Planning and Decision Making
Chapter 3 EXAM Review
Mr. Sherpinsky
Business Management Class
Council Rock School District
The Planning Process
• Planning: the process of deciding which
objectives to pursue during a future time
period and how to achieve those
objectives.
–Primary management function
Why Plan?
• Planning enables an organization
to actively affect rather than
passively accept the future.
• Planning provides a means for
actively involving personnel
from all areas of the
organization in the
management of the
organization
Formal Planning
• Defined: The systematic
studying of an issue and
the preparation of a written
document to deal with the
problem.
– Formal Plan: Defined: a
written, documented plan
developed through an
identifiable process
• Levels of sophistication
• Depends on the needs and
organization
Formal Planning
• Functional Plans
– Most frequently encountered types
• Sales and marketing
• Productions
• Financial
• Personnel
Formal Planning
• Planning Horizons:
– Short-range plans cover upto a one-year period of time
– Long-range plans cover at
least a three-to-five year
period of time.
– Intermediate plans cover
the time span between
short-range and longrange
• Usually between short and long
range timeframes
Operational vs. Strategic Plans
• Operational or
Tactical
– Short-range planning
– Focuses on forming
ideas for dealing with
specific functions in the
company
• Ex: production schedules
and day-to-day operations
• Strategic
– Long-range planning
– Done by highest
management levels
• President, vicepresident, chief
operating officer
– Affects many parts of
the organization
Contingency Plans
• Regardless of
thorough you plan,
something always
goes wrong….
– Remember planning is
a one-sided process
• Contingency Plans:
back up plans that
address the what ifs
of the management
job.
• Always short-term
Objectives
• Objectives: Defined: are
statements outlining what
a manager is trying to
achieve.
• Objectives give an organization
and its members directions and
purpose.
• Should be clear, concise, and
measurable
Objectives
• Long-range
– Generally go
beyond the
organization’s
current fiscal year
– Must support and
not conflict with
the organization
mission
• Short-range
– Derived from indepth evaluation of
long-range
objectives
– List of priorities to
achieve longerrange objectives
The Planning Process
• MBOs (Management by Objectives)
– Philosophy that converts company objectives to
personal and management ones
• Policies
– Broad general guides to action that direct or
constraint and provide predictability
• Procedures
– Series of steps to meet objectives
– Usually done chronologically
• Rules
– Specific actions to take (or not to take)
Making Decisions
• Decision-making
– Not all decisions involve
problems
• Group decision-making
– Group decisions are
generally better then
making quick
independent decisions
Making Decisions
• Decision Making Vs.
Problem Solving
– Decision making: Choosing
from various alternatives
– Problem solving: The process
of determining the
appropriate recompense or
actions
Approaches to Problem Solving
• Satisficing
– Principle of bounded rationality
Assumes that people have the time and
cognitive ability to process only a limited
amount of information
Assumes knowledge of alternatives and criteria
is limited
Assumes people act on the basis of a
simplified concept of the world
Making Decisions
• Decision maker’s environment
• Environmental factors
– Manager’s position
– Structure of organization
– Tradition of organization
– Informal and formal group structures (i.e.,
unions)
– Superiors and subordinates
Making Decisions
• Intuitive approach
– Using emotions to make
decisions
– Fastening on unsubstantiated
facts and sticking with them
Making Decisions
• Maximax and Maximin
approach
– Maximax: Look at best alternative
whose best possible outcome is best
for all alternatives
– Maximin: Looking at the best
alternative and comparing to the
worst possible outcomes
Making Decisions
• Risk averting approach
– Choosing an alternative with least variation
among outcomes
• Timing
– Need for a decision must be recognized
– Must act at some point
• Participation
– Two heads are better than one
– Group performance is usually better than
individual performance
Barriers to Decision Making
• Complacency
– Ignoring data or not making a decision at all
• Defensive avoidance
– Denies the importance of the danger or
opportunity
• Panic
– Frantic attempts to solve a problem
• Deciding to decide
– Accepting responsibility for the decision
Management Information
Systems
• Integrated approach for providing
interpreted and relevant data to
help make decisions
– Data processing
• Capture, processing and storage of data
• MIS uses that data to produce information to
make good decisions
– Transaction processing system
•
•
•
•
Replaced manual record-keeping procedures
Payroll, billing inventory records
Routine
Highly structured decisions
Questions?
• Exam Next Class
• 100 Points
– Multiple Choice
– T/F
– Drop box
– Essay
Thinking Critically 3.1
• Ryanair- The Little
Airline That Could
– Read the challenge, pg 52
• Answer the questions 1-4
– Be Specific! Be Right!