Daft12eIM - 07 - CH 07

Planning and Goal Setting  119
CHAPTER 7
PLANNING AND GOAL SETTING
CHAPTER OUTLINE
Does Goal Setting Fit Your Management Style?

I. Goal-Setting and Planning Overview
A. Levels of Goals and Plans
B. The Organizational Planning Process
II. Goal-Setting in Organizations
A. Organizational Mission
B. Goals and Plans
C. Align Goals Using a Strategy Map
New Manager Self-Test: Your Approach to Studying
III. Operational Planning
A. Criteria for Effective Goals
B. Management by Objectives (MBO)
C. Single-Use and Standing Plans
IV. Benefits and Limitations of Planning
V. Planning for a Turbulent Environment
A. Contingency Planning
B. Building Scenarios
C. Crisis Planning
VI. Innovative Approaches to Planning
A. Set Stretch Goals for Excellence
B. Use Performance Dashboards
C. Deploy Intelligence Teams
ANNOTATED LEARNING OBJECTIVES

After studying this chapter, students should be able to:
1. Define goals and plans and explain the relationship between them.
A goal is a desired future state that the organization attempts to realize. A plan is a blueprint for
goal achievement and specifies the necessary resource allocations, schedules, tasks, and other
actions. The term planning usually incorporates both ideas and means determining the
organization’s goals and defining the means for achieving them.
2. Explain the concept of organizational mission and how it influences goal setting and
planning.
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120  Chapter 7
The overall planning process begins with a mission statement, which describes the organization’s
reason for existence. The mission describes the organization’s values, aspirations and reason for
being. A well-defined mission is the basis for development of all subsequent goals and plans.
Without a clear mission, goals and plans may be developed haphazardly and not take the
organization in the direction it needs to go. Because of mission statements, employees,
customers, suppliers, and stockholders know the company’s stated purpose and values.
Categorize the types of goals an organization should have.
3. Within the organization there are three levels of goals: strategic, tactical, and operational.
 Strategic goals are broad statements of where the organization wants to be in the future.
Strategic goals pertain to the organization as a whole and are the stated intentions of what the
organization wants to achieve.
 Tactical goals define the results that major divisions and departments within the organization
must achieve. Tactical goals apply to middle management and describe what major subunits
must do in order for the organization to achieve its overall goals.
 Operational goals describe specific results expected from departments, work groups, and
individuals. Operational goals are precise and measurable.
4. Explain how managers use strategy maps to align goals.
A strategy map is a visual representation of the key drivers of an organization’s success and
shows how specific goals and plans in each area are linked. Strategy maps provide a powerful
way for managers to see the cause-and-effect relationships among goals and plans. Managers
use the strategy map to align operational goals with tactical goals and to align tactical goals with
strategic goals.
5. Define the characteristics of effective goals.
Organizational goals at the strategic, tactical, and operational levels should: be specific and
measurable; cover key result areas; be challenging but realistic; include a defined time period;
and be linked to rewards.
6. Describe the four essential steps in the management by objectives (MBO) process.
Management-by-objectives (MBO) is a method whereby managers and employees define goals

for every department, project, and person and use them to control subsequent performance. Four
major activities must occur in order for MBO to be successful.
 Setting goals. This is the most difficult step in MBO. A good goal should be concrete and
realistic, provide a specific target and time frame, and assign responsibility. Goals may be
quantitative or qualitative. Goals jointly derived by mutual agreement between employee
and supervisor create the strongest commitment to achieving goals.
 Developing action plans. An action plan defines the course of action needed to achieve the
stated goals. Action plans are made for both individuals and departments.
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 Reviewing progress. A periodic progress review is important to ensure that action plans are
working. This periodic checkup allows managers and employees to determine if they are on
target or if corrective action is necessary. The point of MBO is to achieve goals. The action
plan can be changed whenever goals are not being met.
 Appraising overall performance. The final step in MBO is to determine if annual goals have
been achieved for both individuals and departments. Success or failure to achieve goals can
become part of the performance appraisal system and the designation of salary increases and
other rewards. The appraisal of departmental and overall corporate performance shapes goals
for the coming year.
The MBO cycle repeats itself on an annual basis. The specific application of MBO must fit the
needs of each company.
7. Compare and contrast single- use plans and standing plans.
Single-use plans are developed to achieve a set of goals that are not likely to be repeated in the
future. Single-use plans typically include both programs and projects. A program is a plan for
attaining an important, one-time organizational goal. A project is also designed to achieve a
one-time goal, but generally is short-term and has narrow objectives.
Standing plans are ongoing plans that are used to provide guidance for tasks performed
repeatedly within the organization. The primary standing plans are organizational policies, rules,
and procedures. Standing plans generally pertain to such matters as employee illness, absences,
smoking, discipline, hiring, and dismissal.
8. Discuss the benefits and limitations of planning.
The benefits of planning include:

 Goals and plans provide a source of motivation and commitment. Planning can reduce
uncertainty for employees and clarify what they should accomplish.
 Goals and plans guide resource allocation. Planning helps managers decide where they need
to allocate resources, such as employees, money, and equipment.
 Goals and plans are a guide to action. Planning focuses attention on specific targets and
directs employee efforts toward important outcomes.
 Goals and plans set a standard of performance. Because planning and goal setting define
desired outcomes, they also establish performance criteria so managers can measure whether
things are on or off track.
The limitations of planning include:

 Goals and plans can create a false sense of certainty. Having a plan can give managers a
false sense that they know what the future will be like.
 Goals and plans may cause rigidity in a turbulent environment. A related problem is that
planning can lock the organization into specific goals, plans, and time frames, which may no
longer be appropriate.
 Goals and plans can get in the way of intuition and creativity. Success often comes from
creativity and intuition, which can be hampered by too much routine planning.
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9. Describe contingency planning, scenario building, and crisis planning, and explain the
importance of each for today’s managers.
Contingency plans define company responses to be taken in the case of emergencies, setbacks, or
unexpected conditions. Contingency planning enables managers to identify important factors in
the environment and develop plans. They respond quickly to be somewhat proactive, even in an
uncertain and dynamic environment, rather than simply being buffeted about by events.
Scenario building involves looking at current trends and discontinuities and visualizing future
possibilities. Managers use historical data to develop reasonable expectations for the future and
to mentally rehearse different potential future scenarios based on anticipating varied changes that
could affect the organization.
Crisis planning includes two essential stages: crisis prevention and crisis preparation. The crisis
prevention stage involves activities of managers to prevent crises and detect warning signs of
potential crises. The crisis preparation stage includes all the detailed planning to handle a crisis
when it occurs, and appointing a crisis management team and spokesperson. The team should be
able to immediately implement the crisis management plan, so training and practice are
important. At this point it becomes critical for the organization to speak with one voice so that
employees, customers, and the public do not get conflicting stories about what happened and
what the organization is doing about it. After ensuring the physical safety of people, the next
focus should be on responding to the emotional needs of employees, customers, and the public.
Organizations should also strive to give people a sense of security and belonging.
10. Identify innovative planning approaches that managers use in a fast-changing environment.
 Set stretch goals for excellence. Stretch goals get people to think in new ways that can lead
to bold, innovative breakthroughs.
 Use performance dashboards. Performance dashboards help executives keep track of key
performance metrics, and help all employees track progress toward goals, see when things
are falling short, and find innovative ways to get back on course toward reaching specified
targets.
 Deploy intelligence teams. An intelligence team is a cross-functional group of managers and
employees, usually led by a competitive intelligence professional, who work together to gain
a deep understanding of specific business issue, with the aim of presenting insights,
possibilities, and recommendations about goals and plans related to that issue. Intelligence
teams are useful when the organization confronts a major intelligence challenge.
LECTURE OUTLINE
DOES GOAL SETTING FIT YOUR MANAGEMENT STYLE?
Most organizations have goal setting and review systems that new managers use. Not everyone
thrives under a disciplined goal-setting system, but setting goals and assessing results are tools
that can enhance a new manager’s impact. This exercise helps students determine the extent to
which they have already adopted the disciplined use of goals in their lives and in their work.
I. GOAL-SETTING AND PLANNING OVERVIEW
A goal is defined as a desired future state that the organization attempts to realize. Goals are
important because they define the purpose of an organization. A plan is a blueprint for goal
achievement and specifies the necessary resource allocations, schedules, tasks, and other
actions. Goals specify future ends; plans specify today’s means. The word planning usually
incorporates both ideas; it means determining the organization’s goals and defining the
means for achieving them.
A. Levels of Goals and Plans Exhibit 7.1
1. Top managers are responsible for establishing strategic goals and plans that reflect a
commitment to both organizational efficiency and effectiveness. Tactical goals and
plans are the responsibility of middle managers. Operational plans identify the
specific procedures or processes needed at lower levels of the organization. Frontline
managers and supervisors develop operational plans that focus on specific tasks and
processes and that help meet tactical and strategic goals.
2. Planning at each level supports the other levels.
Discussion Question #5: A new business venture must develop a comprehensive business plan to
borrow money to get started. Companies such as FedEx and Nike say they did not follow the
original plan closely. Does that mean that developing the plan was a waste of time for these
eventually successful companies?
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B. The Organizational Planning Process Exhibit 7.2
1. The overall planning process prevents managers from thinking merely in terms of
day-to-day activities.
2. The planning process includes five steps: develop the plan; translate the plan into
action; lay out operational factors needed to achieve goals; execute the plan; and
monitor and review plans to learn from results and shift plans as needed.
II. GOAL-SETTING IN ORGANIZATIONS
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A. Organizational Mission Exhibit 7.3
1. At the top of the goal hierarchy is the mission—the organization’s reason for
existence—that describes the organization’s values, aspirations, and reason for being.
2. The formal mission statement is a broadly stated definition of purpose that

distinguishes the organization from others of a similar type. The content often
focuses on the market and customers, and identifies desired fields of endeavor. Some
mission statements describe company characteristics such as corporate values,
product quality, location of facilities, and attitude toward employees.
B. Goals and Plans
1. Strategic goals are broad statements describing where the organization wants to be in
the future. Sometimes called official goals, they pertain to the entire organization
rather than to specific divisions or departments. Strategic plans define the action
steps by which the company intends to attain strategic goals. A strategic plan is a
blueprint that defines organizational activities and resource allocations. Strategic
planning tends to be long term.
2. Tactical goals are the results that major divisions and departments within the
organization intend to achieve. Tactical goals apply to middle management and
describe what major subunits must do for the organization to achieve its overall goals.
Tactical plans define what major departments and organizational subunits will do to
implement the organization’s strategic plan. They tend to be for a shorter time period.
3. Operational goals are the specific results expected from departments, work groups,
and individuals. Operational plans are developed at the lower levels of the
organization to specify action plans toward achieving operational goals and to support
tactical plans.
C. Align Goals Using a Strategy Map Exhibit 7.4
1. Effectively designed organizational goals are aligned into a hierarchy in which the
achievement of goals at lower levels permits the attainment of higher-level goals.
Operational goals lead to the achievement of tactical goals, which lead to the
attainment of strategic goals. Organizational performance is an outcome of how well
these interdependent elements are aligned, so that individuals, teams, departments,
and so forth are working in concert to attain specific goals that ultimately help the
organization achieve high performance and fulfill its mission.
2. Strategy maps are visual representations of the key drivers of an organization’s

success and show how specific goals and plans in each area are linked. They provide
a powerful way for managers to see the cause-and-effect relationships among goals
and plans.
Discussion Question #3: One of the benefits of a strategy map is that goals and how they are
linked can be communicated clearly to everyone in the organization. Does a minimum-wage
maintenance worker in a hospital really need to understand any goals beyond keeping the place
clean? Discuss.
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NEW MANAGER SELF-TEST: YOUR APPROACH TO STUDYING
A student’s approach to studying may be a predictor of his or her planning approach as a new
manager. An important part of a new manager’s job is to plan ahead, which involves grasping
the bigger picture. This exercise helps students identify their approaches to studying as being
focused on either the current details or the big picture.
III. OPERATIONAL PLANNING
A. Criteria for Effective Goals Exhibit 7.5
1. Specific and measurable. When possible, goals should be expressed in quantitative

terms. Vague goals tend not to motivate employees.
2. Defined time period. Goals should specify the time period over which they will be
achieved. A time period is a deadline on which goal attainment will be measured.
3. Cover key result areas. Key result areas are those items that contribute most to
company’s performance. Key result areas should include both internal and external
customers.
4. Challenging but realistic. The best quality programs start with extremely ambitious
goals that challenge employees to meet high standards. When goals are unrealistic,
they set employees up for failure and lead to decreasing employee morale. If goals
are too easy, employees may not feel motivated. Stretch goals are extremely
ambitious but realistic goals that challenge employees to meet high standards.
5. Linked to rewards. The impact of goals depends on the extent to which salary
increases, promotions, and other rewards are based on goal achievement. People who
attain goals should be rewarded.
B. Management by Objectives (MBO) Exhibit 7.6
1. Management by objectives (MBO) is a method whereby managers and employees

define objectives for every department, project, and person and use them to monitor
subsequent performance. Four major activities must occur in order for MBO to be
successful.
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a. Set goals. Setting goals is the most difficult step in MBO and should involve
employees at all levels. A good goal should be concrete and realistic, provide a
specific target and time frame, and assign responsibility. Mutual agreement
between employee and supervisor creates the strongest commitment to achieving
goals.
b. Develop action plans. An action plan defines the course of action needed to
achieve the stated goals. Action plans are made for both individuals and
departments.
c. Review progress. A periodic progress review is important to ensure that action

plans are working. This review allows managers and employees to see if they are
on target and if corrective action is needed.
d. Appraise overall performance. The final step in MBO is to evaluate whether

annual goals have been achieved for both individuals and departments. Success
or failure to achieve goals can be part of the performance appraisal system and the
designation of salary increases and other rewards.
Exhibit 7.7
2. The benefits of the MBO process can be many. Corporate goals are more likely to be
achieved when they focus on manager and employee efforts. Problems with MBO
occur when the company faces rapid change. The environment and internal activities
must have some stability for performance to be measured against goals.
3. Management by means (MBM), focuses attention on the methods and

processes used to achieve goals. MBM is based on the idea that when managers
pursue their activities in the right way, positive outcomes will result. MBM focuses
people on considering the means rather than just on reaching the goals.
Discussion Question #4: The MBO technique has been criticized for putting too much emphasis
on achieving goals (ends) and not enough on the methods that people use to achieve them
(means). Do you think this is a flaw in the technique, or in the way managers apply it? How
would you place a balanced emphasis on ends and means?
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C. Single-Use and Standing Plans Exhibit 7.8
1. Single-use plans are developed to achieve objectives that are not likely to be repeated
in the future. Single-use plans include both programs and projects.
2. Standing plans are used to provide guidance for tasks performed repeatedly within
the organization. The primary standing plans are organizational policies, rules, and
procedures. Many companies are discovering a need to develop standing plans

regarding the use of social media.
Discussion Question #1: What strategic plans could the college or university at which you are
taking this management course adopt to compete for students in the marketplace? Would these
plans depend on the school’s goals?
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IV. BENEFITS AND LIMITATIONS OF PLANNING
A. Benefits of Planning
1. Goals and plans provide a source of motivation and commitment. Planning can
reduce uncertainty for employees and clarify what they should accomplish.
2. Goals and plans guide resource allocation. Planning helps managers decide where
they need to allocate resources, such as employees, money, and equipment.
3. Goals and plans are a guide to action. Planning focuses attention on specific targets
and directs employee efforts toward important outcomes.
4. Goals and plans set a standard of performance. Because planning and goal setting
define desired outcomes, they also establish performance criteria so managers can
measure whether things are on or off track.
B. Limitations of Planning
1. Goals and plans can create a false sense of certainty. Having a plan can give
managers a false sense that they know what the future will be like.
2. Goals and plans may cause rigidity in a turbulent environment. A related problem is
that planning can lock the organization into specific goals, plans, and time frames,
which may no longer be appropriate.
3. Goals and plans can get in the way of intuition and creativity. Success often comes
from creativity and intuition, which can be hampered by too much routine planning.
V. PLANNING FOR A TURBULENT ENVIRONMENT
A. Contingency Planning
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1. Contingency plans define company responses to be taken in the case of emergencies

or setbacks. Contingency plans cover such situations as catastrophic decreases in
sales or prices, and loss of important managers.
2. Managers forecast a range of alternative responses to the most likely

high-impact contingencies, focusing on the worst case.
Discussion Question #7: Assume that Southern University decides to (1) raise its admission
standards and (2) initiate a business fair to which local townspeople will be invited. What types
of plans might it use to carry out these two activities?
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B. Building Scenarios
1. Scenario building involves looking at current trends and discontinuities and

imagining possible alternative futures to build a framework with which unexpected
future events can be managed.
2. With scenario building, a broad base of managers mentally rehearses different

scenarios based on anticipating the varied changes that could impact the organization.
Scenarios are like stories that offer alternative vivid pictures of what the future will
look like and how managers will respond. Typically, two to five scenarios are
developed for each set of factors, ranging from the most optimistic to the most
pessimistic view.
C. Crisis Planning Exhibit 7.9
1. Crisis Prevention
a. Although unexpected events and disasters will happen, managers should do

everything they can to prevent crises. A critical part of the prevention stage is
building trusting relationships with key stakeholders such as employees,
customers, suppliers, governments, unions, and the community.
b. By developing favorable relationships, managers can often prevent crises from

happening and respond more effectively to those that cannot be avoided. Good
communication helps managers identify problems early so they do not turn into
major issues.
2. Crisis Preparation
a. Preparation includes designating a crisis management team and spokesperson,

creating a detailed crisis management plan, and setting up an effective
communications system. Some companies are setting up crisis management
offices, with high-level leaders who report direction to the CEO.
b. The crisis management team is a cross-functional group of people who are

designated to swing into action if a crisis occurs. They are closely involved in
creating the crisis management plan they will implement if a crisis occurs. A
spokesperson should be designated.
c. The crisis management plan is a detailed written plan that specifies the steps to be
taken, and by whom, if a crisis occurs. The plan should include the steps for
dealing with various types of crises, such as natural disasters like fires or
earthquakes, normal accidents like economic crises or industrial accidents, and
abnormal events such as product tampering or acts of terrorism. The plan should
be a living, changing document that is regularly reviewed, practiced, and updated
as needed.
Discussion Question #2: From the information provided in the chapter example, identify how
Western Digital Thailand used both the prevention and the preparation stages of crisis planning.
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Discussion Question #9: Some people say an organization could never be “prepared” for a
disaster such as the shooting at Sandy Hook Elementary School, the Japan nuclear disaster, or
the huge BP oil spill in the Gulf of Mexico. Discuss the potential value of crisis planning in
situations like these, even if the situations are difficult to plan for.
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Discussion Question #6: How do you think planning in today’s organizations compares to
planning 25 years ago? Do you think planning becomes more important or less important in a
world where everything is changing fast and crises are a regular part of organizational life?
Why?
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VI. INNOVATIVE APPROACHES TO PLANNING
Decentralized planning means that planning experts work with managers in major
divisions or departments to develop their own goals and plans. Managers
throughout the company come up with their own creative solutions to problems
and become more committed to following through on the plans
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A. Set Stretch Goals for Excellence
1. Stretch goals are reasonable yet highly ambitious goals that are so clear, compelling,
and imaginative that they fire up employees and engender excellence.
2. They are typically so far beyond the current levels that people have to be innovative
to find ways to reach them.
a. An extension of the stretch goal is the big hairy audacious goal or BHAG.
b. A BHAG is any goal that is so big, inspiring, and outside the prevailing paradigm
that it hits people in the gut and shifts their thinking.
B. Use Performance Dashboards Exhibit 7.10
1. A business performance dashboard is a visual display that helps executives keep

track of key performance metrics, such as sales in relation to targets, number of
products on back order, or percentage of customer service calls resolved within
specified time periods.
2. Some dashboard systems incorporate software that lets users perform what-if
scenarios to evaluate the impact of various alternatives for meeting goals.
C. Deploy Intelligence Teams
1. An intelligence team is a cross-functional group of managers and employees, usually

led by a competitive intelligence professional, who work together to gain a deep
understanding of a specific business issue, with the aim of presenting insights,
possibilities and recommendations about goals and plans related to that issue.
2. Intelligence teams are useful when the organization confronts a major intelligence
challenge.
Discussion Question #8: LivingSocial started with one “daily deal,” a $25 voucher for $50
worth of food at a Washington D.C., area restaurant. Since then, the company has grown at
breakneck speed, has 46 million members in 25 countries, and has acquired a dozen companies
that offer related deals and services. Why and how might a company such as LivingSocial want
to use an intelligence team? Discuss.
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Discussion Question #10: Goals that are overly ambitious can discourage employees and
decrease motivation, yet the idea of stretch goals is proposed as a way to get people fired up and
motivated. As a manager, how might you decide where to draw the line between a “good” stretch
goal and a “bad” one that is unrealistic?
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Suggested Answers to End-of-Chapter Discussion Questions
1. What strategic plans could the college or university at which you are taking this management
course adopt to compete for students in the marketplace? Would these plans depend on the
school’s goals?
Yes, strategies will depend on the school’s goals. For example, if a university adopted a goal
of increasing the number of merit scholars who enroll each year from 50 to 60, then
strategies could be to send letters to merit scholars, schedule visits of university
representatives at the schools, or offer scholarships to entice the students to attend the
university. If the goal is simply to increase the number of students, administrators could
determine what attracts students to the university and attempt to adopt strategies related to
them. The strategies might include the implementation of highly visible programs such as
changing tuition rates, building additional dormitories, or striving to field a winning football
team.
2. From the information provided in the chapter example, identify how Western Digital
Thailand used both the prevention and the preparation stages of crisis planning.
 Crisis prevention stage involves activities that managers undertake to

try to prevent crises A critical part of the prevention stage is building
open, trusting relationships. Company leaders worked alongside engineers
and front line employees, even taking personal risks by engaging in diving
operations. Good relationships with customers meant some agreed to special
provisions that deviated from normal contract agreements. A few days before the
disaster, they pulled some inventory from the just-in-time (JIT) process at nearby
warehouses and moved it to a safer location.
 Crisis preparation includes detailed planning to handle a crisis

when it occurs. The company had a process in place for speeding up supplier
qualification in case new suppliers were needed. The crisis budget included
funding for smaller suppliers for rebuilding or relocating production lines. Strong
relationships with employees, customers, suppliers, and other stakeholders helped
significantly. More than 500 Western Digital employees, including all of its senior
managers, returned to work during the peak flood period. Within a week,
operations to recover and restore equipment were underway. To limit the potential
for overreaction and confusion among customers, suppliers, and shareholders, all
formal communications were handled by headquarters in the United States
132  Chapter 7
3. One of the benefits of a strategy map is that goals and how they are linked can be clearly
communicated to everyone in the organization. Does a minimum-wage maintenance worker
in a hospital really need to understand any goals beyond keeping the place clean? Discuss.
A strategy map helps the minimum-wage maintenance worker understand how the process
goal of keeping the place clean contributes to achieving goals for customer service and
satisfaction, and how achieving customer service and satisfaction goals contribute to
achieving financial goals that help the company optimize its value to all stakeholders,
including the minimum-wage maintenance worker. Research supports the notion that
employees work harder and find more meaning in their work when they understand how their
jobs fit into the bigger picture of the organization’s goals.
4. The MBO technique has been criticized for putting too much emphasis on
achieving goals (ends) and not enough on the methods that people use to achieve them
(means). Do you think this is a flaw in the technique, or in the way managers apply it? How
would you place a balanced emphasis on ends and means?
Management by objectives (MBO) is a system whereby managers and employees define

objectives for every department, project, and person and use them to monitor subsequent
performance. Goals should be derived jointly which can be achieved by the mutual agreement
between employee and supervisor, The success of MBO depends on various factors like the
implementation of action plans, a periodic progress review and performance appraisal system
Corporate goals are more likely to be achieved when they focus manager and employee
efforts. Problems with MBO occur when the company faces rapid change. The environment
and internal activities must have some stability for performance to be measured against goals.
5. A new business venture must develop a comprehensive business plan to borrow

money to get started. Companies such as FedEx and Nike say they did not follow the original
plan closely. Does that mean that developing the plan was a waste of time for these
eventually successful companies?
No, it was not a waste of time for these companies. Developing a business plan also helps a
company consider all aspects of the business. For example, an inventor may come up with a
neat new product and not consider where or how to market it. He may not consider financing
either. Developing a business plan helps the company devise options not previously
considered. Even if the plan is not followed exactly, it provides many other benefits.
6. How do you think planning in today’s organizations compares to planning 25 years ago? Do
you think planning becomes more important or less important in a world where everything is
changing fast and crises are a regular part of organizational life? Why?
Planning is much more difficult in today’s organizations than it was 25 years ago due to
increased economic and political uncertainty as a result of globalization, an ever-increasing
rate of technological change, and increased competition in many industries. On the other
hand, greater ease of communication among business components, along with increased
ability to track internal and external activities, resulting from technological advances also
make it easier to anticipate and plan for future events that it was 25 years ago.
Planning becomes more important in a world where everything changes quickly and crises are
a regular part of organizational life due to rapidly changing environmental conditions. There
is a greater need for flexibility and adaptability to meet each situation. Managers must
become even more proactive in anticipating these changing conditions in the marketplace.
Planning is important for the firm to recognize changing conditions and restructure the
organization to create more effective strategies to remain competitive.
7. Assume that Southern University decides to: (1) raise its admission standards, and (2)
initiate a business fair to which local townspeople will be invited. What types of plans might
it use to carry out these two activities?
Raising admission standards would require a standing plan to provide guidance for
admissions performed repeatedly over the next several semesters. Within the concept of a
standing plan, the university may use policies, procedures, or rules to enforce the new
admission standards. A policy would define admission standards, in general, and procedures
would describe how to admit students under the new policy. Specific rules might also be
established for specifying exactly what action to take in specific admission situations.
Initiating a business fair would probably require a single-use plan. The single-use plan
develops a set of objectives that will not be repeated in the future. The business fair would
probably be considered a project, for which participants would develop a set of short-term
objectives and plans to achieve the one-time goal.
8. LivingSocial started with one “daily deal,” a $25 voucher for $50 worth of food at a
Washington D.C., area restaurant. Since then, the company has grown at breakneck speed,
has 46 million members in 25 countries, and has acquired a dozen companies that offer
related deals and services. Why and how might a company such as LivingSocial want to use
an intelligence team? Discuss.
An intelligence team is a cross-functional group of managers and employees, usually led by a

competitive intelligence professional, who work together to gain a deep understanding of a
specific business issue, with the aim of presenting insights, possibilities and
recommendations about goals and plans related to that issue. Intelligence teams are useful
when the organization confronts a major intelligence challenge. Such teams can provide
insights that help managers to make more informed decisions about goals and devise
contingency plans and scenarios related to major strategic issues.
9. Some people say an organization could never be “prepared” for a disaster such as the
shooting at Sandy Hook Elementary School, the Japan nuclear disaster, or the huge BP oil
spill in the Gulf of Mexico. Discuss the potential value of crisis planning in situations like
these, even if the situations are difficult to plan for.
The crisis management plan is a detailed written plan that specifies the steps to be taken, and
by whom, if a crisis occurs. The plan should include the steps for dealing with various types
of crises, such as natural disasters like fires or earthquakes, normal accidents like economic
crises or industrial accidents, and abnormal events such as product tampering or acts of
134  Chapter 7
terrorism. The plan should be a living, changing document that is regularly reviewed,
practiced, and updated as needed.
A carefully thought-out and coordinated plan can be used to respond to any disaster. In
addition, crisis planning reduces the incidence of trouble, much like putting a good lock on a
door reduces burglaries.
10. Goals that are overly ambitious can discourage employees and decrease motivation, yet the
idea of stretch goals is proposed as a way to get people fired up and motivated. As a
manager, how might you decide where to draw the line between a “good” stretch goal and a
“bad” one that is unrealistic?
Stretch goals are extremely ambitious but realistic goals that challenge employees to meet
high standards. Stretch goals get people to think in new ways because they are so far beyond
the current levels that people don’t know how to reach them. A big hairy audacious goal is a
goal that is so big, inspiring, and outside the prevailing paradigm that it creates a shift in
people’s thinking. In determining whether it makes sense to pursue a stretch goal, the
primary considerations would be the need to cause people to think in new ways that can lead
to bold, innovative breakthroughs.
Apply Your Skills: Experiential Exercise
Business School Ranking
This exercise enables students to brainstorm about how to improve their own business schools.
Students should develop ten-point plans to improve their schools, then meet in small groups of
three or four to share their ideas and select the most helpful action steps that will be part of a
final action plan that could be recommended to the deans of their schools.
Apply Your Skills: Small Group Breakout
Course Goal Setting
This exercise asks students to make their goals for themselves regarding desired outcomes for
this course explicit. This should include goals for grades and for learning specific knowledge or
skills. Students should break their goals down into goal behaviors, and then compare their goals
and goal behaviors in groups. Students then discuss their success with their goals and goal
behaviors on the last day of class.
Apply Your Skills: Ethical Dilemma
Inspire Learning Corporation
1. Donate the $1,000 to Central High, and consider the $10,000 bonus a good return on your
investment.
This option will give the appearance of paying Central High to purchase the company’s
product in order to get the bonus. It is unethical if not illegal, and should absolutely not be
undertaken.
2. Accept the fact you didn’t quite make your sales goal this year. Figure out ways to work
smarter next year to increase the odds of achieving your target.
There is no reason Marge should accept defeat in achieving her sales goal without trying to
do something. There may be some other way for Central High to get the $1,000 it needs to
purchase the software without Marge donating it, so she should aggressively investigate other
ethical ways for that to happen.
3. Don’t make the donation, but investigate whether any other ways are available to help
Central High raise the funds that would allow them to purchase the much-needed
educational software.
This is the best option. Although time is short, she may be able to uncover some other ethical
means for Central High to come up with the funds they need. If she can figure something
out, the school will get its much-needed software, and Marge will make her sales goal and
get the bonus. The key is in helping the school find a way to raise the money legitimately
rather than donating the money herself.
Apply Your Skills: Case for Critical Analysis
Central City Museum
1. What goal or mission for the Central City Museum do you personally prefer? As director,
would you try to implement your preferred direction? Explain.
I would prefer that the Central City Museum be a major community resource rather than
being exclusive for the elite. It should have lively contemporary exhibits too. A section of the
museum could be given for training Ph.D. level students. As a director, I would like to
implement my preferred direction as it is the most cohesive and holistic goal for the museum.
2. How would you resolve the underlying conflicts among key stakeholders about museum
direction and goals? What action would you take?
I would resolve the conflict among key stakeholders by uniting them toward a shared goal
and get people to collaborate and cooperate for the larger good. I would build a coalition to
support them too.
136  Chapter 7
3. Review the Manager’s Shoptalk on page 222. Do you think that building a coalition and
working out stakeholder differences in goal preferences is an important part of a manager’s
job? Why?
Building a coalition and working out stakeholder differences in goal preferences is an

important part of a manager’s job as a manager can learn who believes in and supports a
goal, and who opposes it. It is also important for pursuing goals of quick growth and higher
profit margins.
On the Job Video Case Answers

Mi Ola Swimwear: Managerial Planning and Goal Setting
1 Based on how this business owner describes her business, write a one- or two-sentence
organizational mission statement for Mi Ola Swimwear.
Answers will vary. Mi Ola Swimwear makes fashionable yet functional garments for water
sports’ enthusiasts
.
2 Pick four of the following six categories: strategic goal, strategic plan, tactical goal, tactical
plan, operational goal, and operational plan. Then, in the video, find one example to represent
each of the four categories you’ve chosen. Describe your four examples and how they fit
their respective categories in your answer.
 Strategic goals are broad statements of where the organization wants to be in the
future and pertain to the organization as a whole,. Mi Ola wants to make fashionable yet
well-fitting swimwear for surfers and others who engage in water sports and expand its
business.
 Strategic plans are the action steps by which an organization intends to attain
strategic goals. Mi Ola plans to seek investors to have enough funding in place to expand
the design, production, sales, and advertising capabilities for its swimwear.
 The outcomes that major divisions and departments must achieve for the
organization to reach its overall goals are tactical goals. Tactical goals include hiring
planners, financial consultants, inventory managers, web designers and others to carry
out some of the functions carried out by the Mi Ola’s founder.
 Tactical plans are designed to help execute major strategic plans and to
accomplish a specific part of the company’s strategy. Mi Ola’s founder has developed a
written plan to attract investors who want to know what the financial projections are for
the company before committing funds.
3 What did you learn about some of the real benefits and limitations of planning by watching
this video?
 Benefits of Planning
Goals and plans guide resource allocation. By planning the inventory and deciding how
many swimsuits will be produced in each of the four sizes, Mi Ola’s founder can decide
how to allocate resources appropriately.
Goals and plans are a guide to action. Planning focuses attention on specific targets.
Fashion is seasonal, and Mi Ola has to plan ahead in order to produce samples of the
upcoming collection of swimwear.
Goals and plans set a standard of performance. Mi Ola’s collection is comprised of 21

styles and 12 colors of swimsuits. This level of variety sets a creative standard for each
upcoming collection.
 Limitations of Planning
Goals and plans can create a false sense of certainty. Mi Ola plans and produces
inventory. However, the number of swimsuits in each color and in each size that will sell
is an unknown. All planning is based on assumptions, and managers at Mi Ola can’t know
what the future holds for their industry or for their competitors, suppliers, and customers.
Goals and plans may cause rigidity in a turbulent environment. Planning can lock Mi Ola
into specific goals, plans, and time frames that may result in a loss of revenue. If there is
an unforeseen natural disaster, surfing may be drastically curtailed, and Mi Ola could face
reduced sales and revenue coupled with excess inventory.

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Planning and Goal Setting  119

PLANNING AND GOAL SETTING

Does Goal Setting Fit Your Management Style?

ANNOTATED LEARNING OBJECTIVES

Categorize the types of goals an organization should have.

4. Explain how managers use strategy maps to align goals.

5. Define the characteristics of effective goals.

Management-by-objectives (MBO) is a method whereby managers and employees define goals

7. Compare and contrast single- use plans and standing plans.

8. Discuss the benefits and limitations of planning.

The benefits of planning include:

The limitations of planning include:

DOES GOAL SETTING FIT YOUR MANAGEMENT STYLE?

I. GOAL-SETTING AND PLANNING OVERVIEW

A. Levels of Goals and Plans Exhibit 7.1

2. Planning at each level supports the other levels.

B. The Organizational Planning Process Exhibit 7.2

II. GOAL-SETTING IN ORGANIZATIONS

A. Organizational Mission Exhibit 7.3

2. The formal mission statement is a broadly stated definition of purpose that

B. Goals and Plans

C. Align Goals Using a Strategy Map Exhibit 7.4

2. Strategy maps are visual representations of the key drivers of an organization’s

NEW MANAGER SELF-TEST: YOUR APPROACH TO STUDYING

III. OPERATIONAL PLANNING

A. Criteria for Effective Goals Exhibit 7.5

1. Specific and measurable. When possible, goals should be expressed in quantitative

B. Management by Objectives (MBO) Exhibit 7.6

1. Management by objectives (MBO) is a method whereby managers and employees

c. Review progress. A periodic progress review is important to ensure that action

d. Appraise overall performance. The final step in MBO is to evaluate whether

3. Management by means (MBM), focuses attention on the methods and

C. Single-Use and Standing Plans Exhibit 7.8

procedures. Many companies are discovering a need to develop standing plans

IV. BENEFITS AND LIMITATIONS OF PLANNING

V. PLANNING FOR A TURBULENT ENVIRONMENT

1. Contingency plans define company responses to be taken in the case of emergencies

2. Managers forecast a range of alternative responses to the most likely

1. Scenario building involves looking at current trends and discontinuities and

2. With scenario building, a broad base of managers mentally rehearses different

C. Crisis Planning Exhibit 7.9

a. Although unexpected events and disasters will happen, managers should do

b. By developing favorable relationships, managers can often prevent crises from

a. Preparation includes designating a crisis management team and spokesperson,

b. The crisis management team is a cross-functional group of people who are

VI. INNOVATIVE APPROACHES TO PLANNING

A. Set Stretch Goals for Excellence

B. Use Performance Dashboards Exhibit 7.10

1. A business performance dashboard is a visual display that helps executives keep

C. Deploy Intelligence Teams

1. An intelligence team is a cross-functional group of managers and employees, usually

Suggested Answers to End-of-Chapter Discussion Questions

 Crisis prevention stage involves activities that managers undertake to

 Crisis preparation includes detailed planning to handle a crisis

Management by objectives (MBO) is a system whereby managers and employees define

5. A new business venture must develop a comprehensive business plan to borrow

An intelligence team is a cross-functional group of managers and employees, usually led by a

Apply Your Skills: Experiential Exercise

Business School Ranking

Apply Your Skills: Small Group Breakout

Course Goal Setting

Apply Your Skills: Ethical Dilemma

Inspire Learning Corporation