1.

7 Organizational Planning Tools (HL

ONLY)
Tools businesses may use to aid their
decision making and planning
 Tools available to businesses
Scientific decision making tools examined here include:
 Fishbone diagram-cause and effect
 Decision trees-making choices
 Gantt charts-planning
 Force field analysis-assessing effect of

change
Fishbone diagram
 Kaoru Ishikawa’s fishbone diagram
Decision trees
 When choices need to be made
Gantt charts
 When a business needs to plan
 Force field analysis
 When change is inevitable
Ishikawa’s Fishbone diagram
 It is also known as the cause and effect diagram.
 It is a graphical representation of the most likely effects of a significant or
major decision.
 It identifies the root cause of a problem or issue known as the four M’s
(Manpower, Management, Machines, and Materials).
Purpose of the diagram…
 Opening a discussion in order to reach the root cause
of an issue or problem to make a decision regarding
the corrective action for improvement.
The categories typically include:
 People: Anyone involved with the process
 Methods: How the process is performed and the specific

requirements for doing it, such as policies, procedures,

rules, regulations and laws
 Machines: Any equipment, computers, tools, etc. required

to accomplish the job

 Materials: Raw materials, parts, pens, paper, etc. used to

produce the final product

 Measurements: Data generated from the process that are

used to evaluate its quality

 Environment: The conditions, such as location, time,

temperature, and culture in which the process operates

 The 6 Ms (used in manufacturing industry)
 Machine (technology)
 Method (process)
 Material (Includes Raw Material, Consumables and

Information.)
 Man Power (physical work)/Mind Power (brain work):
 Measurement (Inspection)
 Milieu/Mother Nature (Environment)
 The original 6Ms used by the Toyota Production

System have been expanded by some to include the

following and are referred to as the 8Ms
 There are many steps to using Cause and Effect
Analysis. Refer text book
 Identify the problem.
 Work out the major factors involved.
 Identify possible causes.
 Analyze your diagram.
Example ….
Useful???
 The chief advantage is the simplicity involved in producing the
diagram.
 It is also systematic and compels managers to inspect all relevant
components in a business (machines, manpower, material, and
management)
 B U T !!!
 It can be overly simplistic in explaining real world problems and
causes
 Must be used in conjunction with other decision making
frameworks.
 It may result in conflict as the departments engage in a
discussion over causes of a problem through placing blame
Decision trees
 A quantitative mathematical diagrammatic decision
making tool.
What is needed to construct a decision tree?
 Choices for consideration
 Costs of all choices
 Expected return of all choices
 Probability of each outcome
Rules for construction…
 Decision nodes are square
 Chance or probability nodes are circular
 Expected outcome is shown at the end of each branch
 Probability is shown under each branch-however

many branches there are and probabilities, they must

add up to 1.
 When making the final decisions, rejected choices

must be cut off or hatched with two parallel lines

Quantitative tool
Advantages of Decision Trees:

 The visual representation gives users a clear path to

follow and aid insight into a problem.
 All the options are in one place so decisions can be

made more quickly.

 They will consider the possible negatives to a decision

as well.
 With the costs represented on the tree, decisions can be

more easily defended and justified.

Rules Used to Construct and Interpret Decision Trees:
 Constructed left to right
 Decision nodes, aka decision points are squares. These are used
when decisions have to be made.
 Chance nodes are shown as circles. They are used when there
are more than one possible outcome of a decision. This includes
criteria such as ‘improvements or deterioration’ or ‘successes
and failures’.
 For every chance node there is a route (outcome) for the
probability of each. It can be counted as a fraction of the total of
amount of possibilities. This must add up to one.
 Branches will have the actual values for the outcomes. This has
to be pre-determined.
 After the decision tree has been made and assessed, two parallel
lines are drawn on the branches that are rejected.
Disadvantages of Decision Trees:
 The probabilities for the decision trees are all estimates,
not fixed values. They are subject to bias
 They are based solely on the quantitative (data and
statistics), and do not take into account the qualitative side
of issues, raising concerns over issues that cannot be put
into numbers.
 As with any planning, time may void the effectiveness of
the chosen approach, as the business world is never static.
 It does not reduce the risk of making a decision, just
allows one to see where they lie.
Example…
A farmer owns a piece of land, which he isn’t using at
this time. He can either:
 sell it at the current market price of $100,000 or
 wait a year and face three possibilities:
 Property price improves to $210,000-probability (0.5)
 Property price remains unchanged-probability (0.2)
 Property price falls to $87,000-probability (0.3)

Diagram??
 Expected
outcome
Sell property this year $100,000

Property price rises $210,000

A
Wait 0.5
one Property price
year
unchanged
B 0.2 $100,000

Property price falls

$87,000
0.3
Calculations….
 Expected value if he sells now is $100,000
 Expected value if he waits one year is

(0.5 x $210,000 + 0.2 x $100,000 + 0.3 x $87,000=

$105,000 + $ 20,000 + $ 26,100 =
$151,100

 At this point, any costs associated with this option (selling after one year)
are deducted. In this case, there are none. Hence the expected value of
choice B is higher than choice A, and as such the farmer would choose B.
 Choice A is cut off or hatched with a double line.
 Expected
outcome
Sell property this year $100,000
0.5

$210,000
Property price rises
A 0.5
Property price unchanged
B 0.2 $100,000

Property price falls

Decision node $87,000
Probability
0.3
node

Rejected
option
Advantages of decision trees
 Issues or problems are set out in a logical clear
manner for consideration
 All options can be considered in one image facilitating

comparisons
 They compel managers to quantify options (returns

and costs), and this adds a scientific element to

decision making instead of considering only
quantitative factors.
Disadvantages of decision trees
 Figures used in a decision tree are estimates and will have an
element of unreliability due to forecasting errors.
 Qualitative issues such as the effect of a decision on staff
morale are ignored.
 Time lags between producing the decision tree and actually
implementing the decision may have caused changes that
render the model useless.
 The technique is expected to reduce risk involved in a
decision and that is not necessarily true.
Gantt charts
 Planning tool in a given situation where a
visual representation of all tasks in a given
project are shown/plotted against time.
 They are especially helpful through complex

project that encompass many tasks with

dependencies. I.E. a task that can only begin
upon the completion of another.
 The American mechanical engineer Henry

Gantt (1861-1919) created the technique in 1910

and hence the name.
 Gantt charts
 It is a project management tool as well in order to
ensure a given project is completed in the shortest
possible time.
 Gantt charts
Features of a Gantt chart:
 It uses bars to represent activities against a

time scale.
 The time is depicted on the horizontal axis.
 The tasks are represented by horizontal bars in

sequence.
 If an activity cannot begin until the completion

of a preceding one, it is dependent. These are

known as predecessor-successor relationships.
 Tasks that must begin and end at a particular

time are known as critical activities. i.e. no

slack time.
Gantt charts
Conducting a new promotional campaign
Task Task description Preceded by Duration (days)

A Deciding on
theme
- 2
B Designing an
advertisement
A 5
for media
C Designing a
poster
A 4
D Preview for the
business
B,C 1
E Re-design
requested items
D 2
F Preview for the
business
E 1
G Launch the
campaign
F 5
Task 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

G
 Purpose of Gantt charts
 The chief purpose of Gantt charts is the identification
of the shortest possible time for a project to be
completed.
 In order to do so, tasks/activities must be arranged

logically considering dependencies.

 Remember, some activities can take place

simultaneously, while others cannot begin until

preceding activities have been.

...OK…let’s see
Task Order Estimated duration
(weeks)
A - 3

B - 3

C - 3

D A 2

E B 4

F C 1

G D, E and F 6
Tas 1 2 3 4 5 6 7 8 9 10 11 12 13
k

G
 Advantages of Gantt charts
 Assists managers in planning complex projects
 All employees involved in the projects can see all

activities, their durations and dependencies

 May increase efficiency
 Disadvantages of Gantt charts
 All durations of activities are estimated and
therefore, somewhat unreliable
 Complex projects require skilled managers to ensure
efficiency not simply producing a Gantt chart and as
such as of limited value.
Factors leading to change in business
There are two types of factors causing change in
business:
 Internal factors- from within the business
 External factors-from outside the business
Internal factors include:
 Owners-the business may be sold to new owners who
may implement a number of changes (minor or
major).
 Employees-they may become de-motivated or decide

to leave for family or other reasons. They may demand

different working conditions, payment system, or
other demands that require change.
 Management-they may set different strategic

objectives and decide to attain them using a different

approach.
External factors include:
 Customers- changes in taste or level of demand require
businesses to quickly adapt to maintain their market share.
 Competitors-new businesses may enter the industry or

existing businesses innovate producing more attractive

products. This requires businesses to counteract with
versions of their own to maintain a loyal customer base.
 Technology- major changes in technology may compel

businesses to purchase new machines or software often

necessitating re-training their employees.
 Legislation-new laws may affect businesses to the
point that they change their whole production
process or even location.
 Crises-depending on the gravity of the crisis, the

change may be so significant that the business either

ceases to exist or has to re-create itself all over again.
 Economic climate-changes in inflation,

unemployment, economic growth, imports/exports

could either provide opportunities or threats for
businesses. Both require some form of change.
 Demographic factors-changes in the age and gender

structure of a population often dictate a change to

respond to exploit an opportunity or avert a threat.
Barriers to effective change (restraining
forces)
 Employee resistance
 Lack of finance
 Inability to make decisions quickly
 Lack of employee skills

These factors may be overcome but they tend to be time

consuming often rendering the business inflexible and
unable to change fast enough to maintain success.
Resistance to change
This barrier is likely to be the most difficult to overcome.
Professor John Paul Kotter (1979) cited four reasons
why employees tend to resist change:
 Self interest
 Misunderstandings
 Different assessment of the situation
 Low tolerance of change
 Force field analysis-Kurt Lewin
 The idea that every decision has driving forces
supporting it and restraining forces opposing it and
whichever force is greater determines the outcome.
Planning change
In order to plan for a particular change, businesses must
be aware of two major forces:
 Driving forces-forces with the change
 Restraining forces-forces against the change

Driving forces

Proposed change

Restraining forces
Examples of driving forces
To understand driving forces, an example of a business
proposing to relocate from Europe to China will be
considered.

 Lower labor cost

 Avoiding trade protectionism
 Being closer to the customer
 Improving logistics
 Etc.
Restraining forces
However,
 Redundancies in Europe
 Ethical issues
 Trade union problems
 Business reputation in Europe
 Cost of moving
 Etc.

STOP
Force field analysis
 As both forces exist, managers find it
necessary to carry out a force field
analysis.
 By doing so, they can fortify the driving

forces, and reduce the impact of the

restraining forces against it.
 If they fail to do so, change may become

impossible as the forces against it rise

and the support for it wanes away.
Equilibrium-current situation
 Driving forces = Restraining forces

Equilibrium-
current situation
 Lewin’s force field analysis
 Kurt Lewin developed the concept of force field
analysis, arguing that successful businesses are
adaptable businesses. He suggested four steps to
implement change effectively:
 1. listing all driving and restraining forces
 2. Allocating a weight to each numbers

representing weak to strong ranging from 1 to 5

 3. Illustrating the forces in a diagram
 4. Writing the relative weakness or strength next

to each.
 Driving Restraining

 (2) (4)

automation
 (1) (5)

 (5)

The sum of driving forces strength is (8), while the

sum of the restraining forces is (9)
Force field analysis
Benefits & limitations
 Compels managers to examine the change thoroughly:
Why, What, Who, and how.
 Improves the chances of success
 May reveal the change would be harmful

HOWEVER!!
 Weights are subjective and may be faulty
 Difficult to identify all forces with or against
 Imperfect information