Chapter

8
Planning work activities

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 What is Planning?

• Planning: management function that involves setting goals,

establishing strategies for achieving those goals, and
developing plans to integrate and coordinate work activities
-- Planning means “Formal planning” :Specific, time-
oriented goals, Goals written and shared
• Why do managers plan?
1. Provides direction
2. Reduces uncertainty
3. Minimizes waste and redundancy
4. Establishes the goals and standards for controlling
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Planning and Performance

• Formal planning is associated with positive financial

results
• Quality of planning and implementation lead to
high performance than how much planning is done
• External factors can reduce the impact of planning
on performance
• Planning-performance relationship seems to be
influenced by the planning time frame. (At least
four years).

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 Goals and Plans
• Goals (objectives): desired outcomes or targets
• Plans: documents that outline how goals are going to be met
• Types of Goals:
1. Financial goals: related to the financial performance
of an organization.
2. Strategic goals: related to all other areas of an organization’s
performance.
3. Stated goals: official statements of what an organization says,
and what it wants its various stakeholders to believe, its goals
are
4. Real goals: goals that an organization actually pursues, as defined
by the actions of its members
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 Types of Plans
1. Strategic plans are plans that apply to the entire organization and establish the
organization’s overall goals. = organizations vission and mission -- LONG TERM,
DIRECTIONAL, SINGLE USE
2. Operational plans are Plans that encompass a particular operational area of the
organization -- SHORT TERM, SPECIFIC, STANDING
3. Long-term plans are Plans with a time frame beyond three years
4. Short-term plans are Plans covering one year or less
5. Specific plans are Plans that are clearly defined and leave no room for
interpretation -- eliminates ambiguity and problems with misunderstanding
6. Directional plans are Plans that are flexible and set out general guidelines --
when uncertainty is high and managers must be flexible in order to respond to
unexpected changes
7. Single-use plan is A one-time plan specifically designed to meet the needs of a
unique situation
8. Standing plans are Ongoing plans that provide guidance for activities performed
repeatedly -- policies, rules, and procedures (Chapter 2)
Types of Plans

Exhibit 8-1 shows the most popular ways to describe organizational plans.
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Approaches to Setting Goals
• Traditional goal-setting: an approach to setting goals
in which top managers set goals that then flow down
through the organization and become subgoals for
each organizational area -- assumes that top managers
know what’s best because they see the “big picture.
• downside: clarity is lost as the goals make their way
down from the top of the organization to lower levels

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The Downside of Traditional Goal-Setting

Exhibit 8-2 illustrates what can happen as the goals make their way down from the top of the
organization to lower levels.
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 Means-Ends Chain and MBO

• Means-ends chain: an integrated network of goals in which the

accomplishment of goals at one level serves as the means for
achieving the goals, or ends, at the next level. -- 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

• Management by objectives (MBO): a process of setting mutually

agreed upon goals and using those goals to evaluate employee
performance

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 Steps in MBO
Step

Step 1: The organization’s overall objectives and strategies are formulated.

Step 2: Major objectives are allocated among divisional and departmental units.

Step 3: Unit managers collaboratively set specific objectives for their units with their managers.

Step 4: Specific objectives are collaboratively set with all department members.

Step 5: Action plans, defining how objectives are to be achieved, are specified and agreed upon by
managers and employees.

Step 6: The action plans are implemented.

Step 7: Progress toward objectives is periodically reviewed, and feedback is provided.

Step 8: Successful achievement of objectives is reinforced by performance-based rewards.

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 Steps in Goal-Setting
1. Review the organization’s mission, or purpose.
2. Evaluate available resources.
3. Determine the goals individually or with input from others.
4. Write down the goals and communicate them to all who need to
know.
5. Review results and whether goals are being met.

Contingency factors in planning:

• Organizational level
• Degree of environmental uncertainty
• Length of future commitments

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Planning and Organizational
Level

Exhibit 8-5 shows the relationship between a manager’s level in the organization and the type of
planning done.
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Environmental Uncertainty
• When uncertainty is high, plans should be specific, but
flexible.

Length of Future Commitments

Commitment concept: plans should extend far enough to
meet those commitments made when the plans were
developed.

Formal planning department: a group of planning

specialists whose sole responsibility is helping to write
organizational plans

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How Can Managers Plan Effectively in
Dynamic Environments?
• Develop plans that are specific but flexible
• Keep planning even when the environment is
uncertain
• Allow lower organizational levels to set goals and
develop plans

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Environmental Scanning
Environmental scanning = Screening information to detect emerging
trends
1. Competitor intelligence: gathering information about
competitors that allows managers to anticipate competitors’ actions
rather than merely react to them. It seeks basic information about
competitors: Who are they? What are they doing? How will what
they’re doing affect us?
2. Digital Tools: technology, systems, or software that allow the
user to collect, visualize, understand, or analyze data.
a) Business intelligence refers to a variety of data that managers
can use to make more effective strategic decisions. Sources of
business intelligence are company records, industry trends, and
competitors’ financial (for example, profits) or market (for
example, market penetration) data.
b) Data Visualization Tools: methods to organize and summarize data
for visual display
c) Cloud computing refers to storing and accessing data on the
Internet rather than on a computer’s hard drive or a company’s
network. The cloud is just a metaphor for the Internet. -- a company
that provides cloud services to businesses.
d) lnternet of things: Allows everyday “things” to generate and store
and share data across the Internet
Chapter 9
Managing Strategy
 Strategic Management
 Strategic Management: The set of managerial decisions and
actions that determines the long-run performance of an
organization
 Strategies: The plans for how the organization will do what it’s
in business to do, how it will compete successfully, and how it
will attract and satisfy its customers in order to achieve its
goals
 Business model: How a company is going to make money. It
focuses on: (1) whether customers will value what the
company is providing and (2) whether the company can make
any money doing that.
 Why Strategic Management Is Important

1. Higher organizational performance

2. Requires that managers examine and adapt to business
environment changes
3. Coordinates diverse organizational units to focus on
organizational goals
4. Key to the managerial decision-making process
Exhibit 9.1 The Strategic Management
Process

External Analysis
• opportunities
• threats

Identify the
organization's Formulate Implement Evaluate
current mission, goals, SWOT Analysis Strategies Strategies Results
and strategies

Internal Analysis
• strengths
• weaknesses
 Strategic Management Process
Step 1: Identify the Organization’s Current Mission, Objectives, and
Strategies
Mission: the firm’s reason for being
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets

Step 2: Conduct an External Analysis

The environmental scanning of specific and general environments
Focuses on identifying opportunities and threats
Step 3: Conduct an Internal Analysis
Assessing organizational resources, capabilities, activities, and culture:
Strengths (core competencies) create value for the customer and strengthen
the competitive position of the firm
Weaknesses (things done poorly or not at all) can place the firm at a
competitive disadvantage.

Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses,

Opportunities, and Threats)
Step 4: Formulate Strategies
 Develop and evaluate strategic alternatives
 Select appropriate strategies for all levels in the organization that provide
relative advantage over competitors
 Match organizational strengths to environmental opportunities
 Correct weaknesses and guard against threats
 What adjustments, if any, are necessary?
Step 5: Implement Strategies
Implementation: effectively fitting organizational structure and
activities to the environment
The environment dictates the chosen strategy; effective strategy
implementation requires an organizational structure matched to
its requirements
Step 6: Evaluate Results
How effective have strategies been?
What adjustments, if any, are necessary?
 Types of Organizational Strategies
Corporate-level Strategies: An organizational strategy that
determines what businesses a company is in or wants to be in,
and what it wants to do with those businesses -- Top
management’s overall plan for the entire organization and its strategic
business units
Types of Corporate Strategies
1. Growth: A corporate strategy that’s used when an organization
wants to expand the number of markets served or products,
either through its current business(es) or through new
business(es)
a) Concentration focuses on its primary line of business and
increases the number of products or markets served in this
primary business
b) Vertical integration, either backward, forward, or both. In
backward vertical integration, the organization becomes its own
supplier so it can control its inputs. In forward vertical
integration, the organization becomes its own distributor and is
able to control its outputs
c) Horizontal integration, a company grows by combining with
competitors. For instance, Acquisition of NISP bank by OCBC
banks -- OCBC NISP bank
d) Diversification, either related or unrelated. Related
diversification happens when a company combines with other
companies in different, but related, industries. For example,
Google has acquired YouTube. Unrelated diversification is when
company combines with firms in different and unrelated
industries. For instance Pertamina acquired PT Patra Jasa (Hotels
company)
Types of Corporate Strategies
2. Stability strategy: A corporate strategy in which an organization continues to do
what it is currently doing. continuing to serve the same clients by offering the same
product or service, maintaining market share, and sustaining the organization’s
current business operations.
3. Renewal strategy: A corporate strategy designed to address declining
performance. The two main types of renewal strategies are retrenchment and
turnaround strategies.
a) retrenchment strategy is a short-run renewal strategy used for minor
performance problems.
b) When an organization’s problems are more serious, more drastic action—
the turnaround strategy—is needed. Managers do two things for both
renewal strategies: cut costs and restructure organizational operations,
and if necessary Closing underperforming units and Closing entire product
lines or services. For instance Garuda Indonesia
 Exhibit 9.4 Levels of Organizational
Strategy

Corporate Multibusiness
Level Corporation

Business Strategic Strategic Strategic

Level Business Unit 1 Business Unit 2 Business Unit 3

Functional Research and Manufacturing Marketing Human Finance

Level Development Resources
Corporate-Level Strategies (cont’d)

Corporate Portfolio Analysis

BCG Matrix
Developed by the Boston Consulting Group
Considers market share and industry growth rate
Classifies firms as:
Cash cows: low growth rate, high market share
Stars: high growth rate, high market share
Question marks: high growth rate, low market share
Dogs: low growth rate, low market share
Exhibit 7.5 The BCG Matrix
High Low
Low
Market Share

Question
Stars Marks

Sell off or
Growth Rate

Heavily invest
Anticipated

turn into stars

Cash Dogs
Cows
Sell off or
Milk for cash liquidate
High
 Competitive Strategy
 A competitive strategy is a strategy for how an organization will compete in its
business(es). For a small organization in only one line of business or a large
organization that has not diversified into different products or markets,
competitive strategy describes how it will compete in its primary or main market.
For organizations in multiple businesses, however, each business will have its own
competitive strategy that defines its competitive advantage
 So what is COMPETITIVE ADVANTAGE? Developing an effective competitive
strategy requires an understanding of competitive advantage, which is what sets
an organization apart—that is, its distinctive edge. That distinctive edge can come
from the organization’s core competencies by doing something that others cannot
do or doing it better than others can do it.
1. Quality as Competitive Advantage
2. Design Thinking as Competitive Advantage: thinking in unusual ways about what the
business is and how it’s doing what it’s in business to do
3. Social Media as Competitive Advantage: help people—inside and outside the organization
—connect and reduce costs or increase revenue possibilities or both
4. Sustaining Competitive Advantage: The organization must be able to sustain that
advantage; that is, to keep its edge despite competitors’ actions or evolutionary changes in
the industry
Five Competitive Forces by Michael Porter
1. Threat of New Entrants
– The ease or difficulty with which new competitors can enter an
industry
2. Threat of Substitutes
– The extent to which switching costs and brand loyalty affect the
likelihood of customers adopting substitute products and services
3. Bargaining Power of Buyers
– The degree to which buyers have the market strength to hold
sway over and influence competitors in an industry
4. Bargaining Power of Suppliers
The relative number of buyers to suppliers and threats from
substitutes and new entrants affect the buyer-supplier
relationship
5. Current Rivalry
Intensity among rivals increases when industry growth rates slow,
demand falls, and product prices descend
Competitive Strategies
Once managers have assessed the five forces and done a SWOT
analysis, they’re ready to select an appropriate competitive
strategy—that is, one that its the competitive strengths
(resources and capabilities) of the organization and the industry
it’s in
1. Cost Leadership Strategy: Seeking to attain the lowest total
overall costs relative to other industry competitors
2. Differentiation Strategy: Attempting to create a unique and
distinctive product or service for which customers will pay a
premium
3. Focus Strategy: Using a cost or differentiation advantage to exploit
a particular market segment rather than a larger market
4. Stuck in the Middle: Organizations that are unable to develop a
cost or differentiation advantage
 Functional-Level Strategy
Functional-level strategies support the business-level strategy i.e.,
Marketing, human resources, research and development, and finance all
support the business-level strategy. Problems occur when employees or
customers don’t understand a company’s strategy
Current Strategic Management Issues
1. The need for Strategic Leadership. What is strategic leadership? It’s the ability
to anticipate, envision, maintain flexibility, think strategically, and work with
others in the organization to initiate changes that will create a viable and
valuable future for the organization.
2. The Need for Strategic Flexibility. The ability to recognize major external
changes, to quickly commit resources, and to recognize when a strategic
decision was a mistake
3. Important Organizational Strategies for Today’s Environment
a) E-BUSINESS STRATEGIES: Managers use e-business strategies to develop a
sustainable competitive advantage. A cost leader can use e-business to lower
costsin a variety of ways.
b) CUSTOMER SERVICE STRATEGIES Companies emphasizing excellent customer
service need strategies that cultivate that atmosphere from top to bottom.
Such strategies involve giving customers what they want, communicating
effectively with them, and providing employees with customer service
training.
c) INNOVATION STRATEGIES. innovation strategies aren’t necessarily focused on
just the radical, breakthrough products. They can include applying existing
technology to new uses. And organizations have successfully used both
approaches. What types of innovation strategies: innovation emphasis and
innovation timing
 Innovation emphasis: basic scientific research, product development, or
process improvement
 innovation timing: Some organizations want to be the first with innovations,
whereas others are content to follow or mimic the innovations. An organization
that’s first to bring a product innovation to the market or to use a new process
innovation is called a first mover
Chapter 11
Designing Organizational
Elements of Organizational Design
 Organizing: management function that involves arranging and structuring work
to accomplish the organization’s goals
 Organizational structure: the formal arrangement of jobs within an organization
 Organizational chart: the visual representation of an organization’s structure
 Organizational design: creating or changing an organization’s structure
 Organizing is arranging and structuring work to accomplish organizational goals.
It’s an important process during which managers design an organization’s
structure.
 When managers create or change the structure, they’re engaged in
organizational design, a process that involves decisions about six key elements:
1. work specialization,
2. departmentalization,
3. chain of command,
4. span of control,
5. centralization and decentralization,
6. formalization.
Work Specialization & Departmentalization
 Work specialization: dividing work activities into separate job tasks. Individual employees
“specialize” in doing part of an activity rather than the entire activity in order to increase
work output. It’s also known as division of labor. Work specialization makes efficient use of
the diversity of workers skills --- it could lead to great increases in productivity.

 Departmentalization: the basis by which jobs are grouped together. How jobs are grouped
together is called departmentalization. Five common forms of departmentalization are
used, although an organization may develop its own unique classification. Exhibit 11-3
illustrates each type of departmentalization as well as the advantages and disadvantages of
each.
1. geographical departementalization
2. functional departementalization
3. product departementalization
4. process departementalization
5. customer departementalization
Cross-Functional Team & Chain of Command
 Cross-functional team: a work team composed of individuals from various functional
specialties--- work tasks have become more complex and diverse skills are needed to
accomplish those tasks.
 One specific type of team that more organizations are using is a cross-functional team, a
work team composed of individuals from various functional specialties.
 Chain of command: the line of authority extending from upper organizational levels to the
lowest levels, which clarifies who reports to whom
 People need to know who their boss is. That’s what the chain of command is all about.
To understand the chain of command, you have to understand three other important
concepts:
1. authority,
2. responsibility,
3. unity of command
Authority
 The line of authority extending from upper organizational levels to the lowest levels, which
clarifies who reports to whom
1. Line authority: authority that entitles a manager to direct the work of an employee.
employer–employee authority relationship that extends from the top of the
organization to the lowest echelon, according to the chain of command
2. Staff authority: positions with some authority that have been created to support, assist,
and advise those holding line authority. i.e, a hospital administrator who cannot
effectively handle the purchasing of all the supplies the hospital needs creates a
purchasing department, which is a staff function.

 Authority refers to the rights inherent in a managerial position to tell people what to do and
to expect them to do it. Managers in the chain of command have authority to do their job of
coordinating and overseeing the work of others. Authority can be delegated downward to
lower-level managers, giving them certain rights while also prescribing certain limits within
which to operate.
Responsibility and Unity of Command
 Responsibility: the obligation or expectation to perform any assigned duties
 Unity of command: the management principle that each person should report to only one
manager

When managers use their authority to assign work to employees, those employees take on an
obligation to perform those assigned duties. This obligation or expectation to perform is known
as responsibility.

Finally, the unity of command principle (one of Fayol’s 14 management principles) states that a
person should report to only one manager. Without unity of command, conflicting demands
from multiple bosses may create problems.
Span of Control
 Span of control: the number of employees a manager can efficiently and effectively
manage
The traditional view was that managers could not—and should not—directly supervise more
than five or six subordinates. Determining the span of control is important because, to a large
degree, it determines the number of levels and managers in an organization—an important
consideration in how efficient an organization will be. Managers are beginning to recognize
that they can handle a wider span when employees know their jobs well and when those
employees understand organizational processes.
 Centralization and Decentralization
 Centralization: the degree to which decision making is concentrated at upper levels of the
organization
 Decentralization: the degree to which lower-level employees provide input or actually make
decisions
 If top managers make key decisions with little input from below, then the organization is
more centralized. On the other hand, the more that lower-level employees provide input or
actually make decisions, the more decentralization there is. Keep in mind that centralization–
decentralization is not an either-or concept. The decision is relative, not absolute—that is, an
organization is never completely centralized or decentralized.
Employee Empowerment & Formalization
 Employee empowerment: giving employees more authority (power) to make decisions
 As organizations have become more flexible and responsive to environmental trends,
there’s been a distinct shift toward decentralized decision-making. This trend, also
known as employee empowerment, gives employees more authority (power) to make
decisions.
 Formalization: how standardized an organization’s jobs are and the extent to which
employee behavior is guided by rules and procedures
 In highly formalized organizations, there are explicit job descriptions, numerous
organizational rules, and clearly defined procedures covering work processes.
Employees have little discretion over what’s done, when it’s done, and how it’s done.
However, where there is less formalization, employees have more discretion in how
they do their work.
Mechanistic and Organic Structures
 The mechanistic organization (or bureaucracy) was the natural result of combining the six
elements of structure. Adhering to the chain-of-command principle ensured the existence
of a formal hierarchy of authority, with each person controlled and supervised by one
superior.
 The organic organization is a highly adaptive form that is as loose and flexible as the
mechanistic organization is rigid and stable. Rather than having standardized jobs and
regulations, the organic organization’s loose structure allows it to change rapidly as
required. It has division of labor, but the jobs people do are not standardized. Employees
tend to be professionals who are technically proficient and trained to handle diverse
problems. They need few formal rules and little direct supervision because their training has
instilled in them standards of professional conduct.
Strategy and Structure ; Size and Structure
 An organization’s structure should facilitate goal achievement. Because goals are an
important part of the organization’s strategies, it’s only logical that strategy and structure are
closely linked. -- certain structural designs work best with different organizational strategies.
For instance, the flexibility and free-flowing information of the organic structure works well
when an organization is pursuing meaningful and unique innovations. The mechanistic
organization with its efficiency, stability, and tight controls works best for companies
wanting to tightly control costs.

 Size and Structure: There’s considerable evidence that an organization’s size affects its
structure, but once an organization grows past a certain size, size has less influence on
structure. Large organizations—typically considered to be those with more than 2,000
employees—tend to have more specialization, departmentalization, centralization, and rules
and regulations than do small organizations. However, once an organization grows past a
certain size, size has less influence on structure. Why? Essentially, once there are around
2,000 employees, it’s already fairly mechanistic. Adding another 500 employees won’t
impact the structure much. On the other hand, adding 500 employees to an organization
with only 300 employees is likely to make it more mechanistic.
Technology and Structure
 Unit production: the production of items in units or small batches
 Mass production: the production of items in large batches
 Process production: the production of items in continuous processes
Environmental Uncertainty and Structure
 In stable and simple environments, mechanistic designs can be more effective. The greater
the uncertainty, the more an organization needs the flexibility of an organic design.
 The environment–structure relationship helps explain why so many managers today are
restructuring their organizations to be lean, fast, and flexible. Mechanistic organizations are
not equipped to respond to rapid environmental change and environmental uncertainty. As
a result, we’re seeing organizations become more organic.
 Traditional Organizational Design Options
1. Simple structure: an organizational design with little departmentalization, wide spans of
control, centralized authority, and little formalization -- Starts up, small business
2. Functional structure: an organizational design that groups together similar or related
occupational specialties
3. Divisional structure: an organizational structure made up of separate, semiautonomous
units or divisions
Team Structures; Matrix and Project Structures
 Team structure: an organizational structure in which the entire organization is made up of
work teams. In this structure, employee empowerment is crucial because no line of
managerial authority flows from top to bottom. Rather, employee teams design and do
work in the way they think is best, but the teams are also held responsible for all work
performance results in their respective areas.

 Matrix structure: an organizational structure that assigns specialists from different

functional departments to work on one or more projects
 Project structure: an organizational structure in which employees continuously work on
projects
 The matrix structure has One unique aspect of this design is that it creates a dual chain of
command because employees in a matrix organization have two managers, their functional
area manager and their product or project manager, who share authority.
 Many organizations use a project structure, in which employees continuously work on
projects. Unlike the matrix structure, a project structure has no formal departments where
employees return at the completion of a project. Instead, employees take their specific
skills, abilities, and experiences to other projects.
The Boundaryless Organization
 Boundaryless organization: an organization whose design is not defined by, or limited to, the
horizontal, vertical, or external boundaries imposed by a predefined structure. Although the
idea of eliminating boundaries may seem odd, many of today’s most successful organizations
find that they can operate most effectively by remaining flexible and unstructured: that the
ideal structure for them is not having a rigid, bounded, and predefined structure

 Virtual organization: an organization that consists of a small core of full-time employees and
outside specialists temporarily hired as needed to work on projects. The type of work virtual
interns do typically involves “researching, sales, marketing, and social media development”—
tasks that can be done anywhere with a computer and online access. Some organizations are
structured in a way that allows most employees to be virtual employees.
 Task Forces; Telecommuting
 Task force (or ad hoc committee): a temporary committee or team formed to tackle a
specific short-term problem affecting several departments. Another structural option
organizations might use is a task force (also called an ad hoc committee), a temporary
committee or team formed to tackle a specific short-term problem affecting several
departments. The temporary nature of a task force is what differentiates it from a cross-
functional team.

 Telecommuting: a work arrangement in which employees work at home and are linked to
the workplace by computer. Information technology has made telecommuting possible,
and external environmental changes have made it necessary for many organizations..
Working from home used to be considered a “cushy perk” for a few lucky employees, and
such an arrangement wasn’t allowed very often. Now, many businesses view
telecommuting as a business necessity.
Compressed Workweeks, Flextime, and Job Sharing
 Compressed workweek: a workweek where employees work longer hours per day but
fewer days per week. Employees work longer hours per day but fewer days per week. The
most common arrangement is four 10-hour days (a 4–40 program).

 Flextime (or flexible work hours): a scheduling system in which employees are required to
work a specific number of hours a week but are free to vary those hours within certain
limits. A flex-time schedule typically designates certain common core hours when all
employees are required to be on the job, but allows starting, ending, and lunch-hour times
to be flexible.

 Job sharing: the practice of having two or more people split a full-time job. Organizations
might offer job sharing to professionals who want to work but don’t want the demands
and hassles of a full-time position. For instance, at Ernst & Young and Google, employees in
many of the company’s locations can choose from a variety of flexible work arrangements,
including job sharing. Also, many companies have used job sharing during the economic
downturn to avoid employee layoffs.
The Contingent Workforce
 Contingent workers: temporary, freelance, or contract workers whose employment is
contingent on demand for their services. They do not have an implicit or explicit contract
for ongoing employment. Alternative employment arrangements include persons employed
as independent contractors, on-call workers, temporary help agency workers, and workers
provided by contract firms.
 One of the main issues businesses face with their contingent workers, especially the
decision on who is and who isn’t an independent contractor isn’t as easy or as unimportant
as it may seem. Companies don’t have to pay Social Security, Medicare, or unemployment
insurance taxes on workers classified as independent contractors. And those individuals also
aren’t covered by most workplace laws. So it’s an important decision.