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Principles of Management

Session 5: Planning and Decision-making

Chapter 6 & 7 – : Planning and Decision-making

Learning outcomes

On completion of this week’s study, students will be able to:

explain the purpose of planning, differentiating between strategic,tactical and operational plans

explain the steps in the strategic planning process and discuss how the

factors in the organisation’s external environment may affect this process

outline the decision making process and describe different approaches to decisionmaking

differentiate between the rational and behavioural perspectives of decision making

compare group and individual decision making processes

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Planning

Study questions:

How do managers plan?

What types of plans do managers use?

What would be useful planning tools, techniques and processes?

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How and why managers plan

Planning

The process of setting objectives and determining how to accomplish them.

Planning involves deciding exactly what you want to accomplish and the best way to go about it.

Objectives

Specific results that someone wishes to achieve.

May relate to the individual, a group or the whole organisation.

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Benefits of scenario planning

Scenario planning improves: Focus

knows what it does best, knows the needs of its customers and knows how to serve them well.

Flexibility willing and able to change and adapt to shifting circumstances, and operates

with an orientation towards the future rather than the past or present.

Coordination creates a hierarchy of aims that allows linked business planning and

management

Time management avoids employees undertaking non-essential tasks

Control

defining objectives and goals by specific actions

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Sample TQM hierarchy objectives

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Management tips

Tips on how to manage your time:

• Do say ‘no’ to requests that divert you from work you should be doing

• Don’t get bogged down in details

• Do use a system for screening calls and email

• Don’t let visitors use too much of your time

• Do prioritise tasks by importance and urgency

• Don’t become ‘calendar bound’ by losing control of your schedule

• Do work tasks in priority order.

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Types of plans used by managers

Short-range and long-range plans

A rule of thumb is:

• short-range plans cover one year or less

• intermediate-range plans cover one to two years

• long-range plans look three or more years into the future.

Lower management levels focuses on intermediate and short-range plans that serve the long-term objectives.

Top management is most likely to be involved in setting long-range plans and directions for the organisation as a whole.

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Types of plans used by managers

Operational plans

What needs to be done in the short term to progress strategic objectives.

Typical operational plans in an organisation include:

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Policies and procedures

Policy

A standing plan that communicates broad guidelines for decisions and action.

Procedures

Precisely describe actions that are to be taken in specific situations. They define the recommended sequence of events needed to accomplish a task or a set of tasks.

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Budgets and project schedules

Budgets

Plans that commit resources to projects or activities.

A zero-based budget

Allocates resources to a project or activity as if it were brand new.

Project schedules

Single use plans for accomplishing a specific major project.

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Planning tools, techniques and processes: Contingency planning

Contingency planning

Identifying alternative courses of action that can be implemented if and when an original plan proves inadequate because of changing circumstances.

‘Trigger points’ that indicate that an existing plan is no longer desirable. These must be preselected and then monitored throughout the planning process.

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Planning tools, techniques and processes: Benchmarking

Benchmarking

A technique that makes use of external comparisons to better evaluate an organisation’s current performance and identify possible actions for the future.

The purpose of bench marking is to find out what other people and organisations are doing very well and then to plan how to incorporate these ideas into your organisations operations.

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Management by objectives

Management by objectives (MBO)

Structured process of communication in which a manager/team leader works with staff to jointly set performance objectives and review results.

MBO creates agreement regarding:

Performance objectives for a given time period

Plans through which they will be accomplished

Standards of measurement

Procedures for reviewing performance results.

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Performance Objectives in MBO

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Management by objectives

Three types of objectives may be specified in an MBO contract:

1. Improvement objectives document intentions for improving performance in a specific way.

2. Personal development objectives pertain to personal growth activities; often those resulting in expanded job knowledge or skills.

3. Some MBO contracts also include maintenance objectives that formally express intentions to maintain performance at an existing level.

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Participation and planning

Participatory planning includes the people who will be affected by plans and/or whose help is needed to implement them.

To create and implement the best plans, proper attention must be given to genuinely involving others during all planning steps.

Even though this process may mean that planning takes more time, it can improve results by improving implementation.

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Participation and planning

Critical analysis

Review the critical analysis questions on page 183 of the textbook, write down your responses and be prepared to discuss them in the online lecture.

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Planning

Study questions:

How do managers plan?

What types of plans do managers use?

What are some useful planning tools, techniques and processes?

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Information and Decision Making

Information and decision making

Study questions:

How is information technology changing the workplace?

What are the current directions in information systems?

How is information used for decision making?

How do managers make decisions?

Why are knowledge management and organisational learning important?

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Information technology and the workplace

Information is data made useful for decision making. The way information flows through and is used by organisations is the key to organisational performance.

Intellectual capital: The collective brain power or shared knowledge of a workforce.

Computer competency:The ability to understand and use computers to advantage.

Information competency: The ability to use computers and information technology to locate, retrieve, evaluate, organise and analyse information for decision making.

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Planning

Information technology (IT) The combination of computer hardware, software, networks and databases

supporting information use.

Instant messaging Instantaneous communication between people online at the same time.

Peer-to-peer file sharing Connects PCs directly to one another over the internet.

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Globalisation reading

Turn to page 63 of the textbook and read the globalisation case study ‘A network of opportunities’. It should only take a few minutes to read and study.

Reflect on the case study and note down any other similar types of conferences you know of in information technology or computing.

Outside of computing, do you know of any similar networking opportunities in other fields; real estate, banking, finance, etc.

Write down your impressions of these opportunities and be prepared to discuss them during the online lecture.

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Information Technology Barriers

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How information technology is changing business

Electronic commerce, or ‘e-commerce’ is the process of buying and selling goods and services electronically through use of the internet and related information technologies.

In business-to-consumer e-commerce, or B2C, businesses like Amazon.com and Dell.com sell directly to customers over the internet.

In business-to-business e-commerce, or B2B, businesses use the internet to collaborate and make transactions with one another.

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Information technology and the workplace

The stages of development in e-commerce are:

1. Secure an online identity (web address and home page)

2. Establish a web presence (online advertising and product information only)

3. Enable e-commerce (website allows products orders)

4. Provide e-commerce and customer relationship management (online customer relationships)

5. Use a service application model.

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Review the Critical analysis questions on page 153 of the textbook; write

down your responses and be prepared to discuss them during the online

lecture.

Developments in information systems

Managers note pad 3.1 on page 67 of the text book.

Based on the assumptions for avoiding common information system mistakes; write down three instances where you have been a ‘victim’ of information system mistakes:

For example, you lost a computer file or it was corrupted or there was a computer program that did not live up to its ‘hype’.

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Management information systems

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Types of managerial decisions

Programmed decisions Apply solutions from past experience to a routine problem.

Non-programmed decisions Apply specific solutions crafted for a unique problem.

A crisis is an unexpected problem that can lead to disaster if not resolved quickly and appropriately.

Managers in progressive organisations expect that crises will occur and plan ahead on how to deal with them.

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Decision conditions

People in organisations make decisions under each of three decision conditions.

Certain environments offer complete information on possible action alternatives and their consequences.

A risk environment lacks complete information, but offers ‘probabilities’ of the likely outcomes for possible action alternatives.

An uncertain environment lacks so much information that it is difficult to assign probabilities to the likely outcomes of alternatives.

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How managers approach decisions

Managers also differ in their approach to decision making depending on whether they use ‘systematic’ or ‘intuitive’ thinking.

Systematic thinking approaches problems in a rational and analytical fashion.

Intuitive thinking approaches problems in a flexible and spontaneous fashion.

It is important not to be diverted from long-term goals when making decisions. Strategic opportunism refers to the ability to focus on long-term objectives while being flexible in dealing with short-term problems.

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Steps in decision making

Step 1. Find and define the problem.

This is a stage of information gathering, information processing and deliberation.

Three common mistakes are:

1. Defining the problem too broadly or narrowly

2. Focusing on the symptoms instead of causes

3. Choosing the wrong problem to deal with.

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Steps in decision making

Step 2. Generate and evaluate possible solutions. More information is gathered, data are analysed, and the pros and cons of possible alternative courses of action are identified.

The involvement of other people is vital here in order to maximise information and build commitment.

Cost–benefit analysis involves comparing the costs and benefits of each potential course of action.

Cost of problem - Cost of solution = Positive cost benefit

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Steps in decision making

Step 3. Choose a solution.

The classical decision model describes decision making with complete information.

An optimising decision chooses the alternative giving the absolute best solution to a problem.

The behavioural decision model describes decision making with limited information and bounded rationality.

Satisficing decisions choose the first satisfactory alternative that comes to your attention.

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Steps in decision making

Step 4. Implement the solution.

This is the stage at which directions are finally set and problem-solving actions are initiated. At this stage, managers need the ability and willingness to implement their decisions.

Step 5. Evaluate results.

The decision-making process is not complete until results are evaluated.

If the desired results are not achieved, the process must be renewed to allow for corrective actions.

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Individual and group decision making

Advantages of group decisions:

Greater information, knowledge and expertise is available

The number of action alternatives examined is expanded, tunnel vision is avoided

Increased understanding and acceptance of outcomes, increasing member commitment.

Disadvantages of group decisions:

Social pressure to confirm

Lack of timeliness.

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Individual and group decision making

GroupthinkWhen the group pressure for consensus and demand for unanimity overwhelm the rational evaluation of options.

Characteristics of ‘groupthink’ include:

Illusions of invulnerability

Negative stereotyping of others

Pressure on deviant members

Illusions of group morality

Self-censorship.

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Organisational learning

A learning organisation continuously changes and improves using the lessons of experience.

The core disciplines of learning organisations are:

1. Mental models. Everyone sets aside old ways of thinking.

2. Personal mastery. Everyone becomes self-aware and open to others.

3. Systems thinking. Everyone learns how the organisation works.

4. Shared vision. Everyone understands and agrees to a plan of action.

5. Team learning. Everyone works together to accomplish the plan.

All of this depends on a willingness to seek out learning opportunities from these sources and to make information sharing an expected and valued work behaviour.

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Information and decision making

Summary:

How is information technology changing the workplace?

What are the current directions in information systems?

How is information used for decision making?

How do managers make decisions?

Why are knowledge management and organisational learning important?

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Module endThis is the end of this online module.