introduction to decision making preamble to the planning process
TRANSCRIPT
Introduction to Decision MakingPreamble to the Planning Process
Classical Decision Theory
The Rational-Economic Model Basic principles:
humans are rational we seek to optimize our
outcomes The classical model suggests that
decisions are made in a logical series of steps
Steps in Classical Decision Theory
1. Opportunity or problem of situation exists
2. Opportunity is recognized to exist3. Opportunity is defined4. Alternatives are generated5. Information is gathered6. Alternatives are evaluated7. One alternative is selected8. Alternative is implemented and
evaluated in terms of effectiveness
Problems with the Model
The assumptions are flawed humans are not perfectly rational information is not costless or complete
Assumes that all alternatives will be considered
Assumes that the consequences of each alternative will be explored
Assumes that we can cognitively cope with all this information
Behavioral or Administrative Model
Acknowledges the real-world limitations on manager’s decision making
Managers in this model operate with bounded rationality in making decisions
Recognizes that: All possible alternatives and their
associated consequences cannot be generated
Obstacles to Effective Decision-Making
Most common obstacles: Escalation of commitment Willingness of groups to take
risks
The Planning Process
Planning as a Crucial Management Function
planning attempts to define the organization’s future, and influence that future in ways that the managers wish
managers must cope with and adapt to change and uncertainty
What is Planning?
Centralized planning a system in which responsibility for
planning lies with the organization’s highest level, or top management
Decentralized planning a system in which responsibility for
planning lies with employees at certain levels of the organization and participation in the planning process is widespread
many companies have found that moving from centralized to decentralized planning can improve quality, productivity, and competitiveness governments have downsized and
undergone devolution
Planning, Managers, and Organizations
Planning is a prerequisite for the successful performance of the other managerial functions
Planning occurs in the present, but is oriented toward the future
Planning focuses on the means used to achieve an organization’s ends
Planning may be formal or informal
Planning...cont’d
Planning is an ongoing process Planning does not imply inflexibility Planning is an analytical process Planning involves scanning both internal
and external environment Planning helps an organization cope
with environmental change and uncertainty
Planning does not guarantee success
Managers and Planning
Typical manager’s day is characterized by different activities, frequent interruption, and a need to cope with unexpected problems that demand immediate solutions
Managers plan implicate, rather than explicitly
Planning is crucial for managerial success
Benefits of Planning
Coordination of Effort specify goals and objectives both for
the total organization and for each of its parts
Preparation for Change include contingency plans that permit
flexibility to adapt to unforeseen changes in the environment
Development of Performance Standards levels of behaviour or output that are
defined by plans standards and benchmarks for evaluating
performance definition of competencies for each job
Development of Managers managers must be prepared to act on
a variety of scenarios - “what if?” managers must be proactive - make
things happen, not wait for them to happen
managers must be constantly trained, motivated, and enthusiastic
Mission Goals Plans
Goal Achievement
efficiency and
effectiveness
TM 6-2
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Planning Hierarchy
Planning at Different Management Levels
Top Managers Develop
organizational objectives
Spend large amount of time on planning function
Focus on external, internal factors
Lower-Level Mangers Develop plans that fit
overall objectives Spend small amount
of time on planning function
Focus largely on internal organizational factors when planning
Benefits of Planning
Helps identify opportunities for the organization
Helps identify possible problems Forces managers to set objectives Forces managers to set standards Coordinates organizational activity
Problems in Planning
Lack of support from top management Poor information Resistance to change Over- or under commitment to plans Managers not involved in planning
process Managers are too busy to plan Lack of competence in planning
Planning and Organizational Performance
Companies with formal planning procedure do perform better than those without formal procedures
They typically find that they improve on their own past performance
Some unexpected short run events can lead to lowered performance
Planning Process
The Organization’s MissionPurpose Premises Values Directions
The Organization’s MissionPurpose Premises Values Directions
Strategic goalsStrategic goals
Tactical goalsTactical goals
Operational goalsOperational goals Operational plans
Tactical plans
Tactical plans
Strategic plans
Strategic plans
Operational plansOperational plans
The Environmental Context
The Planning Process
1.Set Organizational Objectives2.Determine Gap Between Actual and
Desired Position3.Develop Plans to Achieve Objectives4.Implement Plans5.Evaluate Planning Effectiveness
Set Organizational Objectives
Objectives: are the results that the organization wants to achieve
Objectives focus employee attention on tasks that are consistent with the organizations mission
Goal setting is used to focus employee activity on goals that are critical for success
Strategic goals, tactical goals, operational goals
Types of Goals Mission – a statement of an organization’s
fundamental purpose
Strategic goal – a goal set by & for top management of the organization
Tactical goal – a goal set by & for middle managers of the organization
Operational goal – a goal set by & for first-line managers of the organization
Problems in Goal Setting
Managers should be wary of the following: Different real and stated objectives
goals may be inconsistent with the goals it pursues
Conflicting objectives employees put in position of achieving
contradictory objectives Goal Distortion
managers get sidetracked, and emphasize the achievement of objectives that are at odds with the organizations mission
Barriers to Goal Setting
Inappropriate goals
Improper reward system
Complex environment
Resistance to change
Constraints
Understand purpose of goals
Planning communication & participation
Consistency, revision & updating
Effective reward systems
BarriersBarriers Overcoming the BarriersOvercoming the Barriers
StrategicGoals
OperationalGoals
TopManagement
Middle-levelManagement
First-levelManagement
Level Goals Are Set by Different Levels in an Organization
Types of Plans
Strategic plan – plans developed to achieve strategic goals
Tactical plan – plans developed to achieve tactical goals
Operational plan – plans developed to achieve operational goals
Develop Plans to Achieve Objectives
Strategic Plans Tactical Plans Operational Plans Single - Use - Plans Standing Plans Forecasting
quantitative forecasting qualitative forecasting
Contingency Planning
Strategic Planning
Comprehensive, long-range planning, focusing on broad, enduring issues to increase the organization’s effectiveness
Price Penetration Strategy the strategy of setting low prices to
create a mass market rapidly requires high volumes
Operational Planning
Short-term, focused, specific planning that provides direction for implementing the organization’s broad concepts in the strategic plan into clear objectives for operations
Tactical Planning
more specific and for a shorter period than strategic planning, but less specific and for a longer period than operational planning
Time Frames for Planning
1 year or less 1 – 5 years 6 to 20 years1 year or less 1 – 5 years 6 to 20 years
Short –Range plans
Intermediate
plans
Long–Range
plans
Operational Plans
Single-use planCarry out course of action , not repeated in future
Program Single use plan for larger set of activities
ProjectSingle use plan of less scope & complexity than that of a program
Standing PlanFor activities that recur regularly over a period of time
PolicyOrganization’s general response to a designated problem or situation
Standard Operating Procedure
Standing plan outlining steps to followed in particular circumstances
Rules & RegulationsStanding plan describing exactly how specific activities are to be carried out
Implement Plans
Introducing any change, including new plans, is likely to meet with resistance from employees
A plan is effective if it helps an organization reach it’s objectives
Evaluating the effectiveness of plans may be difficult
Final step in the planning process must be an assessment of the effectiveness of plans
1. Develop organizational goals & plans
2. Collaborative goal setting & planning
3. Communicating goals & plans
4. Periodic Review
5. Evaluation
Management by Objective
Management by Objectives
MBO is a system in which managers and subordinates set mutually agreed upon goals
MBO emphasizes the achievement of results
Encouraging employee participation in goal setting will improve employee motivation and performance
MBO Process
1.Set Strategic Objectives2.Set Departmental Objectives3.Set Individual Objectives4.Develop Action Plans5.Implement Plans and Review
Performance6.Take Corrective Action
MBO Process cont’d ..
Set Strategic Objectives-requires management to set the organization overall objectives
Set Departmental Objectives-each of the departments must set more specific goals that will help achieve the overall goals
Set Individual Objectives-managers and workers negotiate specific goals
MBO Process cont’d..
Develop Action Plans-detail the specific tasks that must be done in order to fulfill the objectives that have been set
Implement Plans and Review Performance-manager and subordinate meet to review the subordinate’s performance
Take Corrective Action-speaks for itself
Steps in the Planning Process
Purposes may be summarized in two questions:
What do we want the future to be?
What must we do now to increase the chance that this desired future will be achieved?
Step 1: Assessing the Organization’s Environments
internal strengths and weaknesses, external opportunities and threats SWOT analysis
change is the only constant attention to technological innovation increasingly global and competitive political climate
Step 2: Deciding on a Mission Statement and Establishing Goals and Objectives
A mission statement defines the organization’s purpose and intentions, its long-term vision, that distinguishes it from other organizations
must be customer focused must state aspirations and be achievable must serve as a source of motivation for
all levels must describe specific strategies
Step 3: Creating an Action Plan
Forecasting a prediction of future events, based
on experience, past and current, and expectations for the future
Communicate the plan clearly and precisely to those who are expected to take actions, and to others who may be affected by those actions
Step 4: Allocating Resources
Resources financial, physical, human, time, and
other assets of an organization that can be used to fulfil its missions, goals and objectives
Budget a document that both predicts future
resources and allocates resources for various purposes within the organization
Step 5: Implementing the Plan
Implementation putting a plan into action by assigning
people and other resources to it, and by acting to achieve its design
Authority decision making power that stems
from a formal position in the hierarchy, as contrasted with persuasive power that stems from the personal attributes of the person holding the position