Chapter 5 Planning and Decision Making

Learning Outcomes After reading this chapter, you should be able to: 1.Discuss the benefits and pitfalls of planning. 2.Describe how to make a plan that works. 3.Discuss how companies can use plans at all management levels, from top to bottom. 4.Explain the steps and limits to rational decision making. 5.Explain how group decisions and group decision- making techniques can improve decision making. Copyright © 2015 by Nelson Education Ltd.5-2

Planning Choosing a goal Developing a method or strategy to achieve that goal Copyright © 2015 by Nelson Education Ltd

General Mills Goals and Methods Reducing the sodium content in its top 10 product categories by 20 percent on average Lowering the sugar levels in cereals advertised to children to single-digit levels per serving Removing trans fats from a significant portion of its products Copyright © 2015 by Nelson Education Ltd Planning

General Mills Results By the end of fiscal year 2011, General Mills was able to report that nutritionally improved products accounted for 64 percent of its retail sales volume. Copyright © 2015 by Nelson Education Ltd Planning

Benefits of Planning Intensified effort Persistence Direction Creation of task strategies Copyright © 2015 by Nelson Education Ltd

Pitfalls of Planning Impede change False sense of certainty Detachment of planners Copyright © 2015 by Nelson Education Ltd

How to Make a Plan That Works Copyright © 2015 by Nelson Education Ltd

1. Setting Goals Copyright © 2015 by Nelson Education Ltd S.M.A.R.T. Specific Measurable Attainable Realistic Timely How to Make a Plan That Works

2.Developing Commitment to Goals The determination to achieve a goal is increased by: setting goals making goals reasonable making goals public obtaining top management support Copyright © 2015 by Nelson Education Ltd How to Make a Plan That Works

3.Developing Effective Action Plans Who – People What – Resources When – Time period How – Specific steps Copyright © 2015 by Nelson Education Ltd How to Make a Plan That Works

4.Tracking Progress Toward goal achievement: distal goals gather and provide performance feedback proximal goals Copyright © 2015 by Nelson Education Ltd How to Make a Plan That Works

5.Maintaining Flexibility Methods of maintaining flexibility: Options-based planning Holding options open gives you choices. And choices, combined with slack resources, give you flexibility. Copyright © 2015 by Nelson Education Ltd.5-13 How to Make a Plan That Works

Planning from Top to Bottom Copyright © 2015 by Nelson Education Ltd

Starting at the Top: Top Management Strategic Plans Clarify how the company will serve customers and position itself against competitors (two to five years) Vision An inspirational statement of an organization’s purpose (two sentences) Copyright © 2015 by Nelson Education Ltd

Mission Overall goal that unifies efforts toward its vision, stretches and challenges the organization, and possesses a finish line and time frame; flows from the vision Copyright © 2015 by Nelson Education Ltd Starting at the Top: Top Management

Bending in the Middle: Middle Management Tactical plans: specify how a company will use resources, budgets, and people to accomplish goals within its mission (6 months to 2 years) Magnotta Winery Copyright © 2015 by Nelson Education Ltd

Bending in the Middle: Middle Management Management by Objectives (MBO) Discuss possible goals. Collectively select goals. Develop tactile plans. Review progress. Copyright © 2015 by Nelson Education Ltd

Finishing at the Bottom: Lower-Level Managers Copyright © 2015 by Nelson Education Ltd

What Is Rational Decision Making? Decision Making The process of choosing a solution from available alternatives Rational Decision Making A systematic process of defining problems, evaluating alternatives, and choosing optimal solutions Copyright © 2015 by Nelson Education Ltd

Steps to Rational Decision Making Steps of the Rational Decision-Making Process 1. Define the problem. 2. Identify the decision criteria. 3. Weight the criteria. 4. Generate alternative courses of action. 5. Evaluate each alternative. 6. Compute the optimal decision. Copyright © 2015 by Nelson Education Ltd

Steps to Rational Decision Making Weight the Criteria Absolute comparisons o Each criterion is compared to a standard or ranked on its own merits. Relative comparisons o Each criterion is compared directly to every other criterion. Copyright © 2015 by Nelson Education Ltd

Absolute Weighting of Decision Criteria for a Car Purchase Copyright © 2015 by Nelson Education Ltd.

Relative Comparison of Home Characteristics Copyright © 2015 by Nelson Education Ltd.

Steps to Rational Decision Making 1.Define the problem. The first step in decision making is to identify and define the problem. 2.Identify the decision criteria. This step is used to set standards to guide judgments and decisions. 3.Weight the criteria. This step is used to decide which criteria are more or less Important Copyright © 2015 by Nelson Education Ltd.

Steps to Rational Decision Making 4.Generate alternative courses of action. The idea is to generate as many alternatives as possible 5.Evaluate each alternative. This step can take much longer and be more expensive than the other steps in the process 6.Compute the optimal decision. Multiply the rating for each criterion by the weight for that criterion. Sum the scores for each alternative course of action Copyright © 2015 by Nelson Education Ltd.

Steps to Rational Decision Making satisfice maximize Copyright © 2015 by Nelson Education Ltd.

Group Decision Making ADVANTAGES 1.View problems from multiple perspectives. 2.Find and access more information. 3.Generate more alternative solutions. 4.Be more committed to making chosen solutions work Copyright © 2015 by Nelson Education Ltd.

Group Decision Making DISADVANTAGES 1.Susceptible to groupthink and to considering a limited number of solutions 2.Takes considerable time 3.One or two people can dominate the group discussion. 4.Members don’t feel personally accountable for decisions and actions Copyright © 2015 by Nelson Education Ltd.

Using Groups to Improve Decision Making Groupthink Structured conflict Delphi technique Nominal group technique Electronic brainstorming Copyright © 2015 by Nelson Education Ltd.

Groupthink Groupthink occurs in highly cohesive groups when group members feel intense pressure not to disagree with each other so that the group can approve a proposed solution Copyright © 2015 by Nelson Education Ltd.

Groupthink Groupthink is most likely to occur under the following conditions: The group is insulated from others with different perspectives, and the group leader begins by expressing a strong preference for a particular decision. There is no established procedure for systematically defining problems and exploring alternatives. Group members have similar backgrounds and experiences Copyright © 2015 by Nelson Education Ltd.

Class Activity: Dead Poets Society—Finding Your Own Way Finding Your Own Way Watch the video. What did this video illustrate on conformity and finding your own way? How does this relate to group decision making? Copyright © 2015 by Nelson Education Ltd. Beyond the Book

Structured Conflict C-Type Conflict (Cognitive Conflict) Disagreement that focuses on problem- and issue- related differences of opinion A-Type Conflict (Affective Conflict) Disagreement that focuses on individuals or personal issues Devil’s Advocacy (Used to Create C-Type Conflict) Assigning the role of critic Copyright © 2015 by Nelson Education Ltd

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.The group discusses advantages/disadvantages. 5.Ideas are ranked during a second “quiet time.” 6.Members read rankings out loud, and the idea with the highest average rank is selected Copyright © 2015 by Nelson Education Ltd.

Delphi Technique 1.Assemble a panel of experts. 2.Create a questionnaire of open-ended questions. 3.Summarize the responses and feedback 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 Copyright © 2015 by Nelson Education Ltd.

Electronic 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 used to come up with even more ideas. 4.Criticism or evaluation of ideas is not allowed Copyright © 2015 by Nelson Education Ltd.

ADVANTAGES Overcomes production blocking o Technology allows everyone to record their ideas as they are created. o No ideas are lost “waiting your turn” to speak. Overcomes evaluation apprehension o Anonymity creates free expression. Copyright © 2015 by Nelson Education Ltd Electronic Brainstorming

DISADVANTAGES 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. Copyright © 2015 by Nelson Education Ltd Electronic Brainstorming

Brainwriting Techniques Brainwriting: where group members sit together around a table; however, instead of expressing ideas through verbal communication, each participant writes down his or her ideas anonymously on sheets of papers or cards and then the ideas are distributed using a variety of formats to help spark more ideas. 5-40Copyright © 2015 by Nelson Education Ltd.