CHAPTER 7
MANAGERIAL 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
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
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
2. Explain the concept of organizational mission and how it influences goal setting and
planning.
The overall planning process begins with a mission statement, which describes the organization’s
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3. Describe the types of goals an organization should have and how managers use strategy
maps to align goals.
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.
4. Define the characteristics of effective goals.
Organizational goals at the strategic, tactical, and operational levels should: be specific and
5. 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
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6. Explain the difference between 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
7. 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.
The limitations of planning include:
• Goals and plans can create a false sense of certainty. Having a plan can give managers a
8. Describe and explain the importance of contingency planning, scenario building, and crisis
planning for today’s managers.
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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
9. 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.
LECTURE OUTLINE
DOES GOAL SETTING FIT YOUR MANAGEMENT STYLE?
Most organizations have goal setting and review systems that new managers use. Not everyone
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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
1. Top managers are responsible for establishing strategic goals and plans that reflect a
commitment to both organizational efficiency and effectiveness. Tactical goals and
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
A. The overall planning process prevents managers from thinking merely in terms of
NEW MANAGER SELF-TEST: MY PERSONAL MISSION
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
II. GOAL-SETTING IN ORGANIZATIONS
A. Organizational Mission Exhibit 7.3
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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.
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
2. Tactical goals are the results that major divisions and departments within the
organization intend to achieve. Tactical goals apply to middle management and
3. Operational goals are the specific results expected from departments, work groups,
and individuals. Operational plans are developed at the lower levels of the
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.
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
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maintenance worker in a hospital really need to understand any goals beyond keeping the place
clean? Discuss.
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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.
5. 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
B. Management by Objectives (MBO) Exhibit 7.6, Exhibit 7.7
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.
a. Set goals. Setting goals is the most difficult step in MBO and should involve
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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.
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
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.
B. Limitations of Planning
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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.
V. PLANNING FOR A TURBULENT ENVIRONMENT
A. Contingency Planning
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.
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?
1. Scenario building involves looking at current trends and discontinuities and
imagining possible alternative futures to build a framework with which unexpected
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
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2. Crisis Preparation
a. Preparation includes designating a crisis management team and spokesperson,
creating a detailed crisis management plan, and setting up an effective
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
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
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. They are
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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
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
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. Write a brief mission statement for a local business with which you are familiar. How might
having a clear, written mission statement benefit a small organization?
Student responses may vary; however, every small business should have a mission statement.
An example of a mission statement might be:
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2. 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
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
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
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
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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
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
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
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9. Some people say an organization could never be “prepared” for a disaster such as the
shooting at an Aurora, Colorado, movie theater, 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
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
Apply Your Skills: Experiential Exercise
Business School Ranking
This exercise enables students to brainstorm about how to improve their own business schools.
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Apply Your Skills: Small Group Breakout
Course Goal Setting
This exercise asks students to make their goals for themselves regarding desired outcomes for
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
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
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
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.
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I would prefer that the Central City Museum be a major community resource rather than being
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
3. Review the Manager’s Shoptalk on page XXX. Do you think that building a coalition and
working out stakeholder differences in global preferences is an important part of a
manager’s job? Why?
Building a coalition and working out stakeholder differences in global preferences is an
On the Job Video Case Answers
Modern Shed
1. What level of planning and goal setting does marketer Scott Pearl perform for Modern Shed?
Students will encounter some difficulty answering this question because Modern Shed is
organized as a vertical network, and assigning levels to the various types of plans and goals
2. Do Scott Pearl’s goals meet the criteria of effective goal setting as discussed in the chapter?
Explain.
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For goals to be effective, they have to be specific and measurable. Pearl’s goals contain specific
3. What are some of the ways in which Scott Pearl’s plans and goals benefit Modern Shed as an
organization? Are there potential downsides to such planning?
Answers will vary, but goal setting and planning benefits organizations by providing legitimacy,
a guide to action, a source of motivation, a rationale for decisions, and a standard for
Despite the many benefits of planning, some researchers argue that goals can create a false sense
of certainty, cause rigidity in a turbulent changing environment, and stifle intuition and
creativity. Modern Shed faces serious uncertainties surrounding the lack of an established market