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CH-IV Planning and Decision Making
CH-IV Planning and Decision Making
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Chapter-IV: Planning
and Decision Making
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Feature of planning
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The Planning Function
Planning
The process of thinking about and organizing the
activities required to achieve a desired goal
Is the fundamental management function,
which involves deciding beforehand, what
is to be done, when is it to be done, how it is
to be done and who is going to do it.
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Why do Managers plan?
At least four reasons can given:
provides direction to managers and non-managers alike
reduce uncertainty by forcing managers to look ahead,
anticipate change, and develop appropriate strategies
minimize waste and redundancy.
establish the goals or standards used in controlling
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Planning Types
• Managers use:
– strategic,
– tactical, and
– operational goals
• to direct employees and resources toward achieving
specific outcomes that enable the organization to
perform efficiently and effectively
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Planning Process
Step1 Establishing objectives
Step 2. Environmental Analysis and forecasting
Step 3. Determining alternative course of Action
Step 4. Evaluating the alternatives
Step 5. Select the best alternatives
Step 6. Implementing the plan
Step 7. Controlling and evaluating the results
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Goals/objectives are desired
outcomes
What is the difference between
goals & objectives?
Plans and planning?
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Foundation of Planning
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Types of plan based on frequency of use
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Types of plan based on time
Long term plans defined as those with the time frame
beyond five years
Short term plans cover one year or less
• Any time period in between would be considered as
intermediate plan
• Although this time frame is common organizations
can use any planning time frame as required
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Types of plan based on specificity
Specific plans… are clearly defined and leave no room for
interpretation
• It states objectives in a way that eliminates ambiguity and
problem with misunderstanding
Directional plans… are flexible and set out general guidelines
• Preferable when there is high uncertainty
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Approaches to Goal setting
Traditional
In traditional goal setting, top managers flow down through the
organization and become sub goals for each succeeding level
Clarity is lost as the goals make their way down from the top of the organization to
the lower levels
Turning broad strategic goals into department, teams, individual is not clear
Managers at each level define the goals and apply their own interpretations
and bias as they make them more specific.
EX. Achieving sufficient profits
Increasing market leadership
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Approaches to Goal setting
Management by objectives (MBO)
is a method whereby managers and employees define mutually agreed
goals for every department, project, and person and use them to
evaluate employee performance
MBO programs have four elements/components
1. Setting specific goal
2. Setting realistic and acceptable goals
3. Joint participation in decision making
4. Feedback
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Planning Tools and Techniques…
Techniques for assessing the Environment
Three techniques used
Environmental Scanning
Forecasting &
Benchmarking
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Planning Tools and Techniques…
Environmental Scanning-
Companies that use environmental scanning have
higher performance
Competitors intelligence experts suggest that 80% of
what managers need to know about competitors can
be found out from their own employees, suppliers,
and customers
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Planning Tools and Techniques…
Forecasting-the second technique to assess environment
Techniques
• Quantitative forecasting-applies a set of mathematical
rules when managers have sufficient data
• Qualitative forecasting-use judgment and opinions of
knowledge
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Planning Tools and Techniques…
Techniques for assessing the Environment
Benchmarking
The search for the best practices among competitors that lead to superior
performance
Steps in Benchmarking
Form a benchmarking team
Gather internal &external data
Analyze data to see performance gap
Prepare & implement action plan
Best Practice and best fit
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Decisions Making
Managers will make decisions during the exercise of all managerial
functions
Most decision making is routine
Making decisions Rationally:
Assumptions 1. Objective and logical
2. Decisions are made in the best interest of the organization
The role of Intuition
Decisions are given on the basis of
experience, feelings, and
accumulated
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judgments 22
The Intuitive Decision Making-Model
How common is intuition in DM?
Survey found that almost half of the executives surveyed used
intuitions more than formal analysis to run their companies
Valu Experience
e/E Based
Bas thics
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Co ecisio
Intuition a s e dd
Sub b
con
s
men cious ti ated
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c e ss i Affect sion
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Types of Decision
Structured and programmed decisions
Problems are straight forward
Problems are familiar
Decision maker goal is clear
Information about the problem is easily defined and complete
Ex. Student wanting to drop class
Customer return of purchase
Sexual harassment
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Types of Decision…
Why programmed decision can be straightforward,
familiar and easily defined?
Because program decisions are repetitive decision
that can be handled by a routine approach
Three types of program decisions:
1. Procedure 2. Rule 3. Policy
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Types of Decision…
Unstructured and Non-programmed decisions
New, unusual and for which information is
ambiguous or incomplete
• Brainstorming
Techniques Delphi
Techniques
Heuristic Non
techniques programmed
decision
making Nomi
nal
Group
i rc le techn
iques
lit y c
Qua
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Types of Decision…
1. Brainstorming Technique
• The brainstorming technique was developed by Alex Faickney
Osborn, who is called "The Father of Brainstorming."
The purpose of this technique is to improve problem solving by finding
new or creative solutions.
In a brainstorming session, five to ten persons sit together. The leader
of the group tells them the problem. All possible ideas are invited to
solve the problem. All the ideas are discussed and analysed.
Finally, the best idea is selected.
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Types of Decision…
2.Delphi technique
The group members interact with each other through modern tools like
video conferencing.
Questionnaires (list of questions about the problem) are also used to collect
information from the group members. Delphi technique gives very good
solutions for the problems.
This is because the group members are not influenced by one another, since
they do not meet fact to face.
The problems are solved quickly because this technique use all latest
technology for the group members to interact with one another.
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Types of Decision…
3. Nominal Group Technique
In Nominal Group Technique, the group members think
independently. Each person comes up with his own ideas.
This technique does not allow interaction among the
group members at the early stage.
Interaction takes place only after the ideas are presented
by every single member of the group.
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Types of Decision…
4. Quality Circles
Quality Circles was started in Japan in the early
1960s.
Quality Circle is a small group of employees from the
same department who volunteer to meet regularly
in order to identify, analyse and to solve problems
about their work.
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Types of Decision…
5. Heuristic Technique
• In Heuristic Technique, decisions are made based
on experience, rule of thumb, common sense, etc.
For e.g. Companies sell their products on an
installment basis because they assume that
people can pay product's price regularly in
installments rather than in one lump sum amount.
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Types of Decision…
Characteristic Programmed decision Non-programmed decision
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Decision Making Levels
Decision making can also be classified into three
• categories based on the level at which they occur.
Strategic decisions set the course of organization.
Tactical decisions are decisions about how things will
get done.
Finally, operational decisions are decisions that
employees make each day to run the organization.
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Decision making conditions
Managers face three different conditions
1. Certainty 2. Risk 3. Uncertainty
Certainty- The ideal situation to make decisions
Risk- conditions in which the decision maker is able to
estimate the likelihood of certain outcomes
Uncertainty- when decisions are not certain about the
outcomes and can’t even make reasonable probability
estimates.
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Factors Affecting Decision Making
DM approach
Rationality Decision making
Types of problems Bounded rationality
Structured and Errors/bias
Intuition
unstructured
Decision Decision
making Choosing best
DM conditions Process alternative
Certainty -Implementing
Risk, uncertainty -evaluating
DM style
Linear and Non-
linear thinking
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