Chap 8

• Define the nature and purpose of planning
• Classify the types of goals organizations might have

and the plans they use
• Compare and contrast approaches to goal-setting and
planning
• Discuss contemporary issues in planning
Copyright © 2012 Pearson Education, Inc.

Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
Publishing as Prentice ©2012
Hall Pearson Education, Inc. publishing as Prentice Hall 8-1
What Is Planning?
• Planning - a primary managerial activity that involves:
– Defining the organization’s goals
– Establishing an overall strategy for achieving those goals
– Developing plans to integrate and coordinate work activities

Publishing as Prentice©2012
HallPearson Education, Inc. publishing as Prentice Hall 8-2
Formal Planning
• Formal planning
– Specific goals covering a specific time period
– Written and shared with organizational members to
reduce ambiguity and create a common understanding
about what needs to be done.

Why Do Managers Plan?
• Purposes of Planning
– Provides direction: When employees know what their organization or work
unit is trying to accomplish and what they must contribute to reach goals, they can
coordinate their activities, cooperate with each other, and do what it takes to
accomplish those goals.
– Reduces uncertainty: by forcing managers to look ahead, anticipate change,

consider the impact of change, and develop appropriate responses. Although
planning won’t eliminate uncertainty, managers plan so they can respond effectively.

Cont…
– Minimizes waste and redundancy: When work activities
are coordinated around plans, inefficiencies become obvious and can
be corrected or eliminated.
– Established the goals or standards used in

controlling

Planning and Performance
• Formal planning is associated with:
– Positive financial results: Higher profits and returns on assets
– Doing a good job planning and implementing those plans play a bigger
part in high performance.
– where formal planning didn’t lead to higher performance, the external

environment often was the culprit
– The external environment (governmental regulations or powerful

labor unions) can reduce the impact of planning on performance

Elements of Planning
• Goals (also Objectives)
– Desired outcomes or targets for individuals, groups, or entire
organizations
– Provide direction and evaluation performance criteria
• Plans
– Documents that outline how goals are to be accomplished
– They usually include resource allocations, schedules, and other
necessary actions to accomplish the goals

Types of Goals
• Financial Goals - related to the internal financial performance of the
organization.
• Strategic Goals - related to the performance of the firm relative to factors

in its external environment (e.g., competitors).
• 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.
Cont…
• 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 inconsistencies

Types of Plans

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).
• Strategic Plans
– Apply to the entire organization and Establish the organization’s
overall goals
– Cover extended periods of time
• Operational Plans
– Encompass a particular operational area of the organization
– Cover a short time period

Types of Plans
• Long-Term Plans
– Time frames extending beyond three years.
• Short-Term Plans
– Time frames of 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.

Types of Plans
• Specific Plans
– Plans that 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
when uncertainty is high and managers must be flexible in order to

respond to unexpected changes, directional plans are preferable.
• Directional Plans
– Flexible plans that set out general guidelines and provide focus, yet
allow discretion in implementation.

Types of Plans
• Single-Use Plan
– A one-time plan specifically designed to meet the need of a unique
situation.
• Standing Plans
– Ongoing plans that provide guidance for activities performed
repeatedly.
– Include policies, rules, and procedures,

Setting Goals & Developing Plans
• Approaches to Setting Goals:
Goals provide the direction for all management decisions and actions and
form the criterion against which actual accomplishments are measured.
Everything organizational members do should be oriented toward achieving

goals.
These goals can be set either through a traditional process or by using

management by objectives.

Traditional Goal Setting
• Broad goals are set at the top of the organization. Goals are then broken
into sub-goals for each organizational level.
• This traditional perspective assumes that top managers know what’s best
because they see the “big picture.”
• And the goals passed down to each succeeding level guide individual
employees as they work to achieve those assigned goals.
• Then, at some later time, performance is evaluated to determine

whether the assigned goals have been achieved. Turning broad strategic
goals into departmental, team, and individual goals can be a difficult and
frustrating process.

Exhibit 8-2: The Downside
of Traditional Goal Setting

Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter ©2012 Pearson Education, Inc. publishing as Prentice Hall
Publishing as Prentice Hall 8-17
Maintaining the Hierarchy of Goals
• Means-Ends Chain
– The integrated network of goals that results from establishing a
clearly-defined hierarchy of organizational goals. Higher level goals
(or ends) are linked to lower-level goals, which serve as the means
for their accomplishment.
– The goals achieved at lower levels become the means to reach the
goals (ends) at the next level. And the accomplishment of goals at
that level becomes the means to achieve the goals (ends) at the next
level and on up through the different organizational levels.

Management By Objectives (MBO)
• Instead of using traditional goal setting, many organizations use
management by objectives (MBO).
• A process of setting mutually agreed-upon goals and using those goals to

evaluate employee performance.
• Progress toward accomplishing goals is periodically reviewed.
• Rewards are allocated on the basis of progress towards the goals.

Management By Objectives (MBO)
MBO programs have four elements:
–goal specificity
–participative decision making
–an explicit time period /evaluation period
–Performance feedback

Exhibit 8-3:
Steps in a Typical MBO Program

Does MBO Work?
• Reason for MBO Success
– Top management commitment and involvement
– It can increase employee performance and organizational productivity.
• Potential Problems with MBO Programs

– Are less effective in dynamic environments that require constant
resetting of goals
– Overemphasis on individual accomplishment may create problems
with teamwork

Characteristics of well written goals
• Goals aren’t all written the same way. Some are better than others at
making the desired outcomes clear.
• For instance, the CEO of Procter & Gamble said that he wants to see the
company add close to 548,000 new customers a day, every day, for the
next five years.
• It’s an ambitious but specific goal. Managers should be able to write well-
written goals.

Exhibit 8-4:
Well-Written Goals

Steps in Goal Setting
1. Review the organization’s mission statement.
A mission is a broad statement of an organization’s purpose that provides an
overall guide to what organizational members think is important.
Managers should review the mission before writing goals because goals
should reflect that mission.
2. Evaluate available resources.

You don’t want to set goals that are impossible to achieve given your available
resources. Even though goals should be challenging, they should be
realistic. After all, if the resources you have to work with won’t allow you
to achieve a goal no matter how hard you try or how much effort is
exerted, you shouldn’t set that goal.

Cont…
3. Determine goals individually or with others.
The goals reflect desired outcomes and should be congruent with the
organizational mission and goals in other organizational areas. These
goals should be measurable, specific, and include a time frame for
accomplishment.
4. Write down the goals and communicate them.

Writing down and communicating goals forces people to think them through.
The written goals also become visible evidence of the importance of
working toward something.
5. Review results and whether goals are being met. If goals aren’t being
met, changes are needed in mission, resources and goals.
Developing Plans
• The process of developing plans is influenced by three contingency factors
and by the planning approach followed.
• Contingency Factors in Planning

Three contingency factors affect the choice of plans: organizational level,
degree of environmental uncertainty, and length of future commitments.
1. Organizational level
– Strategic plans at higher levels
– Operational plans at lower levels
2. Degree of environmental uncertainty
– Stable environment: specific plans
– Dynamic environment: flexible plans
Cont…
3. Length of future commitments
– Commitment Concept: Plans should extend far enough to meet those
commitments made when the plans were developed. Planning for too
long or too short a time period is inefficient and in effective

Exhibit 8-5:
Planning in the Hierarchy Organizations

Approaches to Planning
• Establishing a formal planning department
– Create a group of planning specialists whose sole responsibility is to
help write the various organizational plans.
– Under this approach, plans developed by top-level managers flow
down through other organizational levels, much like the traditional
approach to goal-setting.

Approaches to Planning
• Involving organizational members in the process
– In this approach, plans aren’t handed down from one level to the next,
but instead are developed by organizational members at the various
levels and then coordinated with other units across the organization to
meet their specific needs.
– Work teams set their own daily schedules and track their progress
against those schedules. If a team falls behind, team members develop
“recovery” plans to try to get back on schedule.

Contemporary issues in Planning
1. Planning Effectively in dynamic Environment:
•The external environment is continually changing. For instance, cloud
computing storage is revolutionizing all kinds of industries from financial
services to health care to engineering. Social networking sites are being used
by companies to connect with customers, employees, and potential
employees. Experts believe that China and India are transforming the twenty-
first-century global economy.
•Develop plans that are specific but flexible.

•Understand that planning is an ongoing process.
•Change plans when conditions warrant alterations.
•Persistence in planning eventually pays off.
•Flatten the organizational hierarchy to foster the development of planning
skills at all organizational levels.
Cont…
2. Environmental Scanning
Involves screening information to detect emerging trends. One of the fastest-
growing forms of environmental scanning is competitor intelligence, which is
gathering information about competitors that allows managers to anticipate
competitors’ actions rather than merely react to them


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• Define the nature and purpose of planning

• Classify the types of goals organizations might have

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

– Reduces uncertainty: by forcing managers to look ahead, anticipate change,

Copyright © 2012 Pearson Education, Inc.

– Established the goals or standards used in

Copyright © 2012 Pearson Education, Inc.

– where formal planning didn’t lead to higher performance, the external

– The external environment (governmental regulations or powerful

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

• Strategic Goals - related to the performance of the firm relative to factors

• The goals just described are stated goals—official statements of what an

• However, stated goals— which can be found in an organization’s charter,

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Any time period in between would be an intermediate plan. Although

Copyright © 2012 Pearson Education, Inc.

when uncertainty is high and managers must be flexible in order to

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Everything organizational members do should be oriented toward achieving

These goals can be set either through a traditional process or by using

Copyright © 2012 Pearson Education, Inc.

• Then, at some later time, performance is evaluated to determine

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

• A process of setting mutually agreed-upon goals and using those goals to

• Progress toward accomplishing goals is periodically reviewed.

• Rewards are allocated on the basis of progress towards the goals.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

• Potential Problems with MBO Programs

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

2. Evaluate available resources.

Copyright © 2012 Pearson Education, Inc.

4. Write down the goals and communicate them.

• Contingency Factors in Planning

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

Copyright © 2012 Pearson Education, Inc.

•Develop plans that are specific but flexible.

Copyright © 2012 Pearson Education, Inc.

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