Notes from text
One of the primary responsibilities of managers is to set goals for where the organization or department should go in the future and plan how to get it there. Walmart managers are facing a struggle that executives in every organization encounter as they try to decide what goals to pursue and how to achieve them. Lack of planning or poor planning can seriously hurt an organization.
Goal Setting and Planning Overview
A goal is a desired future circumstance or condition that the organization attempts to realize. 4 Goals are important because organizations exist for a purpose, and goals define and state that purpose. 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 concept of planning usually incorporates both ideas; it means determining the organization's goals and defining the means for achieving them.5
LEVELS OF GOALS AND PLANS
Exhibit 7.1 illustrates the levels of goals and plans in an organization. The planning process starts with a formal mission that defines the basic purpose of the organization, especially for external audiences. The mission is the basis for the strategic (company) level of goals and plans, which in turn shapes the tactical (divisional) level and the operational (departmental) level.6 Top managers are typically responsible for establishing strategic goals and plans that reflect a commitment to both organizational efficiency and effectiveness, as described in Chapter 1. Tactical goals and plans are the responsibility of middle managers, such as the heads of major divisions or functional units. A division manager will formulate tactical plans that focus on the major actions the division must take to fulfill its part in the strategic plan set by top management. Operational plans identify the specific procedures or processes needed at lower levels of the organization, such as individual departments and employees. Frontline managers and supervisors develop operational plans that focus on specific tasks and processes and that help meet tactical and strategic goals. Planning at each level supports the other levels.
THE ORGANIZATIONAL PLANNING PROCESS
The overall planning process, illustrated in Exhibit 7.2, prevents managers from thinking merely in terms of day-to-day activities. The process begins when managers develop the overall plan for the organization by clearly defining mission and strategic (company-level) goals. Second, they translate the plan into action, which includes defining tactical objectives and plans, developing a strategy map to align goals, formulating contingency and scenario plans, and identifying intelligence teams to analyze major competitive issues. Third, managers lay out the operational factors needed to achieve goals. This involves devising operational goals and plans, selecting the measures and targets that will be used to determine if things are on track, and identifying stretch goals and crisis plans that might need to be put into action. Tools for executing the plan include management by objectives, performance dashboards, single-use plans, and decentralized responsibility. Finally, managers periodically review plans to learn from results and shift plans as needed, starting a new planning cycle.
Remember This
• Planning is the most fundamental of the four management functions.
• Agoal is a desired future state that the organization wants to realize.
• Planning is the act of determining goals and defining the means of achieving them.
• Aplan is a blueprint specifying the resource allocations, schedules, and other actions necessary for attaining goals.
• Planning helps managers think about the future rather than thinking merely in terms of day-to-day activities.
Goal Setting in Organizations
The overall planning process begins with a mission statement and goals for the organization as a whole. Goals don't just appear on their own in organizations. Goals are socially constructed, which means they are defined by an individual or group. Managers typically have different ideas about what goals should be, so they discuss and negotiate which goals to pursue. The Shoptalk describes the process of coalition building that often occurs during goal setting.
Organizations perform many activities and pursue many goals simultaneously to accomplish an overall mission. But who decides what mission and goals to strive for? Pursuing some goals means that others have to be delayed or set aside, which means managers often disagree about priorities. After China's Zhejiang Geely Holding Group bought Volvo Car Corporation, for example, the Chinese and European managers disagreed strongly. The European managers wanted to continue pursuing goals of providing safe, reliable, family-friendly vehicles for a stable market. The new Chinese owners and managers, on the other hand, wanted to expand aggressively into the super-luxury car market. The goals of the two sides were mutually exclusive, so managers had to negotiate and come to some agreement on which direction the company would take.
Powerful, motivating goals that unite people are typically established not by a single manager, but by developing a coalition. Coalitional management involves building an alliance of people who support a manager's goals and can influence other people to accept and work toward them. Being an effective coalitional manager involves three key steps:
• Talk to customers and other managers. Building a coalition requires talking to many people both inside and outside the organization. Coalitional managers solicit the views of employees and key customers. They talk to other managers all across the organization to get a sense of what people care about and learn what challenges and opportunities they face. A manager can learn who believes in and supports a particular direction and goals, and who is opposed to them and the reasons for the opposition.
• Address conflicts. Good managers don't let conflicts over goals simmer and detract from goal accomplishment or hurt the organization. At Toyota, for example, the recent recall crisis exposed a longstanding internal conflict between managers who wanted to pursue goals of faster growth and higher profit margins and those who believed that rapid growth would strain the company's ability to ensure quality and reliability. Each side is blaming the other for the recent problems, but it is the failure of managers to unite toward a shared goal that is largely to blame.
• Break down barriers and promote cross-silo cooperation. A final step is to break down boundaries and get people to cooperate and collaborate across departments, divisions, and levels. When Colin Powell was chairman of the U.S. Joint Chiefs of Staff, he regularly brought together the heads of the Army, Air Force, Navy, and Marines so they could understand one another's viewpoints and come together around key goals. Cross-enterprise understanding and cooperation is essential so that the entire organization will be aligned toward accomplishing desired goals.
As a manager, remember that you will accomplish more and be more effective as part of a coalition than as an individual actor. When there are goals that are highly important to you, take steps to build a coalition to support them. Throw your support behind other managers when appropriate. And remember that building positive relationships, discussion, and negotiation are key skills for good management.
Sources: Stephen Friedman and James K. Sebenius, “Organization Transformation: ἀ e Quiet Role of Coalitional Leadership,” Ivey Business Journal (January–February 2009), (accessed January 27, 2012); Gerald R. Ferris et al., “Political Skill in Organizations,” Journal of Management (June 2007): 290–320; Norihiko Shirouzu, “Chinese Begin Volvo Overhaul,” ἀ e Wall Street Journal, June 7, 2011, B1; and Norihiko Shirouzu, “Inside Toyota, Executives Trade Blame Over Debacle,” ἀe Wall Street Journal, April 14, 2010, A1.
ORGANIZATIONAL MISSION
At the top of the goal hierarchy is the mission—the organization's reason for existence. The mission describes the organization's values, aspirations, and reason for being. A welldefined 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. One of the defining attributes of successful companies is that they have a clear mission that guides decisions and actions. When management actions and decisions go against the mission, organizations may get into trouble. Sam Walton, founder of Walmart, told his managers that the fledgling company was going to overtake Sears on the day he heard that Sears had reneged on its satisfaction guaranteed policy. At the time, Walmart had $20 billion less in sales than Sears, but Walton believed that stepping away from a core part of its mission would set Sears on a downhill path—and indeed, the company never recovered. Some people think Walmart made a similar blunder when it began trying to court upscale customers, as described in the opening example.7
Tactical plans are designed to help execute the major strategic plans and to accomplish a specific part of the company's strategy.13 Tactical plans typically have a shorter time horizon than strategic plans—over the next year or so. The word tactical originally comes from the military. In a business or nonprofit organization, tactical plans define what major departments and organizational subunits will do to implement the organization's strategic plan. For example, a tactical goal for Trader Joe's location scouting division might be to identify three new locations a year that fit TJ's target market of educated, adventurous consumers and could support a TJ's store. Tactical goals and plans help top managers implement their overall strategic plan. Normally, it is the middle manager's job to take the broad strategic plan and identify specific tactical plans.
The results expected from departments, work groups, and individuals are the operational goals. They are precise and measurable. “Process 150 sales applications each week,” “Achieve 90 percent of deliveries on time,” “Reduce overtime by 10 percent next month,” and “Develop two new online courses in accounting” are examples of operational goals. An operational goal for Trader Joe's product development department is to identify ten new and intriguing items a week to phase into stores. In the human resources department, an operational goal might be to keep turnover to less than 5 percent a year so that there are longtime employees who have close relationships with customers.
Operational plans are developed at the lower levels of the organization to specify action steps toward achieving operational goals and to support tactical plans. The operational plan is the department manager's tool for daily and weekly operations. Goals are stated in quantitative terms, and the department plan describes how goals will be achieved. Operational planning specifies plans for department managers, supervisors, and individual employees. Schedules are an important component of operational planning. Schedules define precise time frames for the completion of each operational goal required for the organization's tactical and strategic goals. Operational planning also must be coordinated with the budget because resources must be allocated for desired activities.
Effectively designed organizational goals are aligned; that is, they are consistent and mutually supportive so that the achievement of goals at low levels permits the attainment of high-level goals. Organizational performance is an outcome of how well these interdependent elements are aligned, so that individuals, teams, and departments are working in concert to attain specific goals that ultimately help the organization achieve high performance and fulfill its mission.14
An increasingly popular technique for aligning goals into a hierarchy is the strategy map. A strategy map is a visual representation of the key drivers of an organization's success. Because the strategy map shows how specific goals and plans in each area are linked, it provides a powerful way for managers to see the cause-and-effect relationships among goals and plans.15 The simplified strategy map in Exhibit 7.4 illustrates four key areas that contribute to a firm's long-term success—learning and growth, internal processes, customer service, and financial performance—and how the various goals and plans in each area link to the other areas. The idea is that learning and growth goals serve as a foundation to help achieve goals for excellent internal business processes. Meeting business process goals, in turn, enables the organization to meet goals for customer service and satisfaction, which helps the organization achieve its financial goals and optimize its value to all stakeholders.
In the strategy map shown in Exhibit 7.4, the organization has learning and growth goals that include developing employees, enabling continuous learning and knowledge sharing, and building a culture of innovation. Achieving these will help the organization build internal business processes that promote good relationships with suppliers and partners, improve the quality and flexibility of operations, and excel at developing innovative products and services. Accomplishing internal process goals, in turn, enables the organization to maintain strong relationships with customers, be a leader in quality and reliability, and provide innovative solutions to emerging customer needs. At the top of the strategy map, the accomplishment of these lower-level goals helps the organization increase revenues in existing markets, increase productivity and efficiency, and grow through selling new products and services and serving new market segments.
In a real-life organization, the strategy map would typically be more complex and would state concrete, specific goals relevant to the particular business. However, the generic map in Exhibit 7.4 gives an idea of how managers can map goals and plans so that they are mutually supportive. The strategy map is also a good way to communicate goals because all employees can see what part they play in helping the organization accomplish its mission.
Remember This
• Planning starts with the organization's purpose or reason for existence, which is called its mission.
• Amission statement is a broadly stated definition of the organization's basic business scope and operations that distinguishes it from similar types of organizations.
• Goals begin with broad strategic goals, followed by more specific tactical goals and then operational goals.
• Plans are defined similarly, with strategic, tactical, and operational plans used to achieve the goals.
• Strategic goals are broad statements of where the organization wants to be in the future and pertain to the organization as a whole rather than to specific divisions or departments.
• Strategic plans are the action steps by which an organization intends to attain strategic goals.
• The outcomes that major divisions and departments must achieve for the organization to reach its overall goals are called tactical goals.
• Tactical plans are designed to help execute major strategic plans and to accomplish a specific part of the company's strategy.
• Operational goals are specific, measurable results that are expected from departments, work groups, and individuals.
• Operational plans specify the action steps toward achieving operational goals and support tactical activities.
• Managers at Trader Joe's set a strategic goal to become “a nationwide chain of neighborhood grocery stores.”
• Goals and plans need to be in alignment so that they are consistent and mutually supportive.
• Astrategy map is a visual representation of the key drivers of an organization's success, showing the causeand- effect relationship among goals and plans.