Basic Elements of Planning &

Decision Making

INSTRUCTOR
DR. S M TOWHIDUR RAHMAN
PROFESSOR
BUSINESS ADMINISTRATION DISCIPLINE
KHULNA UNIVERSITY
 Planning
Planning: setting an organization’s goals and deciding how best to achieve
them.
❑ It is a generic function
❑It involves decision making i.e. choosing from alternatives future course of
action
❑Plans have two basic components:
❑ Goals: an end state – target or result – the managers hope to achieve
❑ Action statement: the means to achieve the goals
❑Good planning requires the understanding of the environmental context.
❑Planning can be long term or short term.
 Nature of planning
❑Planning contributes to purpose and objectives
❑Primacy among the managers’ tasks
❑Its pervasiveness
❑The efficiency of resulting plans:
❑ both effective and efficient in terms of money, time, production, and individual or group
satisfaction.
 Steps in planning
❑Being aware of opportunities (SWOT)
❑Establishing objectives (form hierarchy, clear, concise & specific)
❑Developing / considering planning premises (involves forecasting : environment & consequence of actions)
❑Determining alternative courses (built on research and experience, data reduction is the challenge)
❑Evaluating alternative courses (profit, cost, risk, objective etc.; mathematical or computing models can be applied)
❑Selecting a course
❑Formulating derivative plans
❑Numbering plans by budgeting (numeration of the plans in any measurable terms)
 Types of plan
❑Based on hierarchy
❑ Strategic plan
❑ Relates to strategic goal e.g. doubling sales revenue
❑ Long-term vision
❑ Outlines decisions of resource allocation, priorities, scope, competitive advantage, and action steps
❑ Intermediate or tactical or administrative plan
❑ Relates to tactical goal e.g. which products to launch or revised
❑ Coordinating internal subdivisions of organization
❑ Concerned more with how to accomplish a task than to decide what to do
❑ Operational plan
❑ Relates to operational goals e.g. number of new products within a specific time period
❑ Short term and relates to specific tasks / day to day operations
 Continued…
❑Based on frequency/repetitiveness of use
❑ Standing plans
❑ Policies
❑ general broad based guideline/intension within which decisions are made,
❑ offers discretion within a limit
❑ customarily developed or spelled out
❑ Rules
❑ specifies what and what not to do
❑ restricts individual discretion
❑ Procedures/SOP
❑ chronological order of steps of accomplishing tasks
Continued…
❑Single use plans
❑Program
❑Project
❑Budgets
 Continued…
❑Contingency plan
Contingency is the determination of alternative courses of action to be taken if an intended plan is
unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and
change.

Ongoing planning process

Action point 1 Action point 2 Action point 3 Action point 4

Develop plan, Implement plan and Specify indicators Successfully complete
considering formally identify for the contingency plan or contingency
contingency events contingency events events and develop plan
contingency plans for
each possible event

Monitor contingency event indicators and

implement contingency plan if necessary
Managerial Decision Making and
Problem Solving

CHAPTER 8
The Nature of Decision Making
Decision making can refer to either a specific act or a general process.
◦ Decision making is the act of choosing one alternative from among a set of
alternatives
◦ Decision making is a process that involves recognizing and defining the nature
of a decision situation, identifying alternatives, choosing the “best”
alternative, and putting it into practice.
The mangers make decisions about both problems and prospects

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Types of Decisions
Programmed decision: A decision that is fairly structured or recurs with some
frequency (or both), e.g. starting your car in the morning.

Non programmed decisions: A decision that is relatively unstructured; occurs

much less often than a programmed decision, e.g. choosing a vacation
destination.

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Decision Making Conditions
State of certainty: A condition in which the decision maker knows with reasonable
certainty what the alternatives are and what conditions are associated with each
alternative.
State of risk: A condition in which the availability of each alternative and its potential
payoffs and costs are all associated with risks.
State of uncertainty: A condition in which the decision maker does not know all the
alternatives, the risks associated with each, or the consequences of each alternative.

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 Distinguishing Between
Decision Making Conditions

Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

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Decision-making conditions and its impact on decision
making.
Figure 8.1
The decision
maker
faces
conditions of...

Certainty Risk Uncertainty

Level of ambiguity and chances of making a bad decision

Lowe Moderat Highe

r e r

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Rational Perspectives on Decision Making
Classical decision model: A prescriptive approach to decision making.
Assumption:
◦ Managers are logical and rational
◦ Managers have complete information
◦ Decisions are made in the best interest of the organization.

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Continued…
The Classical Model of Decision Making

• obtain complete
. . . and end up with
When faced with and perfect information
a a decision that best
decision situation, • eliminate uncertainty
serves the interests
managers Should. . . • evaluate everything
of the organization.
rationally and logically

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 Steps in the Rational Decision-Making Process
Evaluating alternatives.ppt

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 Continued…

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Behavioral Aspects of Decision Making
The Administrative Model (Herbert A Simon)

• use incomplete and

. . . and end up with a
When faced with a imperfect information
decision that may or may
decision situation • are constrained by
not serve the interests
managers actually… bounded rationality
of the organization.
• tend to satisfice

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Other Behavioral Forces Influencing Decision (self reading)
Organizational politics and coalition
Intuition
Escalation of commitment
Risk propensity
Ethical standards

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Group Decision Making in Organization
Forms of group decision making
◦ Interacting group
◦ Delphi group
◦ Nominal group

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 Continued…
Advantages Disadvantages
1. Availability of more information and 1.Time consuming and costly
knowledge
2.Compromise decisions resulting from
2. More alternatives are likely to be indecisiveness may emerge
generated
3.One person may dominate the group
3. More acceptance of the final decision
4.Group think may occur.
4. Enhanced communication of the
decision
5. Better decisions generally emerge.

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