BUSINESS POLICY.

The business's policy is a guide that stipulates rules, regulations and objectives, and may
be used in the managers' decision-making. It must be flexible and easily interpreted and
understood by all employees. Policies – written statements that reflect a plans basic
objectives & provide guidelines for selecting actions to achieve the objectives. Effective
policies should show flexibility, comprehensiveness, coordination, clarity, ethics.

Goal – future states or conditions that contribute to the fulfillment of the orn mission –
expresses relatively intermediate criteria of effectiveness.
Objectives – short term, specific measurable targets that must be achieved to accomplish
ognl goals – lets know what is important. Must be relevant, challenging and focused. The
objectives of the business refers to the ends or activity at which a certain task is aimed.
Strategy – a cluster of decisions about what goals to persuade, what actions to take &
how to use resources to achieve goals. The business's strategy refers to the coordinated
plan of action that it is going to take, as well as the resources that it will use, to realize its
vision and long-term objectives. It is a guideline to managers, stipulating how they ought
to allocate and utilize the factors of production to the business's advantage. Initially, it
could help the managers decide on what type of business they want to form.
Mission – a broad declaration of an orgns purpose that I.D the orgn products and
customers & distinguishes the orgn from its competitors. The mission of the business is
its most obvious purpose -- which may be, for example, to make soap.
The vision of the business reflects its aspirations and specifies its intended direction or
future destination.

Planning – I.D & selecting appropriate goals & courses of action for an organization.
The organizational plan that results from the planning process details the goals of the
orgn & specifies how mgers intent to attain those goals. Planning is both a goal making &
strategy making process. Process by which managers examine their internal & external
environments, ask fundamental questions about their orgns’ purpose & establish a
mission, goals and objectives & actions to achieve those objectives.

Amand Feigenbaum – thinking out in advance the sequence of actions to accomplish a

proposed course of action in doing work to accomplish certain objectives- planning helps
orgns achieve results & enable firms to respond to changing business demands, market
conditions & customer expectations. To be effective it must be flexible & responsive &
should include input from persons through out all levels of orgn, not controlled by a few
people.

Why plan is necessary

1. Gives a sense of direction (reduces zigzagging) and coordination
2. Prepare and reduces impact of change – reduce uncertainty, clarifies consequences of
actions managers might take in response to change.
3. Minimizes wastage, redundancy and reduce cycle time. (Length of time to complete a
task)
4. Develop & set standards to facilitate control
5. Deal with increased orgnl complexity – more products services add into complexity –
(Peter Senge – ‘..to remain competitive in the global economy. Orgns must learn to be
comfortable with uncertainty & complexity, thus they must develop a capacity for
thinking clearly & continuously about the unknown future..’)
6. Increased competition

Types of planning.
Strategic planning – comprehensive, long term & relatively general planning. Focuses
on broad, enduring issues to increase the firm’s effectiveness & survival over many
years. States mission & describes a set of goals to move a company into the future.

Operational planning – focused short term & specific form of planning that translates
the broad concepts of the strategic plan into clear objectives for the short term. Requires
efficient cost effective application of resources to solving problems & meeting objectives.

Tactical planning – falls on the continuum btn strategic & operational planning
processes. Its more narrow, intermediate term and specific than strategic planning.
Tactics deal more with issues of efficiency than with the long term effectiveness.

Categories of plans….
Centralized plans – system in which responsibility for planning lies with the orgns
highest level
Decentralized plans - system in which responsibility for planning lies with the workers
& lower levels of the orgn.
Single use plans – have a clear frame for their utility eg producing a new product.
Developed to handle non programmed decision making in unusual or one of a kind
situation. See projects.
Standing plans - planning with on going meaning and application to an orgn eg
constitution. Situations in which programmed decision making is appropriate, when some
situations occur regularly hence develop policies, rules & SOP to control tasks.
Rolling plan – updated and amended every year to take account of changing conditions
in the external environment.

The planning process.

1. Asses the current conditions – before goals & objectives are established, the current
state of the firm must be assessed – resources, market trends, economic indicators,
competitive forces- internal and external environments. Do competitive bench marking.
2. Determine goals & objectives – conflict must be resolved btn objectives eg short term
vs long term, profit vs non profit …
3. Establish an action plan – to achieve objectives, action plans are required. Actions
need to be specific prior to implementation as part of the planning process. Actions are
specific, prescribed means to achieve objectives – determine success or failure in meeting
the objectives- makes choice btn alternatives. Forecast.
4. Allocate resources – financial, physical, human, time – factors of production
5. Implement the plan – assigning pple & responsibilities for achieving a plan.
Delegation of tasks, taking action. Mgers implement plans through others by
Authority – the legitimate use or form of power stemming from the position, not from the
person
Persuasion – process of convincing workers of the value of a plan prior to
implementation.
6. Control the implementation – manage on going work activities to ensure that the
indented objectives are met, or in some cases adjusted – actual results conform to planned
results. Feed back – process of corrective actions based on measurement.

Criticism of planning
There is an intuitive appeal to planning. The planning urge remains powerful because it is
so tied up with mans notion of himself as an intelligent & rational creature. Despite this,
there are arguments raised against formalized strategic planning.

1. Planning creates too much rigidity- locks pple & orgns into specific goals with specific
time pds. Plans assume conditions will remain relatively stable over that time, which is
never the case.
2. One cant plan for a change in a turbulent environment – the envt is dynamic, changing
& unpredictable. Setting oneself on a predetermined course in unknown waters is the
perfect way to sail straight into iceberg. Turbulence can be turned into an opp. For those
flexible enough to seize it.
3. Systems can’t replace intuition & creativity- formal procedures are not able to forecast
discontinuities. Developing strategy is complex and demanding task that depends as
much if not more on intuition and creativity as on formal analysis.
4. Planning focuses mgt attention on competing with today’s industry structure rather
than competing for tomorrow – too much on how to position products & businesses
within existing industry structures. Inability to look ahead has lead to costly blunders and
monumental catch up costs.
5. Planning reinforces successful orgns to become overly preoccupied with the factors
responsible for their success, forgetting the conditions that can lead to failure. Mgers in
successful orgns tend to develop perpetual biases that encourage them to maintain the
status quo. They become overconfident & entrenched in the strategies they have created.

Implementing policies and strategies

• All policies and strategies must be discussed with all managerial personnel and
staff.
• Managers must understand where and how they can implement their policies and
strategies.
• A plan of action must be devised for each department.
• Policies and strategies must be reviewed regularly.
• Contingency plans must be devised in case the environment changes.
• Assessments of progress ought to be carried out regularly by top-level managers.
• A good environment and team spirit is required within the business.
 • The missions, objectives, strengths and weaknesses of each department must be
analysed to determine their roles in achieving the business's mission.
• The forecasting method develops a reliable picture of the business's future
environment.
• A planning unit must be created to ensure that all plans are consistent and that
policies and strategies are aimed at achieving the same mission and objectives.

All policies must be discussed with all managerial personnel and staff that is required in
the execution of any departmental policy.

Fitting Policies and strategies into the

planning process
• They give mid- and lower-level managers a good idea of the future plans for each
department in an organization.
• A framework is created whereby plans and decisions are made.
• Mid- and lower-level management may add their own plans to the business's
strategic ones.

RISK TAKING AND DECISION MAKING.

Involves a complex mixture of knowledge, experience, creativity & risk taking.

Decision – a conscious choice among analyzed alternatives followed by action
Decision making process – series of related steps or stages that lead up to an action, an
outcome and assessment – effort to make sense of the complicated environment, to attain
some control over the uncontrollable and to achieve some sense of order. Managers in
any organization must find, solve and prevent problems.

Influencers of decisions
Reason uncertainty imagination
Emotion risk individual factors
Knowledge group factors

Types of managerial decisions

Programmed decisions – repetitive and routine with a definite procedure developed for
handling it
Non programmed decision – unstructured, novel, special treatment

Proactive decision – made in anticipation of an external change or other conditions.

Reactive – made in response to external changes.

Intuitive – a process of estimating or guessing to decide among alternatives

Systematic – organized, exacting, data driven process for choosing among alternatives.
The decision making process
1. Establish specific goals and objectives – goals are needed in each area where
performance influences effectiveness. If goals and objectives are adequately established,
they will dictate what results must be achieved.
2. Identify and define the problem- realization that a discrepancy exists between a
desired state and current reality. Problems in defining the problem include
Perceptual inaccuracies – attitudes, feelings, mental modes
Defining problem in terms of solutions
Identifying symptoms as problems
3.Establish priorities – all problems can’t be equal. Prioritize because resources are
limited. Consider and determine each problem significance – urgency, impact
(seriousness) growth tendency (future consequences).
4. Determine causes of the problem – internal vs external
5. Develop alternative solutions – examine internal and external environments which
lead to creative solutions to problems, bench mark.
6. Evaluate the alternatives – evaluate and compare, select the alternative that will
provide the most favorable outcomes and the least unfavorable outcomes.
Certainty- no element of chance, possible loss or unpredictability
Uncertainty – decision maker has absolutely no knowledge of the probability of the
outcome of an alternative.
Risk – chance of a possible loss, or unproductively in a decision
7. Select the solution –to solve a problem in order to achieve a predetermined objective.
Decision isn’t an end in itself but only a means to an end. Selection should not be an
isolated act.
Satisfier- a person who accepts a reasonable alternative that isn’t necessary the optimal
alternative.
8. Implement the decision – effectively implemented to achieve the objective – it is
possible for a good decision to be hurt by a poor implementation. In this sense,
implementation may be more important than the actual choice of the alternative.
9. Follow up – effective management involves periodic measurement of results, actual
results are compared to with planned results. If deviations exist, changes must be made. If
actual results don’t meet planed results, change must be made in the solution chosen, in
its implementation or in the original objective if its deemed unattainable. If the original
objective must be revised, then the entire decision process will be reactivated. Some
system of control and evaluation is necessary to make sure the actual results are
consistent with the original objectives.

Factors influencing individual decision making

1. Values – guidelines a person uses when confronted with a situation in which a choice
must be made. Most of an individuals values are acquired early in life and are a basic part
of the persons personality- other values can be acquired at adult hood eg customer
service. Values influences decisions in
Making value judgments in establishing goals and objectives
Make judgments when developing alternatives about various possibilities
 Selecting a solution and implementation plus follow ups.
2. Personality – psychological forces
Personality variables – individual attitudes, beliefs & needs
Situational variables – pertain to external (physical & social) situations which an
individual find themselves.
Interactional variables – pertain to individual’s momentary state as a result of interaction
with a specific situation with characteristics of an individual.
The pro efficiency, risk relevance, and relation of personality to decision making may
vary from person to person.
3.Propensity for risk – Decision makers vary greatly in their willingness to take risk.
This influences decision making strongly. Low tolerance Vs high tolerance (avoids risk,
seek more risk alternatives). Propensity is also affected by whether potential outcomes
are characterized in terms of loses or gains.
4. Potential for dissonance – what happens after a decision is made, occurrence of post
decision anxiety – cognitive dissonance – lack of consistency or harmony among an
individuals various cognitions ( attitudes, beliefs) after a decision has been made. i.e there
will often be a conflict between what the decision maker believes and the consequences
of a particular decision- doubts and anxiety – may be greater when
A decision is important psychologically or financially, There are a number of forgone,
lternatives
The forgone alternatives have many favorable features.

Group Decision Making.

Teams, task forces and committees – organizational complexity and large amount of
information needed to move decisions – most creatively needed.

Advantages
Good in development and evaluation of alternatives- collective judgment, broad
Superior decisions
Specialists and experts are given an opportunity
Consensus in decision making is better
Majority rule, leadership decisions
Good for non programmed decisions

Disadvantages
More time needed to reach a decision
Negatively influenced by pressure to conform (group think)
Dominant personality
Status incogniety (low profile Vs high opinion pple)
Influence to others
Accept more risk decisions than individual
Responsibility held by individual manager