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Learning Objectives Discuss the benefits and pitfalls of planning Describe how to make a plan that works Discuss how companies can use plans at all management levels, from top to bottom Explain the steps and limits to rational decision making Explain how group decisions and group decision-making techniques can improve decision making

Developing a method or strategy to achieve that goal Planning LO 1 Choosing a goal Developing a method or strategy to achieve that goal Has advantages and disadvantages

Benefits and Pitfalls of Planning LO 1 Benefits Involves intensified effort Leads to persistence Provides direction Encourages the development of task strategies Works for companies and individuals Pitfalls Impedes change and prevents needed adaptation Creates a false sense of certainty Leads to detachment of planners

5.1 How to Make a Plan That Works LO 2 5.1 How to Make a Plan That Works

Goal commitment: Determination to achieve a goal Effective Planning LO 2 S.M.A.R.T. goals: Specific, measurable, attainable, realistic, and timely goals Goal commitment: Determination to achieve a goal Techniques Setting goals participatively Making the goal public Obtaining top management’s support

Effective Planning (continued 1) LO 2 Action plan: Lists the specific steps, people, resources, and time period needed to attain a goal Tracking progress Setting proximal goals and distal goals Proximal goals: Short-term goals or subgoals Distal goals: Long-term or primary goals Gathering and providing performance feedback

Effective Planning (continued 2) LO 2 Maintaining flexibility Options-based planning: Keeping options open by making small, simultaneous investments in many alternative plans Slack resources: Cushion of extra resources that can be used to adapt to unanticipated changes, problems, or opportunities

5.3 Planning from Top to Bottom LO 3 5.3 Planning from Top to Bottom

Planning from Top to Bottom LO 3 Top management - Responsible for developing long-term strategic plans Purpose statement: Declaration of a company’s purpose or reason for existing Strategic objective: Specific goal that: Unifies company-wide efforts Stretches and challenges the organization Possesses a finish line and a time frame

Planning from Top to Bottom (continued 1) LO 3 Middle management - Responsible for developing and carrying out tactical plans to accomplish strategic objectives Tactical plans: Direct behavior, efforts, and attention over the next six months to two years Management by objectives: Managers and employees: Discuss and select goals Develop tactical plans Meet regularly to review progress

Planning from Top to Bottom (continued 2) LO 3 Lower-level managers - Responsible for developing and carrying out operational plans Operational plans: Day-to-day plans for producing or delivering the organization’s products and services over a thirty-day to six-month period

Kinds of Operational Plans LO 3 Single-use plans: Plans that cover unique, one-time-only events Standing plans: Plans used repeatedly to handle frequently recurring events Policies, procedures, and rules and regulations Budgeting: Managers decide how to allocate available money to best accomplish company goals

Decision Making and Rational Decision Making LO 4 Decision making: Process of choosing a solution from available alternatives Rational decision making: Systematic process of defining problems, evaluating alternatives, and choosing optimal solutions

Steps in Rational Decision Making LO 4 Defining the problem Managers must: Be aware of a problem Be motivated to solve the problem Have the knowledge, skills, abilities, and resources to fix the problem Identifying decision criteria Decision criteria: Standards used to guide judgments and decisions

Steps in Rational Decision Making (continued 1) LO 4 Weighing the criteria Absolute comparisons: Each decision criterion is compared to a standard or ranked on its own merits Relative comparisons: Each decision criterion is compared directly with every other criterion Generating alternative courses of action

Steps to Rational Decision Making (continued 2) LO 4 Evaluating each alternative against each criterion systematically Computing the optimal decision Performed by multiplying the rating for each criterion by the weight for that criterion and then summing the generated scores

Limits to Rational Decision Making LO 4 Managers have to operate in a perfect world with no real-world constraints Limited resources as well as attention, memory, and expertise problems make it difficult for managers to maximize decisions Satisficing: Choosing a good-enough alternative

Advantages and Pitfalls of Group Decision Making LO 5 Advantages In the decision-making process, groups perform better than individuals in: Defining the problem Generating alternative solutions Pitfalls Groupthink: Barrier to good decision making Takes considerable time Individuals can dominate group discussions

Types of Conflicts C-type conflict (cognitive conflict) Focuses on problem- and issue-related differences of opinion Involves a willingness to examine, compare, and reconcile the differences to produce the best possible solution C-type conflict (cognitive conflict) Focuses on individuals or personal issues Results in hostility, anger, resentment, distrust, cynicism, and apathy A-type conflict (affective conflict)

Methods of Creating C-Type Conflict LO 5 Devil’s advocacy Assigning an individual or a subgroup the role of critic Dialectical inquiry: Decision makers: State the assumptions of a proposed solution (thesis) Generate a solution that is the opposite (antithesis) of that solution

Nominal Group Technique and Delphi Technique LO 5 Nominal group technique Begins and ends by having group members write down and evaluate ideas Improves group decision making by decreasing a-type conflict Delphi technique Members of a panel of experts respond to questions and to each other until reaching agreement on an issue

Electronic Brainstorming LO 5 Group members use computers to build on each others’ ideas and generate as many alternative solutions as possible Disadvantages associated with face-to-face brainstorming are solved Production blocking: Group member must wait to share an idea because another member is presenting an idea Evaluation apprehension: Fear of what others will think of your ideas

Key Terms Planning S.M.A.R.T. goals Goal commitment Action plan Proximal goals Distal goals Options-based planning Slack resources Strategic plans Purpose statement Strategic objective Tactical plans Management by objectives Operational plans Single-use plans Standing plans Policies Procedures

Key Terms (continued 1) Rules and regulations Budgeting Decision making Rational decision making Problem Decision criteria Absolute comparisons Relative comparisons Maximize Satisficing Groupthink C-type conflict (cognitive conflict) A-type conflict (affective conflict) Devil’s advocacy Dialectical inquiry

Key Terms (continued 2) Nominal group technique Delphi technique Brainstorming Electronic brainstorming Production blocking Evaluation apprehension

Summary Planning brings about increases in individual and organizational performance Planning works best when the goals and action plans at the bottom and middle of the organization support the goals and action plans at the top of the organization Rational decision making is a systematic process of defining problems, evaluating alternatives, and choosing optimal solutions Group decision making can lead to better decisions