research paper for The foundation for planning

The Foundation for Planning 107

It is difficult to develop future strategies for the business without knowing the current status and their success at this point. At this time, an analysis of the status needs to be made. One tool that is often used is the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. This analysis should address all factors that are key to the organization’s future success. Strengths and weaknesses are basically internal to an organization and may include the following:

The external opportunities and threats may be in some of the following areas:

Once the SWOT review is complete, the future strategy may be readily apparent, or as is more likely the case, a series of strategies or combinations of tactics will suggest themselves. Use the SWOTs to help identify possible strategies as follows:

Build on Strengths Weaknesses

Exploit Opportunities Avoid Threats

Vision/Mission Aligned toward meeting customer expectations and within framework

of organization's philosophy

Strategic Issues

SWOT Analysis Gap Analysis

Forecasting

Ongoing Strategic Planning, Goals

Objectives, Strategies

Figure 4-2 Strategic planning.

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108 Chapter 4 Planning and Forecasting

The resulting strategies can then be modeled to form the basis of a realistic strategic plan. The SWOTs identified will assist in the planning, as well as in determining, the gap analysis. A gap analysis is a technique used to analyze/assess where you currently are with respect to where you would like to be in the future.

Mission

SWOT Analysis

Analysis

Strategy

External Opportunities

External Threats

Internal Strengths

Internal Weaknesses

The basic vision, purpose, or mission of an organization must next be interpreted in terms of goals and objectives. Goals give purpose and direction to accomplish the mission of an organiza- tion. The goal statement answers the following questions: What do we do; why do we do it; and for whom do we do it? It is used as a continual point of reference regarding the scope or purpose. The objectives further clarify the goal and answer the question, How do we go about it? There may be several goals, and each goal may have several objectives. Strategies are statements about the way objectives are to be achieved. They are relevant only to the extent that they help meet the objectives. Different organizations may interchange the words vision and mission, and goals and objectives. The importance is not in the words, but in the meaning.

Mission—Pal’s

To delight customer in a way that creates loyalty.

Source: http://www.pals.com, September 2012. Pal’s is a fast food, drive-through restaurant in East Tennessee and winner of the Baldrige Quality Award.

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The Foundation for Planning 109

Mission—Southwest Airlines

The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

At Southwest Airlines, our Mission Statement has always governed the way we conduct our business. It highlights our desire to serve our Customers and gives us direction when we have to make service-related decisions. It is another way of saying, “We always try to do the right thing!” Our Mission Statement has also led the way to the airline industry’s best cumula- tive consumer satisfaction record, according to statistics accumulated and published by the U.S. Department of Transportation. That is why we are sharing it with you.

Source: http://www.southwest.com, 7/7/2012.

Seek Commitment

The Planning Process

Specify Objectives

Generate Strategies

Evaluate Strategies

Monitor Results

(Source: J. Scott Armstrong, Strategic Planning and Forecasting Fundamentals. http://repository.upenn. edu, September 2012).

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One must distinguish between two types of goals that often coexist: the official goals that man- agement says it is pursuing in its public statements, and the operative goals that it actually is pursu- ing. Managers of rural electric cooperatives in the United States, when asked by this author for their underlying goals, often replied, to provide the best possible service at the lowest possible cost. This is hardly an operative goal, since best service implies a high level of staffing of maintenance and repair crews, and “lowest cost” implies a lesser level. Only by examining the level actually being maintained could one deduce the operative goal.

Peter Drucker believes that objectives need to be established in all areas on which the organiza- tion’s survival depends. He distinguishes eight such key result areas:

1. Market share. Market share is the ratio of dollar sales of an enterprise in a particular market to the total sales of all competitive products and services in that market. Firms with a small market share usually are less profitable because they have fewer sales over which to spread the fixed costs of operation, and managers often decline to enter or remain in a specific market unless they can either achieve a satisfactory market share or can define a smaller “market segment” in which they can be a leader.

2. Innovation. Most successful companies, especially in the areas of technology where most engineers will work, are continually searching for new products and services. 3M, for example, requires of its 40-odd divisions that at least 25 percent of sales be of products introduced in the last five years. Nonetheless, some successful companies deliberately choose to be followers and to provide low-cost, high-volume products without the high expense of being first.

3. Productivity and quality. Productivity measures an organization’s ability to produce more goods and services per unit of input (labor, materials, and investment). In recent years, quality has been added as a related and essential area for setting objectives. The two are not inconsistent, since higher quality usually leads to lower scrap and rework losses, fewer returns, and greater customer satisfaction, increasing productivity and profitability.

4. Physical and financial resources. An enterprise needs to establish goals for the resources (plant, equipment, inventory, and capital) it needs to perform effectively.

5. Manager performance and development. Since good management is the key to enterprise success, effective firms plan carefully to assure that managers will be available in the years ahead in the quality and quantity needed for the organization to prosper. Supporting goals are then developed in areas such as recruitment, training, and evaluation.

6. Worker performance and attitude. Peters and Waterman found that respect for the individual employee was a common thread running through America’s most successful businesses. Personnel are crew members at McDonald’s, “hosts” at Disneyland, “ambassadors” at Six Flags, and associates at J.C. Penney stores. An unfortunate outcome of Frederick Taylor’s scientific management revolution was, as we saw in Chapter 2, the division of work into deciding how to do it (by management) and doing as you are told (by the workers). Today’s more educated workforce has much to offer the company that knows how to motivate and challenge them effectively.

7. Profitability. The profitability of an enterprise is essential to its continuation, and the desired level should be set explicitly as an objective against which to measure enterprise success.

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The Foundation for Planning 111

8. Social responsibility. Every enterprise has responsibilities as a corporate citizen that extend beyond the legal and economic requirements. These include responsibilities to customers, employees, suppliers, community, and society as a whole. The organization that does not at least take responsibility for its effect on the environment deserves to be penalized by society.

Management by Objectives

In the same 1954 work, Drucker formulated the concept of management by objectives (MBO). Since then, MBO has been widely adopted to translate broad organizational goals and objectives like those discussed previously into specific individual objectives. MBO can (and usually should) be employed between superior and subordinate at every level. The steps in MBO are generally as follows.

First, both superior and subordinate should have an understanding of the goals and objectives of the overall organization and those of the superior’s group.

The superior and subordinate then meet to establish objectives for the subordinate’s atten- tion over the next six months or year that are consistent with group objectives. These objectives should require some effort to attain, yet not be beyond reach. They should be quantifiable if feasible (e.g., reduce scrap by 20 percent); if not feasible, they should be verifiable (e.g., write a new qual- ity assurance plan) so that it is possible to determine at the end of the period whether or not the objective has been achieved. The relative amount of input from the superior and the subordinate in negotiating these objectives may vary, but the result should be mutual agreement. In agreeing to an objective proposed by the superior, the subordinate may identify specific resources or authority that need to be supplied by the superior to make it possible, and this is to the advantage of both. Objectives should not be confined to tasks for the sole benefit of the superior, but should also include developmental objectives designed to strengthen the subordinate’s capabilities.

The subordinate then proceeds, over the ensuing period (typically, six months or a year), to carry out his or her job with an emphasis on achieving these objectives. Naturally, if problems occur or priorities change, the superior and subordinate can meet at any time and may modify the objec- tives, but they should not be changed without such agreement.

At the end of the period, the superior and subordinate meet again to evaluate the subordinate’s success in meeting assigned goals. This should be a constructive process, not an excuse for plac- ing blame. This review session should end by mutually establishing a new set of objectives for the following period, of which some may be extensions of earlier objectives and some may be new objectives, and some earlier objectives may be deemphasized.

Advantages claimed for MBO include greater commitment and satisfaction on the part of subordinates, enforced planning and prioritizing of future activities on the part of both superiors and subordinates, and a more rational method of performance evaluation based on contribution to organizational objectives.

Disadvantages include the time and paperwork involved, misuse when superiors simply assign (rather than negotiate) objectives, and the gamesmanship of subordinates who try to negotiate easy goals. There is also a tendency for subordinates to focus on the relatively few, verifiable, MBO objectives negotiated to the detriment of the many other objectives, both qualitative and quantita- tive, that a professional must also keep in balance.

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