P la n n in gD e f in e d• Defining the organization’s objectives or goals• Establishing an overall strategy for achievingthose goals• Developing a comprehensive hierarchy of plansto integrate and coordinate activities P la n n in g is c o n c e r n e d w it he n d s ( w h a t is t o b e d o n e ) a s w e lla s w it h m e a n s ( h o w it is t o b edone ).
Planning and Performance The Relationship Between Planning And Performance Formal planning is associated with: Higher profits and returns on assets. Positive financial results.
Reasons Because of changes in environmentFor Planing Provides Reduces direction Uncertainty Managers engage in planing to Sets the : standards for Minimizes waste and controlling redundancy
Ty p e s o f p la n n in g I n f o r m a l : not written down, short- term focus; specific to an organizational unit. F o r m a l : written, specific, and long-term focus, involves shared goals for the organization.
Forma lP la n n in g :• Planning may create rigidity.• Plans can’t be developed for a dynamicenvironment.• Formal plans can’t replace intuition and creativity.• Planning focuses managers’ attention on today’scompetition, not on tomorrow’s survival.• Formal planning reinforces success, which maylead to failure.
Elements of Planning Goals (also Objectives) Desired outcomes for individuals, groups, or entire organizations Provide direction and evaluation performance criteria Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules
Types of Goals Financial Goals Are related to the expected internal financial performance of the organization. Strategic Goals Are related to the performance of the firm relative to factors in its external environment (e.g., competitors).
P la n n in g :F o c u s a n d Tim eS t r a t e g ic p la n s Plans that are organization-wide, establish overall objectives, and position an organization in terms of its environmentTa c t i c a l p l a n s Plans that specify the details of how an organization’s overall objectives are to be achievedS h o r t -t e r m p la n s Plans that cover less than one yearL o n g -t e r m p la n s Plans that extend beyond five years
Strategic Planning Strategic plans Apply broadly to the entire organization Establish the organization’s overall objectives Seek to position the organization in terms of its environment Provide direction to drive an organization’s efforts to achieve its goals. Serve as the basis for the tactical plans. Cover extended periods of time Are less specific in their details
Tactical Planning T a c t ic a l p la n s ( o p e r a t io n a l p la n s ) Apply to specific parts of the organization. Are derived from strategic objectives Specify the details of how the overall objectives are to be achieved. Cover shorter periods of time Must be updated continuously to meet current challenges
Specific and DirectionalPlans S p e c if ic p la n s Plans that have clearly defined objectives and leave no room for misinterpretation “What, when, where, how much, and by whom” (process- focus) D ir e c t io n a l p la n s Flexible plans that set out general guidelines “Go from here to there” (outcome-focus)
Single-Use and StandingPlans S in g le -u s e p la n s A plan that is used to meet the needs of a particular or unique situation Single-day sales advertisement S t a n d in g p la n A plan that is ongoing and provides guidance for repeatedly performed actions in an organization Customer satisfaction policy
Establishing Goals andDeveloping Plans Traditional Goal Setting Broad goals are set at the top of the organization. Goals are then broken into sub-goals for each organizational level. Assumes that top management knows best because they can see the “big picture.” Goals are intended to direct, guide, and constrain from above. Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility.
Management by Objectives Management by Objectives (MBO) A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress. Links individual and unit performance objectives at all levels with overall organizational objectives Focuses operational efforts on organizationally important results. Motivates rather than controls
Elements of MBO• Goal specificity• Participative decisionmaking• Explicit time period forperformance• Performance feedback
Does MBO Work? Reason for MBO Success Top management commitment and involvement Potential Problems with MBO Programs Not as effective in dynamic environments that require constant resetting of goals. Overemphasis on individual accomplishment may create problems with teamwork. Allowing the MBO program to become an annual paperwork shuffle.
Characteristics of Well-DesignedGoals Written in terms of outcomes, Challenging yet attainable not actions Low goals do not motivate. Focuses on the ends, not the High goals motivate if they can means. be achieved. Measurable and quantifiable Written down Specifically defines how the Focuses, defines, and makes outcome is to be measured goals visible. and how much is expected. Communicated to all Clear as to time frame necessary organizational How long before measuring members accomplishment. Puts everybody “on the same page.”
S . M . A . R . T. The acronym S.M.A.R.T. outlines the set of criteria that your goal must follow in order for it to be a well- focused and achievable goal.
SpecificS Do you know what you want to accomplish with all the details? Measurable Are you able to assess yourM progress? AttainableA Is your goal within your reach given your current situation? RelevantR Is your goal relevant towards your purpose in life?T Time Sensitive for completing your goal? What is the deadline
Steps in Goal Settingt R e v ie w t h e o r g a n iz a t io n ’ s m is s io n s t a t e m e n t . D o g o a ls r e f le c t t h e m is s io n ? E v a lu a t e a v a ila b le r e s o u r c e s . A r e r e s o u r c e s s u f f ic ie n t t o a c c o m p lis h t h e m is s io n ?f D e t e r m in e g o a ls in d iv id u a lly o r w it h o t h e r s . A r e g o a ls s p e c if ic , m e a s u r a b le , a n d t im e ly ?i W r it e d o w n t h e g o a ls a n d c o m m u n ic a t e t h e m . Is e v e r y b o d y o n t h e s a m e p a g e ?t R e v ie w r e s u lt s a n d w h e t h e r g o a ls a r e b e in g m e t . W h a t c h a n g e s a r e n e e d e d in m is s io n , r e s o u r c e s ,
Developing Plans Contingency Factors in A Manager’s Planning Manager’s level in the organization Strategic plans at higher levels Operational plans at lower levels Degree of environmental uncertainty Stable environment: specific plans Dynamic environment: specific but flexible plans
P la n n in g in t h eH ie r a r c h y o fO r g a n iz a t io n s
Strategic Management W h a t m a n a g e r s d o t o d e v e lo p t h e o r g a n iz a t io n ’ s s t r a t e g ie s .S t r a t e g ie s T h e d e c is io n s a n d a c t io n s t h a t d e t e r m in e t h e lo n g -r u n p e r f o r m a n c e o f a n o r g a n iz a t io n .
Strategic Management Strategic Management Process A nine-step process that involves strategic planning, implementation, and evaluation The organization’s current identity Mission statement Defines the purpose of the organization Objectives Strategic plan A document that explains the business founders vision and describes the strategy and operations of that business.
Analyze the Environment Environmental scanning Screening large amounts of information to detect emerging trends and create a set of scenarios Competitive intelligence Accurate information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them
SWOT: Identifying Organizational Opportunities SWOT analysis Analysis of an organization’s strengths, weaknesses, opportunities, and threats in order to identify a strategic niche that the organization can exploit
SWOT Analysis S t r e n g t h s ( s t r a t e g ic ) In t e r n a l r e s o u r c e s t h a t a r e a v a ila b le o r t h in g s t h a t a n o r g a n iz a t io n d o e s w e ll C o r e c o m p e t e n c y : a u n iq u e s k ill o r r e s o u r c e t h a t r e p r e s e n t s a c o m p e t it iv e edgeWe a k ne s s e s R e s o u r c e s t h a t a n o r g a n iz a t io n la c k s o r a c t iv it ie s t h a t it d o e s n o t d o w e ll O p p o r t u n it ie s ( s t r a t e g ic ) P o s it iv e e x t e r n a l e n v ir o n m e n t a l f a c t o r s Thre a ts N e g a t iv e e x t e r n a l e n v ir o n m e n t a l f a c t o r s
Grand StrategiesG ro w th s tra te g y A s t r a t e g y in w h ic h a n o r g a n iz a t io n a t t e m p t s t o in c r e a s e t h e le v e l o f it s o p e r a t io n s ;R e tre nc hme nt s tra te g y A s t r a t e g y c h a r a c t e r is t ic o f a c o m p a n y t h a t is r e d u c in g it s s iz e , u s u a lly in a n e n v ir o n m e n t o f d e c lin e C o m b in a t io n s t r a t e g y T h e s im u lt a n e o u s p u r s u it b y a n o r g a n iz a t io n o f t w o o r m o r e o f g r o w t h , s t a b ilit y , a n d r e t r e n c h m e n t s t r a t e g ie s S t a b ilit y s t r a t e g y A s t r a t e g y t h a t is c h a r a c t e r iz e d b y a n a b s e n c e o f s ig n if ic a n t c h a n g e
Growth Strategies Merger Occurs when two companies, usually of similar size, combine their resources to form a new company Acquisition Occurs when a larger company buys a smaller one and incorporates the acquired company’s operations into its own
Competitive Strategies Strategies that position an organization in such a way that it will have a distinct advantage over its competition Cost-leadership strategy Becoming the lowest-cost producer in an industry Differentiation strategy Attempting to be unique in an industry within a broad market Focus strategy Attempting to establish an advantage (cost/differentiation) in a narrow market segment
Benchmarking Benchmarking The search for the best practices among competitors or noncompetitors that lead to their superior performance ISO 9000 series Standards designed by the International Organization for Standardization that reflect a process whereby independent auditors attest that a company’s factory, laboratory, or office has met quality management standards