Chapter 5
Planning and
Decision Making
Learning Outcomes
After reading this chapter, you should be
able to:
1. Discuss the benefits and pitfalls of planning.
2. Describe how to make a plan that works.
3. Discuss how companies can use plans at all
management levels, from top to bottom.
4. Explain the steps and limits to rational decision
making.
5. Explain how group decisions and group decisionmaking techniques can improve decision making.
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Planning
• Choosing a goal
• Developing a
method or
strategy to
achieve that goal
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Planning
General Mills
Goals and Methods
• Reducing the sodium content in its top 10
product categories by 20 percent on average
• Lowering the sugar levels in cereals advertised
to children to single-digit levels per serving
• Removing trans fats from a significant portion
of its products
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Planning
General Mills
Results
• By the end of fiscal year 2011,
General Mills was able to report that
nutritionally improved products accounted for
64 percent of its retail sales volume.
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Benefits of Planning
•
•
•
•
1.1
Intensified effort
Persistence
Direction
Creation of task strategies
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Pitfalls of Planning
• Impede change
• False sense of certainty
• Detachment of planners
1.1
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How to Make a Plan That Works
2
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How to Make a Plan That Works
1. Setting Goals
S.M.A.R.T.
Specific
Measurable
Attainable
Realistic
Timely
2.1
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How to Make a Plan That Works
2. Developing
Commitment to Goals
The determination to achieve
a goal is increased by:
•
•
•
•
2.1
setting goals
making goals reasonable
making goals public
obtaining top management
support
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How to Make a Plan That Works
3. Developing Effective Action Plans
Who – People
What – Resources
When – Time period
How – Specific steps
2.3
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How to Make a Plan That Works
4. Tracking Progress
Toward goal achievement:
• distal goals
• gather and provide
performance feedback
• proximal goals
2.4
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How to Make a Plan That Works
5. Maintaining Flexibility
Methods of maintaining flexibility:
• Options-based planning
• Holding options open gives you choices.
• And choices, combined with slack resources, give you
flexibility.
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Planning from Top to Bottom
3.1
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Starting at the Top:
Top Management
Strategic Plans
•Clarify how the company will serve customers
and position itself against competitors (two to
five years)
Vision
•An inspirational statement of an organization’s
purpose (two sentences)
3.1
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Starting at the Top:
Top Management
Mission
• Overall goal that unifies efforts toward its
vision, stretches and challenges the
organization, and possesses a finish line and
time frame; flows from the vision
3.1
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Bending in the Middle:
Middle Management
Tactical plans: specify how a company will
use resources, budgets, and people to
accomplish goals within its mission (6
months to 2 years)
Magnotta Winery
3.2
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Bending in the Middle:
Middle Management
Management by Objectives (MBO)
• Discuss possible goals.
• Collectively select goals.
• Develop tactile plans.
• Review progress.
3.2
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Finishing at the Bottom:
Lower-Level Managers
Operational Plans
Single-use
3.3
Standing plans:
policies,
procedure,
rules/regulations
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Budgets
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What Is Rational Decision Making?
Decision Making
• The process of choosing
a solution from
available alternatives
4
Rational
Decision Making
• A systematic process of
defining problems,
evaluating alternatives,
and choosing optimal
solutions
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Steps to Rational Decision Making
Steps of the Rational Decision-Making
Process
1. Define the problem.
2. Identify the decision criteria.
3. Weight the criteria.
4. Generate alternative courses of action.
5. Evaluate each alternative.
6. Compute the optimal decision.
4
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Steps to Rational Decision Making
Weight the Criteria
• Absolute comparisons
o
•
Relative comparisons
o
4
Each criterion is compared to a standard
or ranked on its own merits.
Each criterion is compared directly to
every other criterion.
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Absolute Weighting of Decision Criteria
for a Car Purchase
4.3
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Relative Comparison of
Home Characteristics
4.3
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Steps to Rational Decision Making
1. Define the problem.
The first step in decision making is to
identify and define the problem.
2. Identify the decision criteria.
This step is used to set standards to guide
judgments and decisions.
3. Weight the criteria.
This step is used to decide which criteria
are more or less Important.
4.4
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Steps to Rational Decision Making
4. Generate alternative courses of action.
The idea is to generate as many alternatives
as possible
5. Evaluate each alternative.
This step can take much longer and be more
expensive than the other steps in the process
6. Compute the optimal decision.
Multiply the rating for each criterion by the
weight for that criterion. Sum the scores for
each alternative course of action.
4.4
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Steps to Rational Decision Making
maximize
4.6
satisfice
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Group Decision Making
1.
2.
3.
4.
5.1
ADVANTAGES
View problems from multiple
perspectives.
Find and access more information.
Generate more alternative solutions.
Be more committed to making chosen
solutions work.
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Group Decision Making
DISADVANTAGES
1.Susceptible to groupthink and to considering
a limited number of solutions
2.Takes considerable time
3.One or two people can dominate the group
discussion.
4.Members don’t feel personally accountable
for decisions and actions.
5.1
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Using Groups to Improve
Decision Making
Groupthink
• Structured conflict
• Delphi technique
• Nominal group technique
• Electronic brainstorming
5
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Groupthink
Groupthink occurs in highly cohesive groups
when group members feel intense pressure
not to disagree with each other so that the
group can approve a proposed solution.
5
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Groupthink
Groupthink is most likely to occur under the
following conditions:
• The group is insulated from others with different
perspectives, and the group leader begins by
expressing a strong preference for a particular
decision.
• There is no established procedure for
systematically defining problems and exploring
alternatives.
• Group members have similar backgrounds and
experiences.
5
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Class Activity:
Dead Poets Society—Finding Your Own Way
Beyond the Book
Finding Your Own Way
• Watch the video.
• What did this video illustrate on conformity
and finding your own way?
• How does this relate to group decision
making?
5
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Structured Conflict
C-Type Conflict (Cognitive Conflict)
•Disagreement that focuses on problem- and issuerelated differences of opinion
A-Type Conflict (Affective Conflict)
•Disagreement that focuses on individuals or
personal issues
Devil’s Advocacy (Used to Create C-Type Conflict)
•Assigning the role of critic
5.2
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Nominal Group Technique
1. During a “quiet time,” group members write down
as many problems and solutions as possible.
2. Each member shares one idea at a time.
3. Ideas are posted on flipcharts until all ideas are
shared.
4. The group discusses advantages/disadvantages.
5. Ideas are ranked during a second “quiet time.”
6. Members read rankings out loud, and the idea with
the highest average rank is selected.
5.3
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Delphi Technique
1. Assemble a panel of experts.
2. Create a questionnaire of open-ended questions.
3. Summarize the responses and feedback to the
panel until the members reach agreement.
4. Create a brief report and send to the panel
members for agreement/disagreement.
5. Continue the feedback process until panel reaches
agreement.
5.4
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Electronic Brainstorming
1. The more ideas, the better.
2. All ideas are acceptable, no
matter how wild or crazy.
3. Other group members’ ideas
should be used to come up with
even more ideas.
4. Criticism or evaluation of
ideas is not allowed.
5.5
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Electronic Brainstorming
ADVANTAGES
•Overcomes production blocking
o Technology allows everyone to record their
ideas as they are created.
o No ideas are lost “waiting your turn” to
speak.
•Overcomes evaluation apprehension
o Anonymity creates free expression.
5.5
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Electronic Brainstorming
DISADVANTAGES
• Greater expense
• No automatic acceptance of ideas because of
one’s position
• Some find it difficult to express themselves in
writing.
• Lack of typing skills can frustrate participants.
5.5
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Brainwriting Techniques
Brainwriting: where group
members sit together around
a table; however, instead of
expressing ideas through
verbal communication, each
participant writes down his or her
ideas anonymously on sheets of
papers or cards and then the ideas
are distributed using a variety of
formats to help spark more ideas.
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