Chapter 5

Planning and Decision Making

MGMT
2008 Designed & Prepared by
Chuck Williams B-books, Ltd.

1
Copyright ©2008 by Cengage Learning. All rights reserved

Planning

After reading these sections,
you should be able to:

1. discuss the benefits and pitfalls of planning.
2. describe how to make a plan that works.
3. discuss how companies can use plans at all
management levels, from top to bottom.

2
Copyright ©2008 by Cengage Learning. All rights reserved

Planning

Planning

Choosing a goal and developing a
method of strategy to achieve that goal

1
3
Copyright ©2008 by Cengage Learning. All rights reserved

Benefits of Planning
Benefits
Benefits
of
ofPlanning
Planning

Persistence
Persistence Direction
Direction

Creation
Creation
Intensified
Intensified of
of Task
Task
Effort
Effort Strategies
Strategies
1.1
4
Copyright ©2008 by Cengage Learning. All rights reserved

Pitfalls of Planning Pitfalls Pitfalls of of Planning Planning False FalseSense Sense of ofCertainty Certainty Impedes ImpedesChange Change Detachment Detachment and andAdaptation Adaptation of ofPlanners Planners 1.2 5 Copyright ©2008 by Cengage Learning. All rights reserved .

How to Make a Plan That Works Track Track Develop Develop Progress Progress Set Set Develop Develop Effective Effective Maintain Maintain Toward Toward Goals Goals Commitment Commitment Action Action Flexibility Flexibility Goal Goal Plans Plans Achievement Achievement Revise Reviseexisting existingplan plan or or Begin Beginnew newplanning planningprocess process 2 6 Copyright ©2008 by Cengage Learning. All rights reserved .

R.1 7 Copyright ©2008 by Cengage Learning.M.T. Setting Goals Specific Specific S. Measurable Measurable Attainable Attainable Realistic Realistic Timely Timely 2.A. All rights reserved .

M. eliminated the following fiscal scheduled to open in 2007. Goals? • Walgreens: “Second is to hire • Halliburton: “We estimate a significant number of people that 74% of the backlog with disabilities in our South existing on 12/31 will be Carolina distribution center. supply chain.5%. and sell end of 2005.Examples of S. we remaining inventory in early will increase operating profit in each of our 3 key businesses: fiscal 2005.” • Starbucks: “In fiscal 2006.” domestic. the we plan to open approximately company will decrease the 1.A. and year.” 8 Copyright ©2008 by Cengage Learning.S.” achieve 20% productivity gains • there. All rights reserved .” long-term rate of return assumption for the assets of its U. • Wrigley: “In 2005.R. (pension) plans from 8.75 % to 8. int’l.” Martha Stewart Living Omnimedia: “In 2004 we • UPS: “65% of drivers will have will discontinue the Catalog access to the new technology for Living and its online (implemented in 2004) by the product options.800 net new stores globally.T.” and “In 2005.

2. – obtaining top management support. – making goals public. Developing Commitment to Goals The determination to achieve a goal is increased by… – setting goals participatively. – making goals reasonable.2 9 Copyright ©2008 by Cengage Learning. All rights reserved .

Developing Effective Action Plans An Action Plan Lists… Specific Specific Steps Steps People People Resources Resources Time Time Period Period 2.3 10 Copyright ©2008 by Cengage Learning. All rights reserved .

4 11 Copyright ©2008 by Cengage Learning. Tracking Progress Set… Set… Gather Gather and and provide… provide… Proximal Proximal Goals Goals Performance Performance Feedback Feedback Distal Distal Goals Goals 2. All rights reserved .

Maintaining Flexibility Option-based planning – keep options open by making simultaneous investments • invest more in promising options • maintains slack resources Learning-based planning – plans need to be continuously adjusted 2.5 12 Copyright ©2008 by Cengage Learning. All rights reserved .

All rights reserved . Planning from Top to Bottom Vision Mission Tactical Plans. Standing. Single-Use Managers 3 13 Copyright ©2008 by Cengage Learning. MBO Standing Plans Operational Plans Vision Single-Use Plans Top Managers Mission Tactical Plans. MBO Middle First-Level Operational.

1 time timeframe. vision. Starting at the Top Clarify Clarifyhow howthe thecompany companywill will Strategic StrategicPlans Plans serve servecustomers customersand andposition position itself itselfagainst againstcompetitors competitors(2-5 (2-5years) years) An Aninspirational inspirationalstatement statementof ofan an Vision Vision organization’s organization’spurpose purpose (2 (2sentences) sentences) Overall Overallgoal goalthat thatunifies unifiesefforts effortstoward toward its itsvision. All rights reserved .stretches stretchesand andchallenges. 14 Copyright ©2008 by Cengage Learning.Flows Flowsfrom fromvision. frame. vision. challenges. Mission Mission and andpossesses possessesaafinish finishline lineand and 3.

Beyond the Book Planning Time Lines Strategic 2 Years 5 Years 6 months Plans Tactical 2 years 30 days Operational 6 months 0 1 2 3 4 5 6 Years 15 Copyright ©2008 by Cengage Learning. All rights reserved .

mission.budgets. Bending in the Middle Specify Specifyhow howaacompany companywill willuse use resources.2 16 Copyright ©2008 by Cengage Learning. (6 (6months monthsto to22years) years) Management Management by by Develop Developand andcarry carryout outtactical tacticalplans plans Objectives Objectives MBO MBOis isaafour-step four-stepprocess process 3. budgets. resources. All rights reserved .and andpeople peopleto to Tactical TacticalPlans Plans accomplish accomplishgoals goalswithin withinits itsmission.

All rights reserved . Jointly develop tactical plans that lead to the accomplishment of tactical goals and objectives 4. Select goals that are challenging.Management by Objectives Steps to Management by Objectives: 1. attainable and consistent with the company’s overall goals 3. Discuss possible goals 2. Meet regularly to review progress 17 Copyright ©2008 by Cengage Learning.

3 18 Copyright ©2008 by Cengage Learning. Finishing at the Bottom Day-to-day Day-to-dayplans plansfor forproducing producingor or Operational Operational delivering deliveringproducts productsand andservices servicesover over Plans Plans aa30-day 30-daytotosix-month six-monthperiod period 3. All rights reserved .

unique. All rights reserved . policies. Quantitative Quantitativeplanning planningto todecide decidehow how Budgets Budgets to toallocate allocatemoney moneyto toaccomplish accomplish company companygoals goals 3. procedures. events. and andrules rulesand andregulations.3 19 Copyright ©2008 by Cengage Learning. Kinds of Operational Plans Plans Plansthat thatcover coverunique. Standing StandingPlans Plans Three Threekinds kindsare: are: policies. regulations.procedures. Single-Use Plans Single-Use Plans one-time-only events one-time-only events Plans Plansused usedrepeatedly repeatedlyto tohandle handle frequently frequentlyrecurring recurringevents.

What Is Rational Decision Making? After reading these sections. 5. 20 Copyright ©2008 by Cengage Learning. All rights reserved . explain how group decisions and group decision-making techniques can improve decision-making. you should be able to: 4. explain the steps and limits to rational decision making.

Rational Decision Making A systematic process of defining problems. and choosing optimal solutions. All rights reserved . evaluating alternatives. What Is Rational Decision Making? Decision Making The process of choosing a solution from available alternatives. 4 21 Copyright ©2008 by Cengage Learning.

All rights reserved .Steps to Rational Decision Making 11 Define Define the the problem problem 22 Identify Identify decision decision criteria criteria 33 Weight Weight the the criteria criteria 44 Generate Generate alternative alternative courses courses of of action action 55 Evaluate Evaluate each each alternative alternative 66 Compute Compute the the optimal optimal decision decision 4 22 Copyright ©2008 by Cengage Learning.

– be motivated to reduce the gap. skills. Steps to Rational Decision Making 11 Define Define the the problem problem • A problem exists when there is a gap between a desired state and an existing state • To make decisions about problems. 23 Copyright ©2008 by Cengage Learning. managers must… – be aware of the gap. abilities. – have the knowledge. All rights reserved . and 4.1 resources to fix the problem.

Steps to Rational Decision Making 22 Identify Identify decision decision criteria criteria • Standards used to guide judgments and decisions • The more criteria a potential solution meets.2 24 Copyright ©2008 by Cengage Learning. All rights reserved . the better that solution should be 4.

3 25 Copyright ©2008 by Cengage Learning. Steps to Rational Decision Making 33 Weight Weight the the criteria criteria • Absolute comparisons – each criterion is compared to a standard or ranked on its own merits • Relative comparisons – each criterion is compared directly to every other criterion 4. All rights reserved .

Steps to Rational Decision Making Absolute Absolute Weighting Weighting of of Decision Decision Criteria Criteria 4. All rights reserved .3 26 Copyright ©2008 by Cengage Learning.

All rights reserved .3 27 Copyright ©2008 by Cengage Learning. Steps to Rational Decision Making Relative Relative Weighting Weighting of of Decision Decision Criteria Criteria 4.

Steps to Rational Decision Making 44 Generate Generate alternative alternative courses courses of of action action • The idea is to generate as many alternatives as possible 4.4 28 Copyright ©2008 by Cengage Learning. All rights reserved .

5 29 Copyright ©2008 by Cengage Learning. Steps to Rational Decision Making 55 Evaluate Evaluate each each alternative alternative • This step can take much longer and be more expensive than other steps in the process 4. All rights reserved .

All rights reserved .6 30 Copyright ©2008 by Cengage Learning. Steps to Rational Decision Making 66 Compute Compute the the optimal optimal decision decision • Multiply the rating for each criterion by the weight for that criterion • Sum the scores for each alternative course of action 4.

7 31 Copyright ©2008 by Cengage Learning. Limits to Rational Decision Making Bounded Rationality A decision-making process restricted in the real world by:  limited resources  incomplete and imperfect information  managers’ limited decision-making capabilities 4. All rights reserved .

7 32 Copyright ©2008 by Cengage Learning. All rights reserved . Limits to Rational Decision Making Maximize Maximize Satisfice Satisfice 4.

Using Groups to Improve Decision Making Nominal Nominal Structured Structured Group Group Conflict Conflict Technique Technique Delphi Delphi Stepladder Stepladder Electronic Electronic Technique Technique Technique Technique Brainstorming Brainstorming 5 33 Copyright ©2008 by Cengage Learning. All rights reserved .

Group Decision Making Advantages 1.Find Find and and access access more more information information 3. All rights reserved .1 34 Copyright ©2008 by Cengage Learning. 4. 1. 2. 3.Generate Generate more more alternative alternative solutions solutions 4.More More committed committed toto making making chosen chosen solutions solutions work work 5.View View problems problems from from multiple multiple perspectives perspectives 2.

3.Takes Takes considerable considerable timetime 3. 4.Susceptible Susceptible to to groupthink groupthink andand to to considering considering aa limited limited number number of of solutions solutions 2.1 35 Copyright ©2008 by Cengage Learning. All rights reserved . 1.Members Members don’t don’t feel feel personally personally accountable accountable for for decisions decisions and and actions actions 5. Group Decision Making Disadvantages 1. 2.One One or or two two people people can can dominate dominate group group discussion discussion 4.

5.  there thereisisno noestablished establishedprocedure procedureforfordefining defining problems problemsand andexploring exploringalternatives. Groupthink Groupthink is likely to occur when…  the thegroup groupisisinsulated insulatedfrom fromothers otherswith withdifferent different perspectives. backgrounds.  the thegroup groupleader leaderexpresses expressesaastrong strongpreference preference for foraaparticular particulardecision. All rights reserved . perspectives.  group groupmembers membershave havesimilar similarbackgrounds. decision.1 36 Copyright ©2008 by Cengage Learning. alternatives.

Structured Conflict Cognitive Cognitive conflict conflict Disagreement Disagreement thatthat focuses focuses on on C-Type C-Type Conflict Conflict problem- problem.and and issue-related issue-related differences differences of of opinion opinion Affective Affective conflict conflict A-Type A-Type Conflict Conflict Disagreement Disagreement that that focuses focuses on on individuals individuals or or personal personal issues issues 5. All rights reserved .2 37 Copyright ©2008 by Cengage Learning.

2 38 Copyright ©2008 by Cengage Learning. 4. 3. Assign Assignaadevil’s devil’sadvocate advocatetotocriticize criticizeand andquestion question 3.or ornot notuse use the theoriginally originallyproposed proposedsolution solution 5. use. 1. 5. All rights reserved . Devil’s Advocacy Steps to Establish a Devil’s Advocacy Program 1. Present Presentthe thecritique critiqueof ofthe thesolution solutionto to key keydecision decisionmakers makers 4. 2. change.change. Gather Gatheradditional additionalinformation information 5. Decide Decidewhether whetherto touse. Generate Generateaapotential potentialsolution solution 2.

use. All rights reserved . Generate Generateaaconflicting conflictingcounterproposal counterproposalbased based on onopposite oppositeassumptions assumptions 4. 2. Decide Decidewhether whethertotouse. Have Haveadvocates advocatesof ofeach eachposition positionpresent presenttheir their arguments argumentsandandengage engageininaadebate debateininfront frontof of decision decisionmakers makers 5. change. 1. Beyond the Book Dialectical Inquiry Steps to Establish a Dialectical Inquiry Process 1. 5.orornot notuse use the theoriginally originallyproposed proposedsolution solution 39 Copyright ©2008 by Cengage Learning. Generate Generateaapotential potentialsolution solution 2. 3. 4. Identify Identifythe theassumptions assumptionsunderlying underlyingthe the potential potentialsolution solution 3.change.

aloud. Each Eachmember membershares sharesone oneidea ideaatataatime. 2. 5. Ideas Ideasare areranked rankedduring duringaasecond secondquiet quiettime.group groupmembers memberswritewritedown down as asmany manyproblems problemsand andsolutions solutionsasaspossible.and andthe theidea ideawith withthe the highest highestaverage averagerank rankisisselected. 2. Group Groupdiscusses discussesadvantages/disadvantages. 5. Members Membersreadreadrankings rankingsaloud. 6. 3. 4. selected. 6. 1. advantages/disadvantages. possible. shared. 3. time.3 40 Copyright ©2008 by Cengage Learning. time. time. Nominal Group Technique Steps to Establish Nominal Group Technique 1. 5. During Duringaaquiet quiettime. All rights reserved . 4. Ideas Ideasare areposted postedon onflipcharts flipchartsuntil untilall allideas ideasare areshared.

5. agreement. 5. 3. Create Createaabrief briefreport reportand andsend sendto tothe thepanel panelmembers membersforfor agreement/disagreement. 3.4 41 Copyright ©2008 by Cengage Learning. 2. experts. 4. questions. Assemble Assembleaapanel panelof ofexperts. agreement. Summarize Summarizethetheresponses responsesand andfeed feedback backto tothe thepanel panel until untilthe themembers membersreach reachagreement. 2. Continue Continuethe thefeedback feedbackprocess processuntil untilpanel panelreaches reaches agreement. 1. All rights reserved . 5. agreement/disagreement. 4. Create Createaaquestionnaire questionnaireof ofopen-ended open-endedquestions. Delphi Technique Steps to Establish Delphi Technique 1.

ideas. All rights reserved . Share previous Tentative Group Step 3 recommendations thoughts. Tentative Group Step 1 recommendations recommendations Decision is Made 42 Copyright ©2008 by Cengage Learning. ideas. Beyond the Book Stepladder Technique Member 4 Joins Group Members 1. Shares thoughts. Decision is Made recommendations Member 1 Member 2 Discussion is Held and Shares thoughts. 2. & 3 Discussion is Held and Shares thoughts. ideas. ideas. ideas. ideas. Decision is Made recommendations Member 3 Joins Group Members 1 & 2 Discussion is Held and Shares thoughts. Share previous Tentative Group Step 2 recommendations thoughts.

the thebetter. 2. Brainstorming Four Rules of Brainstorming 1. ideas. All rights reserved . 3. Other Othergroup groupmembers’ members’ideas ideasshould shouldbebeused used to tocome comeupupwith witheven evenmore moreideas. 1. 4. The Themore moreideas. crazy. acceptable. 2. allowed. 3.nonomatter matter how howwild wildor orcrazy. 4. All Allideas ideasare areacceptable. better.5 43 Copyright ©2008 by Cengage Learning. Criticism Criticismor orevaluation evaluationof ofideas ideasisisnot notallowed. ideas. 5.

5 44 Copyright ©2008 by Cengage Learning. All rights reserved . Electronic Brainstorming Advantages of Electronic Brainstorming  Overcomes production blocking • technology allows everyone to record their ideas as they are created • no ideas lost while waiting your turn to speak  Overcomes evaluation apprehension • anonymity creates free expression 5.

5 45 Copyright ©2008 by Cengage Learning. Electronic Brainstorming Disadvantages of Electronic Brainstorming • Greater expense • No automatic acceptance of ideas because of one’s position • Some find it difficult to express themselves in writing • Lack of typing skills can frustrate participants 5. All rights reserved .