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A barebones intro to planning and decision making for BBA/MBA Ist Sem students...
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This PPT gives an overview of
planning and decision making.
To maximise the benefit,
please use this PPT along with a
ny good text book on management
and
use the Net extensively
The process of determining the organization’s goals and objectives and selecting a course of action to accomplish them within the environment inside and outside the organization
So it is deciding in advance :What to do,When to do it,How to do it,Who is to do what
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A plan is a predetermined course of action to achieve stated goals
Plans are based on forecasts and assumptions of the future
Plans need to be flexible so that they can adapt to inevitable changes in the environment
The simpler the plan, better it is!
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NeedAssessment
EstablishObjectives
DevelopPremises
GenerateAlternatives
SelectAlternative
FormulateDerivative Plans
Implementation & Control
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Identify a latent or felt “organizational need”
The “organizational need” could be a result of an opportunity or a problem
While making the need assessment, ensure:CREDIBILITY: They are demonstrably objective and science/knowledge-based,
SALIENCY: Relevant to decision-making needs and stakeholders interests,
LEGITIMATCY: Conducted within a framework that complies with recognized rules, standards, practices, and common interests; acting within appropriate entities.
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Now that we are clear of the “organizational need”
in the form of an opportunity or a problem,
What do we hope to achieve?
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Planning premises are the assumptions about the
Environment in which the plans will be made & implemented
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There will exist multiple methods to achieving
an objective……
Enlist all Possible Alternatives
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The first filter for narrowing down on the list of alternatives is to look for congruence with organizational mission and strategyConduct feasibility analysisThe shortlisted alternatives will then be evaluated for pros and consThe alternatives selected then will be subjected to cost benefit analysisProjections will be developed for possible consequencesThe “optimum” alternative will be selected for implementation
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Derivative plans are secondary plans detailing the finer aspects of implementation at departmental and unit levels
It is critical that derivative plans indicate timelines and schedules clearly
Care needs to be taken that the derivative plans for various departments are “oriented” in “one desired” direction
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A plan is only as good as its implementation!
Secure cooperation and participation by clarifying the purpose of the plan and role of departments and individuals in the bigger picture
Create an “enabling environment” for the successful implementation of the plan
Simultaneous monitoring and control is necessary to stay on track!
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The top management assesses the need, establishes the objective, formulates the plan and then communicates the plan down the hierarchy
Commonly seen in highly centralised organisations
Typical of micro, small and medium enterprises
Typical of large family owned businesses too
Success of plans depends heavily on the experience, style and capabilities of the top management
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The planning process is decentralised and lower level managers formulate the department or unit level plans which are then collated by the top management
This is a participatory form of planning
The success of plans now depends on the capabilities and competence of lower level managers
Quite typical of large sales organizations
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A more balanced method
The top management defines the objectives and premises and communicates it down the hierarchy
The middle and lower level managers the formulate their plans and communicate them to the top management
Such plans once approved (with modifications if needed) by the top management have been seen to generate maximum ownership and effort by the lower level managers and executives
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A team of managers is constituted based on their experience and competence
The team is then tasked to formulate the plan for objectives as communicated to them by the top management
The team of managers the formulates the plan based and communicates it to the top management who evaluates it and approves it
The approved plan is the communicated down the hierarchy to the lower level managers for implementation
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Plans can be classified on the basis of their
nature, intended use, time horizon, scope etc..
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Formal plans are written down documents defining specific goals and action plans to achieve those goals
Informal plans are often ad hoc unwritten plans which are general in nature and lack continuity
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Single use plans are one-time plans specifically designed to meet the needs of a unique situation
Standing plans are ongoing plans that provide guidance for activities performed repeatedly in an organization
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A vision statement is essentially an aspirational statement that describes an ideal image an organization would like
be identified with in the future….
A value statement describes the principles, notions and beliefs
that an organization holds supreme and are used to guideindividual and collective decisions and actions
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The mission statement of an organization communicates the role it intends to play in the socio economic ecosystem and the value it intends to deliver
Mission is the “purpose”, “the fundamental reason for existence” of an organization
Objectives set down quantifiable aims with clear timelines for the organization to achieve
“Objectives & Goals” indicate the desired future state or target a management program intends to achieve
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Policies: A statement that guides decision making in recurring events.
Procedures: A chronological sequence of action steps needed to be taken.
Programs: An aggregate of related action plans designed to accomplish a task or an objective.
Schedules: A time table of work clarifying the chronological order of tasks and time the tasks need to be executed.
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Rules describe in detail the manner in which a task is to be carried out
Rules leave no scope for individual discretion or judgment
Guidelines are broad guides for decision making
Guidelines are not rigid and leave considerable scope for individual discretion and judgment
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Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectation
Tactics are actionable steps, decisions and maneuvers made to successfully execute strategy
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The internal environment of an organizationThe manpower, capital, structure, mission, policies etc
The external environmentPolitical environmentEconomic environmentSocial environmentTechnological environmentNatural environmentLegal environment
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Decision is a choice from available alternatives
It is a “Process”, not an event
It is the core of planning (choosing from alternatives)
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Decision MakingProcess
Decision Making Approach• Rational• Bounded Rationality• Intuitive
Decision Maker’s Style• Directive• Analytical• Conceptual• Behavioural
Decision Making Conditions• Certainty• Risk• Uncertainty
Type of Decision• Programmed• Non-Programmed
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Programmed
In structured and routine
problems
Relies on established criteria
Decision making by precedent
Non-Programmed
In unstructured, novel, ill
defined non recurring situations
Relies on subjective judgments
Involves greater risk
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ProgrammedDecisions
Non programmedDecisions
Level inOrganization
Top
LowerWell-Structured
Ill-Structured
Type ofProblem
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Certainty: Only one state of nature can exist
Risk: Several known states of nature may exist and each has a known probability of occurring
Uncertainty: What state of nature can occur is unknown and consequently probabilities cannot be assigned
Uncertainty Risk Certainty
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RationalDecisionMaking
Problem isclear and
unambiguous
Single, well-defined goalis to be achieved
All alternativesand consequences
are known
Preferencesare clear
Preferencesare constantand stable
No time or costconstraints exist
Final choicewill maximize
payoff
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Conditions for rational decision making are rarely met!
In the absence of “ideal” decision making conditions, the “best possible” decision will have to do
So, rational action limited due to lack of information, time, or ability to analyze alternatives in light of a goal sought; unclear goals; or a lack of ability to take a risk
The absence of ideal rational decision making conditions is called “bounded rationality”!
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Tendency of managers to make decisions while facing a “situation of bounded rationality”, which is almost always
The course of action “good enough” is chosen
The making of a “good enough decision” considering the existence of bounded rationality is called satisficing!
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The decision making depends on the psychology of the manager which can range from Intuitive to rationalThe critical factor is “tolerance for ambiguity” which differs from a need for consistency and order to the ability to process many thoughts simultaneously
Directive: Fast, efficient, and logical
Analytical: Careful and able to adapt or cope with new situations
Conceptual: Able to find creative solutions
Behavioural: Seeks acceptance of decisions40
Individualism versus collectivism
Power distance
Tolerance of uncertainty and risk
Perceptions of acceptability and/or desirability of outcomes
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IdentifyProblem
EstablishDecision Making
Criteria
Allocation of Weights to
Criteria
GenerateAlternatives
EvaluateAlternative
SelectAlternatives
Implementation & Control
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Problems are clear
Objectives are clear
People agree on criteria and weights
All alternatives are known
All consequences can be anticipated
Decision makers are rational
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Candidate Criteria Rating X Weight = Score Rahul Motivation 8 x .30 = 2.40
Interpersonal 6 x .25 = 1.50Sales Knowledge 7 x .25 = 1.75
Product Knowledge 6 x .20 = 1.20
Total Score= 6.85
Candidate Criteria Rating X Weight = ScoreAshish Motivation 9 x .30 = 2.70
Interpersonal 8 x .25 = 2.00Sales Knowledge 6 x .25 = 1.50
Product Knowledge 5 x .20 = 1.00
Total Score= 7.20
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Possible solutions examined one at a time
If alternative is unworkable it is discarded
When acceptable (not necessarily best) solution is found, it is likely to be accepted
Thus search and analysis effort is likely to stop at first acceptable solution
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Explicit criteria and weights not used to evaluate alternatives
Decision makers use heuristicsA rule that guides the search for alternatives into areas that have a high probability for yielding success
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Google “Heuristics”!!
Satisficing
Selection of a minimally acceptable solution
Rather than being an optimizer, this model sees him or her as being a satisficer
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Implicit favorite is identified early in decision process
Perceptual distortion of information occurs
Decision rules are adopted that favor the implicit favorite
Positive features of the implicit favorite highlighted over the alternative
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Provide a numerical basis for decision making – reduces decisions to looking at a monetary value placed on different choices
Qualitative factors look to take account of these other issues that may influence the outcome of a decision
Can be wide ranging and especially need to consider the impact on human resources and their response to decisions
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Quantitative
Investment appraisal
Break even analysis
NPV / IRR / EVA
Cost benefit analysis
Forecasting
Market research
Critical path analysis
Decision trees
Qualitative
CSR
SWOT
HRM
PESTEL analysis
Alignment with mission
Effect on image
Effect on brand
Long term implications51
A decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility
Drawn from left to right, decision trees have three types of nodes:
Decision Nodes (represented by squares)Chance Nodes (represented by circles)End Nodes (represented by triangles)
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Determining the effect of decreasing one or more key factors and simultaneously increasing one or more other key factors in a decision
A systemic approach to balancing the trade-offs between time, cost and performance
“How much must I give up to get a little more of what I want most?”
What is “Pareto Optimality”?54
Decision Maker Characteristics
KnowledgeAbility
Motivation
Problem CharacteristicsUnfamiliarity
AmbiguityComplexityInstability
Decision Environment Characteristics
IrreversibilitySignificance
AccountabilityTime and monetary constraints
?
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But in most business organizations, decisions are made by
GROUPS, not individuals!
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Groups can accumulate more knowledge.
Groups have a broader perspective and consider more alternatives.
Individuals who participate in group decisions are more satisfied with the decision and are more likely to support it.
Group decision processes serve an important communication function, as well as a useful political function.
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Groups often work more slowly than individuals.
Group decisions involve considerable compromise that may lead to less than optimal decisions.
Groups are often dominated by one individual or a small clique, thereby negating many of the virtues of group processes.
Over-reliance on group decision making can inhibit management’s ability to act quickly and decisively when necessary.
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When groups are...
• Highly cohesive
• Insulated from outside input
• Dominated by leader
Leading to decisions characterized by...
• Limited search for information
• Limited analysis of alternatives
• Rejection of expert opinions
• Few, if any, contingency plans
...They often experience...
• Illusion of invulnerability
• Illusion of morality
• Illusion of unanimity
• Self-censorship
• Peer pressure for conformity
• Stereotyping of opponents
• Rationalization
That results in...
• Decisions of poor quality
• Poor group performance
• Wasted resources
• Lost opportunities
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The modern business environment is highly competitive and speed is the key!
1. Real-time information: Fast decision makers must have access to and be able to process real-time information.
2. Multiple simultaneous alternatives: Fast decision makers examine several possible alternative courses of action simultaneously, not sequentially.
3. Two-tiered advice process: A two-tiered advisory system, whereby all team members are allowed input but greater weight is given to the more experienced coworkers.
4. Consensus with qualification: Fast decision makers attempt to gain widespread consensus on the decision as it is being made, not after.
5. Decision integration: Fast decision makers integrate tactical planning and issues of implementation within the decision process itself.
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Training for decision making
Advanced levels of data mining
Use of artificial intelligence in DSS
Heuristics
Fuzzy logic
Statistical and econometric modeling…The list goes on!!
Google these terms!!61
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