Chapter 7 - Planning and Goal Setting PDF

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Planning and Goal Setting...

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Chapter

Planning and Goal Setting

7

Chapter Introduction 7-1 Goal Setting and Planning Overview 7-1A Levels of Goals and Plans 7-1B The Organizational Planning Process 7-2 Goal Setting in Organizations 7-2A Organizational Mission 7-2B Goals and Plans 7-2C Align Goals Using a Strategy Map 7-3 Performance Management 7-3A Criteria for Effective Goals 7-3B Management by Objectives (MBO) 7-3C Single-Use and Standing Plans 7-4 Beneits and Limitations of Planning 7-5 Planning for a Turbulent Environment 7-5A Contingency Planning 7-5B Scenario Building 7-5C Crisis Planning https://ng.cengage.com/static/nb/ui/evo/index.html?eISBN=9781337685290&id=1000679371&snapshotId=2097365&

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Chapter Introduction

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Learning Outcomes After studying this chapter, you should be able to: 1. Deine goals and plans and explain the relationship between them. 2. Explain the concept of organizational mission and how it inluences goal setting and planning. 3. Describe the types of goals an organization should have and how managers use strategy maps to align goals. 4. Deine the characteristics of effective goals. 5. Describe the four essential steps in the management by objectives (MBO) process.

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6. Explain the difference between single-use plans and standing plans. 7. Discuss the beneits and limitations of planning. 8. Describe and explain the importance of contingency planning, scenario building, and crisis planning for today’s managers. 9. Identify innovative planning approaches that managers use in a fast-changing environment.

Steve Ells borrowed money from his parents and started a burrito stand in Denver in 1993. By 2015, Chipotle Mexican Grill had 2,000 locations and a market valuation of $23 billion. It sounds like an entrepreneur’s dream come true, but the dream turned into a nightmare after ive customers became ill with the Escherichia coli bacterium after eating at a Seattle Chipotle in mid2015. Over the next several months, at least six more outbreaks of food-borne illness were connected with the restaurant chain. Chipotle managers kicked planning into high gear by hiring a noted food safety specialist, doing a comprehensive review of food safety practices, and developing a plan designed to “establish Chipotle as a leader in food safety.” Chipotle has always emphasized providing food made from locally sourced, organic, fresh ingredients. Now, managers are scrambling to also make goals of food safety a top priority in all of Chipotle’s restaurants. “There’s nothing incompatible about being local, organic and fresh and also safe,” said Bill Marler, a https://ng.cengage.com/static/nb/ui/evo/index.html?eISBN=9781337685290&id=1000679371&snapshotId=2097365&

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Seattle-based lawyer who specializes in representing victims of food-borne illnesses. He says Chipotle has to igure out how to embrace goals of food safety as effectively as it does the other goals the company strives for. One of the primary responsibilities of managers is to set goals for where the organization or department should go in the future and plan how to get it there. Managers in every organization work hard to decide what goals to pursue and how to achieve them. Lack of planning or poor planning can seriously hurt an organization. Managers cannot predict the future, nor can they prevent all problems that might occur, but proper planning can enable them to prioritize goals and respond swiftly and effectively to unexpected events. Of the four management functions—planning, organizing, leading, and controlling—described in Chapter 1, planning is considered the most fundamental. Everything else stems from planning. Yet planning is also the most controversial management function. How do managers plan for the future in a constantly changing environment? The economic, political, and social turmoil of recent years has sparked a renewed interest in organizational planning, particularly planning for crises and unexpected events, yet it also has some managers questioning whether planning is even worthwhile in a world that is in constant lux. Planning cannot read an uncertain future. Planning cannot tame a turbulent environment. A statement by General Colin Powell, former U.S. secretary of state, offers a warning for managers: “No battle plan survives contact with the enemy.”

Does that mean it is

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useless for managers to make plans? Of course not. No plan can be perfect, but without plans and goals, organizations and employees lounder. However, good managers understand that plans should grow and change to meet shifting conditions.

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Goal Setting and Planning Overview A goal is a desired future circumstance or condition that the organization attempts to realize.

Goals are important because organizations exist for

a purpose, and goals deine and state that purpose. A plan is a blueprint for goal achievement and speciies the necessary resource allocations, schedules, tasks, and other actions. Goals specify future ends; plans specify today’s means. The concept of planning usually incorporates both ideas; it means determining the organization’s goals and deining the means for achieving them.

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7-1A

Levels of Goals and Plans

Take a Moment Complete the “Self-Assessment: Does Goal Setting Fit Your Management Style?” to see how your work and study habits align with goal setting and planning.

Exhibit 7.1 illustrates the levels of goals and plans in an organization. The planning process starts with a formal mission that deines the basic purpose of the organization, especially for external audiences. The mission is the basis for the strategic (company) level of goals and plans, which in turn shapes the tactical (divisional) level and the operational (departmental) level.

That is, a broad higher-level mission, such as

“improve the lives of families by providing consumer-preferred paper products for kitchen and bathroom,” provides the framework for establishing more speciic goals for top managers, such as “improve company proits by 5 percent next year.” This might translate into “increase sales by 10 percent next year” as a goal for the manager of the Northwest sales division, and an individual salesperson might have a goal of calling on 10 percent more customers.

Top managers are typically

responsible for establishing strategic goals and plans that relect a commitment to both organizational eficiency and effectiveness, as described in Chapter 1. Tactical goals and plans are the responsibility of middle managers, such as the heads of major divisions or functional units. A division manager will formulate tactical plans that focus on the major actions that the division must take to fulill its part in the strategic plan set by top management. Operational plans identify the speciic procedures or processes needed at lower levels of the organization, such as individual departments and employees. Frontline managers and supervisors develop

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operational plans that focus on speciic tasks and processes and that help meet tactical and strategic goals. Planning at each level supports the other levels.

Exhibit 7.1 Levels of Goals and Plans

Concept Connection

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Mike Fuentes/Bloomberg/Getty Images

From its beginning as a seven-cow farm in New England to its current status as a $350 million organic yogurt business, Stonyield Farm has incorporated environmental responsibility into its organizational planning. Today, every operational plan encompasses Stonyield’s goalof carbon-neutral operations.

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Chapter 7: Planning and Goal Setting: 7-1B The Organizational Planning Process Book Title: Management Printed By: KANG SHI YANG ([email protected]) © 2018 Cengage Learning, Cengage Learning

7-1B The Organizational Planning Process The overall planning process, illustrated in Exhibit 7.2, prevents managers from thinking merely in terms of day-to-day activities. The process begins when managers develop the overall plan for the organization by clearly defining mission and strategic (company-level) goals. Second, they translate the plan into action, which includes defining tactical objectives and plans, developing a strategy map to align goals, formulating contingency and scenario plans, and applying flexible goal setting. Third, managers lay out the operational factors needed to achieve goals. This involves devising operational goals and plans, selecting the measures and targets that will be used to determine if things are on track, and identifying stretch goals and crisis plans that might need to be put into action. Performance management tools for executing the plan include management by objectives (MBO), performance dashboards, single-use plans, and decentralized responsibility. Finally, managers periodically review plans to learn from results and shift plans as needed as they begin a new planning cycle. Exhibit 7.2

The Organizational Planning Process

SOURCE: Based on Robert S. Kaplan and David P. Norton, “Mastering the Management System,” Harvard Business Review (January 2008): 63–77. https://ng.cengage.com/static/nb/ui/evo/index.html?eISBN=9781337685290&id=1000679371&nbId=2097365&snapshotId=2097365&dockAppUid… 1/2

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Remember This Planning is the most fundamental of the four management functions. A goal is a desired future circumstance or condition that the organization wants to realize. Planning is the act of determining goals and defining the means of achieving them. A plan is a blueprint specifying the resource allocations, schedules, and other actions necessary for attaining goals. Planning helps managers think about the future rather than thinking merely in terms of day-to-day activities.

Chapter 7: Planning and Goal Setting: 7-1B The Organizational Planning Process Book Title: Management Printed By: KANG SHI YANG ([email protected]) © 2018 Cengage Learning, Cengage Learning © 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder.

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7-2

Goal Setting in Organizations The overall planning process begins with a mission statement and goals for the organization as a whole. Goals don’t just appear on their own in organizations. Goals are sociallyconstructed, which means they are deined by an individual or group. Managers typically have different ideas about what the goals should be. As A. G. Laley, executive chairman and former CEO of Procter & Gamble, puts it, “Everyone selects and interprets data about the world and comes to a unique conclusion about the best course of action. Each person tends to embrace a single strategic choice as the right answer.” Thus, the role of the top executive is to get people thinking as a team and negotiating about which goals are the important ones to pursue.

The “Manager’s Shoptalk” describes the process of coalition

building that often occurs during goal setting.

Manager’s Shoptalk

Goal Conflict versus Manager Coalition

Organizations perform many activities and pursue many goals simultaneously to accomplish an overall mission. But how do managers decide what goals to strive for? Often there is a conlict between goals, and achieving one goal means another won’t be accomplished. For example, Allegiant Air has achieved aggressive cost-control goals. However, pilots say the tight focus on reining in costs by purchasing older planes and outsourcing maintenance has thwarted safety goals. Another problem is that managers sometimes disagree about which goals to pursue. A new publisher of TheLosAngelesTimes, for example, disagreed with the goal of top executives at the newspaper’s parent company, Tribune Publishing, to run its newspapers as a group, centralizing most operations and directing them from headquarters in Chicago. Austin Beutner, the LosAngeles

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Timespublisher, believed the Times should pursue goals that made it a more independent, local newspaper. The conlict eventually led to Beutner being ired. When goals are in conlict, or when managers disagree over which goals to pursue, coalitional management is crucial. Coalitional managementinvolves building an alliance of people who support a manager’s goals and can inluence other people to accept and work toward them. Being an effective coalitional manager involves three key steps:

Talk to Customers and Other Managers. Building a coalition requires talking to many people both inside and outside the organization. Coalitional managers solicit the views of employees and key customers. They talk to other managers all across the organization to get a sense of what people care about and learn what challenges and opportunities they face. A manager can learn who believes in and supports a particular direction and goals as well as who is opposed to them and the reasons for their opposition.

Address Conflicts. Good managers don’t let conlicts over goals simmer and detract from goal accomplishment or hurt the organization. At Nike, for example, the issue of manufacturing in Bangladesh created a conlict between the head of the production department, who had a goal of keeping manufacturing costs as low as possible, and Nike’s head of sustainable business, who was worried about poor labor and safety practices in the Bangladesh factories. Rather than letting the conlict escalate, the two formed a committee made up of people from both sides of the debate. Committee members visited Bangladesh factories to see the conditions irsthand in order to reach agreement and make an informed decision.

Break Down Barriers and Promote Cross-Silo Cooperation. A inal step is to break down boundaries and get people to cooperate and collaborate across departments, divisions, and levels. When Colin Powell was chairman of the U.S. Joint Chiefs of Staff, he regularly brought together the heads of the Army, Air Force, https://ng.cengage.com/static/nb/ui/evo/index.html?eISBN=9781337685290&id=1000679371&nbId=2097365&snapshotId=2097365&

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Navy, and Marines so they could understand one another’s viewpoints and come together around key goals. Understanding and cooperation across the enterprise is essential so that the entire organization will be aligned toward accomplishing desired goals. As a manager, remember that you will accomplish more and be more effective as part of a coalition than as an individual actor. When there are goals that are highly important to you, take steps to build a coalition to support them. Throw your support behind other managers when appropriate. And remember that building positive relationships, discussing opposing viewpoints, and negotiating toward an informed agreement are key skills for good management. Sources: Stephen Friedman and James K. Sebenius, “Organization Transformation: the Quiet Role of Coalitional Leadership,” Ivey Business Journal (January–February 2009), www.iveybusinessjournal.com/topics/leadership/organizational-transformationthe-quiet-role-of-coalitional-leadership (accessed January 27, 2012); Gerald R. Ferris et al., “Political Skill in Organizations,” Journal of Management (June 2007): 290–320; Jad Mouawad, “Pilots at Allegiant Air Question Safety Standards,” The New York Times (April 20, 2015); Ravi Somaiya, “Firing at Los Angeles Times Focuses Discontent,” The New York Times (September 21, 2015); and Shelly Banjo, “Inside Nike’s Struggle to Balance Cost and Worker Safety in Bangladesh,” The Wall Street Journal (April 21, 2014), http://www.wsj.com/articles/SB10001424052702303873604579493502231397942 (accessed March 2, 2016).

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Chapter 7: Planning and Goal Setting: 7-2A Organizational Mission Book Title: Management Printed By: KANG SHI YANG ([email protected]) © 2018 Cengage Learning, Cengage Learning

7-2A Organizational Mission At the top of the goal hierarchy is the mission (An organization’s purpose or reason for existence.) —the organization’s reason for existence. The mission describes the organization’s values, aspirations, and reason for being. 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. One of the defining attributes of successful companies is that they have a clear mission that guides decisions and actions. For example, CVS Caremark adopted a new name, CVS Health, and redefined its mission as “helping people on the path to better health.” In line with the new mission, CVS Health, which provides health clinics as well as pharmacy and retail sales, stopped selling cigarettes and other tobacco products in all its stores in late 2014. For a company involved in promoting health and wellness, managers say, selling tobacco products doesn’t make sense and goes against the company’s mission. CEO Larry J. Merlo says CVS is positioning itself “at the forefront of what we all see as a changing health care landscape.” When management actions and decisions go against the mission, organizations may get into trouble. “Think of it this way: Would you find… the gift shops in a hospital selling cigarettes? Of course not,” said Nancy Copperman, the corporate director of public health initiatives for Northwell Health. The formal mission statement (A broadly stated definition of an organization’s basic business scope and operations that distinguishes it from

“A real purpose can’t just be words on paper…. If you get it right, people