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Chapter4 part1 planning
- 1. Chapter 4: Planning • Part 1: Goal setting and Organizational planning • Part 2: Strategy formulation and implementation Lecturer: Duong Thi Hoai Nhung (MBA) Faculty of Business Administration Foreign Trade University Email: nhungdth@ftu.edu.vn Mobile: 0985 867 488
- 2. Part 1: Organizational planning and goal setting Learning objectives • Define goals and plans, and explain the relationships between them • Explain the concept of organizational mission and the way it influences goal setting and planning • Describe the types of goals an organization should have and why they assemble a hierarchy • Define the characteristics of effective goals • Describe the four essential steps in the process of management by objectives (MBO) • Describe how responsibility can be allocated to accomplish planning and goal setting
- 3. Outline 1. Goals and plans in organization a. Definition of goals and plans b. Types of goals and plans 2. Planning types and models a. Traditional approaches to planning b. Modern approaches to planning
- 4. 1. Goals and plans in organization a. Definition of goals and plans • A goal is a desired future statement that the organization attempts to realize. • A plan is a blueprint for goal achievement: it specifies the necessary resource allocations, schedules, tasks and other actions. Planning means determining the organization’s goals and defining the means for achieving them.
- 6. The levels of goals and plans in an organization Missi on state ment Strategic goals/plans Senior management (Organization as a whole) Tactical goals/plans Middle management (Major divisions, functions) Operational goals/plans Lower management (Departments, individuals Internal message Legitimacy, motivation, guides, rationale, standards External message Legitimacy for investors, customers, suppliers, community
- 7. a. Definitions of goals and plans Organizational mission - The mission describes the organization’s value, aspirations and reason for being- the organization’s reason for existence - A well-defined mission: + the basis for development of all subsequent goals and plans + a clear mission + short and straightforward + describing basic business activities and purposes as well as the values that guide the organization
- 8. b. Types of Goals and plans Types of Goals • Strategic goals - Broad statements describing where the organization wants to be in the future • Tactical goals - The results that major divisions and departments within the organization intend to achieve • Operational goals - The specific results expected from departments, work groups and individuals
- 9. b. Types of goals and plans Types of Plans BREADTH TIME FREQUENCY OF USE FRAME SPECIFICITY OF USE Strategic Long term Directional Single use (beyond 5 years)(beyond 5 years) Tactical Short term Specific Standing (less than 1 year)(less than 1 year) Operational Short term Specific StandingOperational Short term Specific Standing
- 10. Planning: Focus and TimePlanning: Focus and Time • Strategic PlansStrategic Plans -- The action steps by which the organizationThe action steps by which the organization intends to attain strategic goals.intends to attain strategic goals. • Tactical PlansTactical Plans – Specify the details of how an organization’sSpecify the details of how an organization’s overall objectives are to be achieved.overall objectives are to be achieved. • Operational plans - Specify action steps towards achieving operational goals and to support tactical plans
- 11. Manufacture both standard and custom metal products for various applications in the machine tool industry CEO • 12% return on investment • 5% growth • No employee layoffs • Excellent service to customers Production Executive - Manufacture 1,200,000 products at average cost of $19 - Scrap rate of 3% or less - Increase manufacturing productivity by 2% - Resolve employee grievances within 3 working days Finance Executive - Keep outstanding accounts below $500,000 - Keep borrowing below $1,250,000 - Provide monthly budget statements for departments - Have delinquent accounts of no more than 2% of total Supervisor- Automatic Machines - Produce 150,000 standard units at average cost of $16 - Have machine downtime of less than 7% - Achieve scrap rate of 3% or less - Respond to employee grievances within 24 hours Accounts Receivable Manager - Issue invoices within 5 days of sale - Check new customers’ credit within 1 working day - Allow no account to be overdue more than 5 months - Call delinquent accounts weekly Sales Manager- Region 1 - Respond to customer inquiries within 2 hours - Meet sales quota of 120,600 units - Work with salespeople to: + Visit 1 new customer each day + Call on each large customer every 4 weeks Marketing Executive - Sell 1,200,000 units at average price of $27 - Introduce 1 new product line - Increase sales by 5% in new market areas - Open 1 new sales office - Attain market share of 19% Mission Strategic goals Operational goals Tactical goals
- 12. Planning in the Hierarchy of Organizations
- 14. 2. Planning types and models a. Traditional approaches to planning - Central Planning has been done entirely by top executives, consulting firms or, most commonly, by central planning departments Managing Director Line managers Planning Department Frozen foodsBreakfast cereals Finance Division Head Canned foods Production Marketing FinanceFinance ProductionProduction Marketing Marketing Structural location of central planning department
- 15. a. Traditional approaches to planning Disadvantages - Planners may be out of touch with day-to-day realities - Formal plans may inhibit flexibility - Formal plans may limit creativity and learning
- 16. b. Modern approaches to planning - Decentralized planning: assigned to major departments and divisions to help managers develop their own strategic plans Managing Director Line managers Planning support staff member Frozen foodsBreakfast cereals Finance Division Head Canned foods Production Marketing FinanceFinance ProductionProduction Marketing Marketing Structural location of decentralized planning department
- 17. Management by Objectives • Peter Drucker published ‘The Practice of Management,’ which included his theory of Management by Objectives (MBO) b. Modern approaches to planning
- 18. b. Modern approaches to planning • Management by objectives (MBO) - MBO is a method whereby managers and employees defines goals for every department, project and person, and use them to monitor subsequent performance
- 19. Management by objectives (MBO) Common Elements in an MBO Program Goal Specificity Participative Decision Making Explicit Performance Period Performance Feedback
- 20. Model of the MBO process - Corporate strategic goals - Departmental goals - Individual goals Action plans Take corrective action Review progress Appraise performance Step 1: Set goals Step 4: Appraise overall performance Step 2: Develop action plan Step 3: Review progress
- 21. Model of the MBO process 1. Set goals - To answer the question: what are we trying to accomplish? - A good goal should be + concrete and realistic + a specific target + time frame + assign responsibility + quantitative or qualitative 2. Develop action plans An action plan defines the course of action needed to achieve the sated goals. An action plans are made for both individuals and departments
- 22. Model of the MBO process 3. Review progress - To ensure that action plans working. - Occurring informally between managers and employees - The action plan can be changed whenever goals are not being met 4. Appraise overall performance - Evaluate whether annual goals have been part for both individuals and departments The MBO cycle repeats itself on an annual basis
- 23. Benefits and problems with MBO • Benefits of MBO 1. Managers’ and employee efforts are focused on activities that will lead to goal attainment. 2. Performance can be improved at all company levels. 3. Employees are motivated. 4. Department and individual goals are aligned with company goals.
- 24. Benefits and problems with MBO • Problems with MBO 1. Constant change prevents MBO from taking hold 2. An environment of poor employer-employee relations reduces MBO effectiveness. 3. Strategic goals may be displaced by operational goals. 4. Mechanistic organization and values that discourage participation can harm the MBO process. 5. Too much paperwork saps MBO energy