Decision Making and Planning in Organizations

Decision Making and Planning

• Decision making is the foundation of planning acting as the driving forse and underpins setting goals.
• Planning occurs in all organizations, and despite differences, it exists within an environmental context.
• All goals are tied to higher aspirations, and plans guide their achievement.

Organizational Goals

• Goals direct employees, improve planning quality, motivate and enable evaluation and control.
• Organization's mission incorporates purpose, premise, values, directions, and strategic, tactical, and operational goals and plans.

Kinds of Goals

• A mission statement defines an organization's purpose, while strategic goals, set by top management, address broad issues.
• Tactical goals are used by middle managers to enact strategic goals, and operational goals, defined by lower-level positions, address tactical needs.

Setting Goals

• All managers set goals, and responsibility aligns with organizational level.
• Optimizing multiple goals allows balancing conflicting objectives, finding a middle ground.

Criteria for Effective Goals

• Effective goals should be specific, measurable, realistic, and challenging, with defined time periods and rewards.

Kinds of Organizational Plans

• Strategic plans are general, set by top management, allocate resources and prioritize actions to achieve strategic goals.
• Tactical plans aim to achieve tactical goals for middle management.
• Operational plans are short-term plans set by lower-level positions.

Time Frames for Planning

• Planning requires sufficient time to meet managerial commitments.
• Plans can be long-range (5+ years, strategic), intermediate (1–5 years, tactical), or short-range (one year or less, operational).

Responsibilities for Planning

• Planning staff gather information and take a wider planning view.
• A planning task force addresses specific organizational needs.
• The board of directors sets corporate missions and strategies.

Roles in Planning

• The chief executive officer directs strategy implementation, and sets the mission.
• The executive committee is composed of top executives and CEO.
• Line management has authority and responsibility for organizational management.

Contingency Plans and Crisis Management

• Contingency planning identifies alternative actions if plans are disrupted.
• Ongoing planning involves developing plans, identifying triggers, specifying indicators, and completing plans or contingencies.

Types of Operational Plans

• Single-use plans carry out actions unlikely to repeat.
• Standing plans guide recurring activities through policies, standard procedures, and rules.
• Crisis management involves procedures for disasters or unexpected events.

Managing Goal-Setting and Planning Processes

• Anticipating difficulty and having contingency plans are crucial
• Managers address barriers to goal setting by understanding purposes, improving communication, and updating plans.

Using Goals to Implement Plans

• Management by Objectives (MBO) integrates goals to clarify expectations.

Formal Goal Setting

• Strengths include motivation, communication, performance, focus, talent identification, and control.
• Weaknesses of goal setting includes poor implementation, lack of support from the top-down, too much paperwork, etc.

Nature of Strategic Management

• Strategy is a comprehensive plan for achieving goals.
• Strategic Management formulates strategies to leverage opportunities and tackle business challenges.
• Strategy involves aligning operations with the environment and goals.

Components of Strategy

• Distinctive Competence is exceptional organizational performance.
• Scope defines market range, and Resource Deployment allocates resources strategically.

Types of Strategic Alternatives\

• Business-Level Strategy defines how to compete within the industry.
• Corporate-Level Strategy guides management across industries.

Strategy Formulation and Implementation

• Strategy Formulation focuses on crafting strategies, and Strategy Implementation focuses on executing the plan.
• Deliberate Strategy is a planned strategy to achieve specific goals.
• Emergent Strategy evolves without formal missions or goals.

SWOT Analysis and Strategy

• Evaluating Strengths, Weaknesses, Opportunities, Threats

Evaluating Organizational Strengths

• Organizational Strengths allows strategy implementation and conception.
• Distinctive Competencies: are useful for competitive advantage and superior performance.
• Sustained Competitive Advantage occurs when competence cannot be duplicated.

Evaluating Organizational Weaknesses

• Organizational Weakness: is when skills don't support the mission, but can be improved with investments or modified missions
• Competitive Disadvantage occurs when strategy fails against competitors.

Evaluating an Organization's Opportunities and Threats

• Opportunities are areas that enhance performance, while threats impede it.

Business-Level Strategies

• Porter's Generic Strategies (Differentiation, Cost Leadership, Focus) outline approaches to competitive advantage.
• Differentiation involves distinguishing through quality; cost leadership reduces expenses.
• Focus concentrates on specific markets.

Implementing Porter's Generic Strategies

• Differentiation needs high-quality marketing, and cost leadership focuses on affordable attributes.
• Focus uses either differentiation or cost leadership for specific groups.

Miles and Snow's Strategy Types

• The Prospector: seeks new opportunities.
• The Defender: protects current markets; lower production costs.
• The Analyzer: balances Prospector and Defender. -All focus on being someewhat innovative.
• The Reactor: lacks strategy; react to changes.

Implementing Miles and Snow's Strategies

• Prospectors encourage creativity, and Defenders focus on efficiency.
• Analyzers combine both approaches.

Product Life Cycle

• During the Introduction: focuses on product launch.
• During the Growth: ensures quality.
• The Mature Stage: reduces costs

Corporate-Level Strategies

• Strategic Business Units operate within specific markets.
• Diversification increases the number of businesses involved.

Corporate-Level Strategies

• Single-Product Strategy focuses on one product in one market.
• Related Diversification links diverse businesses, reduce economic-risks, by using Similar technology, distribution, brand name, and customers.
• Unrelated Diversification manages multiple, unrelated businesses.

Advantages and Disadvantages of Diversification

• Advantages exist when performance improves across diverse sectors.
• Disadvantages mean difficulties in overseeing varied businesses

Implementing Corporate-Level Strategies

• Become a Diversified Firm.
• Replacement of Suppliers and Customers through the process of vertical integration
• Becoming a Diversified Firm requires internal development, mergers, and acquisitions.

Managing Diversification

• Organization structure and portfolio management techniques are major tools.
• Diversified firms allocate resources to maximize performance; two techniques include the use the BCG Matrix and GE Business Screen.

The BCG Matrix

• It evaluates businesses based on growth and market share; four classifications in a diversified portfolio with this method: -"Dogs, question marks, stars, and cash cows".
• It evaluates business units in a diversified firm using industry attractiveness and competitive strength.

International vs. Global Strategies

• Global efficiencies involve location, scale, and scope.
• Multimarket flexibility: responds to inter-country changes.

Strategic Alternatives for Internal Businesses

• Home Replication transfers domestic advantages, and Multi-Domestic adapts to local needs.
• Global Strategy standardizes worldwide, and Transnational Strategy balances global and local benefits.

The Decision Making Process

• Decision Making chooses one alternative from many.
• Decision-Making Process recognizes situations, identifies options, selects the best, and implements/evaluates.

Decision-Making Conditions

• Certainty is when all alterantives and conditions are known.
• Risk involves knowing the payoff and its associated costs.
• Uncertainty occurs when limited alternatives and risks are known.

Factors that Prevent Rationality

• Lack of Consensus when definitions and goals are unclear, and unclear relations prevent planning.
• A noisy environment makes outcome prediction difficult.

Behavioral Aspects of Decision Making

• Bounded Rationality is limited by values and reflexes.
• Satisficing is searching only until the minimum standard is met.
• Coalition is a political force to achieve a specific goal.

Cognitive Biases

• Intuition relies on innate belief, and Escalation reinforces poor decisions.
• Risk Propensity affects gambling willingness, while Availability sways likelihood based off recalled examples.

Decision-Making Errors

• Outcome and clustering biases affect judgement.
• Ostich Effect ignores dangerous information.

Ethics and Decision Making

• Personal ethics combine with the orgnanization's values and beliefs.
• Components of managerial responsibility are relations to the firm, the employees, and economic agents.

Group and Team Decision Making

• Interacting teams are the most common.
• Delphi groups use expert opinions, and Nominal groups innovatively rank alternatives.
• Brainstorming doesn’t criticize but encourages creativity.

Disadvantages of Group and Team Decision Making

• Groupthink, shifts choices, leading to compliance
• Groupthink suppresses optimal decisions, but devli's advocate helps avoid this.

Making Group and Team Decisions More Effective

• To make decisions more effective, awareness of pros/cons, deadlines, managing membership, evaluating alternatives, and rechecking decisions should all be considered.

Nature of Operation Management

• Operations Management transforms inputs through managerial activities into outputs.
• Excellence delivers organizational performance and creates value and utilitty

Types of Operations

• Manufacturing makes products you can see, while service create intangible utility.

Operations and Organizational Strategy

• Operations management impacts competitiveness and is interdependent with strategy.
• Strategic goals rely on operations resources.

Designing Operations Systems

• Product-Service Mix involves product-service selection, and capacity requires deciding production amounts
• Facility decisions concern location and layout.

Types of Layouts

• Product layout are arranged around the product.
• Process layout facilities are arranged around the process.
• Fixed position are used for large projects, Cellular layout for families of products

Operational Systems in Supply Chain Management

• Supply Chain Management improves effectiveness by managing operations and purchasing
• Operations Management serves as control coordination, and purchasing is important
• Inventory Management controls material flow, and Just-in-time minimizes material waste.

Managing Total Quality

• Quality satisfies stated/implied needs, and is both relative and absolute.
• Importance is recognized through the Baldrige Award; the importance of this is found in competition, productivity, and costs.

Eight Dimensions of Qualities

• Performance is product operating characteristics.
• Features are product enhancements, and Reliability assures uptime.

Eight Dimensions of Qualities

• Conformance adheres to standards, while Durability measures life
• Serviceability ensure product is repairable, and aesthetics are appealing.

TQM Tools and Techniques

• Benchmarking is learning best practices; and outsourcing involves subcontracting.
• Reducing cycle time is also a tool.

Statistical Quality Control (SQC)

• Consists of acceptance sampling (tested finished products) and in-process sampling (tests throughout).

Managing Productivity

• Productivity measures efficiency.

Levels of Productivity

• Productivity is analyzed at aggregate industry, company, unit, and individual levels

Explore decision-making as the core of planning and goal-setting in organizations. Understand how different types of goals—strategic, tactical, and operational—drive organizational success. Learn about the importance of mission statements and goal alignment across all management levels.