Management
Organizational
Behavior
An Integrated Perspective
CHAPTER 10
Organizational
Planning and
Controlling
Jon L. Pierce &
Donald G. Gardner
with Randall B. Dunham
Copyright © 2002 by South-Western
PowerPoint Presentation
by Charlie Cook
10—1
Learning Objectives
1. Outline the planning and controlling processes.
2. Identify different types of plans and control systems
employed by organizations.
3. Discuss why organizations need to plan and control.
4. Explain the individual and organizational effects associated
with goal setting and planning.
5. Discuss the impact that control has on organizational
members.
6. Describe management by objectives as a philosophy, and
as a management tool/technique; describe its effects.
7. Differentiate between the execution of the planning and
controlling activities under control- and involvementmanagement practices.
Copyright © 2002 by South-Western
10—2
Planning As an Organizational Activity
Planning
 The process by which managers establish goals and
specify how these goals are to be attained.
 Outcome
or goal statements—are the end states—the
targets and outcomes managers hope to attain.
 Action statements—the means by which an
organization moves forward to attain its goals.
Copyright © 2002 by South-Western
10—3
Is Planning Important?
Why should managers plan?
 To offset uncertainty and change.
 To focus organizational activity on a set of objectives.
 To provide a coordinated, systematic road map for future
activities.
 To increase economic efficiency.
 To facilitate control by establishing a standard for later
activity.
Do managers really plan?
 Managers plan with varying levels of deliberateness and
consciousness, but they do plan.
Copyright © 2002 by South-Western
10—4
The Planning Process
Step 1
Developing an
awareness of
the present
state
Step 2
Establishing
outcome
statements
• Goal planning
• Domain
planning
• Hybrid
planning
Step 3
Premising
• Forecasting
• Formulating
assumptions
Source: Adapted from H. Koontz and C. O’Donnell, 1972.
Principles of management: An analysis of managerial functions.
New York: McGraw-Hill, 113.
Copyright © 2002 by South-Western
Step 4
Determining a
course of action
• Identifying
alternatives
• Evaluating
alternatives
• Selecting
alternatives
Step 5
Formulating
supportive plans
• Making
changes in
existing plans
• Creating new
supportive
plans
FIGURE 10–1
10—5
The Planning Process
1. Developing an awareness of the present state
of the firm and its history.
2. Establishing outcome statements
• Goal planning—development of action statements to
move toward the attainment of a specific goal.
• Domain (directional) planning—development of a
course of action that moves an organization toward
one domain or direction (and, therefore, away from
other domains or directions).
• Hybrid planning—the coupling of goal and domain
planning.
Copyright © 2002 by South-Western
10—6
The Planning Process (cont’d)
2. Establishing outcome statements (cont’d)
• Situations requiring domain planning:
•
When there is a recognized need for flexibility.
• When people cannot agree on goals.
• When the external environment is uncertain and
unstable.
• When an organization is starting up or is in a
transitional period.
• Consequences of goal, domain, and hybrid planning
•
Setting goals affects performance and encourages
managers to plan more extensively.
Copyright © 2002 by South-Western
10—7
The Planning Process (cont’d)
3. Premising
• The success and quality of any plan depends on the
quality of the underlying managerial assumptions that
result from scanning the organization’s external and
internal environments.
4. Determining a course of action (action
statements).
• Determining alternatives
• Evaluating alternatives
• Selecting a course of action
5. Formulating supportive plans
Copyright © 2002 by South-Western
10—8
Network of Organization Plans
University—Goal 1
Means to University
Goal 1
School of
Business—Goal 1
Means to School
of Business Goal 1
Marketing
Department—Goal 1
Means to Marketing
Department Goal 1
Means to Marketing
Curriculum Committee Goal 1
Marketing Curriculum
Committee—Goal 1
FIGURE 10–2
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10—9
Planning, Implementation, Controlling
The Deming (Shewart) Cycle
5
 Plan—create the plan.
Plan
 Do—implement the plan.
 Check—monitor the
results of the planned
•
course of action.
•
 Act—on what was
•
learned, modify the
plan, return to the first
stage.
4
1
Act
Do
3
2
Check
6
7
FIGURE 10–3
Copyright © 2002 by South-Western
10—10
Types of Plans
Hierarchical
 Strategic plans—address an organization’s institutional-
level needs and attempt to position it advantageously
within its task environment.
 Operating plans—cover the day-to-day (technical core)
operations of the organization.
 Administrative plans—serve to integrate institutionallevel plans with operating plans as well as integrate all
the operating plans in the allocation of organizational
resources.
Copyright © 2002 by South-Western
10—11
Types of Plans
Frequency-of-use plans
 Standing plans—rules, policies, standard operating
procedures (SOP) about how to deal with issues that
managers face repeatedly.
 Single-use plans—plans (e.g., programs, projects,
budgets) developed for unique situations or problems
and one-time use.
Copyright © 2002 by South-Western
10—12
Types of Plans
Time-frame plans
 Short-range—used for planning up to one year.
 Medium-range—used for plans of one to five years.
 Long-range plans—used for plans of more than five
years.
Organizational scope plans
 Plans vary in their scope—how much of the organization
is covered by the plan.
Contingency plans
 “What if” plans dealing with alternative courses of action
the firm can take if their assumptions are incorrect.
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10—13
Goal or Outcome Statements
Organizational goals:
 Official goals
 Operational goals
Purposes of goals:
1. To guide and direct individual’s and group’s efforts.
2. Motivate individuals and groups to be more
productive.
3. Influence the nature and content of the planning
process.
4. Provide a standard by which to judge and control
organizational activity.
Copyright © 2002 by South-Western
10—14
Goal or Outcome Statements
Goal formulation (emergence)—where do
organizational goals come from?
 From managers’ efforts to balance the organization’s
needs with those of its external environment.
 From the interactions of organization’s internal
components.
Multiple goals and the goal hierarchy
 Organizations must simultaneously pursue multiple
goals and resolve internal conflicts.
 Goal hierarchy—the interrelationship among an
organization’s job-, department-, divisional-, and
organizational-level goals.
Copyright © 2002 by South-Western
10—15
Formal Organizational Planning in Practice
Encouraging planning
 Pre-planning (blue-print planning)—formulating outcome
and action statements before moving ahead.
 In-process planning—planning just before acting.
 Encouraging pre-planning:





Develop an organizational climate that encourages
planning,
Have top management support for lower-level
manager’s planning.
Train people in planning
Create a reward system for good planning activities
Use plans once they have been created.
Copyright © 2002 by South-Western
10—16
Formal Organizational Planning in Practice
Does planning really pay off?
 Effective organizational goals should be:





Difficult but reachable with effort.
Specific and clearly identify what is desired.
Accepted by and have the commitment of those who
will help achieve them.
Developed by employees to improve goal quality and
acceptance.
Monitored for progress regularly.
 Location of the planning activity

Participation by all organizational levels and
individuals that will be affected by the plans.
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10—17
Formal Organizational Planning in Practice
Planning specialists
 Provide in-depth research and specialized planning skills
to support and advise managers who plan.
 May have more objectivity than managers and
employees with vested interests in organizational
activities.
 Help coordinate planning activities across the various
levels within the organization.
Copyright © 2002 by South-Western
10—18
Employee Responses to Planning
Characteristics of goals that motivate
performance:
 Goal specificity—clearly defined performance
expectations motivate better than “do your best.”
 Goal difficulty—difficult (but not impossible) goals
motivate performance better than easy goals.
 Goal acceptance—goals must be accepted by those who
are to achieve them.
 Goal commitment—those who must accomplish goals
must be determined to achieve them.
 Goal feedback—provides information about the
adequacy or results of efforts to attain a goal.
Copyright © 2002 by South-Western
10—19
The Effects of Goals on Performance
Performance Level
Low
High
Type of Goal
No Goal
General Goal
Easy Goal
Difficult Goal
Difficult Specific Goal
FIGURE 10–4
Copyright © 2002 by South-Western
10—20
A Model of Goal Setting
Goal
Acceptance
Goal
Difficulty
Goal-Directed Effort
(Motivation Level)
Goal
Specificity
Goal
Commitment
FIGURE 10–5
Copyright © 2002 by South-Western
10—21
Employee Responses to Planning
The negative side of goals
 Specific goals may inhibit creativity and innovation and
narrow the range of performance.
 Goals can cause slacking off after attaining a goal.
 Difficult goals can cause acts of organizational
citizenship to decline.
 Methods (means) of attaining goals may become goals
instead of the goals (ends).
 Organizational goals may conflict with personal goals.
 Ambiguous goals can fail in providing direction.
 Organizational goals and reward systems may conflict.
Copyright © 2002 by South-Western
10—22
Determinants of Goal Commitment
External Influences
Authority
Peer Group Influence
External Rewards
and Incentives
Internal Factors
Expectancy of Success
Self-Efficacy
Self-Administered Rewards
Goal Commitment
Interactive Factor
Participation
Source: Adapted from E. A. Locke, G. P. Latham, and M. Erez. 1988. The determinants of goal commitment.
Academy of Management Review 13:28. Copyright 1998 by Academy of Management. Reproduced with permission
of Academy of Management in the format Textbook via Copyright Clearance Center; an from E. Erez and P. C.
Earley. 1987. Comparative analysis of goal setting across cultures. Journal of Applied Psychology 72:658–665.
Copyright © 2002 by South-Western
FIGURE 10–6b
10—23
Determinants of Goal Commitment
1. External influences:
authority—being asked to do something by a person possessing
legitimate authority increases goal commitment;
peer group influence—group dynamics, such as peers acting as role
models and group norms, can produce commitment to goals;
rewards and incentives— commitment to goals is often the outgrowth
of rewards and incentives that are associated with goal attainment.
2. Interactive factor:
participation— participation contributes to goal understanding and to
a sense of goal ownership for those who want to be involved in the
process.
3. Internal factors:
expectancy of success—perceptions of being able to achieve goals
positively influence the commitment to those goals;
self-efficacy—people who have a strong belief in their ability to
accomplish goals are more likely to have strong commitment to
these goals;
self-administered rewards— self-generated feedback ( ”I did well ”) can
lead to high goal commitment.
Source: Adapted from E. A. Locke, G. P. Latham, and M. Erez. 1988. The determinants of goal commitment.
Academy of Management Review 13:28. Copyright 1998 by Academy of Management. Reproduced with permission
of Academy of Management in the format Textbook via Copyright Clearance Center; an from E. Erez and P. C.
Earley. 1987. Comparative analysis of goal setting across cultures. Journal of Applied Psychology 72:658–665.
Copyright © 2002 by South-Western
FIGURE 10–6a
10—24
Employee Responses to Planning
Goal setting and employee job satisfaction
 Job satisfaction is most likely determined by the level of
performance and an employee’s affective reaction to
their performance in relation to their level of aspiration.
 Goal setting may contribute to performance by
facilitating employee performance.
Copyright © 2002 by South-Western
10—25
Performance, Aspiration Level, and
Satisfaction
Performance Level
Extrinsic
Outcomes Desired,
Aspiration Level,
Intrinsic Outcomes
Desired
If Yes
Satisfaction
If No
Dissatisfaction
FIGURE 10–7
Copyright © 2002 by South-Western
10—26
Employee Responses to Planning
Managing through goal setting
 Encourage employees’ goal acceptance and
commitment.
 Provide training to make goals attainable.
 Offer constructive feedback to encourage and inform
employees.
 Encourage development of group norms that contribute
to goal commitment.
 Encourage the setting of specific and difficult goals.
 Foster the development of a sense of ownership..
Copyright © 2002 by South-Western
10—27
Controlling and the Control Process
Controlling
 The process of monitoring and evaluating
organizational effectiveness and the initiation of
corrective actions needed to maintain or improve
effectiveness.
A control model
1. Establish standards.
2. Monitor ongoing organizational behavior and results.
3. Compare actual behavior and results against
standards.
4. Evaluate and take action.
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10—28
Environmental Complexity
Need for Control
Simple
Low
Moderate
Moderate
High
Complex
Static
Dynamic
Environmental Stability
FIGURE 10–8
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10—29
The Traditional Control Model
Establish
standards.
Monitor ongoing
organizational
behavior and
results.
Compare actual
behavior and
results against
standards.
Evaluate and
take action.
FIGURE 10–9
Copyright © 2002 by South-Western
10—30
Variations in Control Systems
Cybernetic control
 Self-regulating control procedures that automatically
detect and correct deviations from planned activities and
effectiveness levels.
Noncybernetic
 Control systems that operate independently from the
work system that is being monitored; a monitoring
system that is external to the target of control.
Copyright © 2002 by South-Western
10—31
Variations in Control Systems
Time perspectives
 Hybrid control system—a control system that exercises
control prior to, during, and after the performance of a
work activity.
 Precontrols—controls designed to prevent deviation
from a desired plan of action before work actually
begins.
 Concurrent controls—controls intended to prevent
deviation from a planned course of action while work is
in progress.
 Postaction controls—controls employed after a product
or service is completed.
Copyright © 2002 by South-Western
10—32
Characteristics of Effective Control
Systems
A good control system:
 Follows the prescriptions in the control model and
addresses each organizational target.
 Uses the hybrid approach to monitor and correct
activities at all points in the organization’s operations.
 Makes information readily available and accessible.
 Focuses on issues of importance to the organization;
controls are used only where necessary.
 Has features that enhance the practicality of its use by
the organization.
Copyright © 2002 by South-Western
10—33
The Impact of Control on Organizational
Members
Positive effects
Negative effects
 Clarifies expectations
 Consumes resources
 Reduces ambiguity
 Creates feeling of frustration
 Provides feedback
and helplessness
 Creates “red tape”
 Creates inappropriate goals
 Fosters inappropriate behavior
 Decreases satisfaction
 Increases turnover
 Creates stress
 Facilitates goal setting
 Enhance satisfaction
 Enhances performance
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10—34
Management by Objectives (MBO)—
A Planning and Control Technique
Management by Objectives (MBO)
 A philosophy of management, a planning and controlling
technique, and an employee involvement program in
which managers ask workers to join them in deciding
what their goals should be.
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10—35
MBO and Its Effect on Employees
Commitment
MBO
Involvement
of the self
in work
Higher-Order
Need Satisfaction
(e.g., Self-esteem)
Intrinsic
Work
Motivation
Job
Performance
Psychological
Ownership
FIGURE 10–0
Copyright © 2002 by South-Western
10—36
Management by Objectives (MBO)—
A Planning and Control Technique
The theory of MBO
 Major components of MBO:
 Setting
specific goals
 Setting realistic and acceptable goals
 Joint participation in goal setting, planning, and
controlling
 Feedback
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10—37
Management by Objective (MBO) Process
Stage 1
Collectively formulate
job objectives compatible
with overall departmental
objectives.
Collectively monitor
performance (design
corrective action if
needed).
Stage 4
Stage 2
Collectively formulate
an action plan, evaluating
technique, and schedule.
Implement the plan.
Stage 3
FIGURE 10–11
Copyright © 2002 by South-Western
10—38
Management by Objectives (MBO)—
A Planning and Control Technique
Factors affecting the success of an MBO
program:
 Gaining upper-level managers’ commitment to the MBO
program
 Allowing sufficient time for the MBO process to take
effect in the organization.
 Integrating the MBO program into the overall philosophy
of the organization.
 Integrating employees’ personal goals into the goals of
their work unit and the organization.
Copyright © 2002 by South-Western
10—39
The Control- and Involvement-oriented
Approaches to Planning and Controlling
Mechanistic organizations
 Planning and controlling activities are centralized within
the management of the organizational hierarchy with
employees having only passive, non-participative roles.
Organic organizations
 Employees are active participants in planning and
controlling activities; management takes an involvementoriented approach to planning and controlling the
organization.
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10—40