Chapter 7

Planning & Goal Setting

1. Define goals and plans and explain the relationship between them.
 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 define and state that purpose.
 Goals specify future ends
 A plan is a blueprint for goal achievement and specifies the necessary
resource allocations, schedules, tasks, and other actions.
 Plan specify today’s means.
 Planning usually incorporates both ideas; it means determining the
organization’s goals and defining the means for achieving them.
 Planning is considered the most fundamental.
 Everything else stems from Planning.
 Planning is also the most controversial management function.
 Good managers understand that plans should grow and change to
meet shifting conditions.

2. Explain the concept of organizational mission and how it

influences goal setting and planning.
 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.
 Management actions and decisions go against the mission,
organizations may get into trouble.
 The formal mission statement is a broadly stated definition of purpose
that distinguishes the organization from others of a similar type.
3. Categorize the types of goals an organization should have.
 Strategic goals, sometimes called official goals, are broad statements
describing where the organization wants to be in the future. These
goals pertain to the organization as a whole rather than to specific
divisions or departments.
 Tactical goals, which are the results that major divisions and
departments within the organization intend to achieve. These goals
apply to middle management and describe what major subunits must
do for the organization to achieve its overall goals.
 Tactical plans are designed to help execute the major strategic plans
and to accomplish a specific part of the company’s strategy.
 The results expected from departments, work groups, and individuals
are the operational goals.
 Operational plans are developed at the lower levels of the
organization to specify action steps toward achieving operational
goals and to support tactical plans.
4. Explain how managers use strategy maps to align goals.
 A strategy map is a visual representation of the key drivers of an
organization’s success.
 A Strategy Map for Aligning Goals
5. Define the characteristics of effective goals.
Are specific and measurable

Effective
Are linked Have a defined
Goal time period
To rewards

Are challenging Cover key

but realistic result areas

6. Outline the four essential steps in the management-by-

objectives (MBO) process.
 Management-by-objectives (MBO) is a system whereby managers
and employees define goals for every department, project, and person
and use them to monitor subsequent performance.
 Four major activities make MBO successful
1. Set goals. Setting goals involves employees at all levels and looks
beyond day-today activities.
2. Develop action plans. An action plan defines the course of action
needed to achieve the stated goals. Action plans are made for both
individuals and departments.
3. Review progress. A periodic progress review is important to ensure
that action plans are working. KPIs often provide the data for the
review. The measurements are sometimes referred to as key
performance indicators (KPIs).
4. Appraise overall performance. The final step in MBO is to evaluate
whether annual goals have been achieved for both individuals and
departments. The MBO cycle repeats itself annually.
  Model of the MBO Process
Step 1: Set Goals Step 2: Develop Action Plans

o Corporate Strategic Goals

o Departmental Goals Action Plans
o Individual Goals

Review Progress

Step 3: Review Progress

Take Corrective Action

Appraise Performance

Step 4: Appraise Overall Performance

MBO Benefits

MBO

Focuses manager Can improve

and employee Aligns individual
performance Improves
efforts on activities and departmental
at all employee
that will lead to goals with
company motivation.
goal attainment. company goals
levels
7. Compare and contrast single-use plans and standing plans.
 Single-use plans are developed to achieve a set of goals that are not
likely to be repeated in the future. Standing plans are ongoing plans that
provide guidance for tasks or situations that occur repeatedly within the
organization.

8. Discuss the benefits and limitations of planning.

 Some managers believe that planning ahead is necessary to accomplish
anything, whereas others think that planning limits personal and
organizational performance. Both opinions have merit because planning
can have both advantages and disadvantages.

Benefits and Limitations of Planning

 Goals and plans provide a source of motivation and
commitment. Planning can reduce uncertainty for employees and clarify
what they should accomplish. The lack of a clear goal hampers motivation
because people don’t understand what they’re working toward.
  Goals and plans guide resource allocation. Planning helps
managers decide where they need to allocate resources, such as employees,
money, and equipment.
 Goals and plans are a guide to action. Planning focuses attention
on specific targets and directs employee efforts toward important outcomes.
It helps managers and other employees know what actions they need to take
to achieve goals.
 Goals and plans set a standard of performance. Because
planning and goal setting define desired outcomes, they also establish
performance criteria so that managers can measure whether things are on- or
off-track. Goals and plans provide a standard of assessment.
 Goals and plans can create a false sense of certainty. Having a
plan can give managers a false sense that they know what the future will be
like. However, all planning is based on assumptions, and managers can’t
know what the future holds for their industry or for their competitors,
suppliers, and customers.
 Goals and plans may cause rigidity in a turbulent
environment. A related problem is that planning can lock the
organization into specific goals, plans, and time frames, which may no
longer be appropriate. Managing under conditions of change and uncertainty
requires a degree of flexibility. Managers who believe in “staying the
course” will often stick with a faulty plan even when conditions change
dramatically.
 Goals and plans can get in the way of intuition and
creativity. Success often comes from creativity and intuition, which can
be hampered by too much routine planning.

9. Describe contingency planning, scenario building, and crisis

planning, and explain the importance of each for today’s
managers.
 Contingency plans define company responses to be taken in the
case of emergencies, setbacks, or unexpected conditions. To
develop contingency plans, managers identify important factors
in the environment, such as possible economic downturns,
declining markets, increases in cost of supplies, new
technological developments, or safety accidents.
 An extension of contingency planning is a forecasting technique
known as scenario building. Scenario building involves looking
 at current trends and discontinuities and visualizing future
possibilities.
 Scenarios are meant to expand the range of future possibilities
managers should consider and prepare for Managing the Future.
 Crisis planning to enable them to cope with unexpected events
that are so sudden and devastating that they have the potential to
destroy the organization if managers aren’t prepared with a
quick and appropriate response.
 Crises have become integral features of the organizational
environment.
 Crisis planning involves the two major stages of prevention and
preparation.
 The crisis prevention stage involves activities that managers
undertake to try to prevent crises from occurring and to detect
warning signs of potential crises. A critical part of the
prevention stage is building open, trusting relationships with key
stakeholders such as employees, customers, suppliers,
governments, unions.
 The crisis preparation stage includes all the detailed planning to
handle a crisis when it occurs. Three steps in the preparation
stage are (1) designating a crisis management team and
spokesperson, (2) creating a detailed crisis management plan,
and (3) setting up an effective communications system.
10. Identify innovative planning approaches that managers
use in a fast-changing environment.
• Approaches to planning change with the times. In many
companies today, planning is decentralized.
• Decentralized planning means that top executives or planning
experts work with managers in major divisions or departments to
develop their own goals and plans.
• Stretch goals are reasonable yet highly ambitious and compelling
goals that energize people and inspire excellence.
• At Amazon, a stretch goal was to build the first Kindle e-reader
with built-in cellular access so people didn’t have to connect to a
PC.
• Business performance dashboards can help managers oversee
plans and measure progress toward goals.
• An intelligence team is a cross-functional group of people who
work together to gain a deep understanding of a specific
competitive issue and