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Planning establishes the basis for management functions like organizing, leading, and controlling. It involves setting goals and developing plans. Goals are desired outcomes that guide decisions and measure work results, while plans outline how goals will be met through resource allocation, schedules, and other actions. Organizations have multiple goals, including both strategic goals related to overall performance and financial goals related to profitability. Stated goals in documents like annual reports may differ from real goals shown through organizational actions. Plans can be strategic or operational, long-term or short-term, directional or specific, and single-use or standing depending on factors like scope, time frame, clarity, and frequency of use.
Planning establishes the basis for management functions like organizing, leading, and controlling. It involves setting goals and developing plans. Goals are desired outcomes that guide decisions and measure work results, while plans outline how goals will be met through resource allocation, schedules, and other actions. Organizations have multiple goals, including both strategic goals related to overall performance and financial goals related to profitability. Stated goals in documents like annual reports may differ from real goals shown through organizational actions. Plans can be strategic or operational, long-term or short-term, directional or specific, and single-use or standing depending on factors like scope, time frame, clarity, and frequency of use.
Planning establishes the basis for management functions like organizing, leading, and controlling. It involves setting goals and developing plans. Goals are desired outcomes that guide decisions and measure work results, while plans outline how goals will be met through resource allocation, schedules, and other actions. Organizations have multiple goals, including both strategic goals related to overall performance and financial goals related to profitability. Stated goals in documents like annual reports may differ from real goals shown through organizational actions. Plans can be strategic or operational, long-term or short-term, directional or specific, and single-use or standing depending on factors like scope, time frame, clarity, and frequency of use.
Planning is often called the primary management function because it
establishes the basis for all the other things managers do as they organize, lead, and control. It involves two important aspects: goals and plans. Goals (objectives) are desired outcomes or targets.4 They guide management decisions and form the criterion against which work results are measured. That’s why they’re often described as the essential elements of planning. You have to know the desired target or outcome before you can establish plans for reaching it. Plans are documents that outline how goals are going to be met. They usually include resource allocations, schedules, and other necessary actions to accomplish the goals. As managers plan, they develop both goals and plans. Types of Goals It might seem that organizations have a single goal. Businesses want to make a profit and not-for-profit organizations want to meet the needs of some constituent group(s). However, a single goal can’t adequately define an organization’s success. And if managers emphasize only one goal, other goals essential for long-term success are ignored. Also, as we discussed in Chapter 6, using a single goal such as profit may result in unethical behaviors because managers and employees will ignore other aspects of their jobs in order to look good on that one measure. 5 In reality, all organizations have multiple goals. For instance, businesses may want to increase market share, keep employees enthused about working for the organization, and work toward more environmentally sustainable practices. And a church provides a place for religious practices, but also assists economically disadvantaged individuals in its community and acts as a social gathering place for church members. We can classify most company’s goals as either strategic or financial. Financial goals are related to the financial performance of the organization, while strategic goals are related to all other areas of an organization’s performance. For instance, Volkswagen states that its financial target (to be achieved by 2018) is to sell 10 million cars and trucks annually with a pretax profit margin over 8 percent.6 And here’s an example of a strategic goal from Uniqlo, Asia’s biggest apparel chain: It wants to be the number-one apparel retailer in the United States.7 The goals just described are stated goals—official statements of what an organization says, and what it wants its stakeholders to believe, its goals are. However, stated goals—which can be found in an organization’s charter, annual report, public relations announcements, or in public statements made by managers—are often conflicting and influenced by what various stakeholders think organizations should do. For instance, Nike’s goal is “delivering inspiration and innovation to every athlete.” Canadian company EnCana’s vision is to “be the world’s high performance benchmark independent oil and gas company.” Deutsche Bank’s goal is “to be the leading global provider of financial solutions, creating lasting value for our clients, our shareholders and people and the communities in which we operate.”8 Such statements are vague and probably better represent management’s public relations skills than being meaningful guides to what the organization is actually trying to accomplish. It shouldn’t be surprising then to find that an organization’s stated goals are often irrelevant to what actually goes on.9 If you want to know an organization’s real goals—those goals an organization actually pursues—observe what organizational members are doing. Actions define priorities. For example, universities may say their goal is limiting class sizes, facilitating close student- faculty relations, and actively involving students in the learning process, but then they put students into 300+ student lecture classes! Knowing that real and stated goals may differ is important for recognizing what you might otherwise think are management inconsistencies. Types of Plans The most popular ways to describe organizational plans are breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single use versus standing). As Exhibit 8-1 shows, these types of plans aren’t independent. That is, strategic plans are usually long term, directional, and single use whereas operational plans are usually short term, specific, and standing. What does each include? Strategic plans are plans that apply to the entire organization and establish the organization’s overall goals. Plans that encompass a particular operational area of the organization are called operational plans. These two types of plans differ because strategic plans are broad while operational plans are narrow. The number of years used to define short-term and long-term plans has declined considerably because of environmental uncertainty. Long-term used to mean anything over seven years. Try to imagine what you’re likely to be doing in seven years, and you can begin to appreciate how difficult it would be for managers to establish plans that far in the future. We define long-term plans as those with a time frame beyond three years.10 Short-term plans cover one year or less. Any time period in between would be an intermediate plan. Although these time classifications are fairly common, an organization can use any planning time frame it wants. Intuitively, it would seem that specific plans would be preferable to directional, or loosely guided, plans. Specific plans are clearly defined and leave no room for interpretation. A specific plan states its objectives in a way that eliminates ambiguity and problems with misunderstanding. For example, a manager who seeks to increase his or her unit’s work output by 8 percent over a given 12-month period might establish specific procedures, budget allocations, and schedules of activities to reach that goal. However, when uncertainty is high and managers must be flexible in order to respond to unexpected changes, directional plans are preferable. Directional plans are flexible plans that set out general guidelines. They provide focus but don’t lock managers into specific goals or courses of action. For example, Sylvia Rhone, president of Motown Records, said she has a simple goal—to “sign great artists.”11 So instead of creating a specific plan to produce and market 10 albums from new artists this year, she might formulate a directional plan to use a network of people around the world to alert her to new and promising talent so she can increase the number of new artists she has under contract. Keep in mind, however, that the flexibility of directional plans must be weighed against the lack of clarity of specific plans. Some plans that managers develop are ongoing while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. For instance, when Walmart wanted to expand the number of its stores in China, top-level executives formulated a single-use plan as a guide. In contrast, standing plans are ongoing plans that provide guidance for activities performed repeatedly. Standing plans include policies, rules, and procedures, which we defined in Chapter 2. An example of a standing plan is the nondiscrimination and anti-harassment policy developed by the University of Arizona. It provides guidance to university administrators, faculty, and staff as they make hiring plans and do their jobs.