WORK 1004

FOUNDATIONS OF
MANAGEMENT
Lecture 6 – Managerial Planning and
Decision-Making
Presented by
Dr James Donald
Work and Organisational Studies

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 This week’s agenda
Planning: the first of the four management functions
Decision making: needed to plan well!
• Intro to planning
• Mission/vision/strategy/tactics/operations
• Management by objectives (MBO)
• Planning in uncertain environments (scenarios, contingency, crisis)
• Three decision-making models; decision processes
• Decision-making styles
• Decision biases
• Group decision making
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3
 Planning

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 Introduction to Planning

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 Planning
• Is the most fundamental of the four functions
• Other functions stem from planning
• Refers to identifying goals and deciding on the tasks and resources
needed to attain them

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 Why plan?
• You may sometimes feel too busy to plan, but it can end up saving
you time. Other benefits:
• Forces you to think ahead, beyond your immediate task
• Helps you coordinate your activities, marshall your forces
• Helps you see your progress (what is working, what isn’t)
• Helps you cope with uncertainty

• “If you fail to plan, you are planning to fail!”

- Benjamin Franklin
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 However…

‘No battle plan survives contact with the enemy.’

- former US Secretary of State Colin Powell

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 Some definitions
Goal: A desired future state that
the organisation attempts to
realise.

Plan: A blueprint specifying the

resource allocations, schedules and
other actions necessary for
attaining goals.

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 Benefits of goals and plans in organisations

• Provide a source of motivation and commitment

• Guide resource allocation
• Are a guide to action
• Set a standard of performance

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 Limitations of goals and plans in organisations

• Can create a false sense of security or certainty

• Cause inflexibility in turbulent times
• Limits the benefit of intuition and creativity

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 Mission and Vision

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 Levels of goals or plans and their importance

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 Mission statements

• Your organization’s purpose. “What is our reason for being?”

• A mission should establish a firm’s individuality and be inspirational
• Why do this?
• Legitimacy (external and internal)
• Source of motivation and commitment
• Resource allocation
• Guides to action
• Rationale for decisions
• Standard of performance

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 Whose mission statement is this?

“(Our) mission is to organise the world’s information and make it

universally accessible and useful.”

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 Dan Heath (Duke University) on mission statements…

https://www.youtube.com/watch?v=LJhG3HZ7b4o

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 Vision statements

Where you want your organization to go. “What do we want to

become?”

A picture of what a firm wants to be and, in broad terms, what it wants

to ultimately achieve. It articulates the ideal description of the
organization and gives shape to its intended future. It is short and
concise, making it easy to remember.

Precursor to plans…

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 Whose vision statement is this?

“Our vision is to be the world’s best quick service restaurant. Being

the best means providing outstanding quality, service, cleanliness and
value, so that we make every customer in every restaurant smile.”

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 Strategic, Tactical and Operational Plans

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 Plans: Different time horizons at different levels

• Strategic level (1-5 years, in general). Overall direction of the

organization. Internal and external.
• Tactical level (6-24 months, in general). Implementing policies and
plans from top, from strategy.
• Operational level (1-52 weeks, in general). Daily tasks of non-
managerial personnel. More predictable; routine procedures. Specific
departments and individuals

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 Planning time horizons

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 Characteristics of effective goals

Old goal: “Lose weight this year”

New goal: “Lose 10 kg by October 1 so that I can fit into my tuxedo/dress and attend my sister’s wedding.”

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 The new planning approach
• Traditional approaches to planning:
– Centralised planning department
• A group of planning specialists who develop plans for the
organisation as a whole and its major divisions and
departments, and typically report to the CEO.
• Modern approaches to planning:
– Decentralised planning staff
• A group of planning specialists assigned to major
departments and divisions to help managers develop their
own strategic plans.

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 Innovative approaches to planning

• Involving every one in the organisation

• Sometimes outside stakeholders are involved
• Guidelines for innovative planning:
• Set stretch goals
• Use performance dashboards
• Deploy intelligence teams

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 Management by Objectives

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 Management by objectives (MBO)

• Originated by Peter Drucker

• Manager and employees jointly set goals
• Comprises 4 major activities:
1. Set goals/objectives (involves all employees at all levels)
2. Develop action plans
3. Review progress
4. Appraise overall performance

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 Model of the MBO process

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 Some benefits and problems of MBO
Benefits
• Focuses manager and employee efforts on activities that will lead to
goal attainment
• Can improve performance at all levels
• Improves employee motivation
• Aligns individual and departmental company goals
Problems
• Can occur when MBO is used inappropriately
• Over-emphasis on goal attainment can lead to cutting corners
• Management by Means (MBM) as an alternative
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 Management by objectives vs means: Wells Fargo Bank

– https://www.youtube.com/watch?v=6d9SIYntIlE

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 Reflection question

Which steps in the MBO model did Wells Fargo do poorly?

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 Scenario, Contingency and Crisis Planning

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 Planning in a turbulent environment

Types of planning to counter the effects of today’s turbulent

environment:
• Scenario planning
• Contingency planning
• Crisis planning

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 Scenario planning

• A forecasting technique
• Is future-focused
• Possible scenarios based on extrapolating from current trends and
considering future discontinuities
• Two to five possible scenarios for each factor
• Strategies to deal with each scenario

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 Example: Shell’s scenario planning process

– https://www.youtube.com/watch?v=srY-hJuqYTM

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 Contingency planning
• Define organisation responses to specific situations such as
emergencies, setbacks or unexpected conditions
• Develop strategies to counter impacts

• What if…????
• Fire, flood, tornado?
• Your main supplier suddenly goes bankrupt?
• Your entire sales force gets food poisoning at the annual sales
conference?
• Your payroll clerk calls in sick on payroll day?
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 Crisis planning

• Crises are events that can cause death or injury; significant damage
to the environment; massive interruptions to operations; significant
financial reversals; or long-term or permanent reputational
damage.“
• A good crisis plan can mitigate the effects of sudden and
devastating events
• What are some examples?

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Managerial decision making

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 Decision-making models

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 The classical model

• Is seen as a rational decision making model

• Assumes that managers should make logical decisions that will be in
the organisation’s best economic interests
• Based on 4 economic assumptions:
1. Goals are known and agreed on; problems are clearly defined
and formulated
2. The decision maker strives for certainty
3. Criteria for evaluating alternatives are known
4. Decision-maker is rational and logical (economic man)

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 The administrative model

• Better describes how managers actually make decisions in complex

situations
• Recognises limitations of decision maker and environment
• Originator: Herbert A. Simon
• Introduced concepts of:
• Bounded rationality
• Satisficing

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 The administrative model
• Bounded rationality
• Recognises human limits or boundaries
• Decision makers only have time and cognitive ability to process
only a limited amount of information to make decisions with
• Satisficing
• Decision makers choose the first solution alternative
that satisfies minimal decision criteria
• Additional aspect of the model describes use of intuition
• Quick apprehension of a decision situation based on prior
experience
• Intuitive appraisal saves time but may not always work out
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 Some common decision biases

1. Availability bias (use only information available)

2. Confirmation bias (use information that supports one’s point of view)
3. Representativeness bias (faulty generalizing from a small sample or
a single event)
4. Sunk-cost bias (money already spent seems to justify continuing)
5. Anchoring and adjustment bias (being influenced by an initial figure)
6. Escalation of commitment bias (feeling overly invested in a decision)

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 The political model

• Is useful for understanding non-programmed

decisions when:
• Conditions are uncertain
• Information is limited
• There is disagreement among managers
• Need to build coalition with other managers who support a specific
goal
• Recognises the importance of interests, control, power and politics
• Challenges the technical view of managers as applying a neutral set
of techniques
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 Decision-making Styles

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 Personal decision styles

• Differences among people with respect to how they perceive

problems and make decisions
• Research suggests 4 major decision styles:
• Directive style
• Analytical style
• Conceptual style
• Behavioural style

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 The four decision-making styles

1. Directive style: action-oriented decision makers who focus on facts

2. Analytical style: careful decision makers who like lots of information

and alternative choices

3. Conceptual style: decision makers who rely on intuition and have a

long-term perspective

4. Behavioural style: The most people oriented decision makers

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 Decision making styles
High tolerance for ambiguity

Analytical Conceptual

Value orientation toward Value orientation toward

Task & technical concerns People & social concerns

Directive Behavioural

Low tolerance for ambiguity

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 Reflection

– Turn to a neighbour
– Identify ONE strength and ONE weakness of your default decision-making
style…

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 Innovative approaches to decision-making

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 Group decision-making: Innovative approaches
New decision approaches for turbulent times:
1. Start with brainstorming
• Spontaneous group suggestions on alternatives for decision
making
• Electronic brainstorming?
• Brainswarming?

2. Engage in rigorous debate

• Use point-counterpoint

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 Making better decisions in groups: brainswarming?

– Dr Tony McCaffrey on ‘brainswarming’

– https://hbr.org/video/3373616535001/brainswarming-because-
brainstorming-doesnt-work

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 Innovative group decision making
3. Avoid groupthink
– All members of a group agree on a decision to avoid conflict
– Devil’s advocacy

4. Know when to pull the plug

– Avoiding escalation of commitment
and sunk cost bias

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 For next fortnight’s lecture (Organising)…

• Read Chapter 10 from the textbook

In this week’s tutorials:

• Planning your own academic and professional goals

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