7

Ready Notes

Basic Elements of
Planning and
Decision Making
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 Terms
• GOAL— A broad primary outcome. A goal is an idea of the future or
desired result that a person or a group of people envisions, plans and
commits to achieve.
• PLAN: A detail proposal for doing or achieving something. List of
steps.
• STRATEGY— The approach you take to achieve a goal. Strategy is
bigger than plan.
• A plan says, “Here are the steps,” while a strategy says, “Here are the
best steps.” Strategy speaks to the reasons why (best alternative),
while the plan is focused on how.
• OBJECTIVE— A measurable step you take to achieve a strategy and
goals.
• TACTIC— A tool you use in pursuing an objective aligned with your
strategy. An organized sequence of steps designed to execute
strategic plans.

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Basic Elements of Decision making and The
Planning Process
• Decision making is the cornerstone of planning. P&G decided to set a goal of
doubling its revenues over a ten-year period. The firm’s top management could have
opted an array of alternative options i.e. 25% revenue, time frame shorter or longer,
new markets, cutting costs, or buying competing businesses.
• Decision making is the catalyst that drives the planning process.
• All Planning process occurs within an environmental context. If managers do not
understand this context, they will be unable to develop effective plans. Thus
understanding the environment is essentially the first step in Planning.
• A manager must establish the organization’s mission.

• The mission outlines the organization’s purpose, premises, values and directions.
Flowing from the mission are parallel streams of goals and plans. Directly following
the mission are the strategic goals. These goals and mission help determine
strategic plans. Strategic goals and plans are primary inputs for developing tactical
goals. Tactical goals and the original strategic plans help shape tactical plans.
Tactical plans, in turn, combine with the tactical goals to shape operational goals.
These goals and plans at each level can also be used as input for future activities at
all levels.

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 MISSION STATEMENTS
purpose, premises, values and directions

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Basic Elements of Decision making and The
Planning Process

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 Organizational Goals
• Part of the planning process, Organizational goals describe what a company expects
to accomplish over a specific period of time. Organizations usually outline
their goals and objectives in their mission. Goals might pertain to the company as a
whole, departments, employees, customers, or any other area of the Organization and
strategies to achieve those goals.
• Goals are critical to organizational effectiveness and serve a number of purposes.
• Purposes of goals:
– Provide guidance & unified direction:. Goals can help everyone understand where
the organization is going and why getting strong emphasis on growth and
expansion that is driving the firm e.g P&G goal of doubling revenues.
– Promote good planning (goal setting practices): effective goal setting promotes
good planning and good planning facilitates future goal setting e.g. P&G
demonstrate how setting goals and developing plans to reach them should be seen
as complementary activities, encourage managers to plan for expansion by looking
for new market opportunities.
– Serve as sources of motivation for employees of the organization. Goals that are
specific and moderately difficult can motivate people to work hard, especially if
attaining the goal is likely to result in rewards. E.g. rewards and bonus on sales of
P&G products.
– Mechanism for evaluation and control: that performance can be assessed in the
future in terms of how successfully today’s goals are accomplished. E.g. P&G daily
revenue targets, more or less would provide mechanism for evaluation and control.

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 Organizations Have a Purpose—
That Is Why They Need Goals

Identification Integration
(swot) (Mergers)

Organizational
purpose for
goals

Adaptation Collaboration Revitalization

(Technology) (Strategic Alliance) (mobile phone vs smart phone)

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•
Kinds of Goals
Organizations establish many different kinds of goals.
• Goals vary by level, area, and time frame.

• Level: Goals are set for and by different levels within an organization, the FOUR basic levels
of goals are the mission, Strategic, Tactical and Operational.
- Mission: a statement of an organization’s fundamental purpose and identifies the scope of the
business’s operations in product and market terms. The mission outlines the organization’s
purpose, premises, values and directions.
- Strategic goal: a goal set by and for top management of the organization, focus on broad and
general issues e.g P&G doubling revenues
- Tactical goal: set by and for middle managers of the organization with a focus how to
operationalize actions necessary to achieve the strategic goals e.g. P&G doubling revenues set
goals for middle managers.
- Operational goal: set by and for lower managers of the organization with a focus on short term
goals/ objectives and issues related to tactical goals.
- Area: organizations also set goals for different areas of department e.g. Operations (Quality,
Productivity, Services), Human Resource goals (Turnover and Absenteeism) and Finance
(Advances, Shareholders, Investment).
- Time frame: organizations also set goals across different time frames. As goals are listed as
Strategic (Long term 10 years), Tactical (Intermediate Term 5 years) and Operational levels (Short
Term 1 year).
- At some levels long term means 2 or more than 2 years term and short term mean 1 or less
than 1 year term.
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 Responsibilities for Setting Goals

Who sets goals?

– All managers should be involved in the goal setting process
e.g BOD’s and Top Managers determines Mission and
Strategic Goals, Top and MIDDLE Managers then work
together to establish tactical goals, Finally, Middle and Lower
level Managers are jointly responsible for Operational Goals.

– Each manager has responsibilities for setting goals that

correspond to their level.

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 Managing Multiple Goals and conflict

• Organizations set many different kinds of goals. When setting goals, organizations
sometimes experience conflicts or contradictions among goals. E.g. NIKE Shoes
Manufacturing goal (High Quality) vs Marketing goal (Not stylish) as a result lost
substantial market share.

• Conflicts are addressed through the use of the Optimizing concept:

– Optimizing: balancing and reconciling possible conflicts among goals e.g NIKE
management recognized and corrected the inconsistencies Nike regained its
industry standing.

Another example among airline companies facing optimizing question i.e. carrying
more passengers for lower prices or fewer passengers for higher prices.

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 What is to be
accomplished? Goal/Objective

The planning
function
consists of:

How is it to be
accomplished? Plan/ Strategy

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 Why Is Planning Important?

What
has to
be done Goal/ Objective

A task can not be

accomplished if the
manager is not
aware of:

How is When is
it to be Through Plan and Strategy it to be
done done

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 Organizational Planning
Given the clear link between organizational goals and plans, we now turn our
attention to various concepts and issues associated with planning itself, this
section identifies kinds of plans, time frames for planning, who is responsible for
planning, and contingency planning.

Kinds of organizational
plans:
Include Strategic, Tactical, and
Operational Plans .
– Strategic plan: (to achieve
strategic goals) a general
plan outlining decisions of
allocation, priorities, and
action steps necessary to
reach strategic goals. By
bod’s and top mgmt. and
have extended time
horizon.
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 Tactical Plans and Operational Plans

• A plan aimed at achieving

tactical goals and developed to
implement specific parts of a
strategic plan. Involve Top and
Middle Management, have
shorter time horizon and more
specific more concrete focus.

• Operational plan: a plan that

focuses on carrying out tactical
plans to achieve operational
goals. Developed by middle and
lower Managers, have short
term focus, narrow scope fairly
with small set of activities.

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 Time Frames for Plans
Strategic Plans tends to have Long-term focus, Tactical Plans Intermediate-term
focus and Operational Plans a Short-term focus.
• Long-range plan (Strategic Plans): covers many years, perhaps even decades; make it
unfeasible 250 years however today most managers recognizes environmental changes
to plan to far ahead. Common long-range plans are for five years to Ten years with
constant monitoring of their environment for possible changes.

• Intermediate plan (Tactical Plans): usually covers periods from one to five years
especially important for Middle and First line managers e.g. Nissan vs Toyota and Honda
in profitability and productivity made 3 years plan for updating manufacturing technology.

• Short-range plan (Operational Plans): generally covers a span of one year or less affect
many other managers day-to-day activities.
• Two basic kinds: Action Plan, operationalizes any other kind of plans e.g. Nissan Plant
replaced existing equipment's with new equipment's. Reaction Plan: designed to allow the
company to react to an unforeseen circumstances e.g. Nissan Factory new equipment
arrived earlier than expected and plant managers had to shutdown production more
quickly than expected. These managers thus had to react to events beyond their control
in ways that still allowed their goals to be achieved.

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 Responsibilities for Planning (Developing a Plan)
All managers engage in planning to some degree. Primary planning activities
associated with groups of managers rather than with individual managers.
• Planning staff (responsibility): some large organizations develop a professional planning staff to reduce
workload of individual managers, coordination of planning activities, bring tools and techniques, take a
broader view than individual managers by diffusing planning responsibilities.
• Planning task force: often comprised of line managers with special interest in the relevant area of
planning, may have members from Planning Staff if organization has. Planning task force more often
created when the organization wants to address a special circumstance e.g. Electronic Data System
company decided to expand its information management services to Europe, managers knew that the
firms normal planning approach is insufficient and top management created a special planning task force,
thus, European market was formulated and implemented, later the task force was eliminated.
• Board of directors: establish the corporate mission and strategy, and in some companies take part in the
planning process.
• Chief Executive Officer: Usually the President or the Chair of the BOD’s. Singly most important individual
for planning process and implementing the strategy, Other organizational players have advisory or
consulting role.
• Executive Committee: composed of top executives, working together as a group. Meet regularly to
provide inputs to CEO, review strategic plans and are assigned to various staff committees,
subcommittees and task forces to concentrate on specific projects or problems.
• Line Management: Final component of most organizations planning activities. With formal authority and
responsibility for management of the organization. Play an important role in an organization planning
process for two reasons: First they are valuable source of inside information for other managers to
formulate and implement plans. Secondly, Line Managers at middle and lower levels of the organization
usually must execute the plans developed by top management. They identify, analyzes, and recommends
program alternatives, develops budget and submit for approval and finally sets the plans in motion.

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Contingency Planning & Crisis Management

• Contingency Planning: The determination of alternative courses of action to

be taken if an intended plan of action is unexpectedly disrupted or rendered
inappropriate.
• Crisis Management: The set of procedures the organization uses in the event
of a disaster or other unexpected calamity. A related concept is the set of
procedures the organization uses in the event of a disaster or other
unexpected calamity.
• Disaster: A school near the sea plans for a tsunami. This includes a detailed evacuation
route, procedures, roles & responsibilities, training and regular drills that are evaluated
to drive improvements.
• Partners: A firm plans what to do if they lose a major partner. For example, an
electronics manufacture that makes contingency plans for the loss of a core supplier.
• Markets: A firm plans what they will do if a major product update fails in the market.
• Political: A company plans what to do if political instability impacts its supply chain in a
particular country or region.
• Trade: A company plans what they will do if a trade war and resulting trade barriers
causes their products to be uncompetitive in foreign markets.

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 Tactical Planning
The development and executing of tactical plans:
– Tactical plans are used to accomplish specific parts of a strategic
plan. An organized sequence of steps designed to execute
strategic plans. Each strategic plan is generally implemented
through several tactical plans. Strategy focuses on resources,
environment and mission whereas tactics focus primarily on people
and action. Effective tactical planning involves both development
and execution.
-Developing Tactical Plans: Coca Cola Strategic plan involves
increased worldwide market share. Developed a tactical plan for
building a new plant in France to facilitate additional sales in Europe.
-Executing Tactical Plans: depends upon, First, the Manager needs
to evaluate every possible course of action in the light of the goal,
secondly, information and resources necessary to get the job done,
thirdly, vertical and horizontal communication and integration of
activities, finally, monitor ongoing activities derived from the plan to
make sure they are achieving the desired results

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 Operational Planning
Another critical element in effective organizational planning is the development
and implementation of Operational Plans derived from tactical plans and are
aimed at achieving operational goals.
• Single-use plan: developed to carry out a course of action not likely to be repeated in the future.
E.g. Disney plans the expansion of its theme park in Hong Kong by developing individual rides,
attractions and hotels.
- Two most common forms of single-use plans are programs and projects.
- For a program, a plan for a large set of activities. Consist of identifying procedures for
introducing a new product line (Samsung phones), opening a new facility (plant) or changing
the organization mission.
- For a project, a plan of less scope and complexity than a program. E.g. introducing a new
product in product line (Samsung phone).
• Standing Plans: Developed for activities that recur regularly over a period of time, can greatly
enhance efficiency by making decision making routine. Consist of Policies, Standard Operating
Procedures and rules and regulations are three kinds of Standing Plans:
– For a policy, a standing plan specifying the organization’s general response to a
designated problem or situation. E.g. McDonald’s has a policy that it will not grant a
franchise to an individual who already owns another fast-food restaurant.
– Standard operating procedure SOP: More specific than Policy. A standing plan outlining
steps to be followed in particular circumstances. E.g. McDonald’s has a SOP explaining
exactly how food are to be cooked, what ingredients are mixed, wearing gloves and so on.
– Rules and regulations: Narrowest of the standing plans describing exactly how specific
activities are to be carried out. E.g. McDonald’s restaurants has a rule prohibiting
customers from using its telephones.
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 Barriers to
Goal Setting and Planning
Major Barriers Overcoming Barriers
– Inappropriate goals. – Understanding the
– Improper reward purposes of goals and
system. planning.
– Dynamic and complex – Communication and
environment. participation.
– Reluctance to – Consistency, revision,
establish goals. and updating.
– Resistance to change. – Effective reward
– Constraints. system.

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 Assignment

• What are the basic elements of Planning

and Decision making process?
• Write the importance of Planning in Modern
Organizations and also briefly various types
of Plans?
• What is Planning? Explain various steps
undertaken in the process of Planning?

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