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Chapter 2
PLANNING

Fig: The P-O-L-C Framework

 Planning 2
 In planning, managers set goals and determine the best way to
achieve them. As a result of the planning process, everyone in the
organization knows what should be done, who should do it, and how it
should be done.

 Without a plan, it’s hard to succeed at anything. The reason is simple: if

you don’t know where you’re going, you can’t really move forward.
Successful managers decide where they want to be and then figure
out how to get there.
 Developing a Strategic Plan 3
 Planning begins at the highest level and works its way down through the
organization. Step one is usually called Strategic Planning, which is the
process of establishing an overall course of action. To begin this process,
you should ask yourself a couple of very basic questions: Why, for
example, does the organization exist? What value does it create?
 Steps in the strategic-planning process:
1. Write a mission statement
2. Identify core values
3. SWOT analysis (External and Internal)
4. Establish goals and objectives, or performance targets
5. Develop and implement tactical and operational plans
 1. Mission Statement 4

 The Mission Statement describes the purpose of your organization—

the reason for its existence. That tells customers, employees, and
others why your organization exists what the organization is
committed to doing.

 Example: It can be very concise, like the one from Mary Kay Inc.
(the cosmetics company): “To enrich the lives of women around the
world.”
 2. Core Values 5
 Core values or beliefs that will guide the behavior of members of the
organization.
 The small set of guiding principles that you identify as crucial to your
company are known as core values—fundamental beliefs about
what’s important and what is and isn’t appropriate in conducting
company activities. Core values affect the overall planning processes
and operations.

 Example: Coca-Cola, for instance, reports that its stated core values—
honesty, integrity, diversity, quality, respect, responsibility, and
accountability—tell employees exactly what behaviors are
acceptable.
3. SWOT Analysis 6
 4. Set Goals and Objectives 7
 Goals are major accomplishments that the company wants to achieve over a
long period (say, five years).
 Objectives are shorter-term performance targets that direct the activities of the
organization toward the attainment of a goal. They should be clearly stated,
attainable, and measurable: they should give target dates for the completion of
tasks and stipulate who’s responsible for taking necessary actions.

 Example: List of goals and objectives might look like this:

 Goal 1: Achieve a 10 percent return on profits in your first five years.
 Objective: Sales of $20,000 and profit of $2,000 for the first twelve months of operations.
 Goal 2: Produce a high-quality product.
 Objective: First-year satisfaction scores of 90 percent or higher on quality of notes
(based on survey responses to three measures—understandability, readability, and
completeness).
 Goal 3: Attain 98 percent customer satisfaction by the end of your fifth year.
 Objective: Making notes available within two days after class, 95 percent of the time.
 Management by Objectives and the Balanced Scorecard 8
Organizations use a variety of measurement approaches to go about
setting and managing goals and objectives. In this section, we focus
on two key approaches to setting goals.
1. Management by objectives (MBO) is a goal-setting framework
primarily used when managers and employees collaborate on setting
goals.
2. The Balanced Scorecard, in contrast, is used by top managers to
make sense of multiple performance measures at the organizational
level.
As a structure, the Balanced Scorecard breaks broad goals down
successively into
 objectives,
 measures, and
 tactical activities.
 Management by Objectives 9
 Management by objectives (MBO) is a systematic and organized
approach that aims to increase organizational performance by aligning
the subordinate objectives throughout the organization with the overall
goals set by management. Ideally, employees get strong input to identify
their objectives, time lines for completion, and so on. MBO includes
ongoing tracking and feedback in the process to reach objectives.
 MBO is about setting goals and then breaking these down into more
specific objectives or key results. MBO involves:
 (1) Setting company-wide goals derived from corporate strategy,
 (2) Determining team- and department-level goals,
 (3) Collaboratively setting individual-level goals that are aligned with
corporate strategy,
 (4) Developing an action plan, and
 (5) Periodically reviewing performance and revising goals.
 The Balanced Scorecard 10
The Balanced Scorecard is a framework designed to translate an organization’s mission and
vision statements and overall business strategy into specific, quantifiable goals and objectives
and to monitor the organization’s performance in terms of achieving these goals.
One of the Balanced Scorecard’s innovations is explicit attention to vision and strategy in
setting goals and objectives.
 Balanced Scorecard Dimensions
Performance measures in the Balanced Scorecard can include both
1. Leading indicators include measures that might be examined to predict poor/good
performance of the organization in the future, such as an increase in employee turnover or an
increase of sales. (Upward Focused).
2. Lagging indicators are used to measure performance and allow the Manager to track how
things are going. Because output (performance) is always easier to measure by assessing
whether your goals were achieved, lagging indicators are backward-focused or “trailing” they
measure performance data already captured.
Just about anything you wish to monitor will have lagging indicators: returns on investments, a
budget to plan variances, number of sick days, bags moved per day, equipment support
incidents, a decrease in sales, reflect that performance is in decline.
 The Balanced Scorecard Measurements 11

 The Balanced Scorecard focuses on four types of measures:

1. Customers: Customer satisfaction and retention
2. Learning and growth: the effectiveness of management in terms of
measures of employee satisfaction and retention and information
system performance
3. Internal processes: looks at production and innovation, measuring
performance in terms of maximizing profit from current products and
following indicators for future productivity
4. Financial performance: assessments of measures such as operating
costs and return-on-investment.
 The Balanced Scorecard in Practice (Process) 12
 In practice, the Balanced Scorecard is more than simply a
framework for thinking about goals and objectives. The Balanced
Scorecard relies on four processes to bind short-term activities to
long-term objectives:
1. Translating the vision
2. Communicating and linking
3. Business planning
4. Feedback and learning
In its broadest scope, where the scorecard operates much like a map
of the firm’s vision, mission, and strategy.
 5. Develop Tactical and Operational Plans 13
 The planning process begins at the top of the organization, where
upper-level managers create a strategic plan, but it doesn’t end there.
The execution of the strategic plan involves managers at all levels.
Tactical Plans
The overall plan is broken down into more manageable, shorter-term
components called tactical plans.
Operational Plans
The tactical plan is then broken down into various operational plans that
provide detailed action steps to be taken by individuals or groups to
implement the tactical plan and, consequently, the strategic plan.
Operational plans cover only a brief period—say, a week or a month.

 Example: At Notes-4-You, for example, note takers might be instructed

to turn in typed class notes five hours earlier than normal on the last day
of the semester (an operational guideline). The goal is to improve the
customer-satisfaction score on dependability (a tactical goal) and, as
a result, to earn the loyalty of students through attention to customer
service (a strategic goal).
 Plan for Contingencies and Crises 14
Even with great planning, things don’t always turn out the way they’re supposed to.
Perhaps your plans were flawed, or maybe you had great plans but something in the
environment shifted unexpectedly. Successful managers anticipate and plan for the
unexpected. Dealing with uncertainty requires contingency planning and crisis
management.
Contingency Planning
With contingency planning, managers identify those aspects of the business that are
most likely to be adversely affected by change. Then, they develop alternative courses
of action in case an anticipated change does occur. You probably do your own
contingency planning: for example, if you’re planning to take in a sure-fire hit movie on
its release date, you may decide on an alternative movie in case you can’t get tickets
to your first choice.
Crisis Management
Organizations also face the risk of encountering crises that require immediate attention.
Rather than wait until such a crisis occurs and then scrambling to figure out what to do,
many firms practice crisis management. Some, for instance, set up teams trained to
deal with emergencies. Members gather information quickly and respond to the crisis
while everyone else carries out his or her normal duties. The team also keeps the public,
the employees, the press, and government officials informed about the situation and
the company’s response to it.
Importance of Planning 15
 KEY TAKEAWAYS 16
 Successful managers decide where they want the organization to go and then
determine how to get there.
 Planning for a business starts at the top and works its way down.
 It begins with strategic planning—the process of establishing an overall course of
action.
 Step one is identifying the purpose of the organization.
 Then, management is ready to take the remaining steps in the strategic
planning process:
 Prepare a mission statement that describes the purpose of the organization and tells
customers, employees, and others what it’s committed to doing.
 Select the core values that will guide the behavior of members of the organization by
letting them know what is and isn’t appropriate and important in conducting
company activities.
 Use SWOT analysis to assess the company’s strengths and weaknesses and its fit with
the external environment.
 Set goals and objectives, or performance targets, to direct all the activities needed to
achieve the organization’s mission.
 Develop tactical plans and operational plans to implement objectives.
 17

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