associated with positive financial results—higher profits, higher return on
assets, and so forth.
➔ Doing a good job planning and implementing those plans play a bigger part in high performance.
➔ If formal planning didn’t lead to higher performance, it's because of the external environment.
When external forces constrain managers’ options, it reduces the impact planning has on an
organization’s performance e.g governmental regulations or powerful labor unions

Goals and Plans:

Planning is also called the primary management function. It involves two important aspects:
goals and plans.

Goals (objectives) Plans

● Goals are desired outcomes or targets. ● Plans are documents that outline how
● They guide management decisions and form goals are going to be met.
 the criterion against which work results are ● They usually include resource allocations,
measured. schedules, and other necessary actions to
● Described as the essential elements of accomplish the goals.
planning. ● As managers plan, they develop both
● You have to know the desired target or goals and plans.
outcome before you can establish plans for
reaching it.

Types of Goals:
It might seem that organizations have a single goal. Using a single goal such as profit may
result in unethical behaviors because managers and employees will ignore other aspects of
their jobs in order to look good on that one measure. In reality, all organizations have multiple
goals.

Financial goals Strategic goals:

● Related to the financial performance of the ● Related to all other areas of an

organization organization’s performance.
● E.g McDonald’s states that its financial targets ● Strategic goal from Bloomberg L.P.: “We
are 3 to 5 percent average annual sales and want to be the world’s most influential
revenue growth news organization.”

Stated goals Real goals

● Official statements of what an organization ● Those goals an organization actually

says, and what it wants its stakeholders to pursues.
believe, its goals are. ● Observe what organizational members are
● Vague statements doing.
● Better represent management’s public relations ● Actions define priorities.
skills than being meaningful guides to what the
organization is actually trying to accomplish.
● an organization’s stated goals are often
irrelevant to what actually goes on
Types of Plans:
These types of plans aren’t independent. Strategic plans are usually long term, directional, and
single use whereas operational plans are usually short term, specific, and standing.

Strategic plans: Plans that apply to the entire organization and establish the organization’s
overall goals. (Broad)
Operational plans: Plans that encompass a particular operational area of the organization.
(Narrow)

Long-term plans: Those with a time frame beyond three years.

Short-term plans: Cover one year or less.
Any time period in between would be an intermediate plan. Although these time classifications
are fairly common, an organization can use any planning time frame it wants.

Specific plans: Clearly defined and leave no room for interpretation. A specific plan states its
objectives in a way that eliminates ambiguity and problems with misunderstanding.
Directional plans: Flexible plans that set out general guidelines. They provide focus but don’t
lock managers into specific goals or courses of action. When uncertainty is high and
managers must be flexible in order to respond to unexpected changes.

Single-use plan: One-time plan specifically designed to meet the needs of a unique situation.
E.g when Walmart wanted to expand the number of its stores in China, top-level executives
formulated a single-use plan as a guide.
Standing plans: Ongoing plans that provide guidance for activities performed repeatedly.
Standing plans include policies, rules, and procedures.
E.g a standing plan is the sexual harassment policy developed by the University of Arizona. It
provides guidance to university administrators, faculty, and staff as they make hiring plans.

Approaches to Setting Goals:

Goals set by top managers flow down through the organization and become subgoals for each
organizational area.
Problem with traditional goal setting is that when top managers define the organization’s goals
in broad terms, these ambiguous goals have to be made more specific as they flow down
through the organization. Managers at each level define the goals and apply their own
interpretations and biases as they make them more specific. However, what often happens is
that clarity is lost as the goals make their way down from the top of the organization to lower
levels.
Means-ends chain: An integrated network of goals in which the accomplishment of goals at
one level serves as the means for achieving the goals, or ends, at the next level.
Management by objectives (MBO): A process of setting mutually agreed-upon goals and
using those goals to evaluate employee performance.
Steps in MBO:
1. The organization’s overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmental units.
3. Unit managers collaboratively set specific objectives for their units with their managers.
4. Specific objectives are collaboratively set with all department members.
5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by
managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback is provided.
8. Successful achievement of objectives is reinforced by performance-based rewards.

Well-Written Goals (Characteristics):

● Written in terms of outcomes rather than actions
● Measurable and quantifiable
● Clear as to a time frame
● Challenging yet attainable
● Written down
● Communicated to all necessary organizational members

STEPS IN GOAL SETTING:

1. Review the organization’s mission, or purpose. A mission is a broad statement of an
organization’s purpose that provides an overall guide to what organizational members think is
important. Managers should review the mission before writing goals because goals should
reflect that mission.
2. Evaluate available resources. You don’t want to set goals that are impossible to achieve
given your available resources. Even though goals should be challenging, they should be
realistic. After all, if the resources you have to work with won’t allow you to achieve a goal no
matter how hard you try or how much effort is exerted, you shouldn’t set that goal.
3. Determine the goals individually or with input from others. The goals reflect desired
outcomes and should be congruent with the organizational mission and goals in other
organizational areas. These goals should be measurable, specific, and include a time frame
for accomplishment.
4. Write down the goals and communicate them to all who need to know. Writing down and
communicating goals forces people to think them through. The written goals also become
visible evidence of the importance of working toward something.
5. Review results and whether goals are being met. If goals aren’t being met, change them
as needed.

Developing Plans:
The process of developing plans is influenced by three contingency factors and by the planning
approach followed.
Three contingency factors affect the choice of plans:
1. Organizational level: For the most part, lower-level managers do operational planning
while upper-level managers do strategic planning.

2. Degree of environmental uncertainty: When uncertainty is high, plans should be

specific, but flexible. Managers must be prepared to change or amend plans as they’re
implemented. At times, they may even have to abandon the plans.
3. Length of future commitments: The last contingency factor also is related to the time
frame of plans. The commitment concept says that plans should extend far enough to
meet those commitments made when the plans were developed. Planning for too long or
too short a time period is inefficient and ineffective.

Formal planning department: A group of planning specialists whose sole responsibility is to

help write the various organizational plans.

Environmental scanning: Screening information to detect emerging trends

Competitor intelligence: Gathering information about competitors that allows managers to

anticipate competitors’ actions rather than merely react to them.