CHAPTER 7

1. CHAPTER 7 Basic Elements of Planning and Decision Making

2. Decision Making and the Planning Process • Understanding the environments in which a company operates is the first step in planning. • What is the organization’s mission? The organization’s purpose, premises, values and directions. • Mission is a statement of the organization’s fundamental unique purpose that sets it apart from other firms of its type and identifies the scope of the business’s operations in product and market terms. P&G’s Mission- Doubling Revenue in 10 years

3. Decision Making and the Planning Process. . . • The Mission allows the creation of strategic goals • Strategic goals create strategic plans. • Strategic goals and plans generate tactical goals. • Tactical goals, and the original strategic plans, help shape tactical plans. • Tactical plans combine with the tactical goals to shape operational goals. • Operational goals, combined with tactical plans, determine operational plans. Ref: Figure 7.1

4. Organizational Goals- Four important purposes

5. Goals by level • Strategic Goals are set by and for top management of the organization. • BoD members and President/CEO • Focus is on broad, general issues • Tactical Goals are set by and for middle managers • Vice Presidents, etc • Focus on how to achieve goals at the operational level to achieve the strategic goals. • Operational Goals are set by and for lower-level managers. • Focus on shorter-term issues associated with achieving tactical goals. • Figure 7.2

6. Goals. . . • Goals Set by Area • Marketing, Finance, HR, Production, etc. • Goals Set by Time Frame • Long-Term, Intermediate-Term and Short-Term • Time Frames may vary by level • Strategic Level: long-term may mean 10 years; intermediate-term level, 5 years; and short-term, 1 year. • Whereas at the Operational level, long-term may mean 2-3 years and short-term, a matter of weeks or even days.

7. Goals Responsibilities • Responsibilities for Setting Goals: • All managers should be involved in the goal-setting process. • These goals correspond to the level of the organization in which the manager is working.

8. Managing Multiple Goals • Sometimes organizational goals between departments may be in conflict with each other. • Production versus Marketing • Optimizing – balancing and reconciling possible conflicts among goals. • Managers have to decide to pursue one goal to the exclusion of the other or to try to find a middle ground where both goals can be met over a period of time.

9. Three different types of plans

10. Long-Range Plans • Cover many years – even decades • Generally vary from one organization to another • Five years or longer is generally considered a long-range plan • Organizations in complex, volatile environments need a longer planning time; however, managers is these organizations must constantly monitor their environment for changes.

11. Intermediate Plans • Usually cover period of 1-5 years. • Generally parallel tactical plans. • Central focus of planning activities.

12. Short-Range Plans • Usually cover period of 1 year or less. • Generally affect the manager’s day-to-day activities. • Action Plan is designed to put into operation any other kind of plan. • Reaction Plan is developed to react to some unforeseen circumstance.

13. Responsibilities For Planning • The larger an organization becomes, the more likely the primary planning is done by groups of managers rather than by individual managers.

14. Planning Staff • Professionals, on permanent staff, who reduce the workload of individual managers. [used by Disney, GM, Ford, Boeing] • Help coordinate the planning activities of individual managers. • Bring to a particular problem many different tools and techniques. • Take a broader view than individual managers. • Go beyond ‘pet projects’ and particular departments.

15. Planning Task Force • Most often created when the organization has a special circumstance (problem) to handle. • Usually line managers with a special interest in the relevant area of planning – may include members of the Planning Staff - if an organization has one. • Not a permanent body – dissolved when the circumstance (problem) has been handled.

16. Board of Directors • Develop the ‘mission’ and strategy. • Can take an active role in the planning process. • Can delegate the planning activities to the CEO selected by the Board.

17. Chief Executive Officer • Usually the President or the Chairperson of the Board of Directors. • Single most important individual in any organization’s planning process. • Plays a major role in the complete planning process and is responsible for implementing the strategy. • Assumes, along with the BoD, a direct role in planning. • Other organizational players involved in the planning process have more of an advisory or consulting role.

18. Executive Committee • Usually made up of the top executives in the organization working as a group. • Provide input to the CEO on the proposals that affect their own units (departments) and review the strategic plans that may develop from their input. • Usually appointed to various staff committees, subcommittees or task forces to concentrate on specific projects or problems that might affect the entire organization in the future.

19. Line Management • Line managers are a valuable source of inside information for other managers as plans are formed and put into action. • Line managers at the middle and lower levels usually must execute the plan developed by top management. • Line managers identify, analyze and recommend program changes, develop budgets and submit them for approval and set the plans in motion.

20. Contingency Planning & Crisis Management See Figure 7.3

21. Tactical Plan • A plan aimed at achieving tactical goals and developed to implement specific parts of a strategic plan. • Strategy focuses on resources, environment and mission. • Tactics focus primarily on people and action.

22. Developing Tactical Plans • Manager needs to recognize that tactical planning must be concerned with a number of tactical goals determined by a broad strategic goal. [Coke bottlers] • Strategies are often stated in general terms. Tactics must specify resources and time frames and specify what activities will be performed to achieve that strategic goal. [Increasing world-wide market share – Coke builds plants in India and France – funds to build plants and a target date for completion of each] • Tactical plans require the use of human resources to process information and pass it on to others who may be able to use it.

23. Executing Tactical Plans • Successful implementation depends on the proper use of resources, effective decision making and ensuring that the right things are done at the right times and in the right ways. • Manager needs to evaluate every possible course of action in light of the goal it is intended to reach. • Needs to make sure that every decision maker has the information and resources necessary to get the job done. [Vertical and horizontal communication and integration of activities critical] • Must monitor ongoing activities to make sure desired results are achieved using the organization’s control systems. [Disney plan to bring about growth in foreign markets – expand Disney cable channel and build new theme park in Hong Kong by early 2006]

24. Operational Planning- Single-Use Plans • Single-use Plan is developed to carry out a course of action not likely to be repeated in the future. • Program is a single-use plan for a large set of activities. • Disney plans for individual rides, attractions and hotels in Hong Kong or Black & Decker switching 150 products from GE to B&D • Project is a single-use plan of less scope and complexity than a program. • B&D conversion of each GE product or adding a new benefit option to an existing salary package, etc

25. Ref Table 7.1, page 185. Operational Planning- Standing Plans • Standing Plans are developed for activities that occur regularly over a period of time. • Policy – a standing plan that specifies the organization’s general response to a designated problem or situation. Usually describes how ’exceptions’ are to be handled. [SAT score requirement] • Standard Operating Procedure [SOP] – a standing plan that outlines the steps to be followed in particular circumstances. [focuses on a sequence of activities] • Rules and Regulations – describe exactly how specific activities are to be carried out. [focus on one activity]