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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Planning
11
Planning
Choosing a goal and developing amethod of strategy to achieve that goal
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
What Is Planning?
Planning A primary functional managerial activity that involves:
• Defining the organization’s goals• Establishing an overall strategy for achieving those
goals• Developing a comprehensive set of plans to integrate
and coordinate organizational work. Types of planning
• Informal: not written down, short-term focus; specific to an organizational unit.
• Formal: written, specific, and long-term focus, involves shared goals for the organization.
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Why Do Managers Plan?
Purposes of Planning Provides direction Reduces uncertainty Minimizes waste and redundancy Sets the standards for controlling
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Benefits of Planning
Benefits of Planning
Benefits of Planning
Creationof Task
Strategies
Creationof Task
Strategies
IntensifiedEffort
IntensifiedEffort
DirectionDirectionPersistencePersistence
1.11.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Pitfalls of Planning
Pitfalls of Planning
Pitfalls of Planning
Detachmentof Planners
Detachmentof Planners
Impedes Changeand Adaptation
Impedes Changeand Adaptation
False Senseof Certainty
False Senseof Certainty
1.21.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
How to Make a Plan That Works
22
Set Goals
Set Goals
DevelopCommitment
DevelopCommitment
DevelopEffectiveActionPlans
DevelopEffectiveActionPlans
TrackProgressToward
GoalAchievement
TrackProgressToward
GoalAchievement
MaintainFlexibility
MaintainFlexibility
Revise existing planor
Begin new planning process
Revise existing planor
Begin new planning process
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
S.M
.A.R
.T.
S.M
.A.R
.T.
S.M
.A.R
.T.
S.M
.A.R
.T. SpecificSpecific
MeasurableMeasurable
AttainableAttainable
RealisticRealistic
TimelyTimely
Setting Goals
2.12.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Developing Commitment to Goals
The determination to achieve a goal is increased by:
Setting goals participatively Making goals reasonable Making goals public Obtaining top management support
2.22.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Developing Effective Action Plans
Specific StepsSpecific Steps
PeoplePeople
ResourcesResources
Time PeriodTime Period2.32.3
An Action Plan Lists…
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Tracking Progress
Set…Set…
Proximal GoalsProximal Goals
Distal GoalsDistal Goals
Gather and provide…Gather and provide…
Performance Feedback
Performance Feedback
2.42.4
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Maintaining Flexibility
Option-based planning keep options open by making
simultaneous investments• invest more in promising options• maintains slack resources
Learning-based planning plans need to be continuously adjusted
2.52.5
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Planning from Top to Bottom
Adapted from Exhibit 5.5
33
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Starting at the Top
Strategic PlansStrategic PlansClarify how the company will serve customers and position itself against competitors (2-5 years)
Clarify how the company will serve customers and position itself against competitors (2-5 years)
VisionVisionAn inspirational statement of anorganization’s purpose (2 sentences)
An inspirational statement of anorganization’s purpose (2 sentences)
MissionMission
Overall goal that unifies efforts towardits vision, stretches and challenges,and possesses a finish line andtime frame. Flows from vision.
Overall goal that unifies efforts towardits vision, stretches and challenges,and possesses a finish line andtime frame. Flows from vision.3.13.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Planning Time Lines
3.13.1 Years0 1 2 3 4 5 6
Pla
ns
Strategic
Tactical
Operational
5 Years
2 years
30 days
6 months
6 months
2 Years
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Bending in the Middle
Tactical PlansTactical Plans
Specify how a company will use resources, budgets, and people toaccomplish goals within its mission. (6 months to 2 years)
Specify how a company will use resources, budgets, and people toaccomplish goals within its mission. (6 months to 2 years)
Managementby
Objectives
Managementby
ObjectivesDevelop and carry out tactical plansDevelop and carry out tactical plans
1. Discuss possible goals
2. Participatively select goals consistent with overall goals
3. Jointly develop tactical plans
4. Meet to review progress3.23.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Finishing at the Bottom
Operational Plans
Operational Plans
Day-to-day plans for producing or delivering products and services overa 30-day to six-month period
Day-to-day plans for producing or delivering products and services overa 30-day to six-month period
3.33.3
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Kinds of Operational Plans
Single-Use PlansSingle-Use Plans Plans that cover unique, one-time-only events
Plans that cover unique, one-time-only events
Standing PlansStanding Plans
Plans used repeatedly to handle frequently recurring events.Three kinds are: policies, procedures,and rules and regulations.
Plans used repeatedly to handle frequently recurring events.Three kinds are: policies, procedures,and rules and regulations.
BudgetsBudgetsQuantitative planning to decide how to allocate money to accomplish company goals
Quantitative planning to decide how to allocate money to accomplish company goals
3.33.3
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
What Is Rational Decision Making?
44
Decision Making
The process of choosing a solution fromavailable alternatives.
Rational Decision Making
A systematic process of defining problems, evaluating alternatives, and choosing optimal solutions.
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
Define the problemDefine the problem
Identify decision criteriaIdentify decision criteria
Weight the criteriaWeight the criteria
Generate alternative courses of actionGenerate alternative courses of action
Evaluate each alternativeEvaluate each alternative
Compute the optimal decisionCompute the optimal decision
11
22
33
44
55
6644
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
Define the problemDefine the problem11
Problem exists when there is a gap between a desired state and an existing state
To make decisions about problems, managers must: be aware of the gap be motivated to reduce the gap have the knowledge, skills, abilities, and
resources to fix the problem
4.14.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
Identify decision criteriaIdentify decision criteria22
Standards used to guide judgments and decisions
The more criteria a potential solution meets, the better that solution should be
4.24.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
Weight the criteriaWeight the criteria33
Absolute comparisons each criterion is compared to a standard
or ranked on its own merits
Relative comparisons each criterion is compared directly to
every other criterion
4.34.3
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
4.34.3
Absolute Weighting of Decision CriteriaAbsolute Weighting of Decision Criteria
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
4.34.3
Relative Weighting of Decision CriteriaRelative Weighting of Decision Criteria
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Steps to Rational Decision Making
Generate alternative courses of actionGenerate alternative courses of action44
4.44.4
The idea is to generate as many alternatives as possible
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Evaluate each alternativeEvaluate each alternative55
Steps to Rational Decision Making
4.54.5
This step can take much longer and be more expensive than other steps in the process
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Compute the optimal decisionCompute the optimal decision66
Steps to Rational Decision Making
Multiply the rating for each criterion by the weight for that criterion
Sum the scores for each alternative course of action
4.64.6
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
PLUS—A Process for Ethical Decision Making
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PoliciesPolicies
LegalLegal
UniversalUniversal
SelfSelf
PP
LL
UU
SS
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Limits to Rational Decision Making
4.74.7
Bounded Rationality
A decision-making process restricted in the real world by:
limited resources incomplete and imperfect information managers’ limited decision-making
capabilities
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Limits to Rational Decision Making
4.74.7
MaximizeMaximize SatisficeSatisfice
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Using Groups to Improve Decision Making
DelphiTechnique
DelphiTechnique
StepladderTechnique
StepladderTechnique
ElectronicBrainstorming
ElectronicBrainstorming
StructuredConflict
StructuredConflict
NominalGroup
Technique
NominalGroup
Technique
55
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Group Decision Making
1. View problems from multiple perspectives
2. Find and access more information
3. Generate more alternative solutions
4. More committed to making chosen solutions work
1. View problems from multiple perspectives
2. Find and access more information
3. Generate more alternative solutions
4. More committed to making chosen solutions work
Advantages
5.15.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Group Decision Making
1. Susceptible to groupthink and to considering a limited number of solutions
2. Takes considerable time
3. One or two people can dominate group discussion
4. Members don’t feel personally accountable for decisions and actions
1. Susceptible to groupthink and to considering a limited number of solutions
2. Takes considerable time
3. One or two people can dominate group discussion
4. Members don’t feel personally accountable for decisions and actions
Disadvantages
5.15.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Groupthink
The group is insulated from others with different perspectives
The group leader expresses a strong preference for a particular decision
There is no established procedure for defining problems and exploring alternatives
Group members have similar backgrounds
The group is insulated from others with different perspectives
The group leader expresses a strong preference for a particular decision
There is no established procedure for defining problems and exploring alternatives
Group members have similar backgrounds
Groupthink is likely to occur when…
5.15.1
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Structured Conflict
C-Type ConflictC-Type Conflict
Cognitive conflict. Disagreement that focuses onproblem- and issue-related differences of opinion
Cognitive conflict. Disagreement that focuses onproblem- and issue-related differences of opinion
A-Type ConflictA-Type ConflictAffective conflict.Disagreement that focuses onindividuals or personal issues
Affective conflict.Disagreement that focuses onindividuals or personal issues
5.25.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Devil’s Advocacy
Steps to Establish a Devil’s Advocacy Program
1. Generate a potential solution
2. Assign a devil’s advocate to criticize and question
3. Present the critique of the solution to key decision makers
4. Gather additional information
5. Decide whether to use, change, or not usethe originally proposed solution
1. Generate a potential solution
2. Assign a devil’s advocate to criticize and question
3. Present the critique of the solution to key decision makers
4. Gather additional information
5. Decide whether to use, change, or not usethe originally proposed solution
5.25.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Dialectical Inquiry
Steps to Establish a Dialectical Inquiry Process
1. Generate a potential solution
2. Identify the assumptions underlying thepotential solution
3. Generate a conflicting counterproposal basedon opposite assumptions
4. Have advocates of each position present theirarguments and engage in a debate in front ofdecision makers
5. Decide whether to use, change, or not usethe originally proposed solution
1. Generate a potential solution
2. Identify the assumptions underlying thepotential solution
3. Generate a conflicting counterproposal basedon opposite assumptions
4. Have advocates of each position present theirarguments and engage in a debate in front ofdecision makers
5. Decide whether to use, change, or not usethe originally proposed solution
5.25.2
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Nominal Group Technique
Steps to Establish 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. Group discusses advantages/disadvantages
5. Ideas are ranked during a second “quiet time”
6. Members read rankings aloud, and the idea with thehighest average rank is selected
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. Group discusses advantages/disadvantages
5. Ideas are ranked during a second “quiet time”
6. Members read rankings aloud, and the idea with thehighest average rank is selected
5.35.3
39
Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Delphi Technique
Steps to Establish Delphi Technique
1. Assemble a panel of experts.
2. Create a questionnaire of open-ended questions.
3. Summarize the responses and feed back 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.
1. Assemble a panel of experts.
2. Create a questionnaire of open-ended questions.
3. Summarize the responses and feed back 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.
5.45.4
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Stepladder Technique
Member 1Shares thoughts, ideas, recommendations
Member 2Shares thoughts, ideas, recommendations
Discussion is Held and Tentative Group Decision is Made
Member 3 Joins Group Shares thoughts, ideas, recommendations
Members 1 & 2Share previous thoughts, ideas, recommendations
Discussion is Held and Tentative Group Decision is Made
Member 4 Joins Group Shares thoughts, ideas, recommendations
Members 1, 2, & 3 Share previous thoughts, ideas, recommendations
Discussion is Held and Tentative Group Decision is Made
Adapted From Exhibit 5.13
Step 1
Step 2
Step 3
5.55.5
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Electronic Brainstorming
Four Rules of 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 usedto come up with even more ideas.
4. Criticism or evaluation of ideas is not allowed.
1. The more ideas, the better.
2. All ideas are acceptable, no matter how wild or crazy.
3. Other group members’ ideas should be usedto come up with even more ideas.
4. Criticism or evaluation of ideas is not allowed.
5.65.6
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Electronic Brainstorming
Advantages of Electronic Brainstorming
Overcomes production blocking technology allows everyone to record their
ideas as they are created no ideas lost “waiting your turn” to speak
Overcomes evaluation apprehension anonymity creates free expression
5.65.6
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Chapter 5Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Electronic Brainstorming
Disadvantages of Electronic Brainstorming
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
5.65.6