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Planning and Decision Making
Chapter 3 EXAM ReviewMr. SherpinskyBusiness Management ClassCouncil Rock School District
The Planning Process
• Planning: the process of deciding which objectives to pursue during a future time period and how to achieve those objectives.–Primary management function
Why Plan?
• Planning enables an organization to actively affect rather than passively accept the future.
• Planning provides a means for actively involving personnel from all areas of the organization in the management of the organization
Formal Planning• Defined: The
systematic studying of an issue and the preparation of a written document to deal with the problem.– Formal Plan: Defined:
a written, documented plan developed through an identifiable process• Levels of sophistication• Depends on the needs and
organization
Formal Planning
• Functional Plans– Most frequently encountered types
• Sales and marketing• Productions• Financial• Personnel
Formal Planning
• Planning Horizons:– Short-range plans cover
up-to a one-year period of time
– Long-range plans cover at least a three-to-five year period of time.
– Intermediate plans cover the time span between short-range and long-range• Usually between short and
long range timeframes
Operational vs. Strategic Plans
• Operational or Tactical– Short-range
planning– Focuses on
forming ideas for dealing with specific functions in the company• Ex: production
schedules and day-to-day operations
• Strategic– Long-range planning– Done by highest management
levels• President, vice-president, chief operating
officer– Affects many parts of the organization
Contingency Plans
• Regardless of thorough you plan, something always goes wrong….– Remember planning
is a one-sided process
• Contingency Plans: back up plans that address the what ifs of the management job.
• Always short-term
Objectives• Objectives: Defined: are
statements outlining what a manager is trying to achieve.
• Objectives give an organization and its members directions and purpose.
• Should be clear, concise, and measurable
Objectives
• Long-range– Generally go
beyond the organization’s current fiscal year
– Must support and not conflict with the organization mission
• Short-range– Derived from in-
depth evaluation of long-range objectives
– List of priorities to achieve longer-range objectives
The Planning Process
• MBOs (Management by Objectives)– Philosophy that converts company
objectives to personal and management ones
• Policies– Broad general guides to action that direct or
constraint and provide predictability• Procedures
– Series of steps to meet objectives– Usually done chronologically
• Rules– Specific actions to take (or not to take)
Making Decisions
• Decision-making– Not all decisions
involve problems• Group decision-
making – Group decisions are
generally better then making quick independent decisions
Making Decisions
• Decision Making Vs. Problem Solving– Decision making:
Choosing from various alternatives
– Problem solving: The process of determining the appropriate recompense or actions
Approaches to Problem Solving
• Satisficing–Principle of bounded
rationalityAssumes that people have the time and
cognitive ability to process only a limited amount of information
Assumes knowledge of alternatives and criteria is limited
Assumes people act on the basis of a simplified concept of the world
Making Decisions
• Decision maker’s environment• Environmental factors
– Manager’s position– Structure of organization– Tradition of organization– Informal and formal group structures
(i.e., unions)– Superiors and subordinates
Making Decisions
• Intuitive approach– Using emotions to make
decisions– Fastening on
unsubstantiated facts and sticking with them
Making Decisions
• Maximax and Maximin approach– Maximax: Look at best
alternative whose best possible outcome is best for all alternatives
– Maximin: Looking at the best alternative and comparing to the worst possible outcomes
Making Decisions
• Risk averting approach– Choosing an alternative with least
variation among outcomes• Timing
– Need for a decision must be recognized– Must act at some point
• Participation– Two heads are better than one– Group performance is usually better
than individual performance
Barriers to Decision Making
• Complacency– Ignoring data or not making a decision at
all• Defensive avoidance
– Denies the importance of the danger or opportunity
• Panic– Frantic attempts to solve a problem
• Deciding to decide– Accepting responsibility for the decision
Management Information Systems
• Integrated approach for providing interpreted and relevant data to help make decisions– Data processing
• Capture, processing and storage of data• MIS uses that data to produce information to make
good decisions– Transaction processing system
• Replaced manual record-keeping procedures• Payroll, billing inventory records• Routine• Highly structured decisions