Ch5 IM

Chapter 05 - Planning: The Foundation of Successful Management
Chapter
5
Planning:
The Foundation of Successful Management
CHAPTER CONTENTS
Major Questions the Student Should Be Able to Answer 2

Mapping the Class: Chapter Outline 3
Overview of the Chapter 4
Classroom Outline 5
Challenge: Major Questions 34
Management in Action 36
Legal/Ethical Challenge 38
Group Exercises 40
Video Cases 46
Manager’s Hot Seat 49
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MAJOR QUESTIONS THE STUDENT SHOULD BE ABLE TO ANSWER
5.1 Planning and Strategy

MAJOR QUESTION: What are planning, strategy, and strategic management, and why
are they important to me as a manager?
5.2 Fundamentals of Planning

MAJOR QUESTION: What are mission and vision statements, and what are three types of
planning and goals?
5.3 Goals & Plans

MAJOR QUESTION: What are the three types of goals, and what are different kinds of
plans?
5.4 Promoting Goal Setting: SMART Goals & Management by

Objectives
MAJOR QUESTION: What are SMART goals and MBO and how can they be
implemented?
5.5 The Planning/Control Cycle

MAJOR QUESTION: How does the planning/control cycle help keep a manager’s plans
headed in the right direction?
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MAPPING THE CLASS: CHAPTER OUTLINE

 Planning, Strategy, & Strategic Management
 Why Planning & Strategic Management Are Important

 Mission & Vision Statements
 Three Types of Planning for Three Levels of Management: Strategic, Tactical, &
Operational
5.3 Goals & Plans

 Three Types of Goals: Strategic, Tactical, & Operational
 The Action Plan & the Operating Plan
 Types of Plans: Standing Plans & Single-Use Plans

Objectives
 SMART Goals
 Management by Objectives: The Four-Step Process for Motivating Employees
 Cascading Objectives: MBO from the Top Down
 The Importance of Deadlines

 Using the Planning/Control Cycle
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OVERVIEW OF THE CHAPTER

The first of four functions in the management process is planning, which involves
setting goals and deciding how to achieve them, which is linked to strategy. A
strategy is a large-scale action plan that sets the direction for an organization.
Strategic management is a process that involves managers from all parts of the
organization in the formulation and the implementation of strategies and strategic
goals.

Planning consists of translating an organization’s mission and vision into
objectives. The organization’s purpose is expressed as a mission statement, and
what it becomes is expressed as a vision statement. From these are derived
strategic planning, then tactical planning, then operational planning.
5.3 Goals & Plans

The purpose of planning is to set a goal and then an action plan and an
operational plan. A goal, also known as an objective, is a specific commitment to
achieve a measurable result within a stated period of time. The goal should be
followed by an action plan, which defines the course of action needed to achieve
the stated goal, such as a marketing plan or sales plan. Standing plans are plans
developed for activities that occur repeatedly over a period of time. Single-use
plans are plans developed for activities that are not likely to be repeated in the
future.

Objectives
SMART goals are goals that are Specific, Measurable, Attainable, Results-
oriented, and have Target dates. Management by objectives (MBO), a four-step
process for motivating employees, is a technique for setting goals.

The four-step planning/control cycle helps managers keep in control, to make
sure the unit is headed in the right direction. The cycle is as follows: (1) Make the
plan. (2) Carry out the plan. (3) Control the direction by comparing results with the
plan. (4) Control the direction by taking corrective action in two ways: (a) by
correcting deviations in the plan being carried out or (b) by improving future plans.
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CLASSROOM OUTLINE
The Manager’s Toolbox: Setting Big Goals: Is This the Road to Success?
When people set challenging goals, they may achieve them less often, but yet they still
perform at a higher level. Stretch goals—ones that take you beyond what your mind
might think is safe—can spur extraordinary efforts. Writing out your goals will help you
in feeling more confident. When you write out your goals, you should have a concrete
plan, break your goals into manageable bites, put something of value on the line linked
to goal obtainment, bundle your temptations or rewards to your efforts, and seek social
support. Even if you do fail, don’t give up entirely since you may have an opportunity to
make a fresh start.
Possible Topics for Discussion:
 What would that “crazy” personal goal be for you?
 Think of a time that you set a “stretch goal” but did not achieve it fully. What did
you learn from this process?
 At the stickK website (see https://www.stickk.com/), people create commitment
contracts obliging them to achieve their personal goals such as losing weight or
quitting smoking. Would a commitment contract at stickK be likely to help you to
stick to your goals? Explain your response.
 Which outcome would be more likely to encourage you to stick with your goals,
losing money or having to admit to someone that you failed? Explain your point
of view.
5.1 Planning & Strategy (pp. 136-139)

What are planning, strategy, and strategic management, and why are they
important to me as a manager?
Section 5.1 discusses planning, the first of four functions in the management process.
Planning involves setting goals and deciding how to achieve them, which is linked to
strategy. There are three reasons why planning and strategic management are
important: 1) providing direction and momentum, 2) encouraging new ideas, and 3)
developing a sustainable competitive advantage.
One way that you could begin your coverage of these topics is to profile the company
LittleMissMatched. LittleMissMatched is a clothing company that specializes in colorful,
unmatched items. The company began after a group of friends came up with a plan to
sell children’s socks in sets of three after a conversation about the mystery of
disappearing socks. The plan was to sell mismatched socks to young girls. The
concept proved successful and the firm’s product line has expanded dramatically. The
company was profiled in the Wall Street Journal article “Socks are no Match for this
Teen Clothing Trend,” which you can assign for student reading. You can also have the
students learn more about the company at its website: http://littlemissmatched.com/.
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Article Citation:
Sidel, R. (2015, February 22). Socks are no match for this teen clothing trend. Wall
Street Journal Online.
ProQuest Document ID: 1657238427
http://www.wsj.com/articles/socks-are-no-match-for-this-teen-clothing-trend-
1424489257
 Evaluate how well your company (or a previous one) does at the planning
process.
 Provide examples of how the planning process at your company (or a previous
one) encouraged new ideas that contributed to strategic success.
 Assume you are a venture capitalist, which is someone who lends money to
start-ups. How would you have reacted if the founder of LittleMissMatched came
to you with a plan to sell socks that did not match in sets of three? What type of
details would you have wanted to see in the firm’s business plan prior to
investing in the firm?
Major Idea Outline:
A. Planning has been previously defined as setting goals and deciding how to
achieve them.
1. Another definition: Planning is coping with uncertainty by formulating
future courses of action to achieve specific results.
2. Planning includes a business plan, which is a document that outlines a
proposed firm’s goals, the strategy for achieving them, and the standards
for measuring them.
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Interactive Classroom Material:

EXAMPLE: Is Planning Necessary? Launching a Vending-Machine Business on
$425 (p. 136)
Not every business is started with a plan. One study found that 41% of Inc.
magazine’s 1989 list of fastest-growing private firms didn’t have a business plan and
26% had only rudimentary plans, percentages essentially unchanged in 2002
YOUR CALL
If you had a few hundred dollars with which to launch a small business, do you
think writing a business plan would help you or just be a waste of time?
Writing a business plan is never a waste of time. The time it takes to write out the
different sections, whether strategic, financial or operations related, is time well
spent as far as experience gained. Moreover, that few hundred dollars will
hopefully turn to thousands and millions of dollars worth of revenue at some point
—what will you do then without a plan? Keep in mind that a plan does not have to
be long, complex and perfect. With a few hundred dollars you can keep it simple
now and add to it later!
One way to build on this Example is to have the students read the Harvard Business
Review article “For Founders, Preparation Trumps Passion.” This article from the
July 2015 edition profiles recent research on hundreds of founders that reveals that
passion has nothing to do with results a few years after start-up. Rather, preparation
is more important to firm success. Consider using the following discussion questions:
How can founders strike the right balance between passion and preparation when
seeking outside sources of funding?
Why do you think so many founders start their companies without solid business
plans? What are the benefits and risks of doing so?
Assume you were going to help Bear Snax Vending develop a business plan.
Describe strategic challenges the company is likely to face in the next 3-5 years
and how it could best plan for those challenges.
Article Citation:
(2015). For founders, preparation trumps passion. Harvard Business Review, 93(7),
22, 24.
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Product #: F1507A-PDF-ENG
https://hbr.org/2015/07/for-founders-preparation-trumps-passion
B. Strategy is a large-scale action plan that sets the direction for an organization.
1. Strategic management involves managers from all levels – top, middle, and
first-line – in the formulation, implementation, and execution of strategies
and strategic goals to advance the purposes of the organization.
D. Why Planning & Strategic Management Are Important

1. Provide direction and momentum
2. Encourage new ideas
3. Develop a sustainable competitive advantage.
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EXAMPLE: Developing Competitive Advantage: What’s the Best Strategy in an
E-Commerce Age? (p. 139)
E-commerce has completely changed retail shopping, as more Americans skip going
into stores and order via their tablets and smartphones instead. The result has
severely impacted such chains as Staples, RadioShack, and Sears, which have
reduced the number of stores, and forced other big retailers, such as Walmart, to
ramp up their online buying and delivery operations.
YOUR CALL
For what kinds of products is a visit to a physical store a more attractive
shopping experience for consumers than buying online? How realistic is the
prospect of the use of holograms (which could enable consumers to try clothes
on at home) and 3-D printers (which could print out three-dimensional products
remotely) in the shopping experience within the next 15 years?
There are still many products that people tend to prefer a visit to the store in order
to purchase. Usually large purchases, such as automobiles, are still made in
person. This does not mean that consumers do not do an initial search online first
to educate themselves, but the final purchase is usually done at a dealership. As
the example mentions, IKEA is right to bet that larger furniture purchases are still
made in-person. Individuals like to try out sofas and mattresses before
purchasing them. Moreover, many consumers prefer to try on clothing and shoes,
even if they are not that expensive, because they want to make sure the fit is right.
Holograms and 3-D printers are increasing in use, and with the quick learning
curve of technology nowadays, there is always the chance that the shopping
experience will drastically change within the next 15 years. However, even at that
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point consumers may want to try something face-to-face rather than see a
simulation or have something created in their house. The touch and feel of a
product may still matter just as much in 15 years, it just depends how quickly
technology can get us to that point.
Additional Activities:
One way to build on this Example is to have the students watch the video “Meet
Vincent - Harry Rosen's New Virtual Clothing Advisor.” This 2-minute video
developed by ARHT Media profiles the use of a “HumaGram” by a retailer in Canada.
Consider using the following discussion questions:
What would be the benefits and disadvantages of shopping with a hologram such
as Vincent alongside you?
Thinking of your favorite retailer where you prefer to shop, discuss how e-
commerce is likely to impact the firm over the next 3-5 years. How will this firm be
able to create a competitive advantage?
Provide recommendations for how your company (or a previous one) can best
stay aware of trends in e-commerce or other threats that could impact its
competitive advantage.
Video Link:
https://vimeo.com/114602896
5.2 Fundamentals of Planning (pp. 140-143)

What are mission and vision statements, and what are three types of
planning?
Section 5.2 discusses mission and vision statements, as well as the three types of
planning. Strategic planning determines what the organization’s long-term goals should
be for the next 1–5 years with the expected available resources. Tactical planning
determines what contributions departments or similar work units can make with their
given resources during the next 6–24 months. Lastly, operational planning determines
how to accomplish specific tasks with available resources within the next 1–52 weeks.
One way that you could begin your coverage of these topics is to profile the firm
PillPack, a company which is changing how people take their prescription medications.
The company sends customers their prescription drugs sorted together into clear plastic
wrappers printed with the date and time at which they should be taken, rather than
sending each medication in a separate pill bottle. The company was profiled in the
Forbes article “Pharmacy Startup PillPack Could Change the Way America Takes Its
Medicine,” which you could ask the students to read. You could also have the students
learn more about the company at its website: https://www.pillpack.com/. This company
is an excellent firm to profile for a discussion about mission and vision statements.
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Article Citation:
Hedgecock, S. (2015, May 4). Pharmacy startup PillPack could change the way
America takes its medicine. Forbes.
http://www.forbes.com/sites/sarahhedgecock/2015/04/15/this-pharmacy-startup-wants-
to-change-the-way-you-take-your-medicine/
 Locate the mission and vision statements for your company, a previous one, or
one for which you want to work after graduation. Evaluate the extent to which
these statements serve their purpose for the company.
 For your company (or a previous one), discuss key issues the firm should
address when it conducts its strategic, tactical and operational planning.
 Using the article “Pharmacy Startup PillPack Could Change the Way America
Takes Its Medicine” as your foundation, write a mission statement and a vision
statement for PillPack. Explain why you consider your mission statement and
your vision statement to be appropriate for the firm.
Major Idea Outline:
Fundamentals of Planning.
A. The organization’s mission is translated into a vision, which is implemented
through strategic, tactical, and operational planning.
B. Mission and Vision Statements – The planning process begins with a mission
statement and a vision statement.
1. An organization’s mission is its purpose or reason for being.
a. A mission statement expresses the purpose of the organization.
2. The vision is a long-term goal describing “what” the organization wants to
become; it is a clear sense of the future and the actions needed to get
there.
a. After formulating a mission statement, top managers need to develop
a vision statement, which expresses what the organization should
become, where it wants to go strategically.
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Group Exercise #1: Investigating Corporate Mission and Vision Statements

There is a group exercise available at the end of this manual that allows students to
explore the importance of mission and vision statements.
Exercise Objectives
 To explore the value of creating an organizational mission statement, vision
statement, and supporting goals.

EXAMPLE: Mission Statements for Three Different Companies: Hilton, Amazon,
& Patagonia (p. 141)
Mission statements answer the question, “What is our reason for being?” Here are
the mission statements for three companies, drawn from their websites:
 Hilton – “To fill the earth with the light and warmth of hospitality.”
 Amazon – “Use the Internet to offer products that educate, inform and inspire.
We decided to build an online store that would be customer friendly and easy
to navigate and would offer the broadest possible selection. We believe that a
fundamental measure of our success will be the shareholder value we create
over the long term.”
 Patagonia (clothing maker) – “Build the best product, cause no unnecessary
harm [and] use business to inspire and implement solutions to the
environmental crisis.”
YOUR CALL
Do you think any of these mission statements could be adapted to different
companies offering different products or services? Give an example.
Yes, these mission statements are so broad that they can be adapted to different
companies. Hilton’s mission statement can be used for any service-type business
in the hospitality industry, including air travel. Moreover, it can be used for
environmental groups. Amazon’s mission statement can be used for many online
retailers, including eBay. Patagonia’s mission statement can be used for any
organization that is earth friendly, or even for energy companies.
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One way to build on this Example is to profile Patagonia’s Worn Wear program. With
this program, the company offers free repairs on busted zippers, rips, tears, buttons,
and more and teaches people how to fix their own gear. You could have the students
watch the 4-minute video “Better Than New – Patagonia’s Worn Wear Repair Truck &
Facility” Consider using the following discussion questions:
Discuss how Patagonia’s Worn Wear program is consistent with the firm’s
mission.
Given that this type of program likely encourages customers to buy fewer
products, is this a program that would be supported by the stakeholders of other
retailers if they were to implement a similar program? Defend your position.
Do you have an article of Patagonia clothing that you would rather repair than buy
a new one, even if it were more expensive to repair it? If so, explain the
sentimental value of the garment. If not, explain if your shopping decisions as a
consumer would be influenced by Patagonia’s mission statement.
Video Link:
https://www.youtube.com/watch?v=7muOgpX8vaQ

EXAMPLE: Vision Statements for Three Different Companies: Hilton, Amazon, &
Patagonia (p. 141)
Vision statements answer the question, “What do we want to become?” or “Where do
we want to go? Here are the vision statements for three companies, drawn from their
websites:
 Hilton Hotels: “To be the first choice of the world’s travelers, building on the
rich heritage and strength of our brands by consistently delighting our
customers, investing in our team members, delivering innovative products and
services, expanding our family of brands, and continuously improving
performance.”
 Amazon: “Our vision is to be earth’s most customer-centric company; to build a
place where people can come to find and discover anything they might want to
buy online.”
 Patagonia: “We prefer the human scale to the corporate, vagabonding to
tourism, and the quirky to the toned-down and flattened out.”
YOUR CALL
Do these vision statements work? Do they meet Fortune’s criterion of
describing “what’s happening in the world you compete in and what you want
to do about it. It should guide decisions”?
These vision statements vary on their degrees of incorporating Fortune’s criterion.
Hilton’s vision statement is quite detailed and seems to talk about today’s
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travelers, and how it wants to attract customers to tits brand. Amazon’s vision
statement is a bit more broad and talks about an online place to “discover
anything,” which may be considered quite brief in describing the world it competes
in. Patagonia’s vision statement is the broadest of all three. It would be difficult to
define “the human scale” and apply it to what’s happening in the world it competes
in and what it wants to do about it.
One way to build on this Example is to profile Patagonia’s decision to provide to the
rest of the surf industry free access to the technology Patagonia developed that
allows for wetsuits to be made from plant-based biorubbers rather than neoprene, a
material with a highly toxic manufacturing process. This decision is profiled in a press
release from the firm that is currently available at:
http://www.patagoniaworks.com/press/2014/7/30/new-patagonia-ad-best-weed-in-
town. Consider using the following discussion questions:
Discuss how Patagonia’s development of plant-based biorubbers to replace
neoprene in wetsuits supports the firm’s vision.
Critique the firm’s decision to provide free access to the intellectual property
surrounding these biorubbers to all firms in the surf industry.
To promote its decision to provide free access to this new technology, Patagonia
ran an advertising campaign with the slogan: “We have the best weed in town
(and we are giving it away for free).” Discuss the advantages and disadvantages
of the firm’s use of this slogan.
SELF-ASSESSMENT 5.1 (p. 142)

Assessing Your Career Vision & Plan
Go to connect.mheducation.com and take Self-Assessment 5.1
Student Questions:
1. What is the qualitative status of your vision statement and plan? Are you
surprised by the results?
Student results will differ based on assessment results. Many students will be
surprised that their vision statement and plans are not very clear, and/or that
they are not particularly aiming for growth and leadership-type positions in the
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future. Moreover, many students will be surprised at how engaged they are in
their current happiness, to the detriment of future plans.
2. Based on the three lowest rated survey items, what can you do in the near
term to enhance your vision and plan?
Though the lowest rated survey items will differ amongst students, it is
important for all students to consider a clear vision and plan of action for
future growth. Students need to consider influencing their future by taking
certain steps in their current day-to-day activities in order to foster future
success. This includes making ethical decisions, exhibiting leadership
qualities and working well in teams, amongst other behaviors.
You can also consult the Connect Instructors Manual for the post-assessment activity
and corresponding PowerPoint slides used for this Self-Assessment in Connect. In
this activity, you should ask students to write or type out a vision statement for their
future careers. The statements from the Self-Assessment should be incorporated
into a short-vision statement for students’ future careers. Select students should
share their vision statements with the class as a whole. You can guide discussion
and point out strengths in students’ vision statements.
C. Three Types of Planning for Three Levels of Management: Strategic, Tactical,

and Operational.
1. Mission statements and vision statements provide the basis for the entire
planning process. Then three things happen:
a. Strategic planning by top management: Strategic planning is what
top managers do
(1) They determine what the organization’s long-term goals should
be for the next 1–5 years with the resources they have available.
(Correct answer is A)
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EXAMPLE: Strategic Planning by Top Management: Amazon Manages for the
Future, to the Frustration of Short-Term Investors (p. 142)
Amazon CEO Jeff Bezos has an unconventional opinion about profitability. In 1997,
Bezos warned shareholders that the company’s focus is not producing profits that will
boost the stock every quarter but rather over the long haul.
He is equally unconventional in terms of planning. Most top managers do strategic
planning on a 1-3 year time line. Bezos says, “If everything you do needs to work on
a three-year time horizon, then you’re competing against a lot of people. But if you’re
willing to invest on a seven-year horizon, you’re now competing against a fraction of
those people…” Bezos is very long term, operating on a 10-20 year time line.
Amazon is spending money to open new facilities, cutting prices on its merchandise
to undercut its retail competitors, and slashing prices on its Kindle e-book reader and
its Fire tablet. “Profits will come down the road,” says business writer James Stewart.
Bezos says, “We’re willing to plant seeds, let them grow – and we’re very stubborn.”
YOUR CALL
If Amazon’s strategy hurts short-run profits, should your parents or
grandparents invest in Amazon? Should you? What if Amazon’s strategic plan
is wrong?
If Amazon’s stock price is to be dictated by net profit as opposed to confidence in
a long-term strategic plan, then it may be best if parents and grandparents do not
invest in the organization as their investment may lose value. However, there are
many organizations that went public without making large profits, such as
Facebook, that were valued highly, and continue to gain value. The younger
generation may consider investing in an organization like Amazon if there is faith
in the long term, strategic plan. Without faith in that plan, one might be wasting a
lot of time and money.
One way to build on this Example is to profile Amazon’s “eighth generation” fulfillment
centers. These fulfillment centers utilize advanced robotics to fill orders faster. As of
July 2015, the company was operating 10 of these new generation of fulfillment
centers across the U.S. The eighth generation fulfillment centers were profiled in the
2-minute IGN News video “Amazon Reveals the Robots It's Using to Ship Your
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Packages,” which you could show to the students Consider using the following
discussion questions:
Critique Amazon’s decision to invest in the “eighth generation” fulfillment centers.
Given that Amazon’s use of Kiva robots may result in job losses since fewer
workers may be needed, what strategic, tactical and operational planning should
the firm perform to deal with this labor issue.
How should Amazon’s competitors respond to its decision to invest in the “eighth
generation” fulfillment centers?
Video Link:
https://www.youtube.com/watch?v=lFUtDagKOp8
b. Tactical planning by middle management: Tactical planning is what

middle managers do
(1) They determine what contributions their departments or similar
work units can make with their given resources during the next
6–24 months.
c. Operational planning by first-line management: Operational planning

is what first-line managers do
(1) They determine how to accomplish specific tasks with available
resources within the next 1–52 weeks.
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5.3 Goals & Plans (pp. 144-146)

What are the three types of goals, and what are different kinds of plans?
Section 5.3 discusses the three types of goals: strategic, tactical, and operational. The
goal should be followed by an action plan, which defines the course of action needed to
achieve the stated goal, such as a marketing plan or sales plan. The operating plan,
which is typically designed for a one-year period, defines how you will conduct your
business based on the action plan; it identifies clear targets such as revenues, cash
flow, and market share.
One way that you could begin your coverage of these topics is to have the students
consider how social media has impacted the goals and plans of organizations. Social
media can be used by companies to promote their brands and to target new employees,
but the new technology has created challenges for firms with their desires to always
portray a positive image and to avoid legal liability. One concern about social media is
that ever more frequently employees are using social media to make negative
comments about the organization or to harass co-workers. The HR Magazine article
“Polish your Social Media Policy” provides an excellent summary of issues that
employers should consider when developing their social media policies and it may be a
good article to assign for student reading
Article Citation:
Wright, A. D. (2013). Polish your social media policy. HR Magazine, 58(8), 71-72.
 Obtain a copy of the most recent annual report for your company or a company
about which you would like to learn. Read through the background information in
the report and identify examples of strategic, tactical or operational goals
discussed in the report.
 Discuss examples of single-use programs and projects that have been
developed or implemented in your company (or a previous one) in the past three
years. Discuss the challenges that the firm experienced in implementing these
plans.
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 Using the article “Polish your Social Media Policy” as your foundation, develop
examples of policies, procedures and rules for social media that your company
(or a previous one) should use.
Major Idea Outline:
Goals, Action Plans, and Operating Plans
1. Whatever its type—strategic, tactical, or operational—the purpose of
planning is to set a goal and then to formulate an action plan.
2. Goals: A goal, also known as an objective, is a specific commitment to
achieve a measurable result within a stated period of time.
a. Goals are arranged in a hierarchy known as a means-end chain,

because in the chain of management (operational, tactical, and
strategic) the accomplishment of low-level goals is the means leading
to the accomplishment of high-level goals.
b. Goals are strategic, tactical, and operational.
(1) Strategic goals are set by and for top management and focus
on objectives for the organization as a whole.
(2) Tactical goals are set by and for middle managers and focus
on the actions needed to achieve strategic goals.
(3) Operational goals are set by and for first-line managers and
are concerned with short-term matters associated with realizing
tactical goals.
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3. The action plan and the operating plan:

a. The goal should be followed by an action plan, which defines the
course of action needed to achieve the stated goal, such as a
marketing plan or sales plan.
b. The operating plan, which is typically designed for a one-year period,

defines how you will conduct your business based on the action plan; it
identifies clear targets such as revenues, cash flow, and market share.

EXAMPLE: Strategic, Tactical, & Operational Goals: Southwest Airlines (p. 144)
Southwest Airlines was ranked as one of Fortune’s Most Admired Companies of
2014. The goal of Southwest’s top managers is to ensure that the airline is highly
profitable, following the general strategy of (a) keeping costs and fares down, (b)
offering a superior on-time arrival record, and (c) keeping passengers happy. Cutting
costs and keeping fares low has traditionally been a key tactical goal for Southwest’s
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middle managers. Operationally, Southwest’s first-line managers enhance

productivity in the unloading, refueling, and cleaning of arriving planes.
YOUR CALL
Do you think recent changes will allow the company to continue to achieve its
strategic goals?
Southwest will have to adapt in order to reach its strategic goals based on some
of the recent changes. Though its strategic goals may not have changed, its
tactical goals will have to change now that a quick turnaround may not be as
achievable, there are additional expenses to upgrade its systems, and fares are
rising. In the past Southwest has been able to retain top rankings in areas such
as customer service by doing the little things (i.e., peanuts, free checked-
baggage, etc.). It will now have to rise to the occasion again and do the small
things to retain its competitive edge. These small things are placed in tactical
goals, but implemented through operational goals.
One way to build on this Example is to have the students watch the CNBC video
“Southwest goes International, Charts Expansion.” This 3-minute video profiles some
of the challenges Southwest will face in its international expansion. Consider using
the following discussion questions:
Analyze the advantages and disadvantages for Southwest Airlines of pursuing
international expansion.
Discuss strategic, tactical and operational goals that Southwest Airlines should
create to support its international expansion.
Discuss how Southwest Airlines’ competitors should change their strategic, tactical
and operational goals in response to Southwest Airlines’ international expansion.
Video Link:
http://www.cnbc.com/2014/07/01/southwest-goes-international-charts-expansion.html
3. Standing plans consist of policies, procedures, and rules.

a. A policy is a standing plan that outlines the general response to a
designated problem or situation. Example: “This workplace does not
condone swearing”—gives managers a general idea about what is
allowable about use of bad language but gives no specifics.
b. A procedure is a standing plan that outlines the response to particular
problems or circumstances. Example: McDonald’s specifies exactly
how a hamburger should be dressed.
c. A rule is a standing plan that designates specific required action.
Example: “No smoking is allowed anywhere in the building”—allows no
room for interpretation.
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4. Single-use plans are plans developed for activities that are not likely to
be repeated in the future.
5. Single-use plans can be programs or projects.

a. A program is a single-use plan encompassing a range of projects or
activities. Example: The U.S. space program has several projects.
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b. A project is a single-use plan of less scope and complexity than a

program. Example: The Discovery space shuttle is one project in the
government space program.
Group Exercise #2: Using SMART Goals to Plan a Student Organization

write SMART goals for a new student-based organization.
Exercise Objectives
 To engage in planning by writing SMART goals and action plans for a new
student organization.
5.4 Promoting Goal Setting: SMART Goals & Management

by Objectives (pp. 147-151)
What are SMART goals and MBO and how can they be implemented?
Section 5.4 discusses SMART goals, or goals that are Specific, Measurable, Attainable,
Results-oriented, and have Target dates. A technique that assists in setting goals is
known as management by objectives (MBO), and it is a four-step process for motivating
employees.
read the Harvard Business Review online article “When You Give Your Team a Goal,
Make It a Range.” This article by Steve Martin profiles how using high-low goals (e.g.,
lose 1-3 pounds per week) as opposed to single number goals (e.g., lose 2 pounds per
week) can positively impact performance. The article is currently available at:
https://hbr.org/2014/11/when-you-give-your-team-a-goal-make-it-a-range.
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 Create at least 3 examples of SMART goals pertaining to your schoolwork that
you could focus on this academic term. Evaluate the extent to which the goals
you created meet the SMART criteria.
 Assume your company (or a previous one) wants to implement a management
by objectives program. Describe the likely benefits of the program and possible
challenges in its implementation.
 Using the article “When You Give Your Team a Goal, Make It a Range” as your
foundation, describe the advantages and disadvantages of using high-low goals
rather than single number goals.
Major Idea Outline:
A. A SMART goal is one that is Specific, Measurable, Attainable, Results
oriented, and has Target dates.
1. Specific – Goals should be stated in specific rather than vague terms.
2. Measurable – Whenever possible, goals should be measurable or
quantifiable.
3. Attainable – goals should be challenging, but realistic and attainable.
4. Results-Oriented – Only a few goals should be chosen and they must be
results-oriented.
5. Target Dates—goals should specify the target dates or deadline dates
when they are to be attained.
B. Research has shown that, if goals are made more difficult, people may achieve
them less often than they would easy goals, but they perform at a higher level.
C. People also do better when the objectives are specific rather than general.
Group Exercise #3: Writing SMART Goals

explore writing SMART goals and understand goal-setting.
Exercise Objectives
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 To provide students with an understanding of goal setting.

 To develop SMART goals through group work.

EXAMPLE: Setting Goals: Walmart Lays Out an Agenda for Environmental
Change (p. 148)
Tired of criticism of Walmart’s business practices, its CEO at the time, H. Lee Scott
Jr., in a 2008 speech laid out new environmental goals. Besides continuing to
promote energy-saving products at low prices in its stores, such as fluorescent light
bulbs, Scott said the company would also work with suppliers of high-energy-use
products, such as air conditioners, microwave ovens, and televisions, to make such
products 25% more energy efficient within three years. Later Walmart pledged to
eliminate 20 million tons of carbon emissions from its global supply chain by 2015. By
2014, the company had shot from 15th to 6th place in the EPA’s rankings of the
country’s top purchasers of green power.
YOUR CALL
Whether or not Walmart has included all the sources of emissions in its
calculation, as critics assert, how do the objectives outlined above reflect the
criteria for SMART goals?
Specific - At its 2013 Global Sustainability Milestone Meeting, the company listed
the two following goals, to be achieved by the end of 2020: (1) a 600% increase
(over 2010 levels) in power purchases of renewable energy globally every year,
and (2) a reduction by 20% globally (compared to 2010) in kilowatts required to
power Walmart buildings.
Measurable – These goals can be measured through purchases of renewable
energy and kilowatts usage of power.
Attainable – Nothing is mentioned that says these goals are not attainable or
obviously too challenging, yet they may be challenging, which is a good thing.
Results-oriented – This is based on a pledge to help the environment and have
an environmental plan. The results are related to the activities of Walmart, which
affect the environment on a daily basis whether it is through its own operations, or
the products it sells.
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Target dates – Specific date has been set: End of 2020.

One way to build on this Example is to profile Walmart’s new positions around animal
welfare and the responsible use of antibiotics in farm animals that the firm announced
in May of 2015. Among the initiatives are that Walmart’s food suppliers must treat
animals humanely and limit the use of antibiotics. The firm’s positions are described
in the Wall Street Journal article “Walmart Encourages Meat and Egg Suppliers to
Curb Antibiotic Use” and in a press release by the firm available at:
http://news.walmart.com/news-archive/2015/05/22/walmart-us-announces-new-
animal-welfare-and-antibiotics-positions. Consider using the following discussion
questions:
Evaluate the extent to which Walmart’s positions on animal welfare meet the
criteria for SMART goals.
Assume Walmart wants to make its positions on animal welfare more
“measurable” using the SMART criteria. Provide examples of how the firm’s
position statements should be revised.
Assume that you work for one of Walmart’s suppliers. How are you likely to react
if you view Walmart’s position as challenging, but obtainable? What about if you
view its position as impossible, given your cost constraints?
Article Citation:
Nassauer, S. (2015, May 22). Walmart encourages meat and egg suppliers to curb
antibiotic use. Wall Street Journal Online.
http://www.wsj.com/articles/wal-mart-encourages-meat-suppliers-to-curb-antibiotic-
use-1432305974
D. What Is MBO? The Four-Step Process for Motivating Employees

1. Management by objectives (MBO) is a four-step process, and its
purpose is to motivate rather than control subordinates.
a. Step 1: The employee and manager meet and jointly set objectives to
be attained by the employee.
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(1) There are three types of objectives: improvement objectives,

personal development objectives, and maintenance objectives.
b. Step 2: Managers at each level must prepare an action plan for

attaining them.
(1) These may be prepared for both individuals and work units such
as departments.
c. Step 3: Managers and employees must periodically review
performance.
(1) Managers/employees should meet reasonably often, either
formally or informally every 3 months.
(2) Managers should give employees feedback and objectives
should be updated or revised as necessary to reflect new
realities.
d. Step 4: At the end of 6-12 months, the employee and manager
should meet to discuss results and compare results with initial
objectives.
(1) Because the purpose of MBO is to motivate, performance that
meets objectives should be rewarded.
2) Failure can be addressed by redefining objectives or taking
stronger measures.
E. Cascading Objectives: MBO from the Top Down
1. The commitment of top management is essential.
2. It must be applied organization-wide.
3. MBO works by cascading objectives; that is, objectives are structured in a
unified hierarchy, becoming more specific at lower levels of the
organization.
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SELF-ASSESSMENT 5.2 (p. 149)

What Is the Quality of Goal Setting within a Current or Past
Employer?
Go to connect.mheducation.com and take Self-Assessment 5.2.
Student Questions:
1. What are the strengths and weaknesses of goal setting in the company you
selected?
Student responses will differ based on assessment results. Students may be
surprised to see that goals are underutilized in their selected organization. On
the other hand, students may be surprised to see that goals play a large role
in the operations of the organization, even if not discussed on a daily basis.
2. Based on your results, what recommendations would you provide to senior
management about improving the goal-setting process in this company?
Explain.
Students should recommend that as a start, SMART goals should be utilized
in the organization. This would help with some students who saw a low score
on the assessment, but it does not end here. Students should also
recommend management by objectives. These four-steps would foster
motivation in the organization, especially when the proper objectives are set
(improvement objectives, personal development objectives, and maintenance
objectives).
3. What actions could you take to improve the goal-setting process in this
company? Be specific.
Employees can be part of the process as well. The recommendations
mentioned in Question 2 need employee involvement in order to be
successful, especially the steps in the management by objectives process
(i.e., Step 1: the employee and manager meet and jointly set objectives to be
attained by the employee). If this step is not successful, there may be
additional hurdles down the road, and an important part of its success is the
involvement of both manager and employee.
You can also consult the Connect Instructors Manual for the post-assessment activity
and corresponding PowerPoint slides used for this Self-Assessment in Connect. In
this activity, students should be placed into groups based on Self-Assessment
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results. High scorers should be placed together and low scorers should be placed
together. Students with high organizational facilitation of goal achievement should
discuss what their organizations are doing to facilitate goal achievement. Are MBO
principles implemented? Students with low organizational facilitation of goal
achievement should discuss what their organizations can do to better facilitate goal
achievement. Would MBO principles assist? Groups should share with the class
and you can lead discussion.
F. The Importance of Deadlines

1. Because the whole purpose of planning and goals is to deliver to a client
specified results within a specified period of time, deadlines become a
great motivator, both for you and for the people working for you.
2. Deadlines help you ignore extraneous matters in favor of focusing on
what’s important.
(Correct answer is D)

PRACTICAL ACTION: How to Achieve Your Important Goals: Don’t Keep Every
Option Open (p. 151)
We’ve all been told that it’s important to keep our options open, but according to
behavioral economist Dan Ariely, that may not be the best option! He conducted
experiments involving hundreds of MIT students who showed that they could not bear
to let go of their options even though it was bad strategy.
Ariely suggests that “keeping options open” is really a fear of loss. “Closing a door on
an option is experienced as a loss, and people are willing to pay a price to avoid the
emotion of loss,” he says.
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YOUR CALL
Are you presently considering adding a class, switching majors, or pursuing another
career? Are you wondering whether to continue a personal relationship that no longer
benefits you? What would be the advantages of just saying no?
Based on Ariely’s work, there are advantages to sometimes just saying no, but
those advantages are not realized because people sometimes just cannot bear to
let go of their options. Letting go of options can be seen as a loss, though
continuing can be a bad strategy. This includes the thoughts of adding a class,
switching majors, pursing another career, or even continuing a personal
relationship that is no longer of benefit.
Sometimes making a decision and “cutting your losses” will really assist you in
reducing actual losses down the road as indecision and keeping options open can
take their toll.
One way that you could build on this Practical Action is to show the students the video
“Professor Dan Ariely Talking about FOMO.” In this 5-minute video, Professor Ariely
discusses the “Fear of Missing Out” and how anticipatory regret can impact the
decision-making process. Consider using the following discussion questions:
Provide examples of how your own “fear of missing out” has had negative
implications for your personal or professional life.
Assume that your company uses management by objectives and you ended up
missing your sales goal by 1%. How are you likely to feel? What if you had
missed the sales goal by 10%?
Describe a time where your feelings of anticipatory regret impacted your decision-
making process? How as a manager can you seek to avoid anticipatory regret?
Video Link:
https://www.youtube.com/watch?v=iNN32bHxxxQ
5.5 The Planning/Control Cycle (pp. 152-153)

How does the planning/control cycle help keep a manager’s plans headed
in the right direction?
Section 5.5 discusses the planning/control cycle, which includes the following four
steps: (1) Make the plan. (2) Carry out the plan. (3) Control the direction by comparing
results with the plan. (4) Control the direction by taking corrective action in two ways—
namely (a) by correcting deviations in the plan being carried out or (b) by improving
future plans.
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read the Forbes article “Daughter Knows Best: Inside the 84 Lumber Saga.” The article
is an excellent way to profile the pitfalls of ineffective planning and control processes.
Article Citation:
Alexander, D. (2015, February 9). Daughter knows best: Inside the 84 Lumber saga.
Forbes.
http://www.forbes.com/sites/danalexander/2015/01/21/daughter-knows-best-inside-the-
84-lumber-saga/
 Critique the effectiveness of the planning and control processes at your company
(or a previous one).
 Using the article “Daughter Knows Best: Inside the 84 Lumber Saga” as your
foundation, describe the weaknesses of the firm’s planning and control
processes.
 Using the article “Daughter Knows Best: Inside the 84 Lumber Saga” as your
foundation, evaluate the extent to which you believe the company is on track for
success today and critique the appropriateness of the firm’s current strategic
goals.
Major Idea Outline:
A. The planning/control cycle has two planning steps (1 and 2) and two control
steps (3 and 4), as follows:
1. Make the plan.
2. Carry out the plan.
3. Control the direction by comparing results with the plan.
4. Control the direction by taking corrective action in two ways:
a. by correcting deviations in the plan being carried out
b. by improving future plans
B. The planning/control cycle loop exists for each level of planning.
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EXAMPLE: The Planning/Control Cycle: Apple Keeps Its Products Secret to
Generate Buzz (p. 153)
This Example describes how Apple uses planning and control as part of its marketing
strategy.
YOUR CALL
Can you think of a more effective way to generate consumer interest in a
forthcoming product than just keeping it secret? What kind of planning/control
cycle issues would it raise?
One way a company can generate consumer interest in a forthcoming product is
to release small hints of what capability will be introduced without officially
releasing all the upcoming features. This would lead to a change in plan, its
execution, result comparison and corrective action. Apple will need to consider
how much information should be released in order to attract attention, and what it
should keep consumers in the dark about in order to generate buzz. Once that is
established in the plan, the rest of the steps would follow suit.
One way to build on this Example is to have the students watch the Bloomberg
Business video “Apple's iPhone 6 Failures Should Be Blamed on Secrecy.” In this 6-
minute video from September of 2014, Bloomberg Contributing Editor Paul Kedrosky
discusses Apple’s product snafus that he contends were caused by the firm’s
overemphasis on secrecy. Consider using the following discussion questions:
Discuss how Apple’s emphasis on secrecy can complicate the firm’s
planning/control cycle.
Would you recommend that Apple expand the scope of its product testing prior to
launching new products? Defend your point of view by discussing the advantages
and disadvantages of your position.
Describe other managerial challenges that could be created as a result of Apple’s
heavy reliance on secrecy.
Video Link:
https://www.youtube.com/watch?v=HCA5xZ7792U
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(Correct answer is C)
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CHALLENGE: MAJOR QUESTIONS
5.1 What are planning, strategy, and strategic management, and why are they
important to me as a manager?
Planning is defined as setting goals and deciding how to achieve them. When you
make a plan, you make a blueprint for action that describes what you need to do to
realize your goals (i.e., business plan). A strategy is a large-scale action plan that
sets the direction for an organization. Strategic management is a process that
involves managers from all parts of the organization in the formulation and the
implementation of strategies and strategic goals. A manager should adopt
planning and strategic management for three reasons: They can (1) provide
direction and momentum, (2) encourage new ideas, and above all (3) develop a
sustainable competitive advantage.
5.2 What are mission and vision statements, and what are three types of
planning and goals?
A mission statement expresses the purpose of the organization, whereas a vision
statement expresses what the organization should become, or where it wants to
go strategically. There are three types of planning and goals: strategic, tactical,
and operational. Strategic planning determines what the organization’s long-term
goals should be for the next 1–5 years with the expected available resources.
Tactical planning determines what contributions departments or similar work units
can make with their given resources during the next 6–24 months. Lastly,
operational planning determines how to accomplish specific tasks with available
resources within the next 1–52 weeks.
5.3 What are the three types of goals, and what are different kinds of plans?
Three types of goals are strategic, tactical and operational. Strategic goals are set
by and for top management and focus on objectives for the organization as a
whole. Tactical goals are set by and for middle managers and focus on the
actions needed to achieve strategic goals. Operational goals are set by and for
first-line managers and are concerned with short-term matters associated with
realizing tactical goals. There are two kinds of plans: action and operating. An
action plan defines the course of action needed to achieve the stated goal, such as
a marketing plan or sales plan. The operating plan, which is typically designed for
a one-year period, defines how you will conduct your business based on the action
plan; it identifies clear targets such as revenues, cash flow, and market share.
There are also two types of plans: standing and single-use. Standing plans are
plans developed for activities that occur repeatedly over a period of time. Standing
plans consist of policies, procedures, and rules. Single-use plans are plans
developed for activities that are not likely to be repeated in the future. Such plans
can be programs or projects.
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5.4 What are SMART goals and MBO and how can they be implemented?
A SMART goal is one that is Specific, Measurable, Attainable, Results-oriented,
and has Target dates. Management by objectives (MBO) is a four-step process in
which (1) managers and employees jointly set objectives for the employee, (2)
managers develop action plans, (3) managers and employees periodically review
the employee’s performance, and (4) the manager makes a performance appraisal
and rewards the employee according to results. The purpose of MBO is to
motivate rather than to control subordinates. For MBO to be successful, the
following three things have to happen: top management must be committed, it
must be applied organization wide, and objectives must “cascade.”
5.5 How does the planning/control cycle help keep a manager’s plans headed in
the right direction?
Once plans are made, managers must stay in control using the planning/control
cycle, which has two planning steps (1 and 2) and two control steps (3 and 4), as
follows: (1) Make the plan. (2) Carry out the plan. (3) Control the direction by
comparing results with the plan. (4) Control the direction by taking corrective action
in two ways—namely, (a) by correcting deviations in the plan being carried out or
(b) by improving future plans. This is a continuous feedback loop that helps keep
the manager’s plans headed in the right direction, or let him/her know if they are
not.
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MANAGEMENT IN ACTION: GE’s Poor Planning Results in Delays & Increased

Costs
1. Which of the fundamentals of planning did GE execute ineffectively? Explain

your rationale.
The company’s operational plan was not effectively executed. It did not consider
all the issues at hand with transporting the drilling equipment. Though middle
management had a plan to disassemble the equipment, and upper management
understood how all of this played into the company’s larger strategy, front-line
management did not get the proper approvals (i.e., Nez Perce Tribe) before
going ahead with the plan. There can also be an argument for tactical planning
as getting the proper approvals may be a longer-term plan, but tactical planning
is more related to the decision on how to move the equipment, not the actual
move itself.
2. Which of the three types of goals were ineffectively managed by GE? Explain.
The same justifications as mentioned in the first question can be used here. It
seems that operational, and to a certain extent, tactical goals were not managed
effectively. Getting the proper permits in order to realize the tactical goal, which
is based on a larger strategy, was key here.
3. State two SMART goals for GE based on the case. Given the political issues
discussed in the case, how might GE ensure that these goals are attainable?
Discuss.
GE should use a SMART goal for moving the equipment. It can include the
number of days it would take to move the equipment, when it should be done by,
and how that plays into its larger strategy of focusing on its oil business. Now
the goal may not include the political issue, which is why GE must make sure the
goal is attainable, and the legal hurdle is resolved, before attempting the SMART
goal.
Another SMART goal can be utilized for earning back some of that $75 million in
lost sales due to this issue. That can include a specific goal, related to the oil
sector, which would increase revenues during the time period that the injunction
is in place. Of course, how attainable this may be is up for debate.
4. Using Figure 5.5, describe what GE could have done to improve the process of
transporting the evaporator. Provide specific recommendations.
The first recommendation would be to include all the proper approvals needed
for transporting the equipment in the initial plan. This way, when the plan is
being carried out there is an idea of what needs to be done prior to transport. If
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the initial plan is flawed, there is a greater chance that the rest of process will be
tainted as well. The second recommendation is to learn from this issue and to
incorporate that information for improving future plans. In the current issue, the
deviations do not seem to be correctable based on the injunction in place; so GE
will have to improve future plans so all the correct approvals are received when
such a transport is to occur.
5. What did you learn about planning based on this case? Explain.
Proper planning is key when it comes to large-scale projects. If a plan does not
properly materialize, the carrying out of the plan is likely to fail. In this case, the
strategy and tactical plans may have worked out fine, but the operational
planning was flawed. With that in mind, the plan did not properly execute and
the organization will likely lose millions of dollars worth of revenue. It is
important for the company to learn from this issue during its planning/control
cycle, and to utilize the knowledge gained during future planning stages.
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LEGAL/ETHICAL CHALLENGE
How Do You Think Companies Should Respond to Accusations Made by a
Whistle-Blower?
We defined a whistle-blower in Chapter 3 as an employee who reports organizational

misconduct to the public. Whistle-blowing is important to organizations for many
reasons. One critical one is that the Sarbanes Oxley law, which was discussed in
Chapter 3, mandates that companies develop processes and procedures for handling
whistle-blowing. The Dodd-Frank law further provides financial rewards for employees
who implicate security fraud and other types of wrongdoing. Civilians have received
millions for exposing wrongdoing in companies that do business with the U.S.
government.
This challenge involves consideration of how organizations should plan to respond to

claims of misconduct or illegal activity. Consider what happened at Renault SA. An
employee at Renault provided an anonymous accusation that a senior manager
negotiated a bribe. “After a four-month investigation, Renault in January [2011]
dismissed the executive and two other managers. The employees professed their
innocence, but the company’s chief executive, Carlos Ghosn, said publicly that the
company had evidence against them. Over the past two months, however, Renault has
uncovered no evidence against the trio.” The company’s chief operating officer, Patrick
Pélata, told The Wall Street Journal that “the company may have been ‘tricked’ into
bringing the allegations.”
Solving the Challenge:

What do you think management at Renault should have done about the
anonymous accusation about a senior official negotiating a bribe?
1. A four-month investigation is enough time to investigate the claim of bribery.

Renault obviously was “tricked” by the anonymous tipper.
I thus would punish the person who made the false claim and hire back the three
employees. These employees should also receive pay for the time they were
dismissed. One criticism of the Dodd-Frank law has been that, because of the
financial incentives involved, employees may report “tips” without complete
information or substantiation, figuring “nothing ventured, nothing gained”.
2. Renault obviously did not conduct a thorough investigation prior to firing the
three employees. The company needs to develop detailed guidelines for how
such matters should be investigated. It also needs to hire back the employees
and pay them for the time they were dismissed.
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Having a procedure in place to handle these events in the future is an excellent

idea. However, there was no such procedure in place when this occurred. If
Renault spent time conducting an investigation, it would probably have been
criticized for that as well. If the company does develop a procedure, it should
consider whether employees under investigation should be allowed to continue to
work or be placed on paid leave, pending resolution of the investigation.
3. Renault should have hired an outside firm to investigate the claim, or they should
have consulted with an outside law firm to review results from the investigation
and render an opinion to senior executives. They also need to hire back the
employees and pay them for the time they were dismissed.
Having an outside party investigate may be a good idea, but it is not foolproof
either. Enron had hired the accounting firm of Arthur Andersen to audit its books,
and the accounting firm was later convicted of obstruction of justice for shredding
documents related to its audit.
4. Invent other options.
Renault can lobby the government for changes to the law that allows for such
whistleblowing privileges and compensation. Though proper whistleblowing
should always be encouraged, there should be safeguards so anonymous tips,
that cannot be substantiated, are not allowed to ruin the careers of other
employees and/or provide the tippers with compensation for their actions.
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GROUP EXERCISES
Group Exercise #1: Investigating Corporate Mission and Vision Statements
Objectives
 To explore the value of creating an organizational mission statement, vision

statement, and supporting goals.
Introduction
The overall purpose of this exercise is to enhance students’ understanding about the
value of creating mission and vision statements and the need to create organizational
goals in support of these statements. Students use the Internet in this exercise to focus
on Coca Cola’s mission, vision, and corporate goals.
Instructions
1. Be sure to define mission statement (expresses the purpose of the organization),

vision statement (expresses what the organization should become, where it wants to
go strategically), and corporate goals before using this assignment as an exercise.
2. Give the students the assignment of referring to Coca Cola’s web page:
http://www.coca-colacompany.com/our-company. You may want to give students
the option of searching on any number of firms that may be interesting to you or
them. We recommend Coca Cola for this exercise because its website contains the
information needed to complete this exercise and it’s a well-known company.
3. Ask students to print Coca Cola’s mission statement, vision statement, and
corporate goals. If you use a company besides Coca Cola, tell your students that
many companies include their corporate goals in their annual reports.
Questions for Discussion
1. What are Coca-Cola’s mission and vision statements?
2. Do the organizational goals clearly support these statements? Try to get your
students to explain “how” the goals support the mission and vision.
3. Why is it important for an organization to establish a mission statement, vision

statement, and associated goals?
4. Would you like to work at Coca-Cola? Why or why not?
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Group Exercise #2: Using SMART Goals to Plan a Student Organization
Objectives
 To engage in planning by writing SMART goals and action plans for a new student
organization.
Introduction
The overall purpose of this exercise is to give students an opportunity to experience two
key components of the planning process: creating operational goals and action plans.
This will be accomplished by asking students to create SMART goals and action plans
for a new student organization.
Instructions
1. Lecture on the planning process and the criteria for writing SMART goals. There
is a short exercise for teaching your students how to write SMART goals at the
end of this exercise.
2. Tell the students that the goal of this exercise is for them to experience two major
components of the planning process: creating operational goals and action
plans. Tell students they are to imagine that they are working to bring a new
student organization to their university with a mission to make the campus more
student-friendly.
3. Break the class into groups of 5-6 people. Each group is charged with creating
(1) two SMART goals that the organization will attempt to achieve over the next
12 months in pursuit of its mission (to make the campus more student-friendly)
and (2) an action plan summarizing how the group will accomplish its goals.
Consider giving the students a copy of the sample action planning form shown at
the end of this exercise for use during their planning. Encourage the groups to
make whatever assumptions are needed to complete this task and give them 30
minutes to complete their work. Tell each group to appoint a spokesperson who
will summarize the group’s work at the end of the exercise.
4. Reconvene the class after 30 minutes and ask for a volunteer to summarize the
group’s goals and action plan. Ask the remainder of the class to critique whether
or not the goals are SMART and whether the action plan is logical. Ask for as
many group volunteers to summarize their work as you see fit.
1. What has this exercise taught you about the planning process?
2. Did your team find any of the steps in the planning process difficult? Which one?
3. How can this process be used in your personal life?
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Smart Goals Exercise1
Guidelines for writing SMART goals:
Specific Goals should be stated in specific rather

than vague terms.
Measurable Whenever possible, goals should be
measurable, or quantifiable.
Attainable Goals should be challenging but realistic
and attainable.
Results Oriented Only a few goals should be chosen, they
should be results oriented and they should
support the organization’s vision.
Time Bound Goals should specify the target dates or
deadline dates when they are to be
attained.
Restating Poor Goals to SMART Goals
Instructions: Restate each of the goals below as SMART goals.
1. To improve productivity in my department.
Restated:
2. To improve my leadership skills.
Restated:
3. To improve the level of customer service.
Restated:
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Action Plan
Goal:________________________________________________________________
Activities Responsibility Obstacles/Comments Start Date Finish Date

Primary
Others
1.
This exercise was created by A. Kinicki, “Performance Management Systems”, 2000
Superstition Mountain, AZ, pp. 2-9.
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Group Exercise #3: Writing Smart Goals
Objectives
 To provide students with an understanding of goal setting.

 To develop SMART goals through group work.
Introduction
Anyone can define goals. But, the five characteristics of a good goal are represented
by the acronym SMART.1 SMART stands for specific, measurable, attainable, results
oriented, and target dates. See the table below for guidelines on writing SMART goals.
Specific Goals should be stated in specific rather than vague terms. The
goal “As many planes as possible should arrive on time” is too
general. The goal that “Ninety percent of all planes should arrive
within 15 minutes of the scheduled arrival time” is specific.
Measurable Whenever possible, goals should be measurable, or quantifiable
(as in “90% of planes should arrive within 15 minutes . . .”). That
is, there should be some way to measure the degree to which a
goal has been reached.
Of course, some goals—such as those concerned with improving
quality—are not precisely quantifiable. In that case, something
on the order of “Improve the quality of customer relations by
instituting 10 follow-up telephone calls every week” will do. You
can certainly quantify how many follow-up phone calls were
made.
Attainable Goals should be challenging, of course, but above all they
should be realistic and attainable. It may be best to set goals that
are quite ambitious so as to challenge people to meet high
standards. Always, however, the goals should be achievable
within the scope of the time, equipment, and financial support
available. If too easy (as in “half the flights should arrive on
time”), goals won’t impel people to make much effort. If
impossible (“all flights must arrive on time, regardless of
weather”), employees won’t even bother trying. Or they will try
and continually fail, which will end up hurting morale. Or they will
cheat. (An example was the unrealistic goal of cutting wait times
for appointments by more than half at Veterans Affairs hospitals,
as revealed in 2014 scandals in which VA administrators were
found to have falsified figures.)
Results Oriented Only a few goals should be chosen—say, five for any work unit.
And they should be results-oriented—they should support the
organization’s vision. In writing out the goals, start with the word
“To” and follow it with action-oriented verbs—“complete,”
“acquire,” “increase” (“to decrease by 10% the time to get
passengers settled in their seats before departure”). Some
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verbs should not be used in your goal statement because they

imply activities—the tactics used to accomplish goals (such as
having baggage handlers waiting). For example, you should not
use “to develop,” “to conduct,” “to implement.”
Target Dates Goals should specify the target dates or deadline dates when
they are to be attained. For example, it’s unrealistic to expect an
airline to improve its on-time arrivals by 10% overnight. However,
you could set a target date—3 to 6 months away, say—by which
this goal is to be achieved. That allows enough time for lower-
level managers and employees to revamp their systems and
work habits and gives them a clear time frame in which they
know what they are expected to do.
Instructions
1. First, students should review the following categories.

 Career
 Education/personal development
 Family
 Financial
 Physical
 Social
 Spiritual
2. Students should pick 3 of these 7 categories and write a personal SMART goal
relevant to each category.
3. Break students into groups of 3 or 4 after they complete step 2.
4. Each student should share their first goal with the group. Others in the group then
provide feedback on whether it is a SMART goal or provide feedback to make it a
SMART goal.
5. Each student will share their goals one at a time, until every group member has
shared his or her 3 goals.
6. Students then revise their goals based on feedback.
1. Did you find this exercise easy, moderate, or hard? Why?

2. Why is it hard to write SMART goals?
1
Based on R. Kreitner and A. Kinicki, Organizational Behavior 6e, 2004, McGraw-Hill,
Burr Ridge, IL, p. 305.
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VIDEO CASES
1) Where They’re Doing Something New

Teaching Objective: To illustrate the importance of innovation, provide examples of
innovative companies, and emphasize the necessity of planning to achieve innovation.
Summary: Innovation can change industries and bring big pay-offs to companies who
fully commit to it and support it. Apple Computer, Nintendo, Google, General Electric,
Toyota, and Tata Motor are foremost among companies recognized for innovative
products and strategies.
Questions:
1. What strategy do innovative companies use when responding to uncertainty in

the environment? What is the cost of following this strategy?
Answer: Innovative companies are prospectors that follow the motto, “Let’s
create our own opportunities, not wait for them to happen.” Prospectors focus on
developing new products and finding new markets. Continual product and market
innovation requires constant investment of resources and may occasional cause
a company to suffer a loss of efficiency when some new projects or products do
not succeed.
2. Why should a company wanting to innovate express that goal in a vision

statement?
Answer: A vision statement expresses what the organization should become and
where it wants to go strategically. Stating that the company wants to pursue
innovation expresses the long-term goal and the commitment needed to achieve
it, from the CEO on down throughout the organization.
3. With Nintendo’s Wii gaming system as an example, briefly describe the three
types of planning required to launch an innovative new product.
Answer: First, strategic planning by top management is required. As part of their

plans for growth and profit, Nintendo executives would decide to expand the
market for video games by developing new products.
Next comes tactical planning by middle management, who determine what

contributions their departments can make with their resources during the next 6–
24 months. Nintendo middle managers might work with creative teams to
develop ideas for new games and strategies for distribution, and decide which to
pursue.
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Third, middle managers pass these plans along to first-line managers to do

operational planning, by which they determine how to accomplish specific tasks
with available resources within the next 1–52 weeks. Team leaders and unit
managers at Nintendo would assign tasks such as developing software and
hardware for the Wii system.
2) Panera Bread: Strategy

Teaching Objective: To illustrate the fundamentals of planning as applied to strategic
planning and goal-setting.
Summary: Panera is part of a trend toward healthier eating and more balanced living.
Its menu includes homemade artisan breads, soups, salads, bagels, specialty
sandwiches, and a host of hot, frozen, or iced beverages, from coffee and tea to
specialty drinks. While Panera may be growing at a terrific rate, the company is
committed to smart growth. Its CEO and others are wary of growth that happens too
fast, in the wrong geographic regions, or on the wrong pieces of real estate.
Questions:
1. During the 1980s, Shaich and his colleagues began developing a strategy for
changing the way America eats. How did they decide on the bakery café
strategy? Did Panera’s leaders seem to follow the six steps of strategic
planning?
Answer: The owners did some forecasts of how to change the business in the
mid 1990s, after some growth and success with what they started out as. At this
point, the original company had acquired the St. Louis Bread Company, and 19
stores were in operation. The strategy first involved planning and analyzing what
they had to work with and what customers wanted or what the company
forecasted they would be receptive to. After some scenario plans, the company
settled on the café strategy. In 1996 the company added bagels, and unit
volume grew 25 percent. In 1997, it added the sit-down component and sales
increased about 30 percent in one year. Multiple strategic groups were involved
in the growth and operation of Panera and other stores at this time. Ron and the
others decided to focus on just one cohesive strategy. Panera sold its other
businesses, including its namesake, in order to focus all energies on Panera.
The store has seen growth from 199 cafés in 1999 to over 700 today.
Shaich and the others do appear to have followed all the steps to strategic
planning. They established a mission, vision, and goals for the firm. They
included an analysis of external opportunities and threats, and decided to pursue
a healthy eating kind of fast-food restaurant. They analyzed their internal
strengths and weaknesses, and performed a SWOT analysis. They formulated a
strategy for Panera, and have since implemented the strategy. The leaders have
exercised control over the growth and the company has retained its integrity
throughout the last several very successful years.
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2. A mission describes the company in its current state. Strategic vision, on the
other hand, looks to the future of the business and where it wants to be.
Describe what you think is Panera’s strategic vision. What do you think is the
most important component to that vision?
Answer: Student responses will vary some with this question. Panera’s vision
can be described by considering Ron Shaich’s testimony about the company.
The vision really seems to be to sustain the mission—to offer quality foods,
quality breads, great people, and the best atmosphere in which to eat those
foods. Another component of the vision is to bring great bread and
complimentary foods to every community where it can be self-sustaining.
Shaich’s vision for the company appears to be to achieve growth without
“choking on it” – to pace its growth so that it can always stay true to its goals and
values and be successful.
3. Stakeholders are those groups and individuals who affect and are affected by the
achievement of the organization’s mission, goals, and strategy. Identify the
stakeholders in Panera’s success. How can collaborating with key stakeholders
help Panera execute its strategic plan?
Answer: Panera’s stakeholders include those invested directly in the business

itself, the owners, shareholders, and franchisees. They also include the
communities that support Panera in all its locations. Because the company is so
rooted in the community, it draws its success from being well positioned and well
received in each community it is a part of. This creates a reciprocal relationship
wherein Panera can benefit the community, but Panera can also get valuable
feedback and support from the community with regards to menu options, types of
breads offered, and its marketing strategies, including the eat-in café. Besides
offering a healthy food alternative to customers in its communities, Panera has a
commitment to make its bread fresh every single day. This means it must do
something with leftover breads at the end of the day. Panera has a policy of
giving all its breads away at the end of the day to soup kitchens and places that
rely on donations. Another stakeholder in Panera is the group of people who
work in the bakery-cafés. By listening to feedback from workers, customers, and
constantly managing its strategy from the top, Panera’s management can
determine the best ways to implement its strategic plan at every level of the
organization.
Additional videos directly related to the textbook can be found in the Connect
Instructor’s Manual.
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MANAGER’S HOT SEAT
There are no Manager’s Hot Seat exercises for this chapter.
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Chapter 05 - Planning: The Foundation of Successful Management

Major Questions the Student Should Be Able to Answer 2

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MAJOR QUESTIONS THE STUDENT SHOULD BE ABLE TO ANSWER

5.1 Planning and Strategy

5.2 Fundamentals of Planning

5.3 Goals & Plans

5.4 Promoting Goal Setting: SMART Goals & Management by

5.5 The Planning/Control Cycle

MAPPING THE CLASS: CHAPTER OUTLINE

5.1 Planning and Strategy

5.2 Fundamentals of Planning

5.3 Goals & Plans

5.4 Promoting Goal Setting: SMART Goals & Management by

5.5 The Planning/Control Cycle

OVERVIEW OF THE CHAPTER

5.1 Planning and Strategy

5.2 Fundamentals of Planning

5.3 Goals & Plans

5.4 Promoting Goal Setting: SMART Goals & Management by

5.5 The Planning/Control Cycle

5.1 Planning & Strategy (pp. 136-139)

Interactive Classroom Material:

D. Why Planning & Strategic Management Are Important

Interactive Classroom Material:

5.2 Fundamentals of Planning (pp. 140-143)

Group Exercise #1: Investigating Corporate Mission and Vision Statements

Interactive Classroom Material:

Interactive Classroom Material:

SELF-ASSESSMENT 5.1 (p. 142)

C. Three Types of Planning for Three Levels of Management: Strategic, Tactical,

Interactive Classroom Material:

b. Tactical planning by middle management: Tactical planning is what

c. Operational planning by first-line management: Operational planning

5.3 Goals & Plans (pp. 144-146)

a. Goals are arranged in a hierarchy known as a means-end chain,

3. The action plan and the operating plan:

b. The operating plan, which is typically designed for a one-year period,

Interactive Classroom Material:

middle managers. Operationally, Southwest’s first-line managers enhance

3. Standing plans consist of policies, procedures, and rules.

5. Single-use plans can be programs or projects.

b. A project is a single-use plan of less scope and complexity than a

Group Exercise #2: Using SMART Goals to Plan a Student Organization

5.4 Promoting Goal Setting: SMART Goals & Management

Possible Topics for Discussion:

Group Exercise #3: Writing SMART Goals

 To provide students with an understanding of goal setting.

Interactive Classroom Material:

Target dates – Specific date has been set: End of 2020.

D. What Is MBO? The Four-Step Process for Motivating Employees

(1) There are three types of objectives: improvement objectives,

b. Step 2: Managers at each level must prepare an action plan for

SELF-ASSESSMENT 5.2 (p. 149)

F. The Importance of Deadlines

Interactive Classroom Material:

5.5 The Planning/Control Cycle (pp. 152-153)

Interactive Classroom Material:

CHALLENGE: MAJOR QUESTIONS

MANAGEMENT IN ACTION: GE’s Poor Planning Results in Delays & Increased

1. Which of the fundamentals of planning did GE execute ineffectively? Explain

We defined a whistle-blower in Chapter 3 as an employee who reports organizational

This challenge involves consideration of how organizations should plan to respond to