Planning & Decision Making Function Chapter 3 PDF

THE PLANNING & DECISION MAKING FUNCTION Chapter 3 MEANING, NATURE AND IMPORTANCE OF PLANNING MEANING is the dynamic process of making decisions today about future actions; and it is a selection or choice among alternatives. a process of deciding what...

THE PLANNING & DECISION MAKING FUNCTION Chapter 3 MEANING, NATURE AND IMPORTANCE OF PLANNING MEANING is the dynamic process of making decisions today about future actions; and it is a selection or choice among alternatives. a process of deciding what to do and how to do it before action is required. involves selecting missions and objectives and the actions to achieve to them 2 Planning Answers six basic questions in regard to any intended activity: What goal When time frame to accomplish tasks Where place or places where the plans or planning will reach its conclusion Who people who will perform the tasks How specific steps or methods to reach the goals What resources necessary to reach the goals 3  NATURE AND CHARACTERISTICS  Goal oriented  Intellectual process involves creative thinking, sound judgment and imagination not a mere guesswork but a rotational thinking based on goals, facts and considered estimates  Involves choice among many alternatives and decision making  Primary function of management 4  Continuous process  Pervasive: requires all levels of management  Designed for efficiency Leads accomplishment of objectives at the minimum possible coast It avoids wastage of resources  Flexible  Arranged in a hierarchy 5  Importance Limitation  Provides direction and sense of purpose X Risky because of  reduces uncertainties uncertainties and absence of accurate and adequate data. anticipates the future  provides basis for X difficult and complicated task: controlling requires patience and  provides view of the commitment organization as a X Expensive and time system consuming requires  promotes efficiency resources.  provides the base for X Affected by external cooperative and factors (PESTEC) coordinated efforts natural calamities...  provides guideline for 6 DM  Process 1. Establishing objectives (as direction, standard and motivation) 2. Developing premises (SWOT analysis): analyze current position, forecast future conditions 3. Preparation of derivative plans (sectional plans for segments of the company) 4. Selecting a course of action 5. Implementing the plan 6. Developing methods to control the operation of the plan 7  Types Types of Plans Breadth/Scope Time Use Strategic Long Standing Tactical Medium Single-use Operational Short 8  Scope/Breadth Dimension Level of management where plans are formulated. Based on scope/breadth we can classify plans into: 1. Strategic, 2. Tactical and 3. Operational 9  Operational Tactical Strategic Schermerhorn - Chapter 4 10 Strategic plans – Apply broadly to the entire organization – Establish the organization’s overall objectives – Seek to position the organization in terms of its environment – Provide direction to drive an organization’s efforts to achieve its goals. – Serve as the basis for the tactical plans. – Cover extended periods of time – Are less specific in their details 11 Tactical Plans  Are derived from strategic objectives  Tactical plans are specific and more goal oriented than strategic plans.  Middle level management in consultation with lower level management develops them.  Tactical plans are the means charted to support the implementation of the strategic plans.  They are concerned with shorter time frames and cover a narrower scope (narrower range of activities). 12 …Tactical Plans  Structures a firm’s resources to achieve maximum performance.  Concerned with what the lower level units within each division must do, how they must do it, and who will have the responsibilities for doing it.  Tactical plans make premises for operational plans.  Is narrower in scope than strategic plan and wider than operation plan; but more detailed than strategic plan and less detailed than operational plan E.g. what is the best pricing policy? Which city or town is suitable for marketing our products? 13 Operational Plan  Concerned with the day to day activities of the organization  Is made at the lower level management in consultation with middle level management.  It spell out specifically what must be accomplished to achieve specific/operational goals.  It is the most detailed (more specific) and narrowest plan compared to the above two; because it is to be implemented day-to-day.  E.g. –What production technique is best?  What materials are needed for operation? 14 Time Dimension  Time dimension refers to the time periods for which the planning is intended.  Based on the length of time a plan covers, we do have three types of plans: 1. Long-range (five years or more), 2. Medium-range (between one and five years) and 3. Short-range plans (one year or less). 15 …Time Dimension Therefore,  All strategic plans are long-range plans.  All tactical plans are medium-range plans.  All operational plans are short-range plans. 16 Use Dimension  It refers to the extent to which plans will be used on a recurring basis, i.e. based on how repeatedly/frequently a given plan is used.  Based on this dimension we do have two types of plans: 1. Standing plans and 2. Single use plans. 17 Standing Plans  They are plans which are formulated to be used again and again for the day-to-day operation of the organization.  They become necessary when the same kinds of actions are to be taken over and over.  Standing plans become valuable under relatively stable situations.  Once established, standing plans allow managers to conserve time used for planning and decision-making  The major types of standing plans are objectives, policies, rules and procedures. 18 Single use plans:  Are designed to accomplish a specific objective usually in a relatively shorter period of time and it is non repetitive.  They are detailed courses of action that probably will not be repeated in the same form in the future.  The major types of single use plans are programs, projects, and budgets. 19  Management by Objective (MBO) Is a systematic and organized approach that allows management to focus on achievable objectives and attain the best possible results from available resources Aims to increase individual and organizational effectiveness by aligning organizational objectives and subordinate objectives Clarifies and quantifies objectives to allow for monitoring, evaluation, and feedback throughout the hierarchy of objectives It emphasises the importance of objectives as a tool to be used by managers in fulfilling their managerial roles 20..MBO In an MBO, good objectives are SMART S S specific U M measurable C WORK A achievable HAVE C R result oriented E T time-related S S CASCADING OF OBJECTIVES 22 Setting Employee Objectives Identify an employee’s key job tasks. Establish specific and challenging goals for each key task. Allow the employee to actively participate. Prioritize objectives Build in feedback mechanisms to assess objective progress. Link rewards to objective attainment. 23  MBO; FRAMEWORK CONCEPT Supervisor Jointly plan Individually act Jointly control Setting Performing Reviewing objectives tasks results and Setting Discussing (subordinate) standards Providing implications Choosing support Renewing actions (supervisor) MBO cycle Subordinate 24  MANAGERIAL DECISION- MAKING Meaning:  Decision-making is a rational choice or selection of one alternative from among a set of alternatives.  Decision-making is the management function that consists of choosing one course of action from all the available alternatives. 25 Types of DM Schermerhorn - Chapter 4 26  The Decision-Making Process Revise Setting objectives Searching Comparing & managerial for evaluating objectives alternatives alternatives Revise or update Renew objectives search Follow-up Implementing The act and Take decisions of choice control corrective action as necessary 27  The Decision-Making Process Example 1. Plant expansion 2. Updating and replacing old machinery, Building entirely a new plant 3. Evaluate considering financial, technological, infrastructural and input constraints 4. Implementing and monitoring decision 28