PLANNING, DECISION MAKING

AND CONTROL

DEFINITION OF PLANNING

• Prioritise what needs to be done first, and how it is going to be done.

• Being done formally or informally, the process should involve the information from internal or external sources.

• These processes of collecting, translating, understanding, and delivering information which could help in fixing the quality of current decision which is based on the future expectation.

• Planning means management in:oWhat needs to be done in future?oHow it is to be done?oWhen it is to be done?oWho is going to do it?

• Planning is meant for future; thus uncertainty is always there.

PLANNING TERMS•Mission•Objectives• Plans• Policy

Planning Terms• Mission: Description of the purpose of the

organization as a whole• Objectives: Statement of aims or goals to be

achieved• Plans: Statements of specific actions and

activities to achieve objectives (Plans are sometimes described as strategies)

• Policies: Limits to acceptable behavior expressed in terms of priorities, ethical and moral values, standards, social responsibilities and so on.

Objectives• The objectives of the organization are usually of

two levels of detail.• The highest level – broad general terms intended

to be relatively permanent.• The tactical or operational level – specific so that

it is possible to assess.

Objectives• The nature of overall or strategic objectives is

influenced by many factors including: the attitudes of the owners, political pressures which reflect different views of

society, the history of the organization, the type of business or service and so on.

Policies• Policy is a guide to managers causing them to

take actions in certain ways.• They express the organization’s official attitude to

various forms of behavior.• When the organization’s objectives have been

established, policies provide guidance on the way they will be achieved.

• Policies are formal expressions of organization’s culture and belief systems.

PLANNING LEVELS• Management at all levels should

have plans. • The paramount is strategic

planning. • Tactical and operational parts

should abide to strategic planning.

PLANNING LEVELS• Operation and transaction

(Current)What is the operation that should be operated with facilities available to cater to the output needs in a future operation?

PLANNING LEVELS• Operational Planning (1-12 months)

What are the best ‘products’, ‘production planning’ and ‘marketing’, which matches the objectives?

What are the materials, facilities and etc, needed to be operated?

What is the best method to organise the operation?

PLANNING LEVELS• Tactical Planning (1-5 Years) Which products to be added or

discarded? Which of the financial investment

to cater to strategic needs? What is the best ‘price pattern’? What are the latest facilities,

systems or new way of gaining the strategic planning?

PLANNING LEVELS• Strategic Planning (5 years

and above)Which business should involve organization? Financial and financing?Organization structure?sources distributions?

TYPES AND SOURCES OF PLANNING INFORMATION• Environmental information is

crucial for a long term planning. • At lower short term stage,

internal information is important, unlike for long term planning, external information is more crucial.

TYPES OF EXTERNAL INFORMATION

• Market and competition• Demographic trend• Industrial structure• Social factors• Political factors• Technological changes

TYPES OF INTERNAL INFORMATION

• Sale and marketing– performance, profit and etc. • Financial- cost, profit, investment and etc. • Operation and production- abilities, time, qualities

and etc. • Research and development. • Staff- skills, training and etc.

MODELS• Helps the management in planning and decision

making. • Management Model based on Computer

o Optimization Model (linear programming)

• Suitable in structural decision making and to be used at tactical and operational stage.

o Simulation Model

• Enable for different kind of situation to be explored.

MODELS o Simulation Model • Deterministic Model

oAssume certainty by using single point estimate

• Probabilistic Modelo Incorporate uncertainty by allowing

multi-point estimate• Both models are suitable to analyze the

risk, uncertainty and complex relationship and answer “what if…” question. • Useful to all stages.

MODELS• Formation of ModeloIn order to form a realistic and enough quality in forecasting model, the management and information expertise should work together.

DECISION MAKING• Decision making is part of management and

happens in all functions at all levels. • Process(H.A. Simon)

o Finding occasions for making decisionso Finding possible course of action (alternatives)o Choosing the course of actiono Evaluating past choices

DECISION MAKING• Phase 1: Intelligence (searching the environment

for conditions calling for decisions)• Phase 2: Design (Inventing, developing and

analyzing possible course of action. This involves processes to understand the problem, to generate solutions and the testing of solutions for feasibility)

• Phase 3: Choice (selecting an alternative or course of action from those available. A choice is made and implemented)

• Phase 4: Review (Assessing past choices)

DECISION MAKING• Decision making based on information:

o Information is the trigger to knowing there is a problemo Information is needed to define and structure the problemo Information is needed to explore and choose between alternative

solutionso Information is needed to review the effects of the implemented choice

DECISION MAKING• Programmed Decision

o Repeated, routine, knows the rules or decision procedure, often automatic, machines always involve, and can be delegated to a lower level in an organization.

o Inventory control, scheduling• Unprogrammed Decision

o Unroutine, unknown decision procedure, high level of uncertainty, cannot be delegated to the lower level, involves machines and manpower.

o Acquisition, merging in new products launch, staff appointment.

DECISION MAKING• Relationship point between the

level of management and type of decision.

• Programmed decision (Structured) at lower level and non-programmed decision (unstructured) at the upper level.

DECISION MAKING• Decision that could be categorised based on

knowledge is the result of various alternative. o Provision

• Only one result for each alternative and there will be information on the result which is complete and accurate.

o Risks

• A few of probability may be resulted from each of the alternatives, and the value and probability could be given to each result.

o Uncertainty

• The sum of the result, the value and probability is unknown.

DECISION MAKING AND MIS

• The role of MISoProvide information, examine

alternatives and provide support. oMIS self-decision making suitable

with the routine operational decision, where the procedure is known.

DECISION MAKING AND MIS

• Strategic:o Type of decision: unstructuredo Information support system: Executive Information Systems

• Tactical:o Type of decision: Semi structuredo Information support system : Expert System, DSS

DECISION MAKING AND MIS

• Operational• Type of Decision: Structured• Information support system :

TPS, Automatic Decision-Making

CONTROL

CONTROL• Is the process to make sure that the operation is

undergo as planned. • Management control can be defined as a

systematic effort by management to compare performance to predetermined standards, plans or objectives, in order to determine whether performance is in line with these standards and presumably in order to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives.

Circle of Control Element

• A standard specifying the expected performance • A measurement of actual performance• Comparison of standard and measurement • Feedback of deviations or variations to a control

unit (single loop)• Actions by the control unit to alter performance in

accordance with the plan• Feedback to a higher level control unit regarding

large variations between performance and plan and upon the results of the lower control units action (double loop)

Control in Organization

• Operation ControloRepeated and structured. oDetermined rules and procedures.

• Management Control SystemoThe core decision of top

management is attended to and implemented at all levels of the organization.

CONTROL FEATURES• Level of Operation

o Decision Maker• Supervisor, foreman, operation manager.

o Data Source• Internal– the results of the operation

o Information Complexity• Easy to be manipulated and applied.

o Frequency of Observation• Frequent

o Control width• Limited

o Type of decision procedure• Structured and involvement of qualitative data.

o Type of MIS• Mostly formal

CONTROL FEATURES• Strategic Level

o Decision Maker• Top manager/ Board of Directors

o Data Source• Mostly external

o Information Complexity• Complex to be manipulated or to be used.

o Frequency of Observation• Rarely

o Control width• Wide

o Type of decision procedure• Unstructured and uses qualitative and quantitative

information. o Type of MIS

• Mostly informal

OPERATION CONTROL SYSTEM

• Control system is a rational system. • Depends on set procedure• Fundamental Discipline used are economic and

physical science. • Narrow and brief scope. • Mostly uses mathematical model. • Repeated control• Control is balanced and predictable.

OPERATION CONTROL SYSTEM

• Data used for control is based on exact and current time.

• Accurate and correct data. • Measurement unit could be in cash or non-cash• Data is gathered and reported every day, hour

and etc. • Data detail• Controlled cost• Other measurement is mechanical and technical. • Report is ‘score card’ base.

OPERATION CONTROL SYSTEM

• MIS at this stage is needed as:oTransaction processingoControl report productionoManages inquiries.

Management Control System

• Control which tries to influence or behavior control to make sure the policy could be implemented and strategic objectives achieved.

• Complicated and tries to control too mane factors.

MANAGEMENT CONTROL SCOPE

• Management control attention to the current achievement and future objectives which could be divided into different function field, namely:o Financial management controlo Production management controlo Research and development management controlo Management marketing controlo Staff management control

MANAGEMENT CONTROL SCOPE

• Example:o Staff management control

• New staff intake, interview• Internal and external training• Welfare activities• Study Scheme• Industrial relationship activity• Health and security• Operation control and staff rating