Chapter 5

Report
Chapter 5
Planning and Decision Making
© 2014 Cengage Learning
MGMT6
5-1 discuss the benefits and pitfalls of planning
5-2 describe how to make a plan that works
5-3 discuss how companies can use plans at all management
levels, from top to bottom
5-4 explain the steps and limits to rational decision making
5-5 explain how group decisions and group decision-making
techniques can improve decision making
© 2014 Cengage Learning
Benefits of Planning
• Intensified effort
• Persistence
• Direction
• Creation of task strategies
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5-1
Pitfalls of Planning
• Impedes change and prevents or slows
adaptation
• Creates a false sense of certainty
• Detachment of planners
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5-1
© 2014 Cengage Learning
5-2
Setting Goals
S.M.A.R.T. Goals
•
•
•
•
•
5-2
Specific
Measurable
Attainable
Realistic
Timely
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Developing Commitment to Goals
• Goal commitment
– the determination to achieve a goal
• Set goals collectively
• Make the goal public
• Obtain top management’s support
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5-2
Developing Effective Action Plans
An action plan lists…
•
•
•
•
Specific steps (how)
People (who)
Resources (what)
Time period (when)
…for accomplishing a goal
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5-2
Tracking Progress
• Proximal goals and distal goals
• Performance feedback
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5-2
© 2014 Cengage Learning
5-2
Maintaining Flexibility
• Options-based planning
– keep options open by making, small
simultaneous investments in many
alternative plans.
• Slack resources
– a cushion of resources, like extra time or
money, that can be used to address and
adapt to unanticipated changes.
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5-2
© 2014 Cengage Learning
5-3
Starting at the Top
• Strategic plans
– make clear how the company will serve
customers and position itself against
competitors in the next 2 to 5 years
• Purpose statement
– a statement of a company’s purpose or reason
for existing
• Strategic objective
– a more specific goal that unifies company-wide
efforts, stretches and challenges the
organization, and possess a finish line and a
time frame.
© 2014 Cengage Learning
5-3
Bending in the Middle
• Tactical plans
– specify how a company will use resources,
budgets, and people to accomplish specific goals
related to its strategic objective
– time frame: 6 months to 2 years
• Management by Objectives (MBO)
–
–
–
–
discuss possible goals
collectively set goals
jointly develop tactical plans
meet regularly to review progress
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5-3
Finishing at the Bottom
Operational plans
• Single-use plans
• Standing plans
– policies
– procedures
– rules and regulations
• Budgets
5-3
© 2014 Cengage Learning
Steps to Rational Decision Making
1.
2.
3.
4.
5.
6.
Define the problem
Identify decision criteria
Weight the criteria
Generate alternative courses of action
Evaluate each alternative
Compute the optimal decision
© 2014 Cengage Learning
5-4
Define the Problem
Existing state
Desired state
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5-4
Identify Decision Criteria
The standards used to guide judgments
and decisions.
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5-4
Weight the Criteria
• Absolute comparisons
• Relative comparisons
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5-4
© 2014 Cengage Learning
5-4
© 2014 Cengage Learning
5-4
Generate Alternative
Courses of Action
After identifying and weighting the
criteria that will guide the decisionmaking process, the next step is to
identify possible courses of action
that could solve the problem.
5-4
© 2014 Cengage Learning
Evaluate Each Alternative
• The next step is to systematically
evaluate each alternative against each
criterion.
• The key is to use information to
systematically evaluate each alternative
against each criterion.
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5-4
Criteria Ratings Used to Determine the
Best Location for a New Office
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5-4
Compute the Optimal Decision
(rating for criterion A) x (weight for criterion A)
+
(rating for criterion B) x (weight for criterion B)
+
(rating for criterion C) x (weight for criterion C)
etc.
© 2014 Cengage Learning
5-4
Limits to Rational Decision Making
• In theory, fully rational decision makers
maximize decision by choosing the
optimal solution.
• In practice, limited resources make it
nearly impossible to maximize decisions.
© 2014 Cengage Learning
5-4
Advantages of Group
Decision Making
Groups do a better job than individuals at
• Defining the problem
• Generating alternative solutions
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5-5
Pitfalls of Group
Decision Making
• Groupthink
• Takes considerable time
• Strong willed members
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5-5
Structured Conflict
• C-type (cognitive) conflict
– focuses on problem- and issue-related
differences of opinion
– willingness to examine, compare,
reconcile differences to produce the best
possible solution
• A-type (affective) conflict
– emotional reaction that can occur when
disagreements become personal
– hostility, anger, resentment, distrust,
cynicism, apathy
5-5
© 2014 Cengage Learning
Creating C-Type Conflict
• Devil’s advocacy
• Nominal Group Technique
• Delphi Technique
• Brainstorming/Electronic brainstorming
© 2014 Cengage Learning
5-5
Plant Fantasies
<click screenshot for video>
1. Did Plant Fantasies owner
Teresa Carleo follow the
rational decision-making
process to launch Plant
Fantasies? Explain.
2. List an example of a
programmed decision at
Plant Fantasies. Identify a
nonprogrammed decision
at Plant Fantasies.
© 2014 Cengage Learning

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