Management by chuch williams chapter 05

Chapter 5
Planning and Decision Making
MGMT
2008
Chuck Williams

Designed & Prepared by
B-books, Ltd.
1

Copyright ©2008 by Cengage Learning. All rights reserved


Planning
After reading these sections,
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.

2
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Planning
Planning
Choosing a goal and developing a
method of strategy to achieve that goal

1
3
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Benefits of Planning
Benefits
Benefits
of
ofPlanning
Planning

Persistence
Persistence

Intensified
Intensified
Effort
Effort
1.1

Direction
Direction

Creation
Creation
of
ofTask
Task
Strategies

Strategies
4

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Pitfalls of Planning
Pitfalls
Pitfalls
of
ofPlanning
Planning

False
FalseSense
Sense
of
ofCertainty
Certainty

Impedes
ImpedesChange
Change
and
andAdaptation
Adaptation

Detachment
Detachment
of

ofPlanners
Planners

1.2
5
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How to Make a Plan That Works

Set
Set
Goals
Goals

Develop
Develop
Commitment
Commitment

Develop
Develop
Effective
Effective
Action
Action
Plans
Plans

Track

Track
Progress
Progress
Toward
Toward
Goal
Goal
Achievement
Achievement

Maintain
Maintain
Flexibility
Flexibility

Revise
Reviseexisting
existingplan
plan
or
or
Begin
Beginnew
newplanning
planningprocess
process

2
6
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S.M.A.R.T.

Setting Goals
Specific
Specific
Measurable
Measurable
Attainable
Attainable
Realistic
Realistic
Timely
Timely

2.1
7
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Examples of S.M.A.R.T. Goals?
• Walgreens: “Second is to hire •
a significant number of people
with disabilities in our South
Carolina distribution center,
scheduled to open in 2007, and
achieve 20% productivity gains •
there.”
• UPS: “65% of drivers will have

access to the new technology
(implemented in 2004) by the
end of 2005.” and “In 2005, we
will increase operating profit in
each of our 3 key businesses:
domestic, int’l, supply chain.” •
• Wrigley: “In 2005, the
company will decrease the
long-term rate of return
assumption for the assets of its
U.S. (pension) plans from 8.75
% to 8.5%.”

Halliburton: “We estimate
that 74% of the backlog
existing on 12/31 will be
eliminated the following fiscal
year.”
Martha Stewart Living
Omnimedia: “In 2004 we
will discontinue the Catalog
for Living and its online
product options, and sell
remaining inventory in early
fiscal 2005.”
Starbucks: “In fiscal 2006,
we plan to open approximately
1,800 net new stores globally.”

8

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Developing Commitment to Goals
The determination to achieve a goal is
increased by…
–
–
–
–

setting goals participatively.
making goals reasonable.
making goals public.
obtaining top management support.

2.2
9
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Developing Effective Action Plans
An Action Plan Lists…
Specific
Specific Steps
Steps
People
People
Resources
Resources

Time
Time Period
Period
2.3
10
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Tracking Progress
Set…
Set…

Gather
Gather and
and provide…
provide…

Proximal
Proximal Goals
Goals

Performance
Performance
Feedback
Feedback

Distal
Distal Goals
Goals

2.4
11
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Maintaining Flexibility
Option-based planning
– keep options open by making
simultaneous investments
• invest more in promising options
• maintains slack resources

Learning-based planning
– plans need to be continuously adjusted
2.5
12
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Planning from Top to Bottom
Vision
Mission
Tactical Plans, MBO
Standing Plans
Operational Plans
Single-Use Plans

Vision

Mission

Middle
First-Level
Managers

3

Top
Managers

Tactical Plans, MBO

Operational, Standing, Single-Use
13

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Starting at the Top
Strategic
StrategicPlans
Plans

Vision
Vision

Mission
Mission
3.1

Clarify
Clarifyhow
howthe
thecompany
companywill
will
serve
servecustomers
customersand
andposition
position
itself
itselfagainst
againstcompetitors
competitors(2-5
(2-5years)
years)
An
Aninspirational
inspirationalstatement
statementof
ofan
an
organization’s
organization’spurpose
purpose
(2
(2sentences)
sentences)
Overall

Overallgoal
goalthat
thatunifies
unifiesefforts
effortstoward
toward
its
itsvision,
vision,stretches
stretchesand
andchallenges,
challenges,
and
andpossesses
possessesaafinish
finishline
lineand
and
time
timeframe.
frame.Flows
Flowsfrom
fromvision.
vision.
14

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Beyond the Book

Planning Time Lines
Strategic

2 Years

5 Years

Plans

6 months
2 years

Tactical

30 days
Operational

6 months
0

1

2

3
Years

4

5

6
15

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Bending in the Middle
Tactical
Tactical Plans
Plans

Specify
Specifyhow
howaacompany
companywill
willuse
use
resources,
resources,budgets,
budgets,and
andpeople
peopleto
to
accomplish
accomplishgoals
goalswithin
withinits
itsmission.

mission.
(6
(6months
monthsto
to22years)
years)

Management
Management
by
by
Objectives
Objectives

Develop
Developand
andcarry
carryout
outtactical
tacticalplans
plans

MBO
MBOis
isaafour-step
four-stepprocess
process
3.2
16
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Management by Objectives
Steps to Management by
Objectives:
1. Discuss possible goals
2. Select goals that are challenging, attainable and
consistent with the company’s overall goals
3. Jointly develop tactical plans that lead to the
accomplishment of tactical goals and objectives
4. Meet regularly to review progress

17
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Finishing at the Bottom

Operational
Operational
Plans
Plans

Day-to-day
Day-to-dayplans
plansfor
forproducing
producingor
or
delivering

deliveringproducts
productsand
andservices
servicesover
over
aa30-day
30-dayto
tosix-month
six-monthperiod
period

3.3
18
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Kinds of Operational Plans
Plans
Plansthat
thatcover
coverunique,
unique,
Single-Use
Plans
Single-Use Plans one-time-only events
one-time-only events

Standing
StandingPlans
Plans

Budgets
Budgets
3.3

Plans
Plansused
usedrepeatedly
repeatedlyto
tohandle
handle
frequently
frequentlyrecurring
recurringevents.
events.
Three
Threekinds
kindsare:
are: policies,
policies,procedures,
procedures,
and
andrules
rulesand
andregulations.
regulations.
Quantitative
Quantitativeplanning
planningto
todecide

decidehow
how
to
toallocate
allocatemoney
moneyto
toaccomplish
accomplish
company
companygoals
goals
19

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What Is Rational Decision
Making?
After reading these sections,
you should be able to:

4. explain the steps and limits to rational
decision making.
5. explain how group decisions and group
decision-making techniques can improve
decision-making.
20
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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.
4
21
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Steps to Rational Decision Making
11

Define
Define the
the problem
problem

22

Identify
Identify decision
decision criteria
criteria

33

Weight
Weight the
the criteria
criteria

44

Generate
Generate alternative
alternative courses
courses of
of action
action

55

Evaluate
Evaluate each
each alternative
alternative

66

Compute
Compute the
the optimal
optimal decision
decision

4
22
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Steps to Rational Decision Making
11

4.1

Define
Define the
the problem
problem

• A problem exists when there is a gap between a
desired state and an existing state
• To make decisions about problems, managers
must…
– be aware of the gap.
– be motivated to reduce the gap.
– have the knowledge, skills, abilities, and
resources to fix the problem.
23
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Steps to Rational Decision Making
22

Identify
Identify decision
decision criteria
criteria

• Standards used to guide judgments and
decisions
• The more criteria a potential solution
meets, the better that solution should be

4.2
24
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Steps to Rational Decision Making
33

Weight
Weight the
the criteria
criteria

• Absolute comparisons
– each criterion is compared to a standard
or ranked on its own merits

• Relative comparisons
– each criterion is compared directly to
every other criterion

4.3
25
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