The Main Document

MGT100
Organisations & Management
Presentation prepared by
Lucy
Miller
WEEK 6
Macquarie
SessionUniversity
1, 2014
Laura Andreoli van Schijndel
Todays Agenda
Lecture 6
Decision Making & Planning

(Chapters 6 and 7)
Tutorial 6
Class Activities
Guidance to Assignment 2 (Research & Analysis)
John Wiley and Sons Australia
Lecture 6
Decision Making
Lucy Miller
Macquarie University
(Chapter 6)
WEEK 6 Pre-Class Activity
We have now concluded the examination of general organisational topics and in our next
class we will address the activity that managers engage in the most: decision making. We
will also start addressing the four management functions, examining the planning
function, by many considered the most fundamental part of the management process.
To start becoming familiar with next weeks topics, please watch the following short
videos:
The steps of decision making
http://education-portal.com/academy/lesson/the-seven-steps-of-decisionmaking.html#lesson
Strengths and weaknesses of group decision making
http://education-portal.com/academy/lesson/strengths-and-weaknesses-of-groupdecision-making.html#lesson
Planning as a function of management
http://education-portal.com/academy/lesson/planning-as-a-function-ofmanagement.html#lesson
Types of planning
http://education-portal.com/academy/lesson/types-of-planning-strategic-tacticaloperational-contingency-planning.html#lesson
Decision Making
Learning Objectives:
How is information is used for decision making ?
How do managers make decisions ?
Information and decision making

Decision-making (sometimes called
problem solving) is the process of
identifying a discrepancy between an
actual and desired state of affairs,
and taking action to resolve the
deficiency or take advantage of the
opportunity.
Information systems help managers
gather data, turn them into useful
information, and use that information
to build knowledge in order to make
problem-solving decisions.
How Do Managers Make Decisions?

Problem
A discrepancy between an existing and a desired state of
affairs
Decision-Making Process
A set of steps that includes identifying a problem, selecting
a solution, and evaluating the effectiveness of the solution
Decision
Choice between alternative courses of action
Decision making
in the management process
l
Decision making is the essence of a managers

job and decision maker is almost synonymous
with manager.
Decision making is part of all four management

functions (POLC):
o
Planning
Organising
Leading
Controlling.
2 types of problems
Structured Problem
A straightforward, familiar, and easily defined
problem
Unstructured Problem
A problem that is new or unusual for which
information is ambiguous or incomplete.
Programmed and
Non-programmed Decisions
Programmed Decisions
A repetitive decision that can be handled using a
routine approach
A unique and nonrecurring decision that requires a
custom-made solution.
Types of problems, types of decisions,

and levels in the organisation
Programmed and
Programmed Decision-Making Aids

Rule
An explicit statement that tells managers what they ought or
ought not to do (limits on procedural actions).
Policy
A general guide that establishes parameters and guidelines for
making decisions about recurring problems.
Procedure
A series of interrelated sequential steps that can be used to
respond to a well-structured problem (policy implementation).
Rules, Policies & Procedures EXAMPLES

Rules
Managers must approve all refunds over $200.00.
No credit purchases are refunded for cash.
Policy
Make sure that all customers complaints are resolved in
a manner which leaves the customer happy.

Procedure
Follow all steps for completing merchandise return
documentation.
Decision-making conditions
Decision-making conditions
Certainty
Risk
Uncertainty
Situation where
Condition in which
Situation without
decision maker is
certainty or ability
outcomes are known
able to estimate
likelihood of
outcomes
to estimate
probable outcomes
3 views on how
managers make decisions
Rationality
Bounded
rationality
Intuition
The rational decision maker

Managerial decision making is assumed to be
rational (but often it isnt).
Rational describes choices that are consistent and
value-maximising.
Assumptions of
(perfect) rationality
Bounded rationality
Bounded rationality is behaviour that is rational
within the parameters of a simplified decisionmaking process which is limited (or bounded) by
an individuals ability to process information.
Satisficing is acceptance of solutions that are
good enough.
What is intuition?
The decision making process
Steps in decision making
Step 1. Find and define the problem.

This is a stage of information gathering, information
processing and deliberation.
Three common mistakes are:
1. Defining the problem too broadly or narrowly
2. Focusing on the symptoms instead of causes
3. Choosing the wrong problem to deal with (i.e. not
addressing problems in the most appropriate order
of priority).
Step 2. Generate and evaluate possible

solutions.
More information is gathered, data are analysed, and
the pros and cons of possible alternative courses of
action are identified.
The involvement of other people is vital here in order to
maximise information and build commitment.
Costbenefit analysis involves comparing the costs and
benefits of each potential course of action.
Step 3. Choose a solution.

The classical decision model describes decision making
with complete information. An optimising decision chooses
the alternative giving the absolute best solution to a
problem.
The behavioural decision model describes decision making
with limited information and bounded rationality.
Satisficing decisions choose the first satisfactory
alternative that comes to your attention.
Step 4. Implement the solution.

This is the stage at which directions are finally set and
problem-solving actions are initiated. At this stage,
managers need the ability and willingness to implement
their decisions.
Step 5. Evaluate results.

The decision-making process is not complete until results
are evaluated.
If the desired results are not achieved, the process must
be renewed to allow for corrective actions.
Errors and biases in decision-making
CASE EXAMPLE
The decision making process

involved in buying a car
Criteria and Weights

in a car-buying decision
Assessment of possible alternatives:

car-buying
Evaluation of Car Alternatives
Group Decision Making

Advantages
Group decisions provide
more complete information
Diversity of experiences and
perspectives are higher
Groups generate more
alternatives
Group decisions increase
acceptance of a solution
Group decision making
increases legitimacy
Disadvantages
Group decisions are time
consuming
Responsibility is
ambiguous
Subject to pressure to
conform (Groupthink)
GROUPTHINK
Group think is a psychological phenomena that can
occur within groups of people.

Group members try to minimise conflict and reach a
consensus decision without critical evaluation of

alternative ideas or viewpoints, displaying a high level
of conformity.
It is the result of such factors as group cohesiveness and
specific situational contexts (example when the group is

not culturally diverse).
Groupthink can occur anytime in an organisation a
group is to take a collective decision and it can be

extremely detrimental to the quality of the group
decision making.
The risk of conforming in groups and teams:

GROUPTHINK
Watch video:
.
Groupthink symptoms and remedies
http://www.youtube.com/watch?v=0zRybSPiEoE
How can GROUPTHINK be reduced ?

To reduce the likelihood of groupthink, the team
leader should:
Increase diversity of the team members
.
Keep the discussion open to all opinions

Invite to the discussion persons who are expert
on the specific topic area being discussed

Consciously adopt an impartial stance
.
Appoint a team member to play the role of the
devils advocate
Lecture 6
Planning
Lucy Miller
(Chapter 7)
Planning
Learning Objectives:
How do managers plan ?
What types of plans do managers use ?
What are the useful planning tools, techniques and
processes ?
What is Planning?
Planning is often called the primary management function

because it establishes the basis for all the other things
managers do
Its concerned with ends (what is to be done) as well as
with means (how it is to be done)
What is Planning?
Planning
A primary functional managerial activity that involves:
Defining the organisations goals
Establishing an overall strategy for achieving those
goals
Developing a comprehensive set of plans to integrate
and coordinate organisational work.
Managers set GOALS and PLANS

Goals (also Objectives)
Desired outcomes for individuals, groups, or entire
organisations
Provide direction and evaluation performance criteria
Plans
Documents that outline how goals are to be accomplished
Describe how resources are to be allocated and establish
activity schedules
Setting goals
Traditional Goal Setting

Goals set by top managers flow down through the
organisation and become sub-goals for each organisational area
(top-down approach)
It is a means-end chain, i.e. an integrated network of goals in
which higher level goals are linked to lower-level goals, which
serve as the means for their accomplishment
Goals must be SMART !
Types of plans
Strategic Plans VERSUS Operational Plans

Strategic plans
Apply to the entire organisation.
Establish the organisations overall goals.
Cover extended periods of time.
Operational plans
Specify the details of how the overall goals are to be
achieved.
Normally apply to a part of the organisation (for example
a Department, i.e. Marketing Plan)
Cover short time period.
Planning in the hierarchy

of organisations
The Planning Process

(Strategic Management Process)
STEP 1: Define your objectives (vision, mission, strategic
objectives)
STEP 2: Determine where you stand in relation to objectives
(internal environment analysis)
STEP 3: Develop premises regarding future conditions
(external environment analysis / forecasting)
STEP 4: Analyse and choose among action alternatives
(strategy formulation)
STEP 5: Implement the plan and evaluate results (strategy
implementation and evaluation)
Strategic management process
A hierarchy of goals
Vision vs Mission Statement

.
A vision concerns a firms

future business path.
It answers the questions:
A companys mission
statement typically focuses
on its present business
purpose.
where are we going?

what do we want to
become?
It answers the questions:

who are we ?
what do we do ?
Incorporates the concept of

Stakeholder Management
External Analysis
EXTERNAL ANALYSIS:
An analysis of an organisations General Environment and Specific Environment
(see Chapter 3)
General Environment (Macro-Environment)

PESTEL = Political, Economic, Socio-Cultural, Technological, Environmental
and Legal conditions in which an organisation operates.
Specific Environment (Industry Environment or

Competitive Environment)
The organisations, groups and individuals (stakeholders) with whom an
organisation interacts as it conducts its business.
Internal Analysis
INTERNAL ANALYSIS:
An analysis of an organisations Resources and Capabilities
(Competencies)
Resources
What an organisation has, i.e. factory, machinery, staff, capital,
etc.
Capabilities (Competencies)
What an organisation can do, i.e. the skills and abilities it
possesses in doing the work activities needed in its business
SWOT Analysis
S W O T Analysis stands for:

S trengths (internal environment)
W eaknesses (internal environment)
O pportunities (external environment)
T hreats (external environment)
Strategy formulation
Organisations formulate
strategies that:
Build on their strengths
Remedy their weaknesses or
work around them
Take advantage of the
opportunities presented by
the environment
Protect the organisation from
threats
Long-Term Plans VERSUS Short-Term Plans

Long-term plans
Plans with time frames extending beyond three years
Short-term plans
Plans with time frames on one year or less
Top management is most likely to be involved in setting
long-range plans and directions for the organisation as a
whole.
Middle and lower management levels focus more on
intermediate (one to three years) and short-range plans
that serve the long-term objectives.
Planning tools, techniques and processes:

Forecasting
Forecasting
The process of making
assumptions about what
will happen in the future.
All good plans involve
forecasts.
The PESTEL model is used
to identify emerging
trends that may have an
impact on the
organisation in the future.
(see slides Week 3)
Scenario Planning
Scenarios are detailed
and plausible views of
how the environment of
an organisation might
develop in the future
based on key drivers of
change about which
there is a high level of
uncertainty.
Scenario PLANNING
SCENARIO PLANNING:
Building on PESTEL analysis .
Does not offer a single forecast of how the environment
will change.
An organisation should develop a few alternative
scenarios (4-6) to analyse possible future strategic options.
Watch video:
Introduction to Scenario Planning

http://www.youtube.com/watch?v=yVgxZnRT54E
Scenario PLANNING at shell

The power of scenario planning for business was
originally established by Royal Dutch/Shell, which
has used scenarios since the early 1970s as part of a
process for generating and evaluating its strategic
options. Shell has been consistently better in its oil
forecasts than other major oil companies,
http://www.shell.com/global/futureenergy/scenarios.html
Watch video:
Shell Scenarios - Imagining the future

http://www.shell.com/global/futureenergy/scenarios/new-lens-scenarios.html
Carrying out scenario analysis (1)

Identify the most relevant scope of the study
the relevant product/market and time span.
Identify key drivers of change PESTEL factors
that have the most impact in the future but have
uncertain outcomes.
For each key driver select opposing outcomes
where each leads to very different consequences.
Carrying out scenario analysis (2)

Develop scenario stories - That is, coherent
and plausible descriptions of the environment
that result from opposing outcomes
Identify the impact of each scenario on the
organisation and evaluate future strategies in
the light of the anticipated scenarios.
Scenario analysis is used in industries with
long planning horizons for example, the oil
industry or airlines.
Management By Objectives (MBO)
Management by objectives (MBO)

Structured process of communication in which a
manager/team leader works with staff to jointly set
performance objectives and review results.
MBO creates agreement regarding:
Performance objectives for a given time period
Plans through which they will be accomplished
Standards of measurement
Procedures for reviewing performance results.

Management by objectives (MBO)
Specific performance goals are jointly determined by
employees and managers.
Progress toward accomplishing goals is periodically
reviewed.
Rewards are allocated on the basis of progress
towards the goals.

MBO key elements:
Goal specificity. Goals are specific, measurable and
objective.
Participative decision making. The superior and the
subordinate jointly choose the goals and agree on how they will
be achieved.
Explicit time period. Each goal has a concise time period to
be achieved.
Performance feedback. A key aspect of success is constant
feedback providing the subordinate a continuous flow of usable,

relevant information in task-specific terms. Formal reviews
additionally punctuate the feedback process.
Participation and planning
Participatory planning
means that the process includes people who will be
affected by the resulting plans and/or who will be asked to
help implement them.
Brings the organisation many benefits:
Participation can increase the creativity and
information available for planning.
It can also increase the understanding, acceptance and
commitment of people to final plans.
Tutorial 6
Decision Making
Lucy Miller
True / False Questions

1. All managerial decisions are rational.
2. The last phase in the decision making criteria is the
implementation of the chosen alternative.
3. An example of Bounded Rationality is when a manager
takes a decision based on his/her own feelings.
4. Programmed decisions are normally taken by top
managers.
5. Applying existing organisational rules, policies or
procedures is useful when a manager is facing an
unstructured problem.
Multiple Choice Questions

1. A problem exists when there is a
difference between __________ and
__________.
a. an actual situation, a potential
situation.
b. an actual situation, and a desired
situation.
c. a past situation, the current
situation.
d. the financial bottom line in one
quarter, the financial bottom line in
the next quarter.
e. goals, objectives.
2. Problem solving and decision

making are dependent on quality
__________ being available to
the right people at the right
time.
a. products
b. services
c. information
d. control
e. goals

3. A good example of a
programmed decision is to
a. reorder inventory automatically
when it falls to a certain level.
b. place poor performing students
on probation at a pre-established
minimum grade average.
c. initiate an external audit when
charitable deductions reported on
the tax form exceed a certain limit.
d. All of the above.
e. None of the above.
4. A(n) __________ is made when a

new and unfamiliar problem arises
and a novel solution is crafted to
meet the demands of the unique
situation at hand.
a. programmed decision
b. non-programmed decision
c. structured decision
d. unstructured decision
e. difficult decision

5. Most higher-level managerial
decision situations can be
classified as
a. Non routine and
unstructured.
b. classical and unexpected.
c. routine and administrative.
d. systematic and behavioural.
e. intuitive and functional.
6. The __________ describes

decision making with complete
information, where the manager
faces a clearly defined problem and
knows all possible action
alternatives as well as their
consequences.
a. classical decision model
b. administrative decision model
c. behavioural decision model
d. bounded rationality decision
model
e. political decision model

7. A manager who chooses
the alternative giving the
absolute best solution to a
problem is making a(n)
a. wise decision.
b. optimising decision.
c. managerial decision.
d. rational and limiting
decision.
e. systematic decision.
8. When a manager chooses the

first satisfactory alternative that
comes to his or her attention
during the decision-making
process, ______________ has
occurred.
a. rationalisation
b. intuition
c. satisficing
d. optimisation
e. suboptimisation

9. The tendency to increase
effort and perhaps apply more
resources to pursue a course of
action that is not working is
known as
a. cost-benefit impact.
b. heuristics.
c. escalation of commitment.
d. escalation of cost impact.
e. satisficing.
10. Rules, policies and procedures

are utilised to assist managers in the
approach to:
a. Structured problems.
b. Unstructured problems.
c. Both structured and
unstructured problems.
d. Selective perception.
e. Taking decisions in conditions of
uncertainty.
Activity 1:
Programmed or Non-Programmed Decisions ?
For a car manufacturer:
Order paint from paint manufacturer
Activity 1:
For McDonalds:
Determine supply of potatoes to be reordered
Identify location for new franchise
Activity 1:
For a university:
Decide if a potential student meets enrolment
requirements
Decide to offer a new academic program in Law
Activity 1:
For ANZ Bank:
Reordering toilet paper
Activity 1:
For Priceline Pharmacy:
Determine the location where to rent premises for a
new store in Perth
Activity 1:
For Commonwealth Bank:
Determine stationery to be reordered
Activity 1:
For Coles supermarkets:
Determine the quantity of Coke Zero to be
reordered
Activity 1:
For AVIS car-hire:
Service the vehicles of their fleet
Activity 1:
For Arnotts biscuit:
Determine cocoa to be reordered
Activity 1:
Programmed VS Non-Programmed Decisions
For a bank:
An example of Programmed Decision ?
An example of Non-Programmed Decision ?
Activity 1:
For a supermarket:
Activity 1:
For a cheese factory:
Activity 1:
For a hairdressing salon:
Activity 2:
Decision Making Processes
DISCUSSION QUESTION:
When you made the decision about your University studies,
were you:
Behaving as a rational decision maker ?
Behaving in conditions of bounded rationality ?
Which information sources did you use ?
Behaving according to intuition ?
What were the decision criteria you utilised ?
How did you develop a list of alternative ?
Tutorial 6
Planning
Lucy Miller
True / False Questions

1.
2.
3.
4.
Strategic plans are mainly developed by top managers.

Policies and procedures are examples of single-use plans.
The PESTEL model is a forecasting method widely used in organisations.
Scenario Planning involves developing multiple, alternative plans, that
will be utilised or not utilised in the future, according to whether what
unfolds is or is not in line with the scenarios utilised to develop them.
5. The last phase in the Strategic Management process is the
implementation of the strategy.
6. Management By Objectives requires that the superior and his/her
subordinate jointly choose the goals and agree on how they will be
achieved.

1. __________ refer to the
specific results or desired
outcomes that one intends to
achieve.
a. Guidelines.
b. Objectives.
c. Procedures.
d. Policies.
e. Alternatives.
2. __________ is a statement
of action steps to be taken in
order to accomplish
objectives.
a. A plan
b. A solution
c. A guideline
d. An alternative
e. A goal

3. The __________ and
__________ processes work best
if objectives are well stated in
the first place.
a. planning organising
b. planning control
c. planning leading
d. planning goal-setting
e. planning problem-solving
4. Which level of
management spends more
time with long-range
planning?
a. Lower-level managers.
b. Middle-level managers.
c. Lower-level and middlelevel managers.
d. Top-level managers.
e. All levels of management.

5. __________ plans set
broad, comprehensive, and
longer-term action directions
for the entire organisation.
a. Normal.
b. Single-use.
c. Strategic.
d. Tactical.
e. Operational.
6. Production plans, financial

plans, facilities plans,
marketing plans, and human
resource plans are all
examples of __________
plans.
a. strategic
b. operational
c. contingency
d. standing-use
e. flexible

7. Policies and procedures
that are used repeatedly
are called
a. single-use plans.
b. standing plans.
c. strategic plans.
d. scheduling plans.
e. individual plans.
8. __________
communicate broad
guidelines for making
decisions and taking action
in specific circumstances.
a. Rules
b. Procedures
c. Policies
d. Guidelines
e. Regulations

9. Identifying alternative
future states of affairs that
may occur and then
developing plans to deal with
each case should it actually
occur is known as
a. forecasting.
b. scenario planning.
c. benchmarking.
d. participation.
e. contingency planning.
10. Royal Dutch/Shell uses scenario

planning to explore what the company
would do if and when its oil supplies run
out. For Royal Dutch/Shell, the benefits
of scenario planning include which of
the following?
a. It helps the organisation operate
more flexibly in a dynamic environment.
b. It conditions the company's
executives to think.
c. It enables the company to be better
prepared than competitors for future
shocks.
d. All of the above
e. None of the above

11. __________ is a structured
process of regular communication in
which a supervisor/team leader and
subordinates/team members jointly
set performance objectives and
review results accomplished.
a. Management by goals (MBG)
b. Management by objectives (MBO)
c. Performance management system
(PMS)
d. Objective setting and review (OSR)
e. Performance Planning and
Evaluations (PPE)
12. __________ requires that

the planning process include
people who will be affected by
the resulting plans and/or will be
asked to help implement them.
a. Contingency planning.
b. Scenario planning.
c. Strategic planning.
d. Participatory planning.
e. Benchmarking.
Class Activity 1
Assessing Strategic GOALS

Winning a 20 % market share within 3 years
Introduce a Supplier Code of Conduct and Compliance Monitoring Program
Overtaking key competitors on product performance or quality or customer
service within 2 years
Deriving 35 % of revenues from sale of new products introduced in past 5
years
Being the recognized industry leader in product innovation and/or
technological know-how
Consistently getting new or improved products to market ahead of rivals
Having stronger national or global sales and distribution capabilities than
rivals
Achieve $1 billion in annual revenues with $60 million in profits in the next
financial year.
Enter into 5 new markets by 2014.
Open 50 new stores by 2015.
Class Activity 2:
Class Discussion
Organisations that fail to plan

are planning to fail.
Do you agree with this statement ?
Why ? Why not ?
Class Activity 3
ASSESSING VISIONS
Characteristics of an
Potential shortcomings:
effective one:
Vague
Clear and graphic
Not forward-looking
Directional
Too broad
Audacious, but feasible
Bland or uninspiring
Focused
Not distinctive
Inspiring
Engaging
Inspirational
Class Activity 3
Assessing Visions
.
Our
vision is to be the worlds best quick service

restaurant.
McDonald's
Class Activity 3
Assessing Visions
.
To organize the worlds information and make it

universally accessible and useful.
Google
Class Activity 4
Assessing MISSION STATEMENTS
Be the best employer for our people in each

community around the world and deliver
operational excellence to our customers in each
of our restaurants.
McDonalds
Class Activity 4
Assessing MISSION STATEMENTS

.
Homework
Study TEXTBOOK Chapters 6 and 7

Study MODULE Decision Making & Planning
Next Class Preview
Lecture 7
Organising
(Chapter 9)
Tutorial 7
Class Activities
Guidance for Assignment 2 (Research & Analysis), in
progress
Guidance for Assignment 3 (Essay)

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MGT100

Organisations & Management

Decision Making & Planning

John Wiley and Sons Australia

WEEK 6 Pre-Class Activity

John Wiley and Sons Australia

John Wiley and Sons Australia

Information and decision making

How Do Managers Make Decisions?

John Wiley and Sons Australia

Decision making is the essence of a managers

Decision making is part of all four management

John Wiley and Sons Australia

John Wiley and Sons Australia

Types of problems, types of decisions,

John Wiley and Sons Australia

John Wiley and Sons Australia

Programmed Decision-Making Aids

John Wiley and Sons Australia

Rules, Policies & Procedures EXAMPLES

a manner which leaves the customer happy.

John Wiley and Sons Australia

outcomes are known

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The rational decision maker

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John Wiley and Sons Australia

John Wiley and Sons Australia

John Wiley and Sons Australia

The decision making process

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Steps in decision making

Step 1. Find and define the problem.

Steps in decision making

Step 2. Generate and evaluate possible

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Steps in decision making

Step 3. Choose a solution.

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Steps in decision making

Step 4. Implement the solution.

Step 5. Evaluate results.

Errors and biases in decision-making

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The decision making process

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Criteria and Weights

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Assessment of possible alternatives:

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Evaluation of Car Alternatives

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Group Decision Making

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occur within groups of people.

consensus decision without critical evaluation of

specific situational contexts (example when the group is

group is to take a collective decision and it can be

The risk of conforming in groups and teams:

Groupthink symptoms and remedies

How can GROUPTHINK be reduced ?

Keep the discussion open to all opinions

on the specific topic area being discussed