1. Organizational Planning Tools
Unit 1.7 HL

2. Organizational Objectives
Serve to guide a business and give it a sense of direction
Will be formed by the various stakeholders of a business (Unit 1.4)
Answer the key question:
“Where do we want to be?”

3. 3 Key Functions of Organizational Objectives
To Control
objectives can help control a firm’s plan; they set the boundaries for business activity
To Motivate
objectives can help inspire managers and employees to reach a common goal
To Direct
objectives provide an agreed and clear focus for all individuals and departments of an organization

4. Organizational Planning Tools
Tools that will help businesses plan in order to achieve their organizational objectives:
Fishbone diagram
Decision tree
Force field analysis
Gantt chart

5. Fishbone diagram
Also known as an Ishikawa or cause-and-effect diagram, is a diagram that attempts to identify the causes of an event.
It gets its name from the fact that the diagram resembles the skeleton of a fish.
The diagram was created by Kaoru Ishikawa, who pioneered quality management processes in the Kawasaki shipyards, and became one of the founding fathers of Japanese modern management.
Fishbone analysis provides a structured way to help think through all possible causes of a problem.

6. Fishbone diagram using the 4Ms to identify different categories of the causes:
Unsuitable management style and miscommunication with the workforce
Unskilled workers, a lack of training and insufficient personnel
Management – ie. Unsuitable management style and miscommunication with the workforce
Manpower - Unskilled workers, a lack of training and insufficient personnel
Machines - Technological failures, faulty equipment and the use of outdated machinery
Materials - Sub-standard (poor quality) materials and delayed deliveries
Demotivated or unproductive employees
Technological failures, faulty equipment and the use of outdated machinery
Sub-standard (poor quality) materials and delayed deliveries

7. Another example:

8. Methods – are the bottles used clean?
Machines – are there rusty pipes in the production machines?
Manpower – is it skilled enough?
Materials – are the raw materials to blame?
Measurement – is the calibration incorrect?
‘Mother nature’ (the environment) – is the working environment contaminated?

9. Stepped process for using a fishbone diagram:
1. Identify and agree on the problem
Write down the exact problem
Identify the staff involved, and when and where the problem occurs
Write the problem on the right-hand side of the diagram
Draw an arrow across the paper horizontally to the problem, providing a framework to develop ideas

10. Stepped process for using a fishbone diagram:
Establish the major causal factors involved
Identify the factors that may be root causes of the problem and merit further investigation
Draw lines off the spine for each of the factors and label the branches
These may include factors such as the people involved with the problem, machinery employed, methods used, and materials used
These factors may be established using a brainstorming exercise

11. Stepped process for using a fishbone diagram:
Identify possible causes
Where a cause is complex, there may be several sub-cause
For each root cause identified, ask: why is this cause happening?
Establish possible related sub-causes; these are then shown as smaller lines coming off the “bones” of the fish
The 5 whys techniques would be useful here (to establish the root causes of a problem we keep asking the question “Why?” until the cause is exposed)

12. Stepped process for using a fishbone diagram:
Analyze the diagram
Investigate the most likely causes identified on the diagram, which may involve further, more extensive and detailed research
This should help clarify whether the causes are correct

13. Fishbone Diagram Advantages: Easy to use and understand
Allows decision makers to brainstorm ideas in a systematic, holistic and logical way
It facilitates a visual diagnosis of a problem or issue
Disadvantages:
Tends to be simplistic for some real world problems
Must use with other decision making frameworks to establish the root cause(s) of a problem

14. Exam Tip!
Many students claim that certain decisions should not be pursued due to the risk involved, yet there is an element of risk associated with almost every business decision. It is the role of the skilled managers to ensure that decision-making carries as much quantifiable, rather than unquantifiable, risk as possible.

15. Create your own Fishbone Diagram

16. Decision Trees

17. Decision Trees Context
No technique can eliminate the risk involved in taking decisions, but managers can help themselves greatly if they adopt a logical approach to decision-making. One method of considering all the options available and the chance of them occurring is known as decision trees.
This device is a diagram that is drawn to represent three main features of a decision:
All the options open to a manager.
The different possible outcomes resulting from these options.
The chances of these outcomes occurring.
In brief, a decision tree may be defined as a diagram that sets out the options connected with a decision and the outcomes that may result from ‘chance’, following these options. The manager can minimize the risk involved.

18. Features of a decision tree
Decision Point: Points where decisions have to be made. They are represented by squares.
Outcomes: Points where there are different possible outcomes in a decision tree are represented by circles called decision nodes.
Probability or Chance: The likelihood of possible outcomes happening is represented by probabilities.
Expected Values: This is the financial outcome of a decision, which is based on the predicted profit and loss of an outcome and the probability of that outcome occurring.

19. Constructing a Decision Tree
It is constructed from left to right.
Each branch of the tree represents and option together with a range of consequences of outcomes and the chances of these occurring.
Decision points are denoted by a square – these are decision nodes.
A circle shows that a range of outcomes may occur – a chance node.
Probabilities are shown alongside each of these possible outcomes. These probabilities measure the chance of an outcome occurring.
The pay-offs are the expected financial gains of losses of a particular outcome.

20. Outcomes/Chance Nodes
A Simple Decision Tree
Expected Values
Outcomes/Chance Nodes
Probability/ Chance
Profit or Loss
Decision Point
Success
$15 Million
0.2
Launch New Campaign B
Failure A
-$2 Million
0.8
Success
$7 Million
0.4 C
Retain old Campaign
Failure
-$1 Million
0.6
A simple decision tree based on a decision whether to retain an existing advertising campaign or begin a new one

21. Calculating the Expected Value
Expected Value = Probability of an event occurring * Expected Results
Calculating the expected Value of the new campaign
Expected Value = 0.2 * $15m * (-$2m)
(Probability) (Expected Profit)+ (Probability) (Expected Profit)
=$3m - $1.6m
=$ 1.4m
Calculating the expected Value of retaining current campaign
Expected Value = 0.4 * $7m + 0.6* (-$1m)
= $2.28m – 0.6m
= $2.2m

22. Question
A friend has given you a sum of money for your 18th birthday. Which you want to invest in shares. A local independent financial advisor suggest that you ought to consider three companies:
Techy-Co- A high tech manufacturer.
Risky – Co- A new manufacturer, selling a brand new product which is predicted to be all ranges over the next two or three years.
Large – Co – A multinational conglomerate which sells to a wide range of industries.

23. Question Cont’d
Chance of Success
Chance of Failure
Techy-Company
0.5
Risky - Company
0.3
0.7
Large Company
0.8
0.2
Pay-off if Successful
Pay-off if Failure
$2,000
-$800
$3,000
-$500
$1,200
-$900
Techy = $600
Risky = $550
Large = $1140 (best investment)
Required: Calculate the expected value for each of the three companies and decide on the best investment

24. Outcomes/Chance Nodes
A Simple Decision Tree
Expected Values
Probability/ Chance
Outcomes/Chance Nodes
Profit or Loss
Success
0.5
Decision Point
$ 2,000 A
Failure
0.5
- $ 800
Success
0.3 A B
$ 3,000
0.7
Failure
- $ 500
Success
0.8
$ 1,200 C
Failure
0.2
- $ 900
A: (.5)(2,000) - (.5)(800) = 1, = $ 600
B: (.3)(3,000) - (.7)(500) = = $ 550
C: (.8)(1,200) - (.2)(900) = = $ 780

25. Mini Case
A business is deciding whether or not to launch a new product. It could do some market research, costing $12,000 which would mean the chance of a successful launch would be estimated at 70%. Without market research the chance of a successful launch would be only 50%. A successful launch would earn profit of $ 60,000 for the business, but if it failed, only $20,000 would be earned.
This information is summarized below
Forecast pay –off with market research
Without Market Research
Successful Launch
$60, %
50%
Failed Launch
$20, %
From the information, prepare a diagram of expected values and discuss the best course of action for the business.

26. ANSWER Expected Values
$60,000
Success 0.7
Launch
Research($12,000)
Failure 0.3
$20,000
Do not launch $0
Success 0.5
$60,000
Launch without research
Success 0.5
$20,000
Expected Values
Node 1:( 60,000*0.7) + (20,000*0.3) =$48,000 - $12,000 = $36,000
Node 2: (60,000*0.5) + (20,000*0.5) = $40,000
Question? Which option do you recommend? Justify your answer.

27. Problems of using decision trees
It is purely quantitative technique, which is designed to allow for probability and pay-off. There is no allowance for external issues which may be relevant to the decision being made.
The probabilities are extremely difficult to predict accurately, given their nature.
The forecast pay-offs are assumed to be correct, which may not be the case in reality. If both probability and forecast pay-offs are incorrect then the decision becomes as good as the information which is issued.
There are no in-between value for probability, that is, the pay-off can be one of three options – successful, moderate, poor. All the probabilities must add up to one, but in reality there is a wider range of answers, each with an associated probability.

28. Conclusion
Given the problems and assumptions, what is the point of using decision trees in the first place?
They provide a starting point in terms of allocating probabilities and pay-offs to different decisions.
They allow all potential decisions to be viewed simultaneously.
They can therefore act as an aid to decision making and must be used in conjunction with other factors which affect the decision.

29. Homework Question 1.7.1
Drisner Traders Ltd.

30. Homework Question 1.7.2
Ah-Tieng Beverages

31. Force Field Analysis

32. Lewin’s Force Field Analysis Model
Developed by Kurt Lewin
Driving forces
Push organizations toward change
External forces or leader’s vision
Restraining forces
Resistance to change -- employee behaviors that block the change process
FFA is essentially a specialized technique of weighing up advantages and disadvantages to help decide whether a proposed change is worth implementing
Restraining
Forces
Driving
Forces

33. Forcefield Analysis Steps: Identify a specific Change
Identify forces for and againsty change
Prioritise the forces
Develop Strategies to overcome opposing and reinforce supporting forces
Force field analysis is widely used to inform decision-making, and in particular in planning and implementing change management programmes in organizations. It is also a useful method for gaining a comprehensive view of the different forces (their source and strength) acting on a potential policy change and is therefore a very powerful tool for analyzing the possibilities for influencing policy. Force field analysis can clarify the ‘driving forces’ and identify obstacles or ‘restraining forces’ to change. For bridging research and policy, it can be used to analyse the forces affecting a situation or to assess the forces affecting whether particular research might be adopted as policy. It might also be used to identify where research may help tip forces towards a change.
How to do a forcefield analysis? The first step is to discuss and agree on the current situation and the goal of the policy or institutional change. All the forces for change should then be listed in one column and all forces against change in the other column. The next step is to brainstorm the ‘driving’ and ‘restraining’ forces and write them in the appropriate column. The ‘driving’ and ‘restraining’ forces should be sorted on common themes and/or prioritised according to their ‘magnitude’ towards change by assigning a score to each force, ranging from 1 (weak) to 5 (strong). The last and the most important step is to discuss action strategies to reduce the ‘restraining’ forces and to capitalise on the ‘driving’ forces.

34. What is a Gantt chart?
A Gantt Chart is a graphic display of schedule-related information.
Activities are listed down the left side of the chart
Dates are shown across the top
Activity durations are shown as horizontal bars.

35. Example of a Gantt Chart
Framework
Task Bars
Dependancy links
Milestones

36. Structure of a Gantt Chart
The framework The framework organizes the tasks, dependencies, and time scale of the project.
Task bars Task bars are horizontal bars that show when a task begins and ends. They are the heart of the Gantt chart.
Dependency links Dependency links show the relationship between the start and finish of two tasks.
Milestones A milestone marks a significant event in the project, usually the completion of a major deliverable.

37. Benefits of Gantt Charts
Gantt charts make it easier to manage a complex project than does a simple schedule.
Gantt charts make the relative schedules of many tasks clearly visible.
Gantt charts let managers test changes to the schedule ahead of time.

38. Exam Tip!
You may be required to construct a Gantt chart from given information in the exams. This tool can be very challenging for a lot of students, so the only way to improve is by practicing your techniques. Even if your Gantt chart is slightly wrong, marks are awarded for correctly interpreting and explaining the diagram.
Gantt charts will be used for the Action Plan in the IA research proposal.

39. Review Pages

40. Question & 1.7.4

41. Read the CUEGIS

42. Key Terms

43. Decision Trees
Are a quantitative organizational planning tool that calculates the probable values of different options, helping managers to minimize the risks in decision-making.

44. Force Field Analysis
With the forces for and against change. Driving forces are the benefits of change (such as reduced costs or improved productivity) while restraining forces are the causes of resistance to change.

45. Fishbone diagram (or cause and effect model)
Is an organizational planning tool based on identifying and dealing with the root causes of a problem or issue facing a business.

46. Gantt Charts
Are a visual representation of all the tasks in a particular project plotted against the timescale. As a planning and scheduling tool, it allows project managers to monitor progress.

47. Organizational Planning Tools
Are the various methods that businesses use to aid their decision-making, e.g. decision trees, fishbone diagrams, Gantt chars and force field analysis.