Managerial planning and goal setting

Managerial Planning and
Goal Setting

ORGANISASI dan
MANAJEMEN PERUSAHAAN INDUSTRI

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Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
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Planning for the Future

GOAL PLAN

PLANNING

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Goals and Plans

 Goal - A desired future state that the organization
attempts to realize.
 Plan - A blueprint specifying the resource
allocations, schedules, and other actions necessary
for attaining goals
 Planning – determining the organization’s goals and
the means for achieving them
– the most fundamental management function
– the most controversial management function.

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Managerial Planning
and Goal Setting

 Process of planning
 How managers develop effective plans
 Goal setting
 Types of plans
 New approaches to planning

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The Importance of Goals and Plans

Goals and Plans

Rationale for decisions Standard of performance

Guides to action

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Levels of Goals/Plans & Their Importance

External Message
Legitimacy for
Mission
investors, customers,
Statement suppliers, community

Strategic Goals/Plans
Senior Management
(Organization as a whole)
Internal Message
Legitimacy,
Tactical Goals/Plans motivation,
Middle Management guides,
(Major divisions, functions) rationale,
standards

Operational Goals/Plans
Lower Management
(Departments, individuals)

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Benefits for the Organization
Provided from Internal and External Messages Goals and Plans Send

• Legitimacy
• What the organization stands for - reason for being
• Symbolizes legitimacy
• Employees identify with overall purpose
• Source of Motivation and Commitment
• Employees’ identification with the organization
• Motivate by reducing uncertainty
• Guides to Action
• Provide a sense of direction; focus attention on specific
targets
• Direct efforts toward important outcomes

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Benefits for the Organization
Provided from Internal and External Messages Goals and Plans Send

• Rationale for Decisions
• Learn what organization is trying to accomplish
• Make decisions to ensure that internal policies, roles,
performance, structure, products, and expenditures will be
made in accordance with desired outcomes
• Standard of Performance
• Serve as performance criteria
• Provide a standard of assessment

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Organizational Mission

 Mission = organization’s reason for existing
 Mission Statement
– Broadly states the basic business scope and
operations that distinguishes it from similar types
of organizations
– May include the market and customers
– Some may describe company values, product
quality, attitudes toward employees

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Visi-Misi PT PERTAMINA

VISI :Menjadi Perusahaan Minyak Nasional Kelas
Dunia

MISI :Menjalankan usaha inti minyak, gas, dan
bahan bakar nabati secara terintegrasi,
berdasarkan prinsip-prinsip komersial yang kuat

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Strategic Goals and Plans

Strategic Goals
 Where the organization wants to be in the future
 Pertain to the organization as a whole

Strategic Plans
 Action Steps used to attain strategic goals
 Blueprint that defines the organizational
activities and resource allocations
 Tends to be long term
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Tactical Goals and Plans

●Tactical Goals
- Apply to middle management
- Goals that define the outcomes that major
divisions and departments must achieve

●Tactical Plans
-Plans designed to help execute major strategic plans
-Shorter than time frame than strategic plans

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Operational Goals and Plans

• Operational Goals
- Specific, measurable results
- Expected from departments, work groups, and
individuals
• Operational Plans
- Organization’s lower levels that specify action
steps toward achieving operational goals
- Tool for daily and weekly operations
- Schedules are an important component
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Goal Attainment

Means-end Chain
 Attainment of goals at lower levels permits
the attainment of high-level goals
 Traditional organizational responsibility
– Strategic = top management
– Tactical – middle management
– Operational = 1st line management & workers

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Hierarchy of Goals
Traditional Responsibility Today
Mission

Top Strategic
Management Goals •Shrinking middle
management
Middle Tactical •Employee
Management Goals empowerment
1st-line
Management Operational
& Workers Goals Employees

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Characteristics of Effective
Goal Setting

 Specific and measurable
 Covered key result area
 Challenging but realistic
● Defined time period
● Linked to rewards

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VISION

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OBJECTIVE

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STRATEGY

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TACTIC

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ACTION

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The Organizational Planning Process

Copyright ©2010 by South-Western, a division of Cengage 23
Learning. All rights reserved.

Aligning Goals
with Strategy Maps

 Goals should be consistent and mutually
supportive

 The achievement of goals at low levels
permits the attainment of high-level goals

 Individuals, teams, and departments should
be working in concert

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Strategy Map for Aligning Goals

Goals
should be
consistent
and
mutually
supportive


Operational Planning

 Operational goals should direct employees
and resources toward outcomes

 It is important to establish effective goals
– Management by objective
– Single-use plans
– Standing plans
– Contingency plans
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Management by Objective

Defined by management scholar
Peter Drucker in his 1954 book, The
Practice of Management

Process of defining goals and
monitoring progress


Model of the MBO Process
Step 1: Set Goals Step 2: Develop Action Plans
Corporate Strategic Goals
Departmental goals
Action Plans
Individual goals

Review Progress

Step 3:
Review Progress

Take Corrective Action
Appraise Performance
Step 4: Appraise Overall
Performance
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MBO Benefits and Problems
Benefits of MBO Problems with MBO
 Manager and employee  Constant change prevents
efforts are focused on MBO from taking hold
activities that will lead to  An environment of poor
goal attainment employer-employee relations
 Performance can be reduces MBO effectiveness
improved at all company  Strategic goals may be
levels displaced by operational goals
 Employees are motivated  Mechanistic organizations and
 Departmental and values that discourage
individual goals are participation can harm the
aligned with company MBO process
goals  Too much paperwork saps
MBO energy
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Single-Use Plans
For Goals Not Likely To Be Repeated

● A program is a complex set of objectives and
plans to achieve an important, one-time
organizational goal
● A project is similar to a program, but
generally smaller in scope and complexity

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Standing Plans
For Tasks Performed Repeatedly

● A policy is a general guide to action and
provides direction for people within the
organization
● Rules describe how a specific action is to be
performed
● Procedures define a precise series of steps
to be used in achieving a specific job

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Contingency Plans
Specific Situations - unexpected conditions

 Identify Uncontrollable Factors
– Economic turndowns
– Declining markets
– Increases in costs of supplies
– Technological developments
– Safety accidents
 Minimize Impact of Uncontrollable Factors
– Forecast a range of alternative responses to
most-likely high-impact contingencies

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Strategy Formulation and
Implementation

Strategic Planning

 Strategic planning has taken on new

importance in today’s world of

globalization, deregulation, advancing

technology, and changing demographics,

and lifestyles
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Strategy Formulation and
Implementation

 Strategic Management
– Definition
– Components
– Model of Strategic Management Process
– Models of Strategy Formation

 Managerial Tools to Implement Strategic
Plans
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Thinking Strategically

 Answers to the following define an overall
direction for the organization's grand strategy
 Where is the organization now?
 Where does the organization want to be?
 What changes are among competitors?
 What courses of action will help us achieve our
goals?

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Strategic Management

 Set of decisions and actions used to
implement strategies that will provide a
competitively superior fit between the
organization and its environment so as to
achieve organizational goals

 Responsibility = top managers &
chief executive

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Strategic Management

Managers ask such questions as...
 What changes and trends are occurring?
 Who are our customers?
 What products or services should we offer?
 How can we offer these products or
services most efficiently?

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Grand Strategy

 General plan of major action to achieve
long-term goals
 Falls into three general categories
1. Growth A separate grand
strategy can be
2. Stability
defined for global
3. Retrenchment operations

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Grand Strategy: Growth

 Growth can be promoted internally by
investing in expansion or externally by
acquiring additional business divisions
- Internal growth = can include development of new
or changed products
- External growth = typically involves diversification
– businesses related to current product lines or
into new areas

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Grand Strategy: Stability

 Stability, sometimes called a pause strategy,
means that the organization wants
– to remain the same size or
– to grow slowly and in a controlled fashion

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Grand Strategy: Retrenchment

 Retrenchment = the organization goes through a
period of forced decline by either shrinking current
business units or selling off or liquidating entire
businesses

 Liquidation = selling off a business nit for the cash
value of the assets, thus terminating its existence

 Divestiture = involves selling off of businesses that
no longer seem central to the corporation

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Global Corporate Strategies
High Transnational
Globalization Strategy
Strategy • Seeks to balance global
• Treats world as a efficiencies and local
single global market
responsiveness
• Standardizes global
• Combines standardization
products/advertising
and customization for
Need for Global Integration

strategies
product/advertising
strategies

Export
Strategy Multi-domestic Strategy
•Domestically focused • Handles markets
independently for each
•Exports a few country
domestically produced
products to selected • Adapts product/advertising
countries to local tastes and needs

Low
Low Need for National Responsiveness High
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Global Strategy

 Globalization = product design and
advertising strategies are standardized
around the world
 Multi-domestic = adapt product and
promotion for each country
 Transnational = combine global
coordination with flexibility to meet
specific needs in various countries
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Purpose of Strategy

 The plan of action that prescribes
resource allocation and other
activities for dealing with the
environment, achieving a
competitive advantage, that help
the organization attain its goals
Strategies focus on:
● Core competencies
● Developing synergy
● Creating value for customers

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Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation

Business-Level Strategy:
How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy:
How do we support the business-level
strategy?

Finance R&D Manufacturing Marketing

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Strategic Management Process

Scan External Identify Strategic
Environment – Factors –
National, Opportunities,
Global Threats Implement
Strategy via
Evaluate Formulate Changes in:
Current Mission, Define new Strategy – Leadership
SWOT Mission culture,
Goals, Corporate,
Strategies Goals, Grand Business, Structure, HR,
Strategy Functional Information &
control
Scan Internal systems
Identify Strategic
Environment – Core
Factors –
Competence,
Strengths,
Synergy, Value
Weaknesses
Creation

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Strategy Formulation vs.
Implementation

 Strategy Formulation = stage of strategic
management that involves planning and decision
making that lead to the establishment of the
organization’s goals and of a specific strategic plan
 Strategy Implementation = stage of strategic
management that involves the use of managerial
and organizational tools to direct resources toward
achieving strategic outcomes

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Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization Marketing Human Resources
Management quality Distribution channels Employee experience,
Staff quality Market share education
Degree of centralization Advertising efficiency Union status
Organization charts Customer satisfaction Turnover, absenteeism
Planning, information, Product quality Work satisfaction
control systems Service reputation
Grievances
Sales force turnover
Finance Production Research and Development
Profit margin Plant location Basic applied research
Debt-equity ratio Machinery obsolescence Laboratory capabilities
Inventory ratio Purchasing system Research programs
Return on investment Quality control New-product innovations
Credit rating Productivity/efficiency Technology innovations
Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens,
Long-Range Planning for Your Business (New York: American Management Association, 1976).
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Portfolio Strategy
BCG Matrix

 Mix of business
units and product
lines that fit
together in a
logical way to
provide synergy
and competitive
advantage

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Five Forces Affecting Industry Competition

•Internet reduces Potential New
barriers to entry Entrants

Internet blurs differences among
competitors in an industry

Threat of Substitute Rivalry Bargaining
Products among Power of
Competitors Buyers
•Internet expands market size, but •Internet shifts greater power
creates new substitution threats to end consumers

•Internet tends to increase the
bargaining power of suppliers Bargaining Power of Suppliers

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

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Competitive Edge Through
Competitive Strategies

 Differentiation = attempt to distinguish products
or services from that of competitors
 Cost leadership = aggressively seeks efficient
facilities, pursues cost reductions, and uses tight
cost controls to produce products more efficiently
than competitors
 Focus = concentrates on a specific regional
market or buyer group

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Continuum of Partnership Strategies
Organizational Combination Acquisitions

Mergers

Joint Ventures
Strategic
Alliances
Strategic Business
Partnering

Preferred Supplier Arrangements
Low High
Degree of Collaboration
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Implementing Strategy Tools

 Leadership
 Structural design
 Information and control systems
 Human resources

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Tools for Putting
Environment
Strategy into Action
Organization
Leadership
 Persuasion
 Motivation
 Culture/values

Structural Design
 Organization Chart Human Resources
 Teams  Recruitment/selection
Strategy  Transfers/promotions Performance
 Centralization
Decentralization,  Training
 Facilities, task design  Layoffs/recalls

Information and Control Systems
 Pay, reward system
 Budget allocations
 Information systems
 Rules/procedures
Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115,
Used with permission.
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Managerial planning and goal setting

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Managerial planning and goal setting