5Chapter
Planning and
Goal Setting
5-1
1
Learning Outcomes
After studying this chapter, you will be able to:
•Discuss the nature and purposes of planning.
•Explain what managers do in the strategic management
process.
•Compare and contrast approaches to goal setting and
planning.
•Discuss contemporary issues in planning.
5-2
After studying this chapter, you will be able to:
•Discuss the nature and purposes of planning.
•Explain what managers do in the strategic management process.
•Compare and contrast approaches to goal setting and planning, and
•Discuss contemporary issues in planning.
2
5-3
3
What Is Planning?
5-4
Planning establishes the basis for all the other things managers do as they organize,
lead, and control.
Planning is deciding on the organization’s objectives or goals and getting the job done
by establishing an overall strategy for achieving those goals and developing a
comprehensive hierarchy of plans to integrate and coordinate activities.
Planning can be informal or formal. Smaller businesses often use informal planning
where little is verbalized or written down and the planning is general and lacks
continuity.
Formal planning, however, defines specific goals that are to be met in a specific time
period. They are written down and made available to organization members. Then
managers develop specific plans that clearly define what the organization will do to
move from where it is to where it wants to be.
4
5-5
Reasons for Planning
Managers should plan for at least four reasons, as seen here in Exhibit 5–1.
1. Planning coordinates effort. It gives direction to both managers and
nonmanagerial employees so each knows what he or she must contribute—
individually and as a group—to reach the organization’s goals. Planning
stimulates intra- and inter-department coordination of activities, which
fosters teamwork and cooperation.
2. Planning forces managers to look ahead, anticipate change, consider the
impact of change, and develop appropriate responses. It also clarifies the
consequences of the actions managers might take in response to change.
3. Planning reduces overlapping and wasteful activities. Coordination before
the fact is likely to uncover waste and redundancy.
4. Finally, planning establishes the goals or standards that facilitate
managerial control to ensure that the plans are carried out and the goals are
met.
5
Criticisms of Formal Planning
Formal planning may:
1. Create rigidity
2. Replace intuition and creativity
3. Focus managers’ attention on today’s
competition, not on tomorrow’s survival
4. Reinforce success, which may lead to
failure
1-6
Although it makes sense for an organization to establish goals and direction, critics
have challenged some of the basic assumptions of planning.
1. Planning may create rigidity with goals and a timetable that are set under
the assumption that the environment won’t change.
2. Formal plans cannot replace intuition and creativity. Planning should
enhance and support intuition and creativity, not replace it.
3. Planning focuses managers’ attention on today’s competition, not on
tomorrow’s survival. Formal planning tends to focus on how best to capitalize
on existing business opportunities instead of ways to reinvent the industry.
Instead of focusing on today, managers should plan with an eye to untapped
opportunities.
4. Formal planning reinforces success, which may lead to failure. It’s difficult to
shift from the comfort of what works to the uncertainty of the unknown.
However, managers may need to face that unknown and do things in new
ways to be even more successful.
6
Formal Planning and Organizational Performance
Formal planning generally results
in:
–Higher profits
–Higher return on assets
–Improved quality of planning
–Appropriate implementation
of the plan
5-7
Does it pay to plan? In a nutshell, yes.
