Chapter 4: Planning and Decision Making PDF

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Chapter 4: Planning and Decision Making 29 January 2019 BUSA 2100 Lecture

Planning → choosing a goal & developing a method or strategy to achieve that goal ● Benefits of planning: ○ Provides direction ○ Intensifies effort ○ Reduces uncertainty ○ Facilitates decision making ● Cons of planning: ○ Impedes change ○ Creates false sense of certainty ○ Detachment of planners 1. Setting Goals → SMART objectives (especially specific and challenging) 2. Developing commitment to goals 3. Developing effective action plans a. Who - People b. What - Resources c. When - Time period d. How - Specific steps 4. Tracking progress toward goal achievement 5. Maintaining flexibility Top Management ● Strategic Plans → clarify how the company will serve customers and position itself against competitors (2-5 years) ● Vision → inspirational statement of an organization’s purpose (2 sentences) ● Mission → broad statement of an organization’s purpose that distinguishes it from others of a similar type Middle Management ● Tactical Plans → specify how a company will use resources, budgets and people to accomplish goals within its mission (6 months to 2 years) 1

Decision Making

Rational Decision Making

The process of choosing a solution from A systematic process of defining available alternatives problems, evaluating alternatives and choosing optimal solutions Lower Level → Operation Plans ● SIngle Use ● Standing plans ○ Policy → general course of action ○ Procedures → more specific (event specific) ○ Rules/Regulations → even more specific (precise description of what must be done) ● Budgets Rational Decision Making Process 1. Identify and define the problem 2. Identify the decision criteria 3. Weigh the 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. Generate alternative courses of action 5. Evaluate each alternative 6. Compute the optimal decision Group Decision Making Advantages 1. View problems from multiple perspectives 2. Find and access more info 3. Generate more alternative solutions 4. Be more committed to co making chosen solutions work

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Disadvantages 1. Susceptible to ‘groupthink’ (limited number of solutions) 2. Takes considerable time 3. 1-2 people can dominate group discussion 4. Members don’t feel personally accountable for decisions/actions

Groupthink → occurs in highly cohesive groups when group members feel intense pressure not to disagree with each other so that the group can approve a proposed solution Structured Conflict ● C-Type Conflict (Cognitive Conflict) → disagreement that focuses on problem and issue-related differences of opinion ● A-Type Conflict (Affective Conflict) → disagreement that focuses on individuals or personal issues ● Devil’s Advocacy → assigning the role of critic (creates C-Type conflict)

4-1: Benefits and Pitfalls of Planning Planning: choosing a goal and developing a method or strategy to achieve that goal Figure out what the problem is. Generate potential solutions or plans. Pick the best one. Make it work. 4-1a: Benefits of Planning Offers 4 important benefits: provides direction, intensifies effort, reduces uncertainty, and facilitates decision making 1) Allows everyone in organization to understand how their efforts can contribute to achieving an organization’s goal 2) Plans encourage managers and employees to direct greater efforts toward activities that help accomplish their goals and away from activities that don’t 3) Planning reduces uncertainty a) managers consider future changes and potential problems that might arise and then develop the appropriate strategies to respond. b) Helps minimize the negative impact that can occur as a result of future events and enhance a manager’s ability to deal with change. 4) Planning facilitates decision making. a) When an organization has plans in place, managers and employees will be able to refer to those plans to help guide current decision making. 4-1b: Planning Pitfalls 1) Can impede change or slow needed adaptation a) Sometimes companies become so committed to achieving the goals set forth in their plans or following the strategies and tactics spelled out in them that they fail to notice when their plans aren’t working or their goals need to change 2) Can create a false sense of certainty Some planners think they need to know exactly what the future holds for their competitors, their suppliers, and their companies

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However, all plans are based on assumptions 3) Detachment of planners In theory, strategic planners and top-level managers are supposed to focus on the big picture and not concern themselves with the details of implementation

4-2: How to Make a Plan That Works 4-2a: Setting Goals 1st step in planning To direct behavior and increase effort Goals need to be specific and challenging

S.M.A.R.T goals: goals that are specific, measureable, attainable, realistic and timely 4-2b: Developing Commitment to the Goals Goal commitment: determination to achieve a goal Goals are more likely to be realistic and attainable when individuals participate in setting them 4-2c: Developing Effective Action Plans Action plans: list the specific steps (how), people (who), resources (what), and time period (when) for accomplishing a goal 4-2d: Tracking Progress

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Track progress toward goal achievement 2 accepted methods: 1) Set short term and long term goals 2) Gather and provide performance feedback

4-2e: Maintaining Flexibility Options-based planning: ● keep options open by making small, simultaneous investments in many alternative plans ● Opposite of traditional planning Slack resources: cushion of resources such as extra time, people, money, or production capacity - that can be used to address and adapt to unanticipated changes, problems or opportunities 4-3: Planning from Top to Bottom Planning works best when the goals and action plans at the bottom and middle of the organization support the goals and action plans at the top of organization 4-3a: Starting at the Top ● Strategic plans: top management is responsible for developing long-term strategic plans that make clear how the company will serve customers and position itself against competitors in the next 2-5 years ● Begins with creation of an organizational vision or mission Vision statement: ● statement of company’s purpose and the destination it hopes to reach ● Serves as guide to individuals in an organization ● Should be brief - no more than two sentences ● Should be enduring, inspirational, clear and consistent with widely shared company beliefs and values Mission statement: broad statement of an organization’s purpose that distinguishes the organization from others of a similar type 4-3b: Bending in the Middle Tactical plans: plans created and implemented by middle managers that specify how the company will use resources, budgets and people over the next 6 months to 2 years to accomplish specific goals within its mission 4-3c: Finishing at the Bottom Operational plans: ● which are the day-to-day for producing or delivering the organization’s products and services ● Direct the behavior, efforts, priorities of operative employees for periods ranging from 30 days to 6 months

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3 kinds of operation plans: single-use plans, standing plans, budget

Single-use plans: Unique, one time only events Standing plans: Can be used repeatedly to handle frequently recurring events Policy: Standing plan that indicates that general course of action that should be taken in response to a particular event or situation Procedure: standing plan that indicates the specific steps that should be taken in response to a particular event ● Step 1: Rejected material is locked in a secure area, with "reject" documentation attached. ● Step 2: Material Review Board (MRB) identifies the defect and how far outside the standard the ● rejected products are. ● Step 3: MRB determines the disposition of the defective product either as scrap or as rework. ● Step 4: Scrap is either discarded or recycled, and rework is sent back through the production line to be fixed. ● Step 5: If delays in delivery will result, MRB member notifies customer Rules and Regulations: Standing plans that describe how a particular action should be performed or what must happen or not happen in response to a particular event

4-4: Steps and Limits to Rational Decision Making Decision Making: process of choosing a solution from available alternatives Rational decision making: systematic process in which managers define problems, evaluate alternatives, and choose optimal solutions that provide max benefits to their organizations 4-4a: Define the Problem Problem: gap between a desired state and an existing state 4-4b: Identify Decision Criteria Decision Criteria: standards used to guide judgement and decisions The more criteria a potential solution meets, the better the solution will be 2nd step in decision making: identify the decision criteria relevant to situation 4-4c: Weigh the Criteria Decide which criteria are more or less important

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Decision Criteria: standards used to guide judgements and decisions Absolute comparisons: process in which each criterion is compared to a standard or ranked on its own merits 4-4e: Evaluate Each Alternative Relative Comparisons: which each criterion is compared directly to every other 4-4f: Compute the Optimal Decision Multiplying the rating for each criterion (step 5) by the weight for that criterion (step 3) and then summing those scores for each alternative course of action that you generated (step 4) 4-4g: Implement the Decision Important first step for this process is for management to provide clear and concise communication of the decision to those who will be affected Consideration should also be given to the allocation of resources and the timing of the execution to maximize efficiency and effectiveness. 4-4h: Evaluate the Decision Evaluate the outcome of the decision and the success of the implementation Analysis and feedback tools can provide mgmt with a mechanism to determine the effectiveness of the decision Use of periodic progress reports can help gauge how the implementation is going and also identify any potential problems before they occur 4-4i: Limits to Rational Decision Making In practice, limited resources along with attention, memory, and expertise problems make it nearly impossible for managers to maximize decisions Maximizing: choosing the best alternative Satisficing: choosing a “good enough” alternative

4-5: Using Groups to Improve Decision Making 4-5a: Advantages and Pitfalls of Group Decision Making Groups do a better job in that 1) Defining the problem 2) Generating alternative solutions Group members usually possess different skills, experience, knowledge so they’re able to view problems from multiple perspectives and to gain access to more info PITFALLS 1) GROUP THINK: Barrier to good decision making caused by pressure within a group for members to agree with one another Most likely to occur under following conditions: 1. Group is insulated from others with different perspectives

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2. Group leader begins by expressing a strong preference for a particular decision 3. Group has no established procedure for systematically defining problems and exploring alternatives 4. Group members have similar backgrounds and experiences 2) TAKES CONSIDERABLE TIME Reconciling schedules so that group members can meet takes more time It’s rare to have a group consistently hold productive task-oriented meetings to work through decision process effectively Common complaints on meetings: Meeting’s purpose = unclear Participants are unprepared Critical people are absent/late Conversation doesn’t stay focused on the problem No one follows up on the decisions that were made HOW TO MEET MEETING ON TRACK 1) Firm agenda 2) Assigned note taker 3) Meetings must occur 4) During established office hours 5) Preferably as short, 10 minute micro meetings 6) Discourage office politics and rely on data 7) Stick to the clock 3) STRONG-WILLED GROUP MEMBERS Such an individual, whether the boss or a vocal group members, dominates group discussion and puts limits on how the problem is defined and what the solutions can be Group members may not feel accountable for the decisions made and actions taken by the group unless they’re personally responsible for some aspect of carrying out those decisions

4-5b: Structured Conflict C-type conflict: cognitive conflict - disagreement that focuses on problem-and-issue-related differences of opinion A-type conflict: affective conflict - disagreement that focuses on individual or personal issues Devil’s advocacy: 1. Generate a potential solution 2. Assign a devil’s advocate to criticize and question solution 3. Present the critique of the potential solution to key decision makers 4. Gather additional relevant info 5. Decide whether to use, change or not use the originally proposed solution

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4-5c: Nominal Group Technique ● ● ● ● ● ●

Begins with a quiet time in which group members independently write down as many problem definitions and alternative solutions as possible After quiet time, group leader asks each group member to share one idea at a time with the group Ideas posted on flipcharts/wallboards Then group discusses advantages and disadvantages of the ideas Closes with a second quiet time in which group members independently rank the ideas presented Group members then read their rankings aloud, and idea with highest average rank is selected

4-5d: Electronic Brainstorming Brainstorming: decision-making method in which group members build on one another’s ideas to generate as many alternative solutions as possible 4 rules: 1) The more ideas, the better 2) All ideas are acceptable, no matter how wild or crazy they might seem 3) Other group members’ ideas should be used to come up with even more ideas 4) Criticism or evaluation of ideas is not allowed

Electronic brainstorming: a decision-making method in which group members use computers to build on one another’s ideas and generate many alternative solutions 1. Anonymously generate as many ideas as possible 2. Edit the generated ideas, categorize them, eliminate redundancies 3. Ranking categorized ideas in terms of quality 4. 3 parts: generate a series of action steps, decide the best order for accomplishing these steps, and identify who is responsible for each steps

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