Chapter 5

Planning and Decision

Making

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MGMT6

5-1 discuss the benefits and pitfalls of planning

5-2
describe how to make a plan that works
5-3
discuss how companies can use plans at all
management levels, from top to bottom
5-4
explain the steps and limits to rational
decision making
5-5 explain how group decisions and group decisionmaking techniques can improve decision making

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Benefits of Planning
Intensified effort
Persistence
Direction
Creation of task strategies
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Pitfalls of Planning
Impedes change and prevents or
slows adaptation
Creates a false sense of certainty
Detachment of planners

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Setting Goals
S.M.A.R.T. Goals

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Specific
Measurable
Attainable
Realistic
Timely

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Developing Commitment to
Goals
Goal commitment
the determination to achieve a goal

Set goals collectively

Make the goal public
Obtain top managements support
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Developing Effective Action

Plans
An action plan lists

Specific steps (how)

People (who)
Resources (what)
Time period (when)
for accomplishing a goal
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Tracking Progress
Proximal goals and distal goals
Performance feedback

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Maintaining Flexibility
Options-based planning
keep options open by making, small
simultaneous investments in many
alternative plans.

Slack resources
a cushion of resources, like extra time or
money, that can be used to address and
adapt to unanticipated changes.
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Starting at the Top

Strategic plans
make clear how the company will serve
customers and position itself against
competitors in the next 2 to 5 years

Purpose statement
a statement of a companys purpose or reason
for existing

Strategic objective
a more specific goal that unifies company-wide
efforts, stretches and challenges the
organization, and possess a finish line and a
time frame.
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Bending in the Middle

Tactical plans
specify how a company will use resources,
budgets, and people to accomplish specific
goals related to its strategic objective
time frame: 6 months to 2 years

Management by Objectives (MBO)

discuss possible goals
collectively set goals
jointly develop tactical plans
meet regularly to review progress
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Finishing at the Bottom

Operational plans
Single-use plans
Standing plans
policies
procedures
rules and regulations

Budgets
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Steps to Rational Decision Making

1.
2.
3.
4.

Define the problem

Identify decision criteria
Weight the criteria
Generate alternative courses of
action
5. Evaluate each alternative
6. Compute the optimal decision

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Define the Problem

Existing state

PROBLEM
Desired state

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Identify Decision Criteria

The standards used to guide
judgments and decisions.

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Weight the Criteria

Absolute comparisons
Relative comparisons

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Generate Alternative
Courses of Action
After identifying and weighting the
criteria that will guide the
decision-making process, the next
step is to identify possible courses
of action that could solve the
problem.

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Evaluate Each Alternative

The next step is to systematically
evaluate each alternative against
each criterion.
The key is to use information to
systematically evaluate each
alternative against each criterion.

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Criteria Ratings Used to Determine the

Best Location for a New Office

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Compute the Optimal Decision

(rating for criterion A) x (weight for
criterion A)

+
(rating for criterion B) x (weight for
criterion B)

+
(rating for criterion C) x (weight for
criterion C)
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Limits to Rational Decision

Making
In theory, fully rational decision
makers maximize decision by
choosing the optimal solution.
In practice, limited resources make it
nearly impossible to maximize
decisions.

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Advantages of Group
Decision Making
Groups do a better job than individuals
at
Defining the problem
Generating alternative solutions

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Pitfalls of Group
Decision Making
Groupthink
Takes considerable time
Strong willed members

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Structured Conflict
C-type (cognitive) conflict
focuses on problem- and issue-related
differences of opinion
willingness to examine, compare, reconcile
differences to produce the best possible
solution

A-type (affective) conflict

emotional reaction that can occur when
disagreements become personal
hostility, anger, resentment, distrust, cynicism,
apathy

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Creating C-Type Conflict

Devils advocacy
Nominal Group Technique
Delphi Technique
Brainstorming/Electronic
brainstorming
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Inside Man

<click screenshot for video>

1. Does this scene show

strategic or tactical
planning?
2. What pieces of the
planning type does it
specifically show?
Give examples from
the scene.
3. Do you expect this
plan to succeed? Why
or why not?
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Plant Fantasies

<click screenshot for video>

1.Did Plant Fantasies

owner Teresa Carleo
follow the rational
decision-making process
to launch Plant
Fantasies? Explain.
2.List an example of a
programmed decision at
Plant Fantasies. Identify
a nonprogrammed
decision at Plant
Fantasies.
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