Griffin Mgmt12e IM Ch04
Griffin Mgmt12e IM Ch04
Griffin Mgmt12e IM Ch04
Griffin
CHAPTER 6
Basic Elements of Planning and Decision Making
Part Three of this book is entitled PLANNING AND DECISION MAKING. Its fundamental purpose is
to discuss the first basic management function—planning and decision making.
Part Three has four chapters. Chapter 6 introduces the basic elements of planning and decision making.
Chapter 7 focuses on strategy and strategic planning. Chapter 8 addresses the management of decision
making. Entrepreneurship is the focus of Chapter 9.
Teaching Tip: Some instructors prefer to cover Chapter 9 separately at the end of the
course. If you prefer this method, Chapter 9 is written to be covered “out of sequence.”
CHAPTER SUMMARY
Chapter 6 is the first of four devoted to the planning process. Its purpose, therefore, is to introduce the
basic elements of this management function and to build a foundation for the more detailed coverage of
the material that follows in the remaining chapters of the part.
LEARNING OBJECTIVES
After covering this chapter, students should be able to:
1. Summarize the essential functions of decision making and the planning process.
2. Discuss the purpose of organizational goals, identify different kinds of goals, discuss who sets goals,
and describe how to manage multiple goals.
3. Identify different kinds of organizational plans, note the time frames for planning, discuss who
plans, and describe contingency planning.
4. Discuss how tactical plans are developed and executed.
5. Describe the basic types of operational plans used by organizations.
6. Identify the major barriers to goal setting and planning, how organizations overcome those barriers,
and how to use goals to implement plans.
MANAGEMENT IN ACTION
Cruise Control
The opening case discusses Carnival Cruise Lines’ dismal crisis management. Three separate accidents
show the regression of Carnival’s crisis management from merely adequate to its current state of
contradicting media and customer reports and finger pointing. Crisis management experts say companies
must execute their crisis management plan fast and effectively. Carnival does neither and continues to
flub up with each new accident.
Management Update: Micky Arison was replaced as CEO by Arnold Donald in June
2013. Donald served on the company’s board for 12 years. In July of 2015, Carnival
Corporation announced they are building two ships for their Costa Cruises in Italy. Each
ship can house 6,600 passengers and plans to operate starting in 2019. Currently, the
largest Carnival ships carry 3,600 passengers.
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Chapter 6: Basic Elements of Planning and Decision Making
LECTURE OUTLINE
Teaching Tip: Stress for students that the planning process portrayed in Figure 7.1
reflects an orderly and logical sequence of steps. In reality, of course, the actual planning
process used in any given situation will likely reflect some variation in this process.
Decision making drives planning. Decisions underlie the establishment of organizational goals, for
example, and the formulation and implementation of all plans.
In order to plan effectively, managers must understand the environmental context in which the
organization exists. They must establish a mission that includes the organization’s purpose,
premises, values, and directions. Strategic goals and plans are devised from the mission statement;
tactical goals and plans are generated from the strategic goals and plans; and operational goals and
plans are devised from the tactical goals and plans.
Cross-Reference: Note for students that we are simply introducing decision making
here. Chapter 8 covers decision making more thoroughly.
A. Purposes of Goals
Goals serve four important purposes.
1. Goals provide guidance and a unified direction for people in the organization.
2. Goals promote good planning.
3. Goals motivate employees.
4. Goals provide an effective mechanism for evaluation and control.
Discussion Starter: Ask students to think about their own personal goals. Then ask them
to evaluate each of those goals in terms of the purpose it serves.
B. Kinds of Goals – goals vary by level, area, and time frame.
1. There are four basic levels of goals.
An organization’s mission is a statement of its fundamental, unique purpose that sets it
apart from other firms of the same type. The mission also identifies the scope of the
business’s operations in product and market terms.
Strategic goals are set by and for the top managers of the organization who focus on
broad, general issues.
Tactical goals are set by and for middle managers and focus on how to operationalize
actions necessary to achieve the strategic goals.
Operational goals are set by and for lower-level managers who focus on shorter-term
issues associated with the tactical goals.
2. Goals are set for different areas such as finance, marketing, or human resources.
3. Goals are set across different time frames (long-term, intermediate-term, and short-term).
The length of each time frame differs by level.
C. Responsibilities for Setting Goals
All managers should be involved, but each manager generally is responsible for setting goals
that correspond to his or her level in the organization.
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Management 12e by Ricky W. Griffin
Teaching Tip: Figure 6.2 illustrates the kinds of organizational goals that might be set
for a regional fast-food restaurant chain.
Group Exercise: After discussing the material titled “Kinds of Goals”, have students
construct a hypothetical hierarchy of goals like those in Figure 6.2 for different kinds of
organizations such as a retailer, a manufacturer, a college or university, and so forth.
D. Managing Multiple Goals
Goals set by different areas or at different levels may conflict. Optimizing involves balancing
and reconciling possible conflicts between goals.
Discussion Starter: Ask students to identify situations in which they have had to
optimize multiple goals. A very relevant example for students is the trade-off between
socializing and studying for a test or between studying for multiple tests during finals.
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Chapter 6: Basic Elements of Planning and Decision Making
Management Update: As a corollary to the point noted above, planning task forces have
become more popular in recent years as firms have attempted to get their operating
managers more involved in planning.
Extra Example: Tenneco is an example of a firm that has taken this approach. While
Tenneco still has a planning staff, it is much smaller than it used to be. Its members
usually provide support for planning task forces composed of operating managers.
2. Planning task force—A planning task force is a group of line managers with a special
interest in the area of planning who are grouped together to address a particular issue.
Members of the planning staff also may be included in the task force.
Management Update: As the role of planning task forces has increased, so too has the
role of executive committees. These committees provide a natural analog to a planning
task force. That is, the executive committee can represent senior management, and a
planning task force can represent line management. The two groups can then work
together to effectively develop plans.
3. Board of directors—The board of directors establishes the corporate mission and
strategy.
4. Chief executive officer—The CEO plays a major role in the complete planning process
and is responsible for implementing the strategy.
5. Executive committee—The executive committee provides input to the CEO on the
proposals that affect their own units and reviews the various strategic plans that develop
from this input.
Extra Example: Again, this closely mirrors the approach used at Tenneco today. The
firm’s executive committee works with planning task forces, with the efforts of both
supported and assisted by a small planning staff.
6. Line management—Line managers are individuals with formal authority and
responsibility for the management of the organization. They provide valuable inside
information as plans are formulated and implemented, and they execute the plans
developed by top management.
D. Contingency Planning and Crisis Management
Contingency planning is the determination of alternative courses of action to be taken if an
intended plan of action is unexpectedly disrupted or rendered inappropriate.
Contingency planning usually involves various action points that are used to identify the need
to implement alternative plans.
Extra Example: Starbucks recently developed a contingency plan. Recent frosts in
Brazil drove up the price of coffee beans to the point that Starbucks increased its own
prices by 10 percent. It then developed a contingency plan for dealing with future pricing
alternatives. If the price of beans drops to previous levels, Starbucks will lower its own
prices back to previous levels as well. If bean prices remain high, however, Starbucks
will also keep its own prices high.
Discussion Starter: Ask students to recall examples of times when they have engaged in
contingency planning.
A closely related concept is crisis management—the set of procedures the organization uses
in the event of a disaster or other unexpected calamity.
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Management 12e by Ricky W. Griffin
Tactical plans are an organized sequence of steps designed to execute strategic plans.
A. Developing Tactical Plans
Tactical plans must address a number of tactical goals derived from a broader strategic goal,
must deal with specific resource and time issues, and require the use of human resources.
B. Executing Tactical Plans
For proper execution of tactical plans, a manager must evaluate possible courses of action in
light of the goal, make sure each decision maker has the information and resources necessary
to get the job done, ensure vertical and horizontal communication to minimize conflicts and
inconsistent activities, and monitor ongoing activities derived from the plans to make sure the
desired end results are achieved.
V. OPERATIONAL PLANNING
A. Single-Use Plans
A single-use plan is developed to carry out a course of action that is not likely to be repeated
in the future.
1. Program—a single-use plan for a large set of activities
Extra Example: In 2009, Disney acquired Marvel Comics. The process of integrating
the two companies was a program.
2. Project—similar to a program, but generally of less scope and complexity
B. Standing Plans
A standing plan is used for activities that recur regularly over a period of time.
1. Policy—specify the organization’s general response to a designated problem or situation.
Discussion Starter: Give students several examples of policies at your college or
university, for example, the school’s policy regarding scholastic honesty or sexual
harassment. Ask the students to describe why that policy was developed. In the students’
opinion, is the policy adequately addressing the problem?
2. Standing operating procedure (SOP)—outlines the steps to be followed in particular
circumstances.
3. Rules and regulations—describe exactly how specific activities are to be carried out.
Interesting Quote: McDonald’s is famed for its SOPs and rules and regulations. To see
where this mentality comes from, consider this quote from Ray Kroc, founder of
McDonald’s: “The French Fry has become almost sacrosanct for me. Its preparation is a
ritual to be followed religiously.” (Fortune, July 3, 1989, 80.)
Discussion Starter: Ask students for examples of rules and regulations they have
encountered that they did not understand.
Group Exercise: Form students into small groups of four or five members each. Have
each group identify a rule or regulation. Then have them attempt to find out when and
why that rule or regulation was adopted, and how many exceptions are made to it.
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Chapter 6: Basic Elements of Planning and Decision Making
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Management 12e by Ricky W. Griffin
Discussion Starter: Have students ever worked under a formal goal-setting system?
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Chapter 6: Basic Elements of Planning and Decision Making
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Management 12e by Ricky W. Griffin
The students of many departments will find that there are generally goals in three areas: teaching,
research, and service. Discuss the three areas with the students and try to discover why one is given
more importance than the other two by a given department. It may be interesting to discuss the
inclusion of research because many students do not see the rationale for including or emphasizing
research as a goal of an academic department.
9. Tell about a time when an organization was not able to fully achieve all of its goals
simultaneously. Why did this occur? Is complete realization of all goals impossible for an
organization? Why or why not?
Students’ answers will vary, but here is one example: “At my workplace, we seek to hire
experienced personnel who will be able to offer great customer service, but our budget is limited, so
instead we usually hire entry-level workers, whose customer-service skills are weaker.” Other
reasons for the inability to achieve goals simultaneously might be related to a constraint in other
resources, such as insufficient labor, raw materials, or time. In theory, organizations should be able
to find creative ways to satisfy many or all goals simultaneously. In practice, organizations with
complex sets of stakeholders must try to assure that each group has at least some of its needs met
but is unlikely to be able to fully satisfy all groups.
10. From your library or the Internet, find information about a company’s mission statement and
goals. List its mission and some of its strategic, tactical, and operational goals. Explain the
relationship you see among the goals at different levels.
Answers will vary. For example, if students investigated the mission statement of the IRS, they
would find: “to provide America’s taxpayers with top quality service by helping them understand
and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.”
Among their strategic initiatives are the ability for all taxpayers to file their returns electronically. A
tactical plan that builds on that strategy is the development of relationships with third-party
providers of tax services, such as H&R Block. An operational plan that builds on that tactic is the
development of an IRS web site, which offers specific help and instructions online for every tax
form, to aid online filers. In general, students should find that the mission, strategy, tactics, and
operations build on plans at the previous level.
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Chapter 6: Basic Elements of Planning and Decision Making
C. If the team decides to close the plant, it must draw up a list of the factors on which it based its
decision and be prepared to justify it.
D. If the team decides to keep the plant open, it must draw up a plan explaining how the company
can still remain competitive.
The team has to keep cost as well as quality issues in mind. The Italian competitors are
currently beating them on both fronts.
E. Each member of each team should be prepared to explain the choices that he or she made in
helping the group reach its decision.
MANAGEMENT AT WORK
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Management 12e by Ricky W. Griffin
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Chapter 6: Basic Elements of Planning and Decision Making
The success of the company relies on customers purchasing snack products. Customers are
increasingly opting for healthy snacks. By taking a holistic approach of minding the well-being of
employees, customers, and suppliers, the company is promoting itself as a company that cares.
Having a global presence, the company can ill-afford a customer base on any continent who feels
the company is producing harmful products. For instance, paying special attention to the growing of
products in the supply chain satisfies both the people who live in the growing area as well as
customers purchasing the products anywhere in the world market.
3. Case Question 3: Explain – hypothetically – how the following might emerge as barriers to
sustainability planning at Mondelēz:
Inappropriate goals.
An improper reward system.
A dynamic and complex environment.
Resistance to change.
Constraints.
Inappropriate goals may hinder sustainability planning if the goals are unattainable or if they place
too much emphasis on the wrong measure of success. A goal of producing an unsustainable amount
of coffee per acre will hinder sustainability planning.
An improper reward system may encourage suppliers to overestimate their sustainable production.
Many of Mondelēz’s suppliers are countries with unstable governments. If governments change
leaders, the company may face strict controls or a weakened workforce.
Resistance to change may hinder the company if suppliers do not wish to adopt the sustainable
measures the company encourages.
Constraints may come in the form of import restrictions from supplier countries.
4. Case Question 4: According to a 2014 McKinsey & Co. survey of executives, 36 percent included
reputation management – building, maintaining, or improving corporate reputation – among the top
three reasons for addressing sustainability.* Explain how the following management strategies can
help to enhance both sustainability and reputation:
Setting aggressive internal goals for sustainability initiatives.
Adopting a unified sustainability strategy with clearly articulated priorities.
Building a broad leadership coalition in shaping sustainability strategy.
Ensuring that everyone in the organization understands the financial benefits of
sustainability.
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Management 12e by Ricky W. Griffin
o Broad leadership allows for increased sensitivity to a variety of issues. The more
diverse the leadership, the better the company’s reputation.
Ensuring that everyone in the organization understands the financial benefits of
sustainability.
o Having all employees on the same page and buying into the sustainability
initiatives increases the chance for success.
* Sheila Bonini and Anne-Titia Bové, “Sustainability’s Strategic Worth: McKinsey Global Survey
Results,” McKinsey & Co., July 2014 www.mckinsey.com , on September 15, 2014.
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