MCO 101

Unit 3: Decision-making and Planning

MANAGEMENT

Managing Expectations
TOPIC DETAILS:
After going through UNIT 3, you should be able to:
1.
2.
3.
4.
5.

MCO 101
Issue :2016

Discuss the benefits and pitfalls of planning.

Describe how to make a plan that works.
Discuss how companies can use plans at all management levels,
from top to bottom.
Explain the steps and limits to rational decision making.
Explain how group decisions and group decision-making
techniques can improve decision-making.

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Planning
Choosing a goal and developing a method of strategy to
achieve that goal.
Creation of Task Strategies

Direction

Benefits of Planning

Persistence (continuous)
Intensified Effort

False Sense of Certainty

Downside of Planning

Impedes Change and Adaptation

Detachment of Planners

MCO 101
Issue :2016

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How to Make a Plan That

Works

Set
Goals

Develop
Commitment

Develop
Effective
Action
Plans

Track Progress
Toward Goal
Achievement
Maintain
Flexibility

Revise existing plan

or
Begin new planning process

MCO 101
Issue :2016

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Setting Goals

S.M.A.R.T.

Specific
Measurable
Attainable
Realistic
Timely

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Issue :2016

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Examples of S.M.A.R.T.
Goals?

Starbucks: In fiscal 2006, we

plan to open approximately
1,800 net new stores globally.

Walgreen: 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.

MCO 101
Issue :2016

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, intl,
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.

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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

S.M.A.R.T.

Specific
Measurable
Attainable
Realistic
Timely

MCO 101
Issue :2016

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Developing Effective
Action Plans
An Action Plan Lists

Specific Steps

People

Resources

Time Period

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Issue :2016

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Tracking Progress

Set

Proximal Goals
Distal Goals

Gather and provide

MCO 101
Issue :2016

Performance Feedback

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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

MCO 101
Issue :2016

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Planning from Top to

Bottom

Vision
Mission

Top Managers
Middle Managers
First Level Managers

MCO 101
Issue :2016

Tactical Plans
Operational
Plans

Management
by Objectives

Standing Plans

MANAGEMENT

Single Use
Plans

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Starting at the Top

Vision

Mission

Strategic Plans

MCO 101
Issue :2016

An inspirational statement of an
organisations purpose

Overall goal that unifies efforts toward

its vision, stretches and challenges, and
possesses a finish line and time frame.
Flows from vision.
Clarify how the company will serve
customers and position itself against
competitors
(can be 2-5 years)
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Planning Time Lines

Strategic

2 Years

5 Years

Plans

6 months
2 years

Tactical

30 days
Operational

6 months
0

MCO 101
Issue :2016

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3
Years

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Merck Corporations
Vision and Values

MCO 101
Issue :2016

MANAGEMENT

Source: The Merck Corporate Philosophy, 17 February 2005. Merck

& Co, Inc., All rights reserved.

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Bending in the Middle

Tactical Plans

Specify how a company will use

resources, budgets, and people to
accomplish goals within its mission.
(6 months to 2 years)

Management
by
Objectives

Develop and carry out tactical plans

1. Discuss possible goals

2. Participatively select goals consistent with overall goals
3. Jointly develop tactical plans
4. Meet to review progress
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Issue :2016

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Finishing at the Bottom

Operational
Plans

Day-to-day plans for producing or

delivering products and services over
a 30-day to six-month period

Single-Use Plans

Standing Plans

Budgets

MCO 101
Issue :2016

Plans that cover unique, one-time-only events

Plans used repeatedly to handle frequently recurring

events. Three kinds are: policies, procedures, and
rules and regulations.

Quantitative planning to decide how to allocate

money to accomplish company goals

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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.

MCO 101
Issue :2016

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Steps to Rational
Decision Making

MCO 101
Issue :2016

Define the problem

Identify decision criteria

Weight the criteria

Generate alternative courses of action

Evaluate each alternative

Compute the optimal decision

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Steps to Rational Decision

Making
1

Define the problem

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

MCO 101
Issue :2016

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Steps to Rational Decision

Making
2

Identify decision criteria

Standards used to guide judgments and

decisions
The more criteria a potential solution meets,
the better that solution should be

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Issue :2016

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Steps to Rational Decision

Making
3

Weight the 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

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Issue :2016

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Steps to Rational Decision

Making
4

Generate alternative courses of action

The idea is to generate as many alternatives as
possible

Evaluate each alternative

This step can take much longer and be more
expensive than other steps in the process

Compute the optimal decision

MCO 101
Issue :2016

Multiply the rating for each criterion by the

weight for that criterion
Sum the scores for each alternative course of
action
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Limits to Rational Decision

Making
Bounded Rationality
A decision-making process restricted in the real world
by:
limited resources
incomplete and imperfect information
managers limited decision-making capabilities

MCO 101
Issue :2016

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Using Groups to Improve

Decision Making
Advantages

Disadvantages

1. View problems from multiple

perspectives

1. Susceptible to groupthink and to

considering a limited number of
solutions

2. Find and access more

information

2. Takes considerable time

3. Generate more alternative

solutions
4. More committed to making
chosen solutions work

MCO 101
Issue :2016

3. One or two people can dominate

group discussion
4. Members dont feel personally
accountable for decisions and
actions

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Groupthink
Disadvantages
Groupthink is likely to occur when

1. Susceptible to groupthink and to

considering a limited number of
solutions

The group is insulated from

others with different
perspectives

2. Takes considerable time

3. One or two people can dominate
group discussion

The group leader expresses a

strong preference for a particular
decision

4. Members dont feel personally

accountable
for decisions and actions

There is no established
procedure for defining problems
and exploring alternatives
Group members have similar
backgrounds

MCO 101
Issue :2016

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Using Groups to Improve

Decision Making

Structured
Structured
Conflict
Conflict

Delphi
Delphi
Technique
Technique

MCO 101
Issue :2016

Nominal
Nominal
Group
Group
Technique
Technique

Stepladder
Stepladder
Technique
Technique

MANAGEMENT

Electronic
Electronic
Brainstorming
Brainstorming

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Structured Conflict

MCO 101
Issue :2016

C-Type Conflict

Cognitive conflict.
Disagreement that focuses on
problem- and issue-related
differences of opinion

A-Type Conflict

Affective conflict.
Disagreement that focuses on
individuals or personal issues

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Devils Advocacy &

Dialectical Inquiry

Steps to Establish a Devils Advocacy Program

Steps to Establish a Dialectical Inquiry Process

1. Generate a potential solution

1. Generate a potential solution
2. Assign a devils advocate to criticise
and question
3. Present the critique of the solution to
key decision makers
4. Gather additional information
5. Decide whether to use, change, or not
use the originally proposed solution

MCO 101
Issue :2016

2. Identify the assumptions underlying the

potential solution
3. Generate a conflicting counterproposal
based on opposite assumptions
4. Have advocates of each position
present their arguments and engage in
a debate in front of decision makers
5. Decide whether to use, change, or not
use
the originally proposed solution

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Nominal Group
Technique & Delphi
Technique

Steps to Establish Nominal Group Technique

1. During a quiet time, group members write

down as many problems and solutions as
possible
2. Each member shares one idea at a time
3. Ideas are posted on flipcharts until all ideas
are shared
4. Group discusses advantages /
disadvantages
5. Ideas are ranked during a second quiet
time
6. Members read rankings aloud, and the
idea with the highest average rank is
selected
MCO 101
Issue :2016

Steps to Establish Delphi Technique

1. Assemble a panel of experts.

2. Create a questionnaire of openended questions.
3. Summarise the responses and feed
back to the panel until the
members reach agreement.
4. Create a brief report and send to
the panel members for agreement /
disagreement.
5. Continue the feedback process until
panel reaches agreement.

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Stepladder Technique

Step 3

Step 2

Step 1

MCO 101
Issue :2016

Member 4 Joins Group

Shares thoughts, ideas,
recommendations

Members 1, 2, & 3 Share

previous thoughts, ideas,
recommendations

Member 3 Joins Group

Shares thoughts, ideas,
recommendations

Members 1 & 2
Share previous thoughts,
ideas, recommendations

Member 1
Shares thoughts, ideas,
recommendations

Member 2
Shares thoughts, ideas,
recommendations

MANAGEMENT

Discussion is Held and

Tentative Group Decision is
Made

Discussion is Held and

Tentative Group Decision is
Made

Discussion is Held and

Tentative Group Decision is
Made

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Electronic Brainstorming
Four Rules of Brainstorming

1. The more ideas, the better.

Overcomes production blocking

technology allows everyone to record
their
ideas as they are created
no ideas lost waiting your turn to speak
Overcomes evaluation apprehension
anonymity creates free expression

2. All ideas are acceptable, no

matter
how wild or crazy

Disadvantages of Electronic Brainstorming

3. Other group members ideas

should be used
to come up with even more
ideas.

4. Criticism or evaluation of ideas is

not allowed.

MCO 101
Issue :2016

Advantages of Electronic Brainstorming

MANAGEMENT

Greater expense
No automatic acceptance of ideas because of
ones position
Some find it difficult to express themselves in
writing
Lack of typing skills can frustrate participants

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