Planning and Decision Making

Chapter 3 EXAM ReviewMr. SherpinskyBusiness Management ClassCouncil Rock School District

The Planning Process• Planning: the process of deciding

which objectives to pursue during a future time period and how to achieve those objectives.–Primary management function

Why Plan?• Planning enables an

organization to actively affect rather than passively accept the future.

• Planning provides a means for actively involving personnel from all areas of the organization in the management of the organization

Formal Planning• Defined: The

systematic studying of an issue and the preparation of a written document to deal with the problem.– Formal Plan: Defined:

a written, documented plan developed through an identifiable process• Levels of sophistication• Depends on the needs and

organization

Formal Planning• Functional Plans

– Most frequently encountered types• Sales and marketing• Productions• Financial• Personnel

Formal Planning• Planning Horizons:

– Short-range plans cover up-to a one-year period of time

– Long-range plans cover at least a three-to-five year period of time.

– Intermediate plans cover the time span between short-range and long-range• Usually between short and

long range timeframes

Operational vs. Strategic Plans

• Operational or Tactical– Short-range

planning– Focuses on

forming ideas for dealing with specific functions in the company• Ex: production

schedules and day-to-day operations

• Strategic– Long-range planning– Done by highest management

levels• President, vice-president, chief operating

officer– Affects many parts of the organization

Contingency Plans• Regardless of

thorough you plan, something always goes wrong….– Remember planning

is a one-sided process

• Contingency Plans: back up plans that address the what ifs of the management job.

• Always short-term

Objectives• Objectives: Defined: are

statements outlining what a manager is trying to achieve.

• Objectives give an organization and its members directions and purpose.

• Should be clear, concise, and measurable

Objectives• Long-range

– Generally go beyond the organization’s current fiscal year

– Must support and not conflict with the organization mission

• Short-range– Derived from in-

depth evaluation of long-range objectives

– List of priorities to achieve longer-range objectives

The Planning Process• MBOs (Management by Objectives)

– Philosophy that converts company objectives to personal and management ones

• Policies– Broad general guides to action that direct or

constraint and provide predictability• Procedures

– Series of steps to meet objectives– Usually done chronologically

• Rules– Specific actions to take (or not to take)

Making Decisions• Decision-making

– Not all decisions involve problems

• Group decision-making – Group decisions are

generally better then making quick independent decisions

Making Decisions• Decision Making Vs. Problem Solving– Decision making:

Choosing from various alternatives

– Problem solving: The process of determining the appropriate recompense or actions

Approaches to Problem Solving

• Satisficing–Principle of bounded

rationalityAssumes that people have the time and

cognitive ability to process only a limited amount of information

Assumes knowledge of alternatives and criteria is limited

Assumes people act on the basis of a simplified concept of the world

Making Decisions• Decision maker’s environment• Environmental factors

– Manager’s position– Structure of organization– Tradition of organization– Informal and formal group structures

(i.e., unions)– Superiors and subordinates

Making Decisions• Intuitive approach

– Using emotions to make decisions

– Fastening on unsubstantiated facts and sticking with them

Making Decisions• Maximax and Maximin

approach– Maximax: Look at best

alternative whose best possible outcome is best for all alternatives

– Maximin: Looking at the best alternative and comparing to the worst possible outcomes

Making Decisions• Risk averting approach

– Choosing an alternative with least variation among outcomes

• Timing– Need for a decision must be recognized– Must act at some point

• Participation– Two heads are better than one– Group performance is usually better

than individual performance

Barriers to Decision Making• Complacency

– Ignoring data or not making a decision at all

• Defensive avoidance– Denies the importance of the

danger or opportunity• Panic

– Frantic attempts to solve a problem• Deciding to decide

– Accepting responsibility for the decision

Management Information Systems

• Integrated approach for providing interpreted and relevant data to help make decisions– Data processing

• Capture, processing and storage of data• MIS uses that data to produce information to make

good decisions– Transaction processing system

• Replaced manual record-keeping procedures• Payroll, billing inventory records• Routine• Highly structured decisions

Questions?• Exam Next Class• 100 Points

– Multiple Choice– T/F– Drop box– Essay