Revision for topic: Planning & Decision Making

There are 4 benefits of planning:

1. Intensified Effort- Managers and employees put forth greater effort when following a plan.

2. Planning leads to persistence, that is, working hard for long periods. In fact, planning encourages persistence even when there may be little chance of short-term success.

3. The 3rd of planning is direction which it encourages managers and employees to direct their persistent efforts toward activities that help accomplish their goals and away from activities that don’t.

4. It encourages the development of task strategies. In other words, planning not only encourages people to work hard for extended periods and to engage in behaviours directly related to goal accomplishments, it also encourages them to think of better ways to do their jobs.

Pitfalls of Planning

There are 3 pitfalls of planning:

1. It can impede change and prevent or slow needed adaptation.

2. Planning can create false sense of certainty. Planners sometimes feel that they know exactly what the future holds for their competitors, their suppliers and their companies. However, all plans are based on assumptions.

3. 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 e.g. carrying out the plan. Plans are meant to be guidelines, not abstract theories. Consequently, planners need to be familiar with the daily details of their businesses if they are to produce plans that can work.

STEPS TO RATIONAL DECISION MAKING

There are 6 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

2. Identify the decision criteria - Standards used to guide judgments and decisions. The more criteria a potential solution meets, the better that solution should be.

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

4. Generate alternative courses of action – the idea is to generate as many alternatives as possible.

5. Evaluate each alternative – this step can take much longer and be more expensive than other steps in the process.

6. Compute the optimal decision:

- Multiply the rating for each criterion by the weight for that criterion

- Sum the scores for each alternative course of action