MGT 521 Week 3 Assignment
Solution
figure_5.3.pdf
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FIGURE 5.3 Three levels of management, three types of planning Each type of planning has different time horizons, although the times overlap because the plans are somewhat elastic.
Goals & Plans What are the three types of goals, and what are different kinds of plans?
THE BIG PICTURE The purpose
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EXAMPLE
of planning is to set a goal and then an action plan and an operational plan. Types of plans include standing and singleuse plans.
Whatever its type—strategic, tactical, or operational—the purpose of planning is to set a goal and then to formulate anaction plan.
Three Types of Goals: Strategic, Tactical, & Operational A goal, also known as an objective, is a specific commitment to achieve a measurable result within a stated period of time.
As with planning, goals are of the same three types—strategic, tactical, and operational. Also, like planning, goals are arranged in a hierarchy known as a meansend chain because in the chain of management (operational, tactical, strategic) the accomplishment of lowlevel goals is the means leading to the accomplishment of highlevel goals or ends.
Strategic goals are set by and for top management and focus on objectives for the organization as a whole.
Tactical goals are set by and for middle managers and focus on the actions needed to achieve strategic goals.
Operational goals are set by and for firstline managers and are concerned with shortterm matters associated with realizing tactical goals.
As we will see later inSection 5.4, goals should be SMART—specific, measurable, attainable, results oriented, and with target dates.
The Action Plan & the Operating Plan The goal should be followed by an action plan, which defines the course of action needed to achieve the stated goal, such as a marketing plan or sales plan.
The operating plan, which is typically designed for a oneyear period, defines how you will conduct your business based on the action plan; it identifies clear targets such as revenues, cash flow, and market share.
Strategic, Tactical, & Operational Goals: Southwest Airlines
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Ranking No. 9 onFortune’s 2014 Most Admired Companies list, Dallasbased Southwest Airlines has inspired a host of lowfare imitators—big ones like Alaska and JetBlue and small ones like Allegiant, Frontier, Spirit, Sun Country, and Virgin America—which have grown rapidly in recent years compared to mainline carriers such as United, Delta, American, and US Airways. It has continually achieved its strategic goals and as of 2014 had been profitable for 41 consecutive years.47
Strategic Goals. The goal of Southwest’s top managers is to ensure that the airline is highly profitable, following the general strategy of (a) keeping costs and fares down, (b) offering a superior ontime arrival record, and (c) keeping passengershappy. One of the most important strategic decisions Southwest made was to fly just one type of airplane—Boeing 737s. (Several dozen Boeing 717s, inherited when the company acquired AirTran, were leased to Delta. Southwest has about 680 jets overall.) Thus, it is able to hold down training, maintenance, and operating expenses.48
Lookalikes.One key to the success of Southwest Airlines is that all the planes in its fleet have been the same type, Boeing 737s, which saves on maintenance and training costs.
Another strategic decision was to create a strong corporate culture that, according to one former CEO, allows people to “feel like they’re using their brains, they’re using their creativity, they’re allowed to be themselves and have a sense of humor, and they understand what the mission of the company is.”49
Tactical Goals.Cutting costs and keeping fares low has traditionally been a key tactical goal for Southwest’s middle managers. For example, the organization cut costs in its maintenance program by doing more work on a plane when it’s in for a check instead of bringing it in three different times. In addition, it has tried to get more use out of its planes every day by limiting the turnaround time between flights to 20 minutes, compared to up to an hour for other airlines.
Although now it flies longer flights between bigger cities, which uses fuel more efficiently but is more subject to delays, until recently Southwest flew shorthaul flights to midsize cities to save time and money by avoiding traffic. There is just one class of seating, doing away with the distinction between coach and first class. Originally, even the boarding passes were reusable, being made of plastic (most passengers print out their own passes now). Finally, the airline saves by not feeding passengers: it serves mostly peanuts, no inflight meals.
How do you make arrival times more reliable? To achieve this second tactical goal, middle managers did away with guaranteed seat reservations before ticketing, so that noshows wouldn’t
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complicate (and therefore delay) the boarding process. (It changed that policy slightly in 2007 to ensure that passengers paying extra for “business select” fares would be placed at the front of the line.)
In addition, as mentioned, the airline has tried to turn planes around in exactly 20 minutes, so that ontime departures are more apt to produce ontime arrivals. Although the airline is about 83% unionized, turnaround was helped by looser work rules, so that workers could pitch in to do tasks outside their normal jobs. “If you saw something that needed to be done,” said one former employee, “and you thought you could do it, you did.”50
Unfortunately, in 2013, in an attempt to offer more convenient flight schedules, the airline instituted a new system to reduce times it allowed for flights and compressed its turnaround times even further—the result of which sent its ontime performance reeling to last place among U.S. carriers. Its involuntarily denied–boarding rate and mishandledbaggage rate also increased slightly.51
Despite the delays, Southwest still retained its top ranking for having the lowest customer complaints.52The difference lies in small things: the free peanuts (an emotional subject among travelers), switching of flights without charge, and no charge for checkedin luggage up to two pieces. (The airline does, however, charge for checking a third bag.)
Operational Goals.Consider how Southwest’s firstline managers can enhance productivity in the unloading, refueling, and cleaning of arriving planes. “One example [of productivity] customers mention all the time,” said former chairman Herb Kelleher, “is if you look out the window when the airplane is taxiing toward the jetway, you see our ground crews charging before the airplane has even come to rest. Customers tell me that with other airlines nobody moves until the airplane has turned off its engines.”53
The New Southwest.In January 2014, Southwest began venturing into the international market, marking a significant shift.54 Its initial flights are to the Caribbean, but other international routes may be attempted later. Some operations, such as fast turnaround times, may be difficult to implement because of departure restrictions.55Southwest also faces costly upgrades to its computer systems and an antiquated phone system, its traditionally low fares are not so low anymore, and it is negotiating with workers to try to achieve more productivity and flexibility.56
YOUR CALL Do you think recent changes will allow the company to continue to achieve its strategic goals?
