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
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 Setting Goals
Specific
Specific

S.M.A.R.T. Measurable
Measurable
Attainable
Attainable
Realistic
Realistic
Timely
Timely

2.1
7
Copyright 2008 by Cengage Learning. All rights reserved
Examples of S.M.A.R.T. 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, eliminated the following fiscal
scheduled to open in 2007, and year.
achieve 20% productivity gains
there. 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, and sell
end of 2005. and In 2005, we remaining inventory in early
will increase operating profit in
each of our 3 key businesses: fiscal 2005.
domestic, intl, supply chain. Starbucks: In fiscal 2006,
Wrigley: In 2005, the we plan to open approximately
company will decrease the 1,800 net new stores globally.
long-term rate of return
assumption for the assets of its
U.S. (pension) plans from 8.75
% to 8.5%.

8
Copyright 2008 by Cengage Learning. All rights reserved
 Developing Commitment to Goals
The determination to achieve a goal is
increased by
setting goals participatively.
making goals reasonable.
making goals public.
obtaining top management support.

2.2
9
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 Developing Effective Action Plans
An Action Plan Lists

Specific
Specific Steps
Steps

People
People

Resources
Resources

Time
Time Period
Period

2.3
10
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 Tracking Progress
Set
Set Gather
Gather and
and provide
provide

Proximal
Proximal Goals
Goals Performance
Performance
Feedback
Feedback

Distal
Distal Goals
Goals

2.4
11
Copyright 2008 by Cengage Learning. 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
 Planning from Top to Bottom
Vision
Mission
Tactical Plans, MBO
Standing Plans
Operational Plans
Vision
Single-Use Plans
Top
Managers
Mission

Tactical Plans, MBO

Middle

First-Level Operational, Standing, Single-Use

Managers
3 13
Copyright 2008 by Cengage Learning. All rights reserved
 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 organizations
organizationspurpose
purpose
(2
(2sentences)
sentences)

Overall
Overallgoal
goalthat
thatunifies
unifiesefforts
effortstoward
toward
its
itsvision,
vision,stretches
stretchesand
andchallenges,
challenges,
Mission
Mission and
andpossesses
possessesaafinish
finishline
lineand
and
3.1 time
timeframe.
[Link]
Flowsfrom
fromvision.
vision.
14
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 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
 Bending in the Middle
Specify
Specifyhow
howaacompany
companywill
willuse
use
resources,
resources,budgets,
budgets,and
andpeople
peopleto
to
Tactical
TacticalPlans
Plans accomplish
accomplishgoals
goalswithin
withinits
itsmission.
mission.
(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

3.2
16
Copyright 2008 by Cengage Learning. All rights reserved
Management by Objectives
Steps to Management by
Objectives:
1. Discuss possible goals
2. Select goals that are challenging, attainable and
consistent with the companys overall goals
3. Jointly develop tactical plans that lead to the
accomplishment of tactical goals and objectives
4. Meet regularly to review progress

17
Copyright 2008 by Cengage Learning. All rights reserved
 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

3.3
18
Copyright 2008 by Cengage Learning. All rights reserved
 Kinds of Operational Plans

Plans
Plansthat
thatcover
coverunique,
unique,
Single-Use Plans
Single-Use Plans one-time-only events
one-time-only events

Plans
Plansused
usedrepeatedly
repeatedlyto tohandle
handle
frequently
frequentlyrecurring
recurringevents.
events.
Standing
StandingPlans
Plans Three
Threekinds
kindsare:
are: policies,
policies,procedures,
procedures,
and
andrules
rulesand
andregulations.
regulations.

Quantitative
Quantitativeplanning
planningto
todecide
decidehow
how
Budgets
Budgets to
toallocate
allocatemoney
moneyto
toaccomplish
accomplish
company
companygoals
goals
3.3
19
Copyright 2008 by Cengage Learning. All rights reserved
 What Is Rational Decision
Making?
After reading these sections,
you should be able to:

4. explain the steps and limits to rational

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

20
Copyright 2008 by Cengage Learning. All rights reserved
 What Is Rational Decision Making?
Decision Making

The process of choosing a solution from

available alternatives.

Rational Decision Making

A systematic process of defining problems,

evaluating alternatives, and choosing optimal
solutions.
4
21
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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. All rights reserved
 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, managers
must
be aware of the gap.
be motivated to reduce the gap.
have the knowledge, skills, abilities, and
4.1 resources to fix the problem.
23
Copyright 2008 by Cengage Learning. All rights reserved
 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, the better that solution should be

4.2
24
Copyright 2008 by Cengage Learning. All rights reserved
 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

4.3
25
Copyright 2008 by Cengage Learning. All rights reserved
 Steps to Rational Decision Making
Absolute
Absolute Weighting
Weighting of
of Decision
Decision Criteria
Criteria

4.3
26
Copyright 2008 by Cengage Learning. All rights reserved
 Steps to Rational Decision Making
Relative
Relative Weighting
Weighting of
of Decision
Decision Criteria
Criteria

4.3
27
Copyright 2008 by Cengage Learning. All rights reserved
 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
 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

4.5
29
Copyright 2008 by Cengage Learning. All rights reserved
 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

4.6
30
Copyright 2008 by Cengage Learning. All rights reserved
 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

4.7
31
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 Limits to Rational Decision Making

Maximize
Maximize Satisfice
Satisfice

4.7
32
Copyright 2008 by Cengage Learning. All rights reserved
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.
[Link]
View problems
problems from
from multiple
multiple perspectives
perspectives
2.
[Link]
Find and
and access
access more
more information
information
3.
[Link]
Generate more
more alternative
alternative solutions
solutions
4.
[Link]
More committed
committed toto making
making chosen
chosen solutions
solutions work
work

5.1
34
Copyright 2008 by Cengage Learning. All rights reserved
 Group Decision Making
Disadvantages

1.
[Link]
Susceptible to
to groupthink
groupthink andand to
to considering
considering aa
limited
limited number
number of of solutions
solutions
2.
[Link]
Takes considerable
considerable timetime
3.
[Link]
One or
or two
two people
people can
can dominate
dominate group
group discussion
discussion
4.
[Link]
Members dont
dont feel
feel personally
personally accountable
accountable
for
for decisions
decisions and
and actions
actions

5.1
35
Copyright 2008 by Cengage Learning. All rights reserved
 Groupthink
Groupthink is likely to occur when
the
thegroup
groupisisinsulated
insulatedfrom
fromothers
otherswith
withdifferent
different
perspectives.
perspectives.
the
thegroup
groupleader
leaderexpresses
expressesaastrong
strongpreference
preference
for
foraaparticular
particulardecision.
decision.
there
thereisisno
noestablished
establishedprocedure
procedureforfordefining
defining
problems
problemsand andexploring
exploringalternatives.
alternatives.
group
groupmembers
membershave
havesimilar
similarbackgrounds.
backgrounds.

5.1
36
Copyright 2008 by Cengage Learning. All rights reserved
 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

5.2
37
Copyright 2008 by Cengage Learning. All rights reserved
 Devils Advocacy
Steps to Establish a Devils Advocacy Program

1.
1. Generate
Generateaapotential
potentialsolution
solution
2.
2. Assign
Assignaadevils
devilsadvocate
advocatetotocriticize
criticizeand
andquestion
question
3.
3. Present
Presentthe
thecritique
critiqueof
ofthe
thesolution
solutionto
to
key
keydecision
decisionmakers
makers
4.
4. Gather
Gatheradditional
additionalinformation
information
5.
5. Decide
Decidewhether
whetherto
touse,
use,change,
change,or
ornot
notuse
use
the
theoriginally
originallyproposed
proposedsolution
solution
5.2
38
Copyright 2008 by Cengage Learning. All rights reserved
 Beyond the Book
Dialectical Inquiry
Steps to Establish a Dialectical Inquiry Process

1.
1. Generate
Generateaapotential
potentialsolution
solution
2.
2. Identify
Identifythe
theassumptions
assumptionsunderlying
underlyingthe
the
potential
potentialsolution
solution
3.
3. Generate
Generateaaconflicting
conflictingcounterproposal
counterproposalbased
based
on
onopposite
oppositeassumptions
assumptions
4.
4. Have
Haveadvocates
advocatesof ofeach
eachposition
positionpresent
presenttheir
their
arguments
argumentsandandengage
engageininaadebate
debateininfront
frontof
of
decision
decisionmakers
makers
5.
5. Decide
Decidewhether
whethertotouse,
use,change,
change,orornot
notuse
use
the
theoriginally
originallyproposed
proposedsolution
solution

39
Copyright 2008 by Cengage Learning. All rights reserved
 Nominal Group Technique
Steps to Establish Nominal Group Technique
1.
1. During
Duringaaquiet
quiettime,
time,group
groupmembers
memberswritewritedown
down
as
asmany
manyproblems
problemsand
andsolutions
solutionsasaspossible.
possible.
2.
2. Each
Eachmember
membershares
sharesone
oneidea
ideaatataatime.
time.
3.
3. Ideas
Ideasare
areposted
postedon
onflipcharts
flipchartsuntil
untilall
allideas
ideasare
areshared.
shared.
4.
4. Group
Groupdiscusses
discussesadvantages/disadvantages.
advantages/disadvantages.
5.
5. Ideas
Ideasare
areranked
rankedduring
duringaasecond
secondquiet
quiettime.
time.
6.
6. Members
Membersreadreadrankings
rankingsaloud,
aloud,and
andthe
theidea
ideawith
withthe
the
highest
highestaverage
averagerank
rankisisselected.
selected.
5.3
40
Copyright 2008 by Cengage Learning. All rights reserved
 Delphi Technique
Steps to Establish Delphi Technique

1.
1. Assemble
Assembleaapanel
panelof
ofexperts.
experts.
2.
2. Create
Createaaquestionnaire
questionnaireof
ofopen-ended
open-endedquestions.
questions.
3.
3. Summarize
Summarizethetheresponses
responsesand
andfeed
feedback
backto
tothe
thepanel
panel
until
untilthe
themembers
membersreach
reachagreement.
agreement.
4.
4. Create
Createaabrief
briefreport
reportand
andsend
sendto
tothe
thepanel
panelmembers
membersforfor
agreement/disagreement.
agreement/disagreement.
5.
5. Continue
Continuethe
thefeedback
feedbackprocess
processuntil
untilpanel
panelreaches
reaches
agreement.
agreement.
5.4
41
Copyright 2008 by Cengage Learning. All rights reserved
 Beyond the Book
Stepladder Technique
Member 4 Joins Group Members 1, 2, & 3 Discussion is Held and
Shares thoughts, ideas, Share previous Tentative Group
Step 3
recommendations thoughts, ideas, Decision is Made
recommendations

Member 3 Joins Group Members 1 & 2 Discussion is Held and

Shares thoughts, ideas, Share previous Tentative Group
Step 2 recommendations thoughts, ideas, Decision is Made
recommendations

Member 1 Member 2 Discussion is Held and

Shares thoughts, ideas, Shares thoughts, ideas, Tentative Group
Step 1 recommendations recommendations Decision is Made

42
Copyright 2008 by Cengage Learning. All rights reserved
 Brainstorming
Four Rules of Brainstorming

1.
1. The
Themore
moreideas,
ideas,the
thebetter.
better.
2.
2. All
Allideas
ideasare
areacceptable,
acceptable,nonomatter
matter
how
howwild
wildor
orcrazy.
crazy.
3.
3. Other
Othergroup
groupmembers
membersideas
ideasshould
shouldbebeused
used
to
tocome
comeupupwith
witheven
evenmore
moreideas.
ideas.
4.
4. Criticism
Criticismor
orevaluation
evaluationof ofideas
ideasisisnot
notallowed.
allowed.

5.5
43
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
44
Copyright 2008 by Cengage Learning. All rights reserved
 Electronic Brainstorming
Disadvantages of Electronic Brainstorming

Greater expense
No automatic acceptance of ideas because
of ones position
Some find it difficult to express themselves
in writing
Lack of typing skills can frustrate
participants

5.5
45
Copyright 2008 by Cengage Learning. All rights reserved