I. Goal Setting and Planning

A goal is an end state that the organization is expected to achieve. Goal setting, then, is the process of developing a set of goals. Every organization has goals of several types.

The most fundamental type of goal is the organization’s purpose, which is the reason for the organization’s existence. Texaco Inc.’s purpose is to earn a profit for its owners. Houston Community College System’s purpose is to provide an education for local citizens. The purpose of the Secret Service is to protect the life of the president. The organization’s mission is the means by which it is to fulfill its purpose. Apple Computer attempts to fulfill its purpose by manufacturing computers, whereas Ford Motor Company fulfills the same purpose (making a profit) by manufacturing cars. Finally, an objective is a specific statement detailing what the organization intends to accomplish as its goes about its mission. For McDonald’s, one objective might be that all customers will be served within two minutes of their arrival.

Goals can deal with a variety of factors, such as sales, company growth, costs, customer satisfaction, and employee morale. They can also span various periods of time. The goals developed for these different levels must be consistent with one another. However, it is likely that some conflict will arise. A production department, for example, may have a goal of minimizing costs. One way to do this is to produce only one type of product and offer no “frills”. Marketing, on the other hand, may have a goal of maximizing sales. And one way to implement this goal is to offer prospective customers a wide range of products with many options available. As part of his or her own goal setting, the manager who is ultimately responsible for both departments must achieve some sort of balance between such competing or conflicting goals. This balancing process is called optimization. The optimization of conflicting goals requires insight and ability.

Once goals have been set for the organization, managers must develop plans for achieving them. A plan is an outline of the actions by which the organization intends to accomplish its goals. The processes involved in developing plans are referred as planning. Just as it has several goals, the organization should develop several types of plans.

An organization’s strategy is its broadest set of plans and is developed as a guide for major policy setting and decision making. A firm’s strategy defines what business the company is in or wants to be in and the kind of company it is or wants to be. When the Surgeon General issued a report linking smoking and cancer in the 1950s, top management at Philip Morris Companies recognized that the company’s very survival was threatened. Action was needed to broaden the company’s operations. Major elements in the overall Philip Morris strategy were first to purchase several non-tobacco-related companies and then to aggressively promote the company’s products. As a result of its strategy, Philip Morris seems to have attained the goal of being less dependent on tobacco sales.

Most organizations also employ several narrower kinds of plans. A tactical plan is a smaller-scale (of smaller size) plan developed to implement a strategy. If a strategic plan will take five years to complete, the firm may develop five tactical plans, one covering each year. Tactical plans may need to be updated periodically as conditions and experience dictate. Their narrower scope permits them to be changed more easily than strategies.

Another category of plans is referred to as standing plans. These result from – and implement – decisions that have previously been made by management. A policy is a general guide for action in a situation that occurs repeatedly. A standard operating procedure (SOP) is a plan that outlines the steps to be taken in a situation that arises again and again. A SOP is thus more specific than a policy. For example, a Sears, Roebuck department store may have a policy of accepting deliveries only between 9 a.m. and 4 p.m. Standard operating procedure might then require that each accepted delivery be checked, sorted, and stored before closing time on the day of the delivery.