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Planning and Decision Making

Planning and Decision Making. McGraw-Hill/Irwin Principles of Management . © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. 5. chapter. Describe the different levels of planning in an organization. Explain the difference between strategic, tactical, operating, and unit plans.

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Planning and Decision Making

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  1. Planning and Decision Making McGraw-Hill/Irwin Principles of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. 5 chapter

  2. Describe the different levels of planning in an organization. Explain the difference between strategic, tactical, operating, and unit plans. Outline the value of simple-use plans, standing plans, and contingency plans. Describe the main components of a typical strategic planning system. Identify the main pitfalls that managers encounter when engaged in formal planning processes, and describe what can be done to limit those pitfalls. Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions. Learning Objectives

  3. Steps in Planning • Choose goals • Identify actions • Allocate responsibility • Review Performance • Make adjustments

  4. Levels of Planning Corporate-level Strategic plan (CEO) Sets the context for Shaped by input from Business-level strategic plan (heads of businesses) Operating plans (heads of functions) Unit plans (heads of departments, teams, individuals

  5. Strategic plans:A plan that outlines the major goals of an organization and the organizationwide strategies of attaining those goals. Operating plans: Plans that specify goals, actions, and responsibility for individual functions. Tactical plans: The action managers adopt over the short to medium term to deal with a specific opportunity or threat that has emerged. Unit plans: Plans for departments within functions, work teams, or individuals. Types of Plans

  6. Single-use plans:Plans that address unique events that do not reoccur. Standing plans: Plans used to handle events that reoccur frequently. Contingency plans:Plans formulated to address specific possible future events that might have a significant impact on the organization. Crisis management planning:Plan formulated specifically to deal with possible future crises. Scenario planning: Plans that are based on “what if” scenarios about the future. Types of Plans

  7. Scenario Planning Identify different Possible futures (scenarios) Formulate plans to deal with those futures Invest in one plan but … Switch strategy if tracking of signposts shows alternative scenarios becoming more likely Hedge your bets by preparing for other scenarios and …

  8. Question • Can scenario planning apply and be useful to you as a student? Explain. Develop three scenarios for your post-graduation future and possible plans to deal with them.

  9. Treating scenarios as forecasts Failing to make scenarios global enough in scope Failing to focus scenarios in areas of potential impact Treating scenarios as informational only Not using an experience facilitator Scenario Planning Traps Source:www.valuebasedmanagement.net

  10. The Strategic Planning Process Feedback Mission, vision, values, and goals Internal analysis (strengths and weaknesses) External analysis (opportunities and threats) SWOT analysis formulate strategies Draft action plans Assign subgoals, roles, responsibilities, timelines, and budgets Review progress against plan Implement

  11. Mission:The purpose of an organization. Vision:A desired future state. Values:The philosophical properties to which managers are committed. Goals:A desired future state that an organization attempts to utilize. Setting the Context: Mission, Vision, Values, and Goals

  12. In describing the purpose of the organization, _____ should be _______-oriented. mission; customer vision; product values; product goals; customer Question

  13. Ends, not means Effort Verbs Nouns embodying activities The Unidentifiable Brevity Broad vs. narrow Value added Unique Mission Checklist Source: raise-funds.com

  14. They are precise and measurable. They address important issues. They are challenging but realistic. They specify a time period in which they should be achieved. Characteristics of Goals

  15. Specific Simple Significant Strategic Rational Measurable Tangible Written Shared Consistent with your values 10 Ingredients for Successful Goals Source:www.topachievement.com

  16. Planning gives direction and purpose to an organization; it is a mechanism for deciding the goals of the organization. Planning is the process by which management allocates scarce resources, including capital and people, to different activities. Planning drives operating budgets-strategic, operations, and unit plans determine financial budgets for the coming year. Planning assigns roles and responsibilities to individuals and units within the organization. Planning enables managers to better control the organization. The Benefits of Planning

  17. Pitfall Countering the Pitfalls of Planning Solution Too centralized; top-down Decentralized planning Failure to question assumption Scenario planning; devil’s advocate Failure to implement Link to goals; tie to budgets Failure to anticipate rivals’ actions Role-playing

  18. The Rational Decision-Making Model Identify the problem Identify decision criteria Weight criteria Generate alternative courses of action Does not meet expectations Evaluate Implement alternative Choose one alternative Meets expectations outcome Continue with course of action

  19. Bounded rationality:Limits in human ability to formulate complex problems, to gather and process the information necessary for solving those problems, and thus to solve those problems in a rational way. Satisfice:Aiming for a satisfactory level of a particular performance variable rather than its theoretical maximum. Bounded Rationality and Satisficing

  20. Decision-Making Heuristics and Cognitive Biases • Decision heuristics • 80-20 rule • Cognitive bias • Prior hypothesis bias • Framing bias

  21. Performing in your 20 percent if you’re: Engaged in activities that advance your overall purpose in life Doing things you have always wanted to do not what others want you to do Hiring people to do the tasks you are not good at or don't like doing. Smiling. 80-20 Rule Source: Family Practice Management, September 2000

  22. Devil’s advocacy: The generation of both a plan and a critical analysis of the plan by a devil’s advocate. Dialectic injury: The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action. Outside view: Identifying a reference class of analogies past strategic initiatives, determining whether those initiatives succeeded or failed, and evaluating a project at hand against those prior initiatives. Improving Decision Making

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