Why is plastic different than any other substance on earth

Major Questions You Should Be Able to Answer

5.1

Planning & Strategy

Major Question: What are planning, strategy, and strategic management, and why are they important to me as a manager?

5.2

Fundamentals of Planning

Major Question: What are mission and vision statements, and what are three types of planning?

5.3

Goals & Plans

Major Question: What are the three types of goals, and what are different kinds of plans?

5.4

Promoting Goal Setting: SMART Goals & Management by Objectives

Major Question: What are SMART goals and MBO and how can they be implemented?

5.5

The Planning/Control Cycle

Major Question: How does the planning/control cycle help keep a manager’s plans headed in the right direction?

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the manager’s toolbox

Setting Big Goals: Is This the Road to Success?

What’s a big goal? A four-year college degree.

Worth it? Not getting a degree has been estimated at about half a million dollars in lost income over your lifetime!1 People with such degrees averaged 98% more an hour than those without them.2 College graduates ages 25–32 are more apt than non–college graduates (86% versus 57%) to say their job is a path to a career.3

Big Goals, Hard Goals

Getting a college degree is not only a big goal, it’s a hard goal—difficult, stressful, expensive, time consuming. Still, do you perform better when you set difficult goals? If goals are made harder, people may achieve them less often, but they nevertheless perform at a higher level.4

If you have outsize ambitions, you might set yourself a really hard goal (“Increase study time 50%)—what’s known as a stretch goal, “stretching yourself beyond what your mind might think is safe,” in one definition.5 Richard Branson, founder of Virgin Atlantic airlines, Virgin records, and many other enterprises, has done a lot of incredible things, in part because of setting stretch goals: “My interest in life,” he says, “comes from setting myself huge, apparently unachievable challenges and trying to rise above them.”6 However, in organizations, stretch goals may spur extraordinary efforts but may also lead to excessive risk taking, cheating, and interpersonal strife.7

Writing Out Your Goals

Research suggests that writing about two paragraphs outlining your goals will help you feel more confident and energetic when entering a new group.8 Some advice for writing out—and achieving—your biggest goals are as follows:9

• Make a concrete plan—which embeds your intentions firmly in your memory.

• Break your goals into manageable bites—and set out clear steps that you can use to record and track your progress.

• Put something of value on the line—such as money that will be forfeited if you’re unsuccessful. (You can deposit the money at stickK.com.)

• Bundle your temptations or rewards to your efforts—such as tying your reading of pleasurable trashy novels to when you do gym workouts.

• Seek social support—pursue your goal with the help of a mentor or fellow strivers.

If you fail, don’t give up entirely. Realize that you may have other opportunities to make a fresh start.

For Discussion One writer advises setting one somewhat “crazy” personal goal from time to time. This is a stretch goal, he suggests, “that if accomplished would create a new, different, and exciting future state, the kind of goal that if you can only get halfway there, you will still feel good about the progress you have made and will be better for the effort.”10 What would that goal be for you?

We describe planning and its link to strategy. We define planning, strategy, and strategic management and state why they are important. We deal with the fundamentals of planning, including the mission and vision statements and the three types of planning—strategic, tactical, and operational. We consider goals, action plans, and operating plans; SMART goals and management by objectives; and finally the planning/control cycle.

Page 136Planning & Strategy

What are planning, strategy, and strategic management, and why are they important to me as a manager?

THE BIG PICTURE

The first of four functions in the management process is planning, which involves setting goals and deciding how to achieve them and which is linked to strategy. We define planning, strategy, and strategic management. We then describe three reasons why strategic management and strategic planning are important and how they may work for both large and small firms.

The management process, as you’ll recall (from Chapter 1), involves the four management functions of planning, organizing, leading, and controlling, which form four of the part divisions of this book. In this and the next two chapters we discuss planning and strategy.

Planning, Strategy, & Strategic Management

Planning, which we discuss in this chapter, is used in conjunction with strategy and strategic management, as we describe in Chapter 6. Let’s consider some definitions.

Planning: Coping with Uncertainty As we’ve said (Chapter 1), planning is defined as setting goals and deciding how to achieve them. Another definition: planning is coping with uncertainty by formulating future courses of action to achieve specified results. 11When you make a plan, you make a blueprint for action that describes what you need to do to realize your goals.

Example: One important type of plan is a business plan, a document that outlines a proposed firm’s goals, the strategy for achieving them, and the standards for measuring success. Here you would describe the basic idea behind your business—the business model, which outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses. It also describes the industry you’re entering, how your product will be different, how you’ll market to customers, how you’re qualified to run the business, and how you will finance your business.

 EXAMPLE

Is Planning Necessary? Launching a Vending-Machine Business on $425

Brian Allman of Reno, Nevada, was 17 years old when he bought a simple vending machine at Sam’s Club for $425 and used it to start Bear Snax Vending, stocking the machine and four others he added later with Skittles, M&Ms, and Snickers to serve several small to midsize businesses, such as banks. Allman did this without apparently drawing up a business plan.12

Why Plan? Almost everyone starting a new business is advised to write a business plan. The reasons: Creating such a plan helps you get financing. (“If you want us to invest our money, show us your plan.”) It helps you think through important details. (“Don’t rush things; it’s best to get the strategy right.”) Finally, it better guarantees your firm will succeed. (A study of 396 entrepreneurs in Sweden found that a greater number of firms that failed never had a formal business plan.13)

“Going with What You’ve Got.” Even so, sometimes major decisions, including starting up companies, are made without much planning. Indeed, one study found that 41% of Inc. magazine’s 1989 list of fastest-growing private firms didn’t have a business plan and 26% had only rudimentary plans, percentages essentially unchanged in 2002.14 Planning of any sort, of course, requires time, and sometimes you need to make a quick decision and “go with what you’ve got”—with or without a plan.15

YOUR CALL

Nine years after founding Bear Snax Vending without a formal business plan, Brian Allman was still running it. (Allman was also working as a financial advisor for financial services firm Edward Jones.) If you had a few hundred dollars with which to launch a small business, do you think writing a business plan would help you or just be a waste of time?

Page 137Strategy: Large-Scale Action Plan A strategy is a large-scale action plan that sets the direction for an organization. It represents an “educated guess” about what must be done in the long term for the survival or the prosperity of the organization or its principal parts. We hear the word expressed in terms like “Budweiser’s ultimate strategy . . .” or “Visa’s overseas strategy . . .” or financial strategy, marketing strategy, and human resource strategy.

An example of a strategy is “Find out what customers want, then provide it to them as cheaply and quickly as possible” (the strategy of Walmart). However, strategy is not something that can be decided on just once. It needs to be revisited from time to time due to ever changing business conditions.

Strategic Management: Involving All Managers in Strategy In the late 1940s, most large U.S. companies were organized around a single idea or product line. By the 1970s, Fortune 500 companies were operating in more than one industry and had expanded overseas. It became apparent that to stay focused and efficient, companies had to begin taking a strategic-management approach.

Strategic management is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals. This definition doesn’t mean that managers at the top dictate ideas to be followed by people lower down. Indeed, precisely because middle managers in particular are the ones who will be asked to understand and implement the strategies, they should also help to formulate them.

As we will see, strategic management is a process that involves managers from all parts of the organization—top managers, middle managers, and first-line managers—in the formulation, implementation, and execution of strategies and strategic goals to advance the purposes of the organization. Thus, planning covers not only strategic planning (done by top managers) but also tactical planning (done by middle managers) and operational planning (done by first-line managers).

Planning and strategic management derive from an organization’s mission and vision about itself, as we describe in the next section. (See Figure 5.1 .)

FIGURE 5.1 Planning and strategic management

The details of planning and strategic management are explained in Chapters 5 and 6.

Why Planning & Strategic Management Are Important

An organization should adopt planning and strategic management for three reasons: They can (1) provide direction and momentum, (2) encourage new ideas, and above all (3) develop a sustainable competitive advantage. 16 Let’s consider these three matters.

1. Providing Direction & Momentum Some executives are unable even to articulate what their strategy is.17 Others are so preoccupied with day-to-day pressures that their organizations can lose momentum. But planning and strategic management can help people focus on the most critical problems, choices, and opportunities.

If a broad group of employees is involved in the process, that can foster teamwork, promote learning, and build commitment across the organization. Indeed, as we describe Page 138in Chapter 8, strategy can determine the very structure of the organization—for example, a top-down hierarchy with lots of management levels, as might be appropriate for an electricity-and-gas power utility, versus a flat-organization with few management levels and flexible roles, as might suit a fast-moving social media start-up.

Unless a plan is in place, managers may well focus on just whatever is in front of them, putting out fires—until they get an unpleasant jolt when a competitor moves out in front because it has been able to take a long-range view of things and act more quickly. In recent times, this surprise has been happening over and over as companies have been confronted by some digital or Internet trend that emerged as a threat—as Amazon.com was to Borders; as digital cameras were to Kodak’s film business; as Google News, blogs, and citizen media were to newspapers.18

But there are many other instances in which a big company didn’t take competitors seriously (as Sears didn’t Walmart, IBM didn’t Microsoft, and GM didn’t Toyota). “We were five years late in recognizing that [microbreweries] were going to take as much market as they did,” says August Busch III, CEO of massive brewer Anheuser-Busch, “and five years late in recognizing we should have joined them.”19

Of course, a poor plan can send an organization in the wrong direction. Bad planning usually results from faulty assumptions about the future, poor assessment of an organization’s capabilities, ineffective group dynamics, and information overload.20 And it needs to be said that while a detailed plan may be comforting, it’s not necessarily a strategy.21

2. Encouraging New Ideas Some people object that planning can foster rigidity, that it creates blinders that block out peripheral vision and reduces creative thinking and action. “Setting oneself on a predetermined course in unknown waters,” says one critic, “is the perfect way to sail straight into an iceberg.”22

Actually, far from being a straitjacket for new ideas, strategic planning can help encourage them by stressing the importance of innovation in achieving long-range success. Management scholar Gary Hamel says that companies such as Apple have been successful because they have been able to unleash the spirit of “strategy innovation.” Strategy innovation, he says, is the ability to reinvent the basis of competition within existing industries—“bold new business models that put incumbents on the defensive.”23

100 Montaditos. Characterized as a “Spanish Starbucks for sandwiches” or “the dollar store of fast-food franchises,” 100 Montaditos is a hugely successful Spanish restaurant chain that has set its sights on the United States. Named for bargain-rate traditional 5-inch sandwiches (such as those stuffed with Serrano ham or duck mousse with crispy onions for only $1), the chain’s strategy emphasizes atmosphere combined with low prices. Starting with this Miami restaurant in 2011, it aimed to open 4,000 outlets from Canada to Argentina during the next five years—a growth rate that would exceed even that of Starbucks, which took three decades to achieve the same number of U.S. stores. Some business analysts say the Spanish company’s plans are too ambitious. Is there anything wrong with a strategy built on bold dreams?

Page 139Some successful innovators are companies creating new wealth in the food and restaurant industries, where Starbucks Coffee, Trader Joe’s, ConAgra, and Walmart, for example, developed entirely new grocery product categories and retailing concepts. Chili’s, the casual-dining chain, has installed table-top computer screens that take menu orders, accept payments by credit card, and let diners play videogames, changing how diners and wait staff interact.24 GrubHub Seamless, an online takeout and delivery company, serves customers armed with cell phones and delivery apps, delivering pizzas and other foods anywhere they want—at the gym, in the park, on the playground.25 Vending machines are now serving everything from salads to smoothies to caviar, and supermarkets are experimenting with personalized pricing, using complex shopping data to ascertain the unique needs of individual customers.26

3. Developing a Sustainable Competitive Advantage Strategic management provides a sustainable competitive advantage, which, you’ll recall (from Chapter 1), is the ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them. Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas: (1) in being responsive to customers, (2) in innovating, (3) in quality, and (4) in effectiveness. Today technology has made achieving a sustainable competitive advantage nearly impossible in many industries, so the advantage may well be fleeting.27