Mgt 101

Planning

Decision Making ProcessIdentification of a problem

Identification of Decision Criteria

Allocation of weights to criteria

Development of alternatives

Analysis of Alternatives

Selection of an Alternative

Implementation of the Alternative

Evaluation of Decision Effectiveness

Decision – A choice from two or more alternatives

Decision Making Process – A set of eight steps that include identifying a problem, selecting an alternative and evaluating the decision’s effectiveness.

Problem – A discrepancy between an existing and a desired state of affairs.

Making Decisions

Rational Decision Making – Decision-making behaviour where choices are consistent and value-maximizing within specified constraints.

Intuitive decision making – Making decisions on the basis of experience, feelings and accumulated judgment.

Programmed Decision – A repetitive decision that can be handled by a routing approach.

Decide?

Structured Problems – Straightforward, familiar, and easily defined problems.

Procedure – A series of interrelated sequential steps that can be used to respond to a well-structured problem.

Rule – An explicit statement that tells managers what they can or cannot do.

Policy – A guideline for making decisions.

Decision Making Conditions

Certainty – A situation in which a manager can make accurate decisions because all outcomes are known.

Risk – A situation in which the decision maker is able to estimate the likelihood of certain outcomes.

Uncertainty –A situation in which a decision maker has neither certainty nor reasonable probability estimates available.

Common Decision-Making Errors

Anchoring Effect – Describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.

Selective Perception Bias – Decision makers selectively organize and interpret events based on their biased perceptions.

Availability Bias – Decision makers tend to remember events that are the most recent and vivid in their memory.

Common Decision-Making Errors

• Self serving

• Overconfidence

• Immediate Gratification

• Randomness

Types of Plans

Plan

Strategic

Operational

Time Frame

Long Term

Short Term

Specificity

Directional

Specific

Frequency of Use

Single Use

Standing

Plans

Strategic Plans – Plans that apply to the entire organization, establish the organization’s overall goals and seek to position the organization in terms of its environment.

Operational Plans – Plans that specify the details of how the overall goals are to be achieved.

=============================================Long-term – Plans with a time frame beyond 3 years.

Short-term – Plans covering 1 year or less.

What is Planning?

Defining organization’s goals, establishing overall strategy and developing plans.

Reasons:1. Provides Direction2. Reduces Uncertainty3. Minimizes waste and redundancy4. Establishes goals and objectives5. Is associated with positive financial results.