V. Orekhivskyy. Basics of Management. Lesson 2. Planning

Lesson 2. Planning and Decision Making

1. The planning process 1

2. The nature of organizational goals 1

Levels of goals 1

First level management – operational goals 1

Middle management – tactical goals 1

Strategic goals – top management 1

How goals facilitate performance 2

Five major characteristics of effective goals: 2

Linking goals and plans 2

3. Strategic management and MBO process 3

Environmental assessment 4

4. Managerial Decision Making 5

1. The planning process

Plan – The means devised to reach a goal

Goal – A future target or end result that an organization wishes to achieve

Mission – The organization’s purpose or fundamental reason for existence

Mission statement (MS) – a broad declaration of the basic, unique purpose and scope of operations that distinguishes the organization form others of its type

Mission – Goals – Plans – Goal attainment (organizational efficiency and effectiveness)

M.S. for managers: is a benchmark against which to evaluate the success.

for employees: defines a common purpose.

for external parties – investors, governments – unique insight into an organization’

values, and future directions.

2. The nature of organizational goals

Use of goals – benefits

1. can increase performance b) help clarify expectations c) facilitate the controlling function – provide benchmarks d) increased motivation

Levels of goals

First level management – operational goals

Targets or future results set by lower management that address specific measurable outcomes required from the lower levels.

Middle management – tactical goals

Targets or future results usually set by middle management for specific departments or units

Spell what must be done to achieve the results outlined in the strategic goals. Tend to be stated in more measurable terms than strategic ones.

Strategic goals – top management

Broadly defined targets or future end results set by top management. Called “official goals”.

Areas:

Market standing - desired share of present and new markets

Innovation – in products, services, in skills and activities as required

Human resources - supply, development and performance of managers

Physical resources – facilities and how to use ‘em in production process

Productivity – efficient use of resources relative to outcomes

Social responsibility – community and ethical behavior

Profit requirements – level of profitability, other indicators.

How goals facilitate performance Five major characteristics of effective goals:

1. Challenging. Difficult goals lead to higher performance

2. Attainable. Usually work best when they are attainable. At some point, use of maximum skills and abilities and cannot achieve higher performance levels. Even with difficult goals individuals usually attempt to achieve as much as possible – if they are given credit for what they do achieve.

3. Specific and Measurable. Clear what is expected and when the goal has been achieved. Quantitative goals and qualitative ones.

4. Time-limited. Should be a defined period of time wihin which the goals must be accomplished.

5. Relevant. If clearly relevant to the major work of organization and the particular department.

Goal commitment – one’s attachment to, or determination to reach, a goal. To feel committed.

Linking goals and plans

Strategic plans. Detailed action steps mapped out to reach strategic goals. Issues – how to respond to changing conditions, to allocate resources, what actions should be taken to create unified and powerful organizationwide effort aimed at strategic goals. From 3-5 years and more.

Tactical plans. The means charted to support implementation of the strategic plan and achievement of tactical goals. 1-3 years. Developed by middle managers, who may consult lower-level managers before commitments to top managers. Generally more specific and concrete than strategic plans.

Operational plans. The means charted to support implementation of the tactical plans and achievement of operational goals. Less than 1 year. Developed by lower – first line managers in conjunction with the middle management levels. Spell out what must be accomplished over short time periods.

Organizational plans:

Single use: programs, projects, budgets

Standing plans: policies, standard operating procedures, rules.

Single use plans:

Aimed at achieving a specific goal that, once reached, will most likely not recur in the future.

Program: Comprehensive plan that coordinates a complex set of activities related to a major goal.

Project: a plan that coordinates a set of limited-scope activities that do not need to be divided into several major projects in order to reach a major non-reccuring goal.

Policy: a general guide that specifies the broad parameters within which organization members are expected to operate in pursuit of organizational goals.

Procedure: a prescribed series of related steps to be taken under certain recurring circumstances.