mgmt5 © 2012 cengage learning planning and decision making 5

MGMT5

© 2012 Cengage Learning

Planning and Decision Making

5

© 2012 Cengage Learning

1. discuss the benefits and pitfalls of planning2. describe how to make a plan that works3. discuss how companies can use plans at all

management levels, from top to bottom4. explain the steps and limits to rational decision

making5. explain how group decisions and group decision-

making techniques can improve decision making

Planning

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

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Benefits of Planning

• Intensified effort

• Persistence

• Direction

• Creation of task strategies

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Pitfalls of Planning

• Impedes change and prevents or slows adaptation

• Creates a false sense of certainty

• Detachment of planners

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How To Make a Plan That Works

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Setting Goals

S.M.A.R.T. Goals• Specific• Measurable• Attainable• Realistic • Timely

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Developing Commitment to Goals

• Goal commitment– the determination to achieve a goal

• Set goals collectively

• Make the goal public

• Obtain top management’s support

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Developing Effective Action Plans

An action plan lists…

• Specific steps (how)• People (who)• Resources (what)• Time period (when)

…for accomplishing a goal

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Tracking Progress

• Proximal goals and distal goals

• Performance feedback

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Effects of Goal Setting, Training, and Feedback on Safe Behavior in a Bread Factory

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Maintaining Flexibility

• Options-based planning– keep options open by making, small

simultaneous investments in many alternative plans.

• Slack resources– a cushion of resources, like extra time or

money, that can be used to address and adapt to unanticipated changes.

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Planning from Top to Bottom

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Starting at the Top

• Strategic plans– make clear how the company will serve

customers and position itself against competitors in the next 2 to 5 years

• Purpose statement– a statement of a company’s purpose or reason

for existing

• Strategic objective– a more specific goal that unifies company-wide

efforts, stretches and challenges the organization, and possess a finish line and a time frame.

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Bending in the Middle

• Tactical plans– specify how a company will use resources,

budgets, and people to accomplish specific goals related to its strategic objective

– time frame: 6 months to 2 years

• Management by Objectives (MBO)– discuss possible goals– collectively set goals– jointly develop tactical plans– meet regularly to review progress

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Finishing at the Bottom

Operational plans• Single-use plans• Standing plans

– policies– procedures– rules and regulations

• Budgets

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What Is Rational Decision Making?

4. explain the steps and limits to rational decision making

5. explain how group decisions and group decision-making techniques can improve decision making

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Steps to Rational Decision Making

1. Define the problem2. Identify decision criteria3. Weight the criteria4. Generate alternative courses of action5. Evaluate each alternative6. Compute the optimal decision

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Define the Problem

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Existing state

Desired state

Identify Decision Criteria

The standards used to guide judgments and decisions.

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Weight the Criteria

• Absolute comparisons

• Relative comparisons

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Absolute Weighting of Decision Criteria for a Car Purchase

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Relative Comparison of Home Characteristics

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Generate Alternative Courses of Action

After identifying and weighting the criteria that will guide the decision-making process, the next step is to identify possible courses

of action that could solve the problem.

The idea is to generate as many alternatives as possible.

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Evaluate Each Alternative

• The next step is to systematically evaluate each alternative against each criterion.

• The key is to use information to systematically evaluate each alternative against each criterion.

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Criteria Ratings Used to Determine the Best Location for a New Office

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Compute the Optimal Decision

(rating for criterion A) x (weight for criterion A)

+(rating for criterion B) x (weight for criterion B)

+(rating for criterion C) x (weight for criterion C)

etc.

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Limits to Rational Decision Making

• In theory, fully rational decision makers maximize decision by choosing the optimal solution.

• In practice, limited resources make it nearly impossible to maximize decisions.

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Advantages of Group Decision Making

Groups do a better job than individuals at• Defining the problem• Generating alternative solutions

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Pitfalls of Group Decision Making

• Groupthink– occurs in highly cohesive groups when

group members feel intense pressure to agree with each other so that the group can approve a proposed solution

• Takes considerable time

• Strong willed members

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Structured Conflict

• C-type (cognitive) conflict– focuses on problem- and issue-related

differences of opinion– willingness to examine, compare, reconcile

differences to produce the best possible solution

• A-type (affective) conflict– emotional reaction that can occur when

disagreements become personal– hostility, anger, resentment, distrust, cynicism,

apathy

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Creating C-Type Conflict

Devil’s advocacy1.Generate a potential solution2.Assign a devil’s advocate to criticize and

question the solution3.Present the critique of the potential

solution to key decision makers4.Gather additional relevant information5.Decide whether to use, change, or not use

the originally proposed solution

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Creating C-Type Conflict

Nominal Group Technique• Begins with group quiet time• Each member shares one idea at a time

with the group• Group discusses the pros and cons of each

idea• Group members independently rank ideas

presented• Idea with highest average rank is selected

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Creating C-Type Conflict

Delphi Technique• A group of experts respond to questions

and to each other until reaching agreement

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Creating C-Type Conflict

Brainstorming/Electronic Brainstorming • The more ideas the better• All ideas are acceptable• Other members’ ideas should be used to

come up with even more ideas• Criticism or evaluation of ideas is not

allowed

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REELTOREAL

Inside Man

1. Does this scene show strategic or tactical planning?

2. What pieces of the planning type does it specifically show? Give examples from the scene.

3. Do you expect this plan to succeed? Why or why not?

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REELTOREAL

Plant Fantasies

1. Did Plant Fantasies owner Teresa Carleo follow the rational decision-making process to launch Plant Fantasies? Explain.

2. List an example of a programmed decision at Plant Fantasies. Identify a nonprogrammed decision at Plant Fantasies.

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