2. Planning and Decision Making5
chapter
Planning and Decision Making
McGraw-Hill/Irwin
Principles of Management
© The McGraw-Hill Companies, Inc., All Rights Reserved.

3. Learning Objectives
Describe the different levels of planning in an organization.
Explain the difference between strategic, tactical, operating, and unit plans.
Outline the value of simple-use plans, standing plans, and contingency plans.
Describe the main components of a typical strategic planning system.
Identify the main pitfalls that managers encounter when engaged in formal planning processes, and describe what can be done to limit those pitfalls.
Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.

4. Steps in Planning Choose goals Identify actions
Allocate responsibility
Review Performance
Make adjustments
Learning Objective 1: Describe the different levels of planning in an organization.
See Text Page: 106

5. Levels of Planning Corporate-level Strategic plan (CEO)
Sets the context for
Shaped by input from
Business-level strategic plan
(heads of businesses)
Operating plans (heads of functions)
Learning Objective 1: Describe the different levels of planning in an organization.
See Text Pages:
Unit plans (heads of departments, teams, individuals

6. Types of Plans
Strategic plans: A plan that outlines the major goals of an organization and the organizationwide strategies of attaining those goals.
Operating plans: Plans that specify goals, actions, and responsibility for individual functions.
Tactical plans: The action managers adopt over the short to medium term to deal with a specific opportunity or threat that has emerged.
Unit plans: Plans for departments within functions, work teams, or individuals.
Learning Objective 2: Explain the difference between strategic, tactical, operating, and unit plans.
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7. Types of Plans
Single-use plans: Plans that address unique events that do not reoccur.
Standing plans: Plans used to handle events that reoccur frequently.
Contingency plans: Plans formulated to address specific possible future events that might have a significant impact on the organization.
Crisis management planning: Plan formulated specifically to deal with possible future crises.
Scenario planning: Plans that are based on “what if” scenarios about the future.
Learning Objective 3: Outline the value of single-use plans, standing plans, and contingency plans.
See Text Pages:

8. Scenario Planning Formulate plans to deal Invest in one with those
Identify different
Possible futures
(scenarios)
Formulate
plans to deal
with those
futures
Invest in one
plan but …
Learning Objective 3: Outline the value of single-use plans, standing plans, and contingency plans.
See Text Page: 112
Switch strategy if
tracking of signposts
shows alternative
scenarios becoming
more likely
Hedge your bets
by preparing for
other scenarios
and …

9. Question
Can scenario planning apply and be useful to you as a student? Explain. Develop three scenarios for your post-graduation future and possible plans to deal with them.
Learning Objective 3: Outline the value of single-use plans, standing plans, and contingency plans.
Question
This should be an interesting application exercise for students to understand that these type of planning apply to them as well as organizations.

10. Scenario Planning Traps
Treating scenarios as forecasts
Failing to make scenarios global enough in scope
Failing to focus scenarios in areas of potential impact
Treating scenarios as informational only
Not using an experience facilitator
Learning Objective 3: Outline the value of single-use plans, standing plans, and contingency plans.
Scenario Planning Traps
This slide presents some common traps with scenario planning.
Ask the students – what other items should managers be concerned about or watch out for? (Some of the other issues may be not spending enough time on scenario development or using enough imaginative power in developing scenarios, not having adequate process, etc.)
Ask the students – where can they see the utility of scenario planning in their life? (some immediate examples may be job search, housing situations, etc.)
Source:
Source:

11. The Strategic Planning Process
Feedback
Mission, vision,
values, and goals
Internal
analysis
(strengths and
weaknesses)
External
analysis
(opportunities and
threats)
SWOT analysis
formulate strategies
Learning Objective 4: Describe the main components of a typical strategic planning system.
See Text Page: 113
Draft action plans
Assign subgoals,
roles,
responsibilities,
timelines,
and budgets
Review progress
against plan
Implement

12. Setting the Context: Mission, Vision, Values, and Goals
Mission: The purpose of an organization.
Vision: A desired future state.
Values: The philosophical properties to which managers are committed.
Goals: A desired future state that an organization attempts to utilize.
Learning Objective 4: Describe the main components of a typical strategic planning system.
See Text Pages:

13. Question
In describing the purpose of the organization, _____ should be _______-oriented.
mission; customer
vision; product
values; product
goals; customer
Learning Objective 4: Describe the main components of a typical strategic planning system.
Answer: A

14. Mission Checklist Ends, not means Effort Verbs
Nouns embodying activities
The Unidentifiable
Brevity
Broad vs. narrow
Value added
Unique
Learning Objective 4: Describe the main components of a typical strategic planning system.
Mission Checklist
This slide presents a checklist for developing effective mission statements as adapted from the Center for Nonprofit Organization.
Many of these aspects can apply to students for developing a mission statement for their own use in their personal life as well.
The mission should focus on the results. Make sure the mission is broad enough to allow for creative growth but narrow enough to have the focus. The mission should ignite effort and it should be brief, not too long. It should be unique and add value and provide direction.
Source: raise-funds.com
Source: raise-funds.com

15. Characteristics of Goals
They are precise and measurable.
They address important issues.
They are challenging but realistic.
They specify a time period in which they should be achieved.
Learning Objective 4: Describe the main components of a typical strategic planning system.
See Text Page: 115

16. 10 Ingredients for Successful Goals
Specific
Simple
Significant
Strategic
Rational
Measurable
Tangible
Written
Shared
Consistent with your values
Learning Objective 4: Describe the main components of a typical strategic planning system.
10 Ingredients for Successful Goals
This slide presents 10 ingredients for successfully setting and achieving goals according to the author Phillip Humbert.
Ask the students before showing this slide as to what they would consider as the necessary ingredients for setting ands achieving goals successfully?
Goals should be specific in concrete terms. It should be simple not complex, i.e., several goals should not be jumbled up together. They should be significant. Something one really wants. They should be strategic, i.e., it should impact as many areas of your life as possible. They should make sense. You must be able to measure them. Tangible: Define the goals in terms that excite your senses.They should be written and shared and consistent with your values.
Source:
Source:

17. The Benefits of Planning
Planning gives direction and purpose to an organization; it is a mechanism for deciding the goals of the organization.
Planning is the process by which management allocates scarce resources, including capital and people, to different activities.
Planning drives operating budgets-strategic, operations, and unit plans determine financial budgets for the coming year.
Planning assigns roles and responsibilities to individuals and units within the organization.
Planning enables managers to better control the organization.
Learning Objective 5: Identify the main pitfalls that managers encounter when engaged in formal planning processes, and describe what can be done to limit those pitfalls.
See Text Page: 118

18. Countering the Pitfalls of Planning
Solution
Too centralized;
top-down
Decentralized
planning
Failure to
question
assumption
Scenario planning;
devil’s advocate
Learning Objective 5: Identify the main pitfalls that managers encounter when engaged in formal planning processes, and describe what can be done to limit those pitfalls.
See Text Page: 119
Failure to
implement
Link to goals;
tie to budgets
Failure to
anticipate
rivals’ actions
Role-playing

19. The Rational Decision-Making Model
Identify the
problem
Identify
decision
criteria
Weight
criteria
Generate
alternative
courses of
action
Does not meet
expectations
Evaluate
Implement
alternative
Choose one
alternative
Learning Objective 6: Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.
See Text Page: 122
Meets
expectations
outcome
Continue with course of action

20. Bounded Rationality and Satisficing
Bounded rationality: Limits in human ability to formulate complex problems, to gather and process the information necessary for solving those problems, and thus to solve those problems in a rational way.
Satisfice: Aiming for a satisfactory level of a particular performance variable rather than its theoretical maximum.
Learning Objective 6: Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.
See Text Page: 122

21. Decision-Making Heuristics and Cognitive Biases
Decision heuristics
80-20 rule
Cognitive bias
Prior hypothesis bias
Framing bias
Learning Objective 6: Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.
See Text Pages:

22. 80-20 Rule Performing in your 20 percent if you’re:
Engaged in activities that advance your overall purpose in life
Doing things you have always wanted to do not what others want you to do
Hiring people to do the tasks you are not good at or don't like doing.
Smiling.
Learning Objective 6: Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.
80-20 Rule
This slide presents some ways of identifying whether you are working on the 20 or 80 percent of the issue or work.
80-20 rule suggest that 20% of the work will generate 80% of the result and therefore it would be ideal to understand where and when you are working on the 20 or the 80 % issue.
Ask the students – Can they identify and testify to this rule? Has this or does this work?
Source: Family Practice Management, September 2000

23. Improving Decision Making
Devil’s advocacy: The generation of both a plan and a critical analysis of the plan by a devil’s advocate.
Dialectic injury: The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.
Outside view: Identifying a reference class of analogies past strategic initiatives, determining whether those initiatives succeeded or failed, and evaluating a project at hand against those prior initiatives.
Learning Objective 6: Discuss the major reasons for poor decisions, and describe what managers can do to make better decisions.
See Text Page: 127