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 CHAPTER 2

PLANNING AND
DECISION-MAKING
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 PLANNING WITHIN
ORGANIZATIONS

 The planning process includes specifying goals

and plans—these are the two major components of
planning.
 A goal refers to a future target or end result that an
organization wishes to achieve.
 A plan, on the other hand, refers to the methods
devised to achieve an organizational goal. Planning
is, thus, a management function which involves the
setting of goals and deciding how best to achieve
them.
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 PLANNING WITHIN
ORGANIZATIONS (cont.)

 Planning can also be defined as the process of

choosing a goal and developing a method or
strategy to achieve that goal.

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 PLANNING WITHIN
ORGANIZATIONS (cont.)

 Organizational vision
– A vision is a mental
picture that you have
and want to turn into a
reality in the future.

 Organizational mission
– Essentially, the planning process builds on the
mission of the organization, which is the
organization’s purpose or fundamental reason for
existence.
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 PLANNING FROM TOP TO
BOTTOM

 Planning works best when the goals and plans at the

lower and middle level managements of an organization
support the goals and plans at the top level management.

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 SPECIAL-PURPOSE PLANS

Organizations use special-purpose plans to plan for:

 Change
 Contingencies
 Product development

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 Planning for Change

 Planning for change involves stretch goals and

benchmarking.
 One way an organization is able to choose stretch
goals of just the right difficulty is by benchmarking
 Benchmarking is a process of identifying
outstanding practices, processes and standards in
other organizations and adapting them to an
organization

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 Planning for Contingencies

Planning for contingencies involve the following steps:

1. Defining the scope of a scenario.
2. Identifying the major stakeholders (customers,
suppliers, competitors, government) and the roles
you expect them to play in the scenario.
3. Identifying basic political, economic, societal,
technological, competitive and legal trends that you
expect will occur in the scenario.

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 Planning for Contingencies
(cont.)

4. Identifying key uncertainties and the likely

outcomes associated with them.
5. Putting together your initial scenario using steps 1
to 4.
6. Checking for consistency and plausibility of facts
and assumptions in the scenario.
7. Writing the final scenario and conducting a series
of planning sessions for management teams to
develop contingency plans for the scenario.

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 Planning for Product
Development

 Organizations develop aggregate product plans to

manage and monitor all new products in development
at any one time.
 Aggregate product plans should indicate the
resources (funds, equipment, facilities, materials and
employees) that are being used for each product, and
how all the products fit with the organization’s mission
and strategic plan.
 Four key factors to faster product development are:

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 Planning for Product
Development (cont.)

 Cross-functional teams
 Internal and external communication
 Overlapping development phases
 Frequent testing of product prototypes

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 COSTS AND BENEFITS OF
PLANNING

Planning helps managers become more successful, but it does

not guarantee success. Planning has its advantages and
disadvantages, i.e.:
 Planning ensures that managers and employees put forth
greater effort.
 Planning can create a false sense of certainty, i.e. planners
sometimes feel that they know exactly what the future holds for
their competitors, suppliers and organizations.
 Planning can cause the detachment of planners. In theory,
strategic planners and top level managers are supposed to
focus on the big picture and not concern themselves with the
details of implementation (carrying out a plan).
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 NATURE OF ORGANIZATIONAL
GOALS

Organizational goals are one of the important elements

in a planning process. Benefits of goals:
 Goals can increase performance
 Goals help to clarify expectations
 Goals facilitate the controlling function
 Goals can increase motivation

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 Levels of Goals

The three levels of goals, strategic, tactical and

operational which form a hierarchy of goals.

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 Levels of Goals (cont.)

 Strategic goals
– Broadly defined goals or targeted outcomes set by top
level management
– These goals address issues concerning an organization
as a whole
 Tactical goals
– Goals or targeted outcomes set by middle level
management.
– These goals specify what has to be done by the
departments or units to achieve the results outlined in
the strategic goals
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 Levels of Goals (cont.)

 Operational goals
– Goals or targeted outcomes set by lower level
management.
– These goals address specific measurable outcomes
required from the lower levels.

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 DECISION MAKING

 Quality and timely decision making is essential for

the success of any organization.
 How an organization chooses to design its decision-
making rules are one of the most fundamental
aspects of its internal design.
 An organization’s ability to make good decisions is
particularly important in the face of increasing global
competition and greater uncertainty from exposure
to more competitors.

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 DECISION MAKING (cont.)

The Stages of Decision-making:

1. Identifying and diagnosing the problem
2. Generating alternative solutions
3. Evaluating alternatives
4. Making the choice
5. Implementing the decision
6. Evaluating the decision

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 Group Decision-making

 Group decision-making is a situation where people

are brought together to solve problems by sharing
their opinions and inputs.
Methods of Group Decision-making:
1. Authoritarian style
2. Brainstorming
3. Voting based method

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 Group Decision-making (cont.)

– Advantages of group decision-making

• Helps to combine individual strengths of group members
• Individual opinions can be biased or affected by pre-
conceived notions. A group decision always means enhanced
collective understanding of the course of action to be taken
after the decision is made.
• Gains greater group commitment since every member shares
in the decision-making process.
• Fosters a strong sense of team spirit amongst group
members and helps the group to think together in terms of
success as well as failure.

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 Group Decision-making (cont.)

– Disadvantages of group decision-making

• More time consuming than the process of individual decision-
making
• Takes longer to be finalized since there are many opinions to
be considered and valued
• In the case of an authoritarian or a minority group decision-
making process, the members whose opinions are not
considered tend to be left out from the process. This causes
team spirit to diminish.
• The responsibility and accountability of decisions are not
shared equally in some cases which leads to a split in the
group. This hampers overall efficiency of the group.
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