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CHAPTER: IVPLANNING AND DECISION MAKING

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Planning and decision making

Some DefinitionRicky W. Griffin – “ planning is setting an organizations goals and deciding how best to achieve them.”Richard steers – “ planning is the process by which managers defines goals and takes necessary steps to ensure that goals are achieved.”Robert R Kreitner - “ Planning is the process of coping with uncertainty formulating future course of action to achieve specified results.”

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Characteristics of planning

Focus on goalsPrimary functionPervasive activityFuture orientedContinuous activityIntellectual workFlexibleEfficiency and economyActionable

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Important of planning

Focus on goalsMinimize uncertaintyMaintain effective controlInnovation and creativityOrganizational effectivenessEconomy in operationFacilitates coordinationAvoids business failure

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Planning process/stepsAnalyze opportunitiesSetting goalsDetermination of premisesDetermination of alternativesEvaluation of alternativesSelecting of course of actionFormulation of derivatives plansImplementation of planReviewing the planning process

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Purposes of organizational goalsTo provide guidance and unified directionTo promote good planningTo serve as a source of motivationTo provide an effective mechanism for evaluation and controlTo provide distinct image and identity

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Function of organizational goals

Basis of organizingBasis of controlProper use of resourcesAssist in staffingFulfill individual goalsMaintain distinct imagesFeeling of job security

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Types of planning

•On the basis of hierarchyCorporate planTactical plan operational plan•On the basis of useSingle use planStanding use plan•On the basis of flexibilitySpecific planFlexible plan

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Method of planning

Top – down method Bottom – up methodComposite methodTeam method

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Tools for planning•Quantitative planning toolsForecastingNetwork techniqueFlow chartGantt chartBreakeven analysisLinear programmingsimulation

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Concept of strategic planning

• Ricky W. Griffin- “ strategic plan is a general plan outlining decision of resource allocation, priorities and action steps necessary to reach strategic goals.”•Ivancevich , Donnelly, Gibson – “ strategic planning is the process that involves the review of market conditions, customers needs, competitive strength and weakness, social- political and economic conditions, technological developments and availability of resources that lead to the specific opportunities or threats facing the organization.”

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Formulation of strategic planning

1. Identifying organization current mission, goals and strategies.

2. Analyze the external environment3. Identifying opportunities and threats4. Analyzing internal environment5. Identifying strengths and weakness6. Formulating strategies

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Implementation of strategic planningOrganizational structure and DesignCommunicationTechnologyOrganizational ResourcesGroups and TeamworkMotivating EmployeesLeadershipMonitoring and Evaluating

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Techniques Used for Environmental Scanning

SWOT ANALYSIS( strength, weaknesses, opportunities and threats)

PESTEL ANALYSIS (political, economical, social, technological, environmental, legal)

ETOP ANALYSIS (Environmental, Threat, Opportunity Profile)

QUEST ANALYSIS (Quick environ mental scanning technique)

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Situational AnalysisA systematic collection and evaluation of past and present economical, political, social, and technological data, aimed at (1) identification of internal and external forces that

may influence the organization's performance and choice of strategies, and

(2) assessment of the organization's current and future strengths, weaknesses, opportunities, and strengths. PEST analysis and SWOT analysis.

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Fig..

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Environmental scanning

• Environmental scanning is one component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. Environmental scanning refers to the macro environment.

• The global environment refers to the macro environment which comprises industries, markets, companies, clients and competitors.

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P E S T E LPolitical factors

Economical factors

Socio-cultural Technological factor

Environmental factors

Legal factors

Taxation Policy

Inflation rate age distribution

Internet competitive advantage

Unemployment law

Trade regulations

Growth in spending power

education levels.

E-commerce Waste disposal Health and safety

Governmental stability

Rate of people in a pensionable age

income level. Social Media Energy consumption

Product safety

Unemployment Policy

Recession or Boom

consumerism. Pollution monitoring

Advertising regulations

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Others are

Ecology• affects customer's buying habits.• affect the firm production process. Potential supplies• labor supply

– quantity of labor available.– quality of labor available.

• material suppliers. – delivery delay.– level of competition to suppliers,

• service provider. – special requirement.

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Methods for Environmental Scanning

Extrapolation Method (future from the past) Intuitive Reasoning (ability to acquire knowledge )Scenario building (what might happen in future) Cross-impact analysis (attempt to answer a question

whether perceptions of how future events may interact )Simulation and modeling( computer-based tools

developed to represent reality)Brain storming (generate new ideas)Delphi technique (expert opinion)

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SWOT Analysis

A SWOT Analysis is another method under the situation analysis that examines the Strengths and Weaknesses of a company (internal environment) as well as the Opportunities and Threats within the market (external environment). A SWOT analysis looks at both current and future situations, where they analyze their current strengths and weaknesses while looking for future opportunities and threats. The goal is to build on strengths as much as possible while reducing weaknesses. A future threat can be a potential weakness while a future opportunity can be a potential strength. This analysis helps a company come up with a plan that keeps it prepared for a number of potential scenarios.

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Management by Objectives (mbo)

Management by Objectives is a powerful tool for aligning employees actions with an organization's goals. By empowering employees to take responsibility for their performance and allowing them to see how their achievements impact the organization as a whole, you increase people's motivation, dedication, and loyalty. When you bring that full circle and link performance to evaluation and appraisal, you have a strong system that supports and values employees and facilitates great performance.

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Cont..

• To make MBO goal and objective setting more effective, Ducker used the SMART acronym to set goals that were attainable and to which people felt accountable. He said that goals and objectives must be:

Specific Measurable Agreed (relating to the participative management

principle) Realistic Time related

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Steps of mbo

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Unique features and advantages of the MBO process

• Behind the principle of Management by Objectives (MBO) is for employees to have a clear understanding of the roles and responsibilities expected of them. Then they can understand how their activities relates to the achievement of the organization's goal. Also places importance on fulfilling the personal goals of each employee.

• Some of the important features and advantages of MBO are:• Motivation – Involving employees in the whole process of goal setting and increasing

employee empowerment. This increases employee job satisfaction and commitment.• Better communication and coordination – Frequent reviews and interactions between

superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems.

• Clarity of goals• Subordinates tend to have a higher commitment to objectives they set for themselves

than those imposed on them by another person.• Managers can ensure that objectives of the subordinates are linked to the

organization's objectives.

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TYPES OF DECISIONS

PROGRAMMED DECISIONS: Programmed decisions are routine and repetitive, and the organization typically develops specific ways to handle them. A programmed decision might involve determining how products will be arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard arrangement decisions are typically made according to established management guidelines.

NON PROGRAMMED DECISIONS : Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision.

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DECISION MAKING PROCESS

Decision making steps this model depicts are as follows:• Identify an existing problem

• List possible alternatives for solving the problem • Select the most beneficial of these alternatives.

• Implement the selected alternative.

• Gather feedback to find out if the implemented alternative is

solving the identified problem.

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Types by natureStrategic Decisions Administrative Decisions Operational Decisions

Strategic decisions are long-term decisions.

Administrative decisions are taken daily.

Operational decisions are not frequently taken.

These are considered where The future planning is concerned.

These are short-term based Decisions.

These are medium-period based decisions.

Strategic decisions are taken in Accordance with organizational mission and vision.

These are taken according to strategic and operational Decisions.

These are taken in accordance with strategic and administrative decision.

These are related to overall Counter planning of all Organization.

These are related to working of employees in an Organization.

These are related to production.

These deal with organizational Growth.

These are in welfare of employees working in an organization.

These are related to production and factory growth.

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Decision Making Styles

• Democratic decision making is when the leader gives up ownership and control of a decision and allows the group to vote.

• Autocratic decision making is when the leader maintains total control and ownership of the decision.

• Collective - Participative decision making is when the leader involves the members of the organization. Other perspectives of the situation are discovered because the leader deliberately asks and encourages others to participate by giving their ideas, perceptions, knowledge, and information concerning the decision.

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Cont..

• Consensus decision making is when the leader gives up total control of the decision. The complete group is totally involved in the decision. The leader is not individually responsible for the outcome. The complete organization or group is now responsible for the outcome. This is not a democratic style because everyone must agree and "buy in" on the decision.

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Participatory Management

LEADER DECIDES FOLLOWERS DECIDES

Autocratic Consultative GroupDecides Delegation

Decide and TellDecide after

consultation and/orrecommendation

Followers share in decision

Delegation of decision with clear parameters

Style #1: AutocraticDecide unilaterally and announce decision. Ask for paraphrase to make sure you have been clear.

Style #2: ConsultAlmost decided, check reactions before final decision.

Style #4: MajorityMajority vote with leader having one vote … no veto power.

Style #6: DelegationDelegate the decision with clear parameters of freedom. Ask for paraphrase to make sure clear.

Style #3: recommendSolicit inputs before deciding.

Style #5: ConsensusAll agree after discussion.

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Decision-making conditions

• Certainty :When we have a feeling of complete belief or complete confidence in a single answer to the question is called certainty e.g. Decisions such as deciding on a new carpet for the office or installing a new piece of equipment or promoting an employee to a supervisory position are made with a high level of certainty. While there is always some degree of uncertainty about the eventual outcome of such decisions but there is enough clarity about the problem, the situation and the alternatives to consider the conditions to be certain.

• Risk: A state of uncertainty where some possible outcomes have an undesired effect or significant loss.

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Decision-making conditions

• Measurement of risk :• A set of measured uncertainties where some

possible outcomes are losses, and the magnitudes of those losses - this also includes loss functions over continuous variables.

• Uncertainty :The lack of certainty, A state of having limited knowledge where it is impossible to exactly describe existing state or future outcome, more than one possible outcome.

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Fig..

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VISUAL MEETING

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Group decision making

• Group decision making is a type of participatory process in which multiple individuals acting collectively, analyze problems or situations, consider and evaluate alternative courses of action, and select from among the alternatives a solution or solutions.

• The number of people involved in group decision-making varies greatly, but often ranges from two to seven. The individuals in a group may be demographically similar or quite diverse.

• Decision-making groups may be relatively informal in nature, or formally designated and charged with a specific goal. The process used to arrive at decisions may be unstructured or structured. The nature and composition of groups, their size, demographic makeup, structure, and purpose, all affect their functioning to some degree.

• The external contingencies faced by groups (time pressure and conflicting goals) impact the development and effectiveness of decision-making groups as well.

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Group Decision Making Techniques in an Organization

• Interacting Group Technique:

This type of technique involves people who interact face to face and on daily basis and they use both verbal and non-verbal skills to communicate with each other. This technique is not considered much reliable at organizational level decision making process because non-verbal symbols are misinterpreted sometimes which can affect the verdict badly.

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Brainstorming

• Brainstorming is an idea generation process that specifically encourages any all alternatives while withholding any criticism of those alternatives. It is meant to overcome the pressure of conformity that impede to the development of inventive substitutes.

• In Brainstorming usual session people are invited to meet each other physically, one person states the problem in a clear manner and respondents freewheel to generate multiple ideas in a given length of time.

• Everyone can give multiple ideas even how absurd it is, but no one can pass any criticism on those ideas unless the session is open for discussion on alternatives.

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Nominal Group Technique

A better form of Brainstorming is Nominal Group Decision Making Technique. People are restricted to have discussion or inter-personal communication during nominal session. Employees are met physically but they act independently, they are asked to write their ideas in response to a problem individually.

After this silent period, each member presents his ideas to the group, until all ideas have been presented and recorded no discussion takes place.

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Electronic Meeting

In Electronic Meeting, Nominal Group Technique is merged with new computer technology. Half dozen to a dozen people sit around a table and same process is repeated, respondents write their ideas on computers in front of them which are apparent to others just by a click of tab. This process is considered as the best because individual comments as well as aggregate votes are displayed on a projection screen. It allows people to be brutally honest, and the process is fast as chitchat is eliminated. Participants can talk at once, and remain anonymous.

The major disadvantage of group decision making is that it is more time consuming as compared to individual decision making.

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Delphi method

In this method of decision making, the facilitator allows team members to individually brainstorm their ideas and submit their ideas “anonymously”. The other team members do not know the owner of the ideas. The facilitator then collects all the inputs and circulates them among others for modifying or improving them. This process continues until a final decision is made.

Team decision making is a time-consuming process and before the team leader organizes participation of the full team, he/ she must be sure that he/ she has enough time and resources for the decision making process and choose a technique that is most appropriate in a given situation, keeping the profile of team members in mind.

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Tools and techniques

a. Cost/Benefit AnalysisA tool that allows the decision maker to simply compare the costs with the benefits of something

b. SWOTThe acronym stands for Strengths, Weaknesses, Opportunities and Threats. It is a very useful and effective tool for various situations in businesses and organizations wherein the strengths and weaknesses are identified as well as the opportunities and threats in order to arrive at sound decisions.

c. Pareto AnalysisThis tool is useful in focusing on major causes for changes that will bring about huge benefits to the decision maker.

d. Stepladder TechniqueThe technique works by managing the entry or admission of members in a decision making group. It encourages every member to contribute ideas and alternatives to the group.

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Cont..

e. Star burstingStar bursting is a process of gaining knowledge on new ideas through brainstorming but the focus is more on the questions and not on the answers.

f. PMIPMI tool is used for arriving at quick decisions that do not quite have problems. The acronym stands for Plus, Minuses, and Interesting points.

g. Paired Comparison AnalysisIt is a tool that helps determine the relative significance and feasibility of the alternatives.

h. Decision TreesWith this tool, the decision maker can choose from among alternatives by foreseeing the possible outcomes or courses of action.

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Cont..

• I . Why’s TechniqueThis is a very simple but effective tool that requires analyzing the problem at hand by asking “Why?” and “What caused it?” The question “Why?” is asked simultaneously 5 times, thus the term 5 Whys.

• j. Six Thinking HatsHere is another powerful tool that allows the person to look at decisions from various perspectives by thinking out of the box or going beyond the conventional manner of thinking.

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The Significance of Decision Making Tools and Techniques

• The various tools for decision making are so useful in providing structured data and close-to-accurate information and details. There are tools that are primarily used for projecting or forecasting possible outcomes, so decisions undergo elimination of choices in the process. Other tools are suitable for simulating different alternatives while some can serve as leading tools for a decision towards a certain direction.

• There are techniques that apply to workplace and business settings. Certain tools work best for individual decision making. It is important to choose the tool carefully and choose the one that is most appropriate to the situation at hand.