3. Chapter Three Planning and Decision Making (1).pdf
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About This Presentation
Management
Slide Content
MGMT1061-Introduction to
Management
1
FessehaAfewerk(A/Professor)
Certified Management educator and Trainer
October 2023
AAU SCHOOL OF COMMERCE
Management
1
FessehaAfewerk(A/Professor)
Certified Management educator and Trainer
October 2023
AAU SCHOOL OF COMMERCE
Chapter Three Planning and Decision
Making
Learning Outcomes
After completing this chapter, you should be able
to:
1.Define the planning function intermsof managerial
responsibilities and decisions.
2.Describe planning functions four principal
elements.
3.Discuss why the planning function must begin with
the determination of objectives.
4.Compare arguments for and against the alternative
for implementing a plan.
2
Making
Learning Outcomes
After completing this chapter, you should be able
to:
1.Define the planning function intermsof managerial
responsibilities and decisions.
2.Describe planning functions four principal
elements.
3.Discuss why the planning function must begin with
the determination of objectives.
4.Compare arguments for and against the alternative
for implementing a plan.
2
Learning Outcomes…
5. Define programmed and non-programmed
decisions.
6. Define programmed and non-programmed
decisions.
7. Describe how the types of decisions managers
make are related to their levels in organization.
8. Compare individual and group decision-making.
9. Identify the major sources for locating problems
that require management decisions.
3
5. Define programmed and non-programmed
decisions.
6. Define programmed and non-programmed
decisions.
7. Describe how the types of decisions managers
make are related to their levels in organization.
8. Compare individual and group decision-making.
9. Identify the major sources for locating problems
that require management decisions.
3
Chapter 3 Planning and Decision
Making
3.1 Meaning, Nature, and Importance of
Planning
3.2 The Planning Process
3.3 Types of Plans
3.4 Limitations of Plans
3.5 Management by Objectives (MBO)
3.6 decision making and creative problem
solving
4
Making
3.1 Meaning, Nature, and Importance of
Planning
3.2 The Planning Process
3.3 Types of Plans
3.4 Limitations of Plans
3.5 Management by Objectives (MBO)
3.6 decision making and creative problem
solving
4
3.0 Introduction
•Planning is the basic activity for all managerial
operations.
•Managerial success depends to a very great
extent upon good and effective planning.
•Without planning, work will be haphazard and
success will be doubtful.
•Management cannot be effective without
planning nor can it be successful. In fact,
managers at all levels have to plan in their own
spheres. It ensures proper application of
resources for the attainment of desired ends.
5
•Planning is the basic activity for all managerial
operations.
•Managerial success depends to a very great
extent upon good and effective planning.
•Without planning, work will be haphazard and
success will be doubtful.
•Management cannot be effective without
planning nor can it be successful. In fact,
managers at all levels have to plan in their own
spheres. It ensures proper application of
resources for the attainment of desired ends.
5
Introduction…
•Successful managerial operations
demand prompt and proper
decisions. Decisions should be
taken quickly.
•Planning would involve
forethought, i.e., thinking before
hand. Planning would also provide
a base for taking decisions.
6
•Successful managerial operations
demand prompt and proper
decisions. Decisions should be
taken quickly.
•Planning would involve
forethought, i.e., thinking before
hand. Planning would also provide
a base for taking decisions.
6
Maslow’s
Hierarchy-of-Needs Theory
Introduction…
7
Hierarchy-of-Needs Theory
Introduction…
7
3.1 Meaning, Nature, and Importance
of Planning
•What is Planning?
•Planning is the chalking out of a course of
action.
•It is the preparation of a blue print.
•It is the spelling out of what is to be done,
when, how and by whom.
•Planning is the determination of the course and
sequence of activities, which would help the
enterprise to attain its objectives.
8
of Planning
•What is Planning?
•Planning is the chalking out of a course of
action.
•It is the preparation of a blue print.
•It is the spelling out of what is to be done,
when, how and by whom.
•Planning is the determination of the course and
sequence of activities, which would help the
enterprise to attain its objectives.
8
Planning…
•According to Koontz and Cyril O’Donnell,
‘planning is an intellectual process, the conscious
determination of the course of action and the
taking of decisions on purpose, knowledge and
considered estimates.’
•Planning bridges the gap between where we are
and what we want to achieve. When a manager
plans, he projects a course of action for the
future, attempting to achieve a consistent.
Coordinated structure of operations aimed at the
desired results.
9
•According to Koontz and Cyril O’Donnell,
‘planning is an intellectual process, the conscious
determination of the course of action and the
taking of decisions on purpose, knowledge and
considered estimates.’
•Planning bridges the gap between where we are
and what we want to achieve. When a manager
plans, he projects a course of action for the
future, attempting to achieve a consistent.
Coordinated structure of operations aimed at the
desired results.
9
Planning…
10
10
Planning…
•According to Koontz and Cyril O’Donnell,
‘planning is an intellectual process, the conscious
determination of the course of action and the
taking of decisions on purpose, knowledge and
considered estimates.’
•Planning bridges the gap between where we are
and what we want to achieve. When a manager
plans, he projects a course of action for the
future, attempting to achieve a consistent.
Coordinated structure of operations aimed at the
desired results.
Planning…
11
•According to Koontz and Cyril O’Donnell,
‘planning is an intellectual process, the conscious
determination of the course of action and the
taking of decisions on purpose, knowledge and
considered estimates.’
•Planning bridges the gap between where we are
and what we want to achieve. When a manager
plans, he projects a course of action for the
future, attempting to achieve a consistent.
Coordinated structure of operations aimed at the
desired results.
Planning…
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Forecasting
•Forecasting is an essential element of planning.
•Objectives and the course of action cannot be
properly framed without forecasting future course
of events in the business world.
•Forecasting is the technique of taking a
prospective view of things.
•It is estimating the shape of the things to be in the
foreseeable future. It is an attempt to foresee the
future on the basis of the present, i.e. on the basis
of known facts such as availability of raw
materials, labourcosts, plant capacity, etc.
19
•Forecasting is an essential element of planning.
•Objectives and the course of action cannot be
properly framed without forecasting future course
of events in the business world.
•Forecasting is the technique of taking a
prospective view of things.
•It is estimating the shape of the things to be in the
foreseeable future. It is an attempt to foresee the
future on the basis of the present, i.e. on the basis
of known facts such as availability of raw
materials, labourcosts, plant capacity, etc.
19
Forecasting…
•Forecasting is anticipating sales, financial
requirements, and general business conditions in
the years to come.
•It is a guess but not a leap in the dark. For,
business forecasting is the analysis of statistical
data and other economic information for the
purpose of reducing risks in making decisions
and long range plans. Business forecasting
provides a logical basis for anticipating the
future course of events.
20
•Forecasting is anticipating sales, financial
requirements, and general business conditions in
the years to come.
•It is a guess but not a leap in the dark. For,
business forecasting is the analysis of statistical
data and other economic information for the
purpose of reducing risks in making decisions
and long range plans. Business forecasting
provides a logical basis for anticipating the
future course of events.
20
Forecasting…
•Forecasting involves:
1) Forecasting of economic and the
business conditions as a whole
2) Forecasting for changes in the
particular industry and
3) Forecasting for the particular
unit.
21
•Forecasting involves:
1) Forecasting of economic and the
business conditions as a whole
2) Forecasting for changes in the
particular industry and
3) Forecasting for the particular
unit.
21
3.2 The Planning Process
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3.3
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Elements of Plans(Telsang:2003)
•Mission: This mission statement sets a company
apart from others by stating clearly what
customers it wants to serve with what products
and in which market.
•Objectives: These are the specific goals, which
the organization wants to achieve.
•Strategies: These are plans of attack; they are
the broad based plan of action by which the
organization intends to achieve its objectives.
27
•Mission: This mission statement sets a company
apart from others by stating clearly what
customers it wants to serve with what products
and in which market.
•Objectives: These are the specific goals, which
the organization wants to achieve.
•Strategies: These are plans of attack; they are
the broad based plan of action by which the
organization intends to achieve its objectives.
27
Elements of Plans(Telsang:2003)…
•Tactics: These are the means by which
strategies are implemented.
•They are more specific and detailed than
strategies
•Policies: These are general guidelines for
decision making especially on issues that
crop up regularly. They are broad
guidelines that channel management
thinking and actions so as to be consistent
with organizational objectives.
28
•Tactics: These are the means by which
strategies are implemented.
•They are more specific and detailed than
strategies
•Policies: These are general guidelines for
decision making especially on issues that
crop up regularly. They are broad
guidelines that channel management
thinking and actions so as to be consistent
with organizational objectives.
28
Elements of Plans(Telsang:2003)…
•Procedures: A procedure is a standing plan describing a
customary method of handling an activity whenever it is
to be undertaken. It is more specific than policies and
according to Certo(1980:126) it “outlines a series of
related actions that must be taken to accomplish a
particular task”. It may be a procedure for placing and or
receiving orders and when such procedures are in place,
they are expected to be followed strictly by the staff.
•Methods: These are prescribed manners for performing
a given task with adequate considerations to the
objectives, resources available and total expenditure of
time money and effort.
29
•Procedures: A procedure is a standing plan describing a
customary method of handling an activity whenever it is
to be undertaken. It is more specific than policies and
according to Certo(1980:126) it “outlines a series of
related actions that must be taken to accomplish a
particular task”. It may be a procedure for placing and or
receiving orders and when such procedures are in place,
they are expected to be followed strictly by the staff.
•Methods: These are prescribed manners for performing
a given task with adequate considerations to the
objectives, resources available and total expenditure of
time money and effort.
29
Elements of Plan…
•Rules: These are prescriptive directive to people on
their conduct and action. They are detailed and
recorded instruction that a specific action must or
must not be performed in a given situation. It does
not allow any rule for interpretation!
•Program: This is a comprehensive that includes
future use of different resources in an established
pattern and establishes a sequence of required
actions and time schedules for each in order to
achieve the stated objectives
•Standard: This is a unit of measurement to serve as
a criterion for performance
30
•Rules: These are prescriptive directive to people on
their conduct and action. They are detailed and
recorded instruction that a specific action must or
must not be performed in a given situation. It does
not allow any rule for interpretation!
•Program: This is a comprehensive that includes
future use of different resources in an established
pattern and establishes a sequence of required
actions and time schedules for each in order to
achieve the stated objectives
•Standard: This is a unit of measurement to serve as
a criterion for performance
30
Elements of Plan…
•Schedules: This is a time sequence of work
to be done; it is an essential part of an action
plan
•Budget: This is the statement of expected
results expressed in numerical terms. It may
be in Naira, hours, or units of production
•These elements are hierarchical as one is
derived from the other and they all end up
assisting in achieving the organizations
mission
31
•Schedules: This is a time sequence of work
to be done; it is an essential part of an action
plan
•Budget: This is the statement of expected
results expressed in numerical terms. It may
be in Naira, hours, or units of production
•These elements are hierarchical as one is
derived from the other and they all end up
assisting in achieving the organizations
mission
31
Characteristics of a good plan(Urwick)
1)Itissimpletounderstandandputinto
operation.
2)Itisbasedonclearlydefinedobjectives.
3)Itisnotrigidandshouldprovideroomfor
changesintargetsand/ormethodinfuture,
ifcircumstanceswarrantso.
4)Itshouldbebasedonthepresenti.e.,
availableresourcesoftheenterprise.
5)Itshouldbebalanced.
32
1)Itissimpletounderstandandputinto
operation.
2)Itisbasedonclearlydefinedobjectives.
3)Itisnotrigidandshouldprovideroomfor
changesintargetsand/ormethodinfuture,
ifcircumstanceswarrantso.
4)Itshouldbebasedonthepresenti.e.,
availableresourcesoftheenterprise.
5)Itshouldbebalanced.
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3.4 Limitations of Plans
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Limitations of Plans…
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Limitations of Plans…
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3.5
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3.6 Decision making and creative problem solving
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6C'sofDecisionMaking
1.Construct.
2.Compile.
3.Collect.
4.Compare.
5.Consider.
6.Commit.
1.Construct.
2.Compile.
3.Collect.
4.Compare.
5.Consider.
6.Commit.
Constructa clear picture of exactly what
mustbedecided.
Compilealistofrequirementsthatmustbemet.
Collectinformationonalternativesthatmeetthe
requirements.
Comparealternativesthatmeettherequirements.
Consider the “what might go wrong” factor with each
alternative.
Committoadecisionandfollowthroughwithit.
mustbedecided.
Compilealistofrequirementsthatmustbemet.
Collectinformationonalternativesthatmeetthe
requirements.
Comparealternativesthatmeettherequirements.
Consider the “what might go wrong” factor with each
alternative.
Committoadecisionandfollowthroughwithit.
ProblemAnalysisvsDecisionMaking
Itisimportanttodifferentiatebetween
problemanalysisanddecisionmaking.
Theconceptsarecompletelyseparatefrom
oneanother.Problemanalysismustbe
donefirst,thentheinformationgathered
inthatprocessmaybeusedtowards
decisionmaking.
Itisimportanttodifferentiatebetween
problemanalysisanddecisionmaking.
Theconceptsarecompletelyseparatefrom
oneanother.Problemanalysismustbe
donefirst,thentheinformationgathered
inthatprocessmaybeusedtowards
decisionmaking.
DecisionMaking
•Objectives must firstbe established
•Objectivesmustbeclassifiedandplacedinorder
ofimportance
•Alternativeactionsmustbedeveloped
•Objectives must firstbe established
•Objectivesmustbeclassifiedandplacedinorder
ofimportance
•Alternativeactionsmustbedeveloped
•Thealternativemustbeevaluatedagainst
alltheobjectives
•Thealternativethatisabletoachieve
alltheobjectivesisthe tentative
decision
•Thetentativedecisionisevaluatedfor
morepossiblevalues
alltheobjectives
•Thealternativethatisabletoachieve
alltheobjectivesisthe tentative
decision
•Thetentativedecisionisevaluatedfor
morepossiblevalues
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Creative thinking
•Creative thinking is of great assistance in
all functions of management, but it is of
particular value in the development of
relevant alternatives from which the
decision maker can exercise choice.
•Creativity is a highly valued asset in most
progressive organizations. As political,
technological, sociological, and economic
environments change, the organization
must innovate, adapt, or dies.
67
•Creative thinking is of great assistance in
all functions of management, but it is of
particular value in the development of
relevant alternatives from which the
decision maker can exercise choice.
•Creativity is a highly valued asset in most
progressive organizations. As political,
technological, sociological, and economic
environments change, the organization
must innovate, adapt, or dies.
67
Creative thinking…
•Typical definitions of creative behavior involve
such characteristics as the following:
(1) development innovative or new ideas or
products,
(2) sensitivity to gaps in knowledge and
disharmonies,
(3) high self-motivation and persistence, and
(4) nonhabitualbehavior encompassing a seeming
rejection of convention norms. Maslow
1
sees two
types of creativity.
68
•Typical definitions of creative behavior involve
such characteristics as the following:
(1) development innovative or new ideas or
products,
(2) sensitivity to gaps in knowledge and
disharmonies,
(3) high self-motivation and persistence, and
(4) nonhabitualbehavior encompassing a seeming
rejection of convention norms. Maslow
1
sees two
types of creativity.
68
Creative thinking…
•The first, primary creativity refers to the
unconscious processes of insight, incubation, seeing
things from within, inspiration, and the like.
•Secondary creativity deals more with logic, science,
planning, and a calculated research for new
combinations of existing ideas.
•Secondary creativity is that sought in an organized
fashion by research and development departments in
business firms.
•It is also the type which usually issues from artificial
creativity techniques such as brainstorming,
checklists, and the Gordon technique.
69
•The first, primary creativity refers to the
unconscious processes of insight, incubation, seeing
things from within, inspiration, and the like.
•Secondary creativity deals more with logic, science,
planning, and a calculated research for new
combinations of existing ideas.
•Secondary creativity is that sought in an organized
fashion by research and development departments in
business firms.
•It is also the type which usually issues from artificial
creativity techniques such as brainstorming,
checklists, and the Gordon technique.
69
Characteristics Creative thinking
1.Creative people do not differ significantly from less
creative in terms of intelligence. Intelligence is
necessary for creative thinking, but its presence does
not assure that it will occur.
2.The more creative are more likely o view authority
as conventional rather than absolute. They therefore
are able to reduce the external inhibitions upon their
thinking processes.
3. Creative people tend to make fewer black-and-white
distinctions. They have a more relativistic and less
dogmatic view of life.
4. The creative are more willing to consider and
express their "irrational" impulses.
70
1.Creative people do not differ significantly from less
creative in terms of intelligence. Intelligence is
necessary for creative thinking, but its presence does
not assure that it will occur.
2.The more creative are more likely o view authority
as conventional rather than absolute. They therefore
are able to reduce the external inhibitions upon their
thinking processes.
3. Creative people tend to make fewer black-and-white
distinctions. They have a more relativistic and less
dogmatic view of life.
4. The creative are more willing to consider and
express their "irrational" impulses.
70
Creativity in Organizational Decision
Making
•The process of creating products, ideas, or
procedures that are novel or original, and
are potentially relevant or useful to an
organization.
•Creativity is important because
–It allows the decision maker to more fully
understand and appraise the problem
Making
•The process of creating products, ideas, or
procedures that are novel or original, and
are potentially relevant or useful to an
organization.
•Creativity is important because
–It allows the decision maker to more fully
understand and appraise the problem
Creative Potential
•Who has the greatest creative potential?
–Those who score high in Openness to
Experience
–People who are intelligent, independent, self-
confident, risk-taking, have an internal locus-
of-control, tolerant of ambiguity, low need for
structure, and who persevere in the face of
frustration
•Who has the greatest creative potential?
–Those who score high in Openness to
Experience
–People who are intelligent, independent, self-
confident, risk-taking, have an internal locus-
of-control, tolerant of ambiguity, low need for
structure, and who persevere in the face of
frustration
Exhibit 2-3 The Three Components of
Creativity
Creativity
Creativity Blocks
•Expected evaluation
•Surveillance
•External motivators
•Competition
•Constrained choice
•Expected evaluation
•Surveillance
•External motivators
•Competition
•Constrained choice
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Simon’s Model of Problem Solving
•Decision-making
consists of three major
phases---intelligence,
design, and choice
[Simon:1972]
•Decision-making
consists of three major
phases---intelligence,
design, and choice
[Simon:1972]
Example
A farmer with his wolf, goat, and cabbage
come to the edge of a river they wish to
cross. There is a boat at the river’s edge,
but of course, only the farmer can row.
The boat can only handle one
animal/item in addition to the farmer. If
the wolf is ever left alone with the goat,
the wolf will eat the goat. If the goat is
left alone with the cabbage, the goat will
eat the cabbage. What should the farmer
do to get across the river with all his
possessions?
A farmer with his wolf, goat, and cabbage
come to the edge of a river they wish to
cross. There is a boat at the river’s edge,
but of course, only the farmer can row.
The boat can only handle one
animal/item in addition to the farmer. If
the wolf is ever left alone with the goat,
the wolf will eat the goat. If the goat is
left alone with the cabbage, the goat will
eat the cabbage. What should the farmer
do to get across the river with all his
possessions?
Phase I: Intelligence
–Problem Identification and
Definition
•What's the problem?
•Why is it a problem?
•Whose problem is it?
–Problem Identification and
Definition
•What's the problem?
•Why is it a problem?
•Whose problem is it?
Phase II: Design
–Problem Structuring
•Generate alternatives
•Set criteria and objectives
•Develop models and scenarios to
evaluate alternatives
•Solve models to evaluate
alternatives
–Problem Structuring
•Generate alternatives
•Set criteria and objectives
•Develop models and scenarios to
evaluate alternatives
•Solve models to evaluate
alternatives
Problem Solving
•State Space Search
–Initial State
–Goal State
–Operators
•Choosing representation and
controlling the application of operators
requires decision making
•State Space Search
–Initial State
–Goal State
–Operators
•Choosing representation and
controlling the application of operators
requires decision making
Phase III: Choice
–Solution
•Determine the outcome of
chosen alternatives
•Select the/an outcome
consistent with the decision
strategy
–Solution
•Determine the outcome of
chosen alternatives
•Select the/an outcome
consistent with the decision
strategy
Decisions and Alternatives
•Alternatives
•where do they come from?
•how many are enough?
•Evaluation
•how should each alternative be evaluated?
•how reliable is our expectation about the impact
of an alternative?
•Choice
•What strategy will be used to arrive at a choice?
•Alternatives
•where do they come from?
•how many are enough?
•Evaluation
•how should each alternative be evaluated?
•how reliable is our expectation about the impact
of an alternative?
•Choice
•What strategy will be used to arrive at a choice?
Human Cognitive Limitations (Harrison, 1995)
•Retain only limited information in short-term
memory
•Display different types and degrees of
intelligence
•Those who embrace closed belief systems
restrict information search
•Propensity for risk varies
•Level of aspiration positively correlated to
desire for information
•Retain only limited information in short-term
memory
•Display different types and degrees of
intelligence
•Those who embrace closed belief systems
restrict information search
•Propensity for risk varies
•Level of aspiration positively correlated to
desire for information
Common Perceptual Blocks
(Clemen, 1991)
•Difficulty in isolating a problem
•Delimiting the problem space too
closely
•Inability to see the problem from
various perspectives
•Stereotyping
•Cognitive saturation or overload
(Clemen, 1991)
•Difficulty in isolating a problem
•Delimiting the problem space too
closely
•Inability to see the problem from
various perspectives
•Stereotyping
•Cognitive saturation or overload
Decision Making Strategies
•Strategies:
–Optimizing
–Satisficing
–Quasi-satisficing
–Sole decision rule
–Selection by elimination
–Incrementalismand muddling
through
•Strategies:
–Optimizing
–Satisficing
–Quasi-satisficing
–Sole decision rule
–Selection by elimination
–Incrementalismand muddling
through
Decision Making Strategies
•Considerations
–Individual-focused vs.
organization-focused decisions
–Individual vs. group decisions
–Expensive-to-change vs.
inexpensive-to-change decisions
•Considerations
–Individual-focused vs.
organization-focused decisions
–Individual vs. group decisions
–Expensive-to-change vs.
inexpensive-to-change decisions
Optimizing
•Goal: select the course of action with the
highest payoff
–estimation of costs and benefits of every
viable course of action
–simultaneous or joint comparison of
costs and benefits of all alternatives
–high information processing load on
humans
•people do not have the ``wits to
maximize'' [Simon]
•Goal: select the course of action with the
highest payoff
–estimation of costs and benefits of every
viable course of action
–simultaneous or joint comparison of
costs and benefits of all alternatives
–high information processing load on
humans
•people do not have the ``wits to
maximize'' [Simon]
Observations
•Given high cost in time, effort, and money
•Decisions are made under severe time pressure
(``fighting fires'')
•Optimization on stated objectives may result in sub-
optimization on unstated, less tangible objectives
•Therefore, people often
–Do not consider all alternatives
–Do not evaluate all alternatives thoroughly and
rigorously
–Do not consider all objectives and criteria
•Place more weight on intangible objectives and criteria
•Given high cost in time, effort, and money
•Decisions are made under severe time pressure
(``fighting fires'')
•Optimization on stated objectives may result in sub-
optimization on unstated, less tangible objectives
•Therefore, people often
–Do not consider all alternatives
–Do not evaluate all alternatives thoroughly and
rigorously
–Do not consider all objectives and criteria
•Place more weight on intangible objectives and criteria
Satisficing
•Decision-makers satisficerather than maximize
[Simon]. They choose courses of action that are
``good enough''---that meet a certain minimal set
of requirements
–Theory of bounded rationality: human beings
have limited information processing
capabilities
–Optimization may not be practical, particularly
in a multi-objective problem, yet knowing the
optimal solution for each objective and under
various scenarios can provide insight to make
a good satisficingchoice
•Decision-makers satisficerather than maximize
[Simon]. They choose courses of action that are
``good enough''---that meet a certain minimal set
of requirements
–Theory of bounded rationality: human beings
have limited information processing
capabilities
–Optimization may not be practical, particularly
in a multi-objective problem, yet knowing the
optimal solution for each objective and under
various scenarios can provide insight to make
a good satisficingchoice
Sole Decision Rule
•``Tell a qualified expert about your problem and
do whatever he (she) says---that will be good
enough'' [Janis and Mann]
•Rely upon a single formula as the sole decision
rule
•Use only one criterion for a suitable choice
–e.g., do nothing that may be good for the
enemy
•Impulsive decision-making usually falls under
this category
•``Tell a qualified expert about your problem and
do whatever he (she) says---that will be good
enough'' [Janis and Mann]
•Rely upon a single formula as the sole decision
rule
•Use only one criterion for a suitable choice
–e.g., do nothing that may be good for the
enemy
•Impulsive decision-making usually falls under
this category
Selection by Elimination
•Eliminate alternatives that do not
meet the most important criterion
(screening; elimination by aspects)
•Repeat process for the next
important criterion, and so on
•Decision-making becomes a
sequentialnarrowing down process
•Eliminate alternatives that do not
meet the most important criterion
(screening; elimination by aspects)
•Repeat process for the next
important criterion, and so on
•Decision-making becomes a
sequentialnarrowing down process
Selection by Elimination…
•``Better'' alternatives might be
eliminated early on---improper
weights assigned to criteria
•Decision-maker might run out of
alternatives
•For complex problems, this
process might still leave decision
maker with large number of
alternatives
•``Better'' alternatives might be
eliminated early on---improper
weights assigned to criteria
•Decision-maker might run out of
alternatives
•For complex problems, this
process might still leave decision
maker with large number of
alternatives
Incrementalism
•Often, decision-makers have no real awareness
of arriving at a new policy or decision
–decision-making is an ongoing process
–the satisficingcriteria themselves might
change over time
•Make incremental improvements over current
situation and aim to reach an optimal situation
over time
•Useful for ``fire-fighting'' situations
•Frequently found in pluralistic societies and
organizations
•Often, decision-makers have no real awareness
of arriving at a new policy or decision
–decision-making is an ongoing process
–the satisficingcriteria themselves might
change over time
•Make incremental improvements over current
situation and aim to reach an optimal situation
over time
•Useful for ``fire-fighting'' situations
•Frequently found in pluralistic societies and
organizations
Heuristics and Biases
•Heuristics are “rules of thumb” that can
make a search process more efficient.
•Most common biases in the use of
heuristics
–Availability
–Adjustment and anchoring
–Representativeness
–Motivational
•A. Tverskyand D. Kahneman. 1974. “JudgementUnder Uncertainty: Heuristics and Biases.”
Science, 185:1124-31
•Heuristics are “rules of thumb” that can
make a search process more efficient.
•Most common biases in the use of
heuristics
–Availability
–Adjustment and anchoring
–Representativeness
–Motivational
•A. Tverskyand D. Kahneman. 1974. “JudgementUnder Uncertainty: Heuristics and Biases.”
Science, 185:1124-31
Example 1
•Which is riskier (probability of
serious accident):
a. Driving a car on a 400 mile
trip?
b. Flying on a 400 mile
commercial airline flight?
•Which is riskier (probability of
serious accident):
a. Driving a car on a 400 mile
trip?
b. Flying on a 400 mile
commercial airline flight?
Example 2
•Are there more words in the
English language
a. that start with the letter r ?
b. for which ris the third
letter?
•Are there more words in the
English language
a. that start with the letter r ?
b. for which ris the third
letter?
Example 2
•A newly hired programmer for a software
firm in Addis has two years experience
and good qualifications. When an
employee at Hawssawas asked to
estimate the starting salary she guessed
$80,000. What is your estimate?
a. $30,000 -$50,000?
b. $50,000 -$70,000?
c. $70,000 -$90,000?
•A newly hired programmer for a software
firm in Addis has two years experience
and good qualifications. When an
employee at Hawssawas asked to
estimate the starting salary she guessed
$80,000. What is your estimate?
a. $30,000 -$50,000?
b. $50,000 -$70,000?
c. $70,000 -$90,000?
Adjustment and Anchoring
•Make estimates by choosing an initial
value and then adjusting this starting
point up or down until a final estimate
is obtained
–Most subjectively derived probability
distributions are too narrow and fail to
estimate the true variance of the event
–Assess a set of values, instead of just the
mean
•Make estimates by choosing an initial
value and then adjusting this starting
point up or down until a final estimate
is obtained
–Most subjectively derived probability
distributions are too narrow and fail to
estimate the true variance of the event
–Assess a set of values, instead of just the
mean
Example
What is the most likely sequence
of gender for series of children
born within a family?
-The sequence of BBGGBG,
BGBBBG, BBBBGG?
What is the most likely sequence
of gender for series of children
born within a family?
-The sequence of BBGGBG,
BGBBBG, BBBBGG?
Example
•Mike is finishing his MM degree.
He is very interested in the arts and
at one time considered a career as a
musician. Is Mike more likely to
take a job:
a. In the management of the arts?
b. A medical management position?
•Mike is finishing his MM degree.
He is very interested in the arts and
at one time considered a career as a
musician. Is Mike more likely to
take a job:
a. In the management of the arts?
b. A medical management position?
Representativeness
•Attempt to ascertain the probability that a
person or object belongs to a particular group
or class by the degree to which characteristics
of that person or object conform to a
stereotypical perception of members of that
group or class. The closer the similarity
between the two, the higher is the estimated
probability of association
–Small sample size bias
–Failure to recognize regression to the mean
(predicted outcomes representative of the input?)
•Attempt to ascertain the probability that a
person or object belongs to a particular group
or class by the degree to which characteristics
of that person or object conform to a
stereotypical perception of members of that
group or class. The closer the similarity
between the two, the higher is the estimated
probability of association
–Small sample size bias
–Failure to recognize regression to the mean
(predicted outcomes representative of the input?)
Motivational
•Incentives, real or perceived, often lead
to probability estimates that do not
accurately reflect his or her true beliefs
–Non-cognitive, motivational biases
–Difficult to address through the design of
a DSS
•Solicit a number of estimates from similar
sources, both related and unrelated to
problem context
•Incentives, real or perceived, often lead
to probability estimates that do not
accurately reflect his or her true beliefs
–Non-cognitive, motivational biases
–Difficult to address through the design of
a DSS
•Solicit a number of estimates from similar
sources, both related and unrelated to
problem context
Evaluation Metrics
•Effectiveness: what should be done
–Easier access to relevant information
–Faster, more efficient problem recognition and
identification
–Easier access to computing tools and models
–Greater ability to generate and evaluate large set of
alternatives
•Efficiency: how should it be done
–Reduction in decision costs
–Reduction in decision time for same level of detail in
the analysis
–Better quality feedback
•Effectiveness: what should be done
–Easier access to relevant information
–Faster, more efficient problem recognition and
identification
–Easier access to computing tools and models
–Greater ability to generate and evaluate large set of
alternatives
•Efficiency: how should it be done
–Reduction in decision costs
–Reduction in decision time for same level of detail in
the analysis
–Better quality feedback
Implications for Decision Support
•Different people will use different
strategies at different times for
different kinds of decisions
–Which decision strategy to engineer
in a decision support system?
–Multiple strategies may be used in
making a decision
•Different people will use different
strategies at different times for
different kinds of decisions
–Which decision strategy to engineer
in a decision support system?
–Multiple strategies may be used in
making a decision
Implications for Decision Support…
•Is there an ``optimal decision
strategy’’ for each problem?
–What are the information
processing requirements for each
decision-making strategy?
–Which strategy do decision-makers
favor, When, and Why?
•Is there an ``optimal decision
strategy’’ for each problem?
–What are the information
processing requirements for each
decision-making strategy?
–Which strategy do decision-makers
favor, When, and Why?
Value of DSS
•Increase the bounds of
rationality
–easier access to information
–identify relevant information
–increase ability to process
information
•Increase the bounds of
rationality
–easier access to information
–identify relevant information
–increase ability to process
information
114
The Principle of Choice
•What criteria to use?
•Best solution?
•Good enough solution?
The Principle of Choice
•What criteria to use?
•Best solution?
•Good enough solution?
How Do Individuals Actually Make
Decisions?
•Bounded Rationality
–Limitations on one’s ability to interpret, process, and
act on information.
•Satisficing
–Identifying a solution that is “good enough.”
•Intuition
–A non-conscious process created from distilled
experience that results in quick decisions
•Relies on holistic associations
•Affectively charged –engaging the emotions
Decisions?
•Bounded Rationality
–Limitations on one’s ability to interpret, process, and
act on information.
•Satisficing
–Identifying a solution that is “good enough.”
•Intuition
–A non-conscious process created from distilled
experience that results in quick decisions
•Relies on holistic associations
•Affectively charged –engaging the emotions
Common Biases in Decision Making
•Overconfidence Bias
–Believing too much in our own ability to make good
decisions –especially when outside of own expertise
•Anchoring Bias
–Using early, first received information as the basis for
making subsequent judgments
•Confirmation Bias
–Selecting and using only facts that support our decision
•Availability Bias
–Emphasizing information that is most readily at hand
•Recent
•Vivid
•Overconfidence Bias
–Believing too much in our own ability to make good
decisions –especially when outside of own expertise
•Anchoring Bias
–Using early, first received information as the basis for
making subsequent judgments
•Confirmation Bias
–Selecting and using only facts that support our decision
•Availability Bias
–Emphasizing information that is most readily at hand
•Recent
•Vivid
Common Biases in Decision Making…
•Escalation of Commitment
–Increasing commitment to a decision in spite of evidence
that it is wrong –especially if responsible for the decision!
•Randomness Error
–Creating meaning out of random events -superstitions
•Winner’s Curse
–Highest bidder pays too much due to value overestimation
–Likelihood increases with the number of people in auction
•Hindsight Bias
–After an outcome is already known, believing it could have
been accurately predicted beforehand
•Escalation of Commitment
–Increasing commitment to a decision in spite of evidence
that it is wrong –especially if responsible for the decision!
•Randomness Error
–Creating meaning out of random events -superstitions
•Winner’s Curse
–Highest bidder pays too much due to value overestimation
–Likelihood increases with the number of people in auction
•Hindsight Bias
–After an outcome is already known, believing it could have
been accurately predicted beforehand
Group Decision Making
Strengths of Group
Decision Making
•More complete
information and
knowledge.
•Increased diversity of
views.
•Generates higher-quality
decisions.
•Leads to increased
acceptance of a solution.
Weaknesses of Group
Decision Making
•More time consuming.
•Conformity pressures in
groups.
•Discussion can be
dominated by one or a
few members.
•Decisions suffer from
ambiguous responsibility.
Strengths of Group
Decision Making
•More complete
information and
knowledge.
•Increased diversity of
views.
•Generates higher-quality
decisions.
•Leads to increased
acceptance of a solution.
Weaknesses of Group
Decision Making
•More time consuming.
•Conformity pressures in
groups.
•Discussion can be
dominated by one or a
few members.
•Decisions suffer from
ambiguous responsibility.
Group Decision-Making Techniques
•Interacting Groups
•Brainstorming
•Nominal Group Technique
•Electronic Meetings
•Interacting Groups
•Brainstorming
•Nominal Group Technique
•Electronic Meetings
Exhibit 2.2 Group vs. Individual
Decision Making
Exhibit 2.2
Decision Making
Exhibit 2.2
Effectiveness and Efficiency:Group
vs. Individual Decision Making
•Measures of Effectiveness
–Accuracy
–Speed
–Creativity
–Acceptance
•Efficiency
–groups almost always stack up as a poor second
to the individual decision maker
–With few exceptions, group decision making
consumes more work hours than if an
individual were to tackle the same problem
alone.
vs. Individual Decision Making
•Measures of Effectiveness
–Accuracy
–Speed
–Creativity
–Acceptance
•Efficiency
–groups almost always stack up as a poor second
to the individual decision maker
–With few exceptions, group decision making
consumes more work hours than if an
individual were to tackle the same problem
alone.
Four Criterion for Making Ethical
Choices
•Utilitarian criterion
–A decision focused on outcomes or consequences that
emphasize the greatest good for the greatest number of people.
•Rights criterion
–Decisions consistent with fundamental liberties and privileges
as set forth in documents like the Canadian Charter of Rights
and Freedoms.
•Justice criterion
–Decisions that impose and enforce rules fairly and impartially
so there is an equitable distribution of benefits and costs.
•Care criterion
–Decisions “…that expresses care in protecting the special
relationships that individuals have with each other.”
Choices
•Utilitarian criterion
–A decision focused on outcomes or consequences that
emphasize the greatest good for the greatest number of people.
•Rights criterion
–Decisions consistent with fundamental liberties and privileges
as set forth in documents like the Canadian Charter of Rights
and Freedoms.
•Justice criterion
–Decisions that impose and enforce rules fairly and impartially
so there is an equitable distribution of benefits and costs.
•Care criterion
–Decisions “…that expresses care in protecting the special
relationships that individuals have with each other.”
Exhibit 2-4 Factors Affecting Ethical
Decision-Making Behavior
Stage of moral
development
Organization
environment
Locus of
control
Ethical
decision-making
behaviour
Decision-Making Behavior
Stage of moral
development
Organization
environment
Locus of
control
Ethical
decision-making
behaviour
Exhibit 2-5
Stages of Moral Development
6.Following self-chosen ethical
principles even if they violate
the law.
5.Valuing rights of others and
upholding absolute values
and rights regardless of the
majority’s opinion.
4.Maintaining conventional
order by fulfilling
obligations to which
you have agreed.
3.Living up to what is
expected by people close
to you.
2.Following rules only
when doing so is in your
immediate interest.
1.Sticking to rules to avoid
physical punishment.
Conventional
Principled
Preconventional
Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach,”
in Moral Development and Behaviour: Theory, Research, and Social Issues, ed. T. Lickona (New York:
Holt, Rinehart and Winston, 1976), pp. 34-35.
Stages of Moral Development
6.Following self-chosen ethical
principles even if they violate
the law.
5.Valuing rights of others and
upholding absolute values
and rights regardless of the
majority’s opinion.
4.Maintaining conventional
order by fulfilling
obligations to which
you have agreed.
3.Living up to what is
expected by people close
to you.
2.Following rules only
when doing so is in your
immediate interest.
1.Sticking to rules to avoid
physical punishment.
Conventional
Principled
Preconventional
Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach,”
in Moral Development and Behaviour: Theory, Research, and Social Issues, ed. T. Lickona (New York:
Holt, Rinehart and Winston, 1976), pp. 34-35.
Exhibit 2-6
Is a Decision Ethical?
Unethical
Unethical
Unethical
Ethical
o
N
o
N
o
N
s
e
Y
s
e
Y
s
e
Y
Does the
decision
respect the
rights of the
individuals
affected?
Is the decision
motivated by
self-serving
interests?
Is the decision
fair and
equitable?
Question 1
Question 2
Question 3
Is a Decision Ethical?
Unethical
Unethical
Unethical
Ethical
o
N
o
N
o
N
s
e
Y
s
e
Y
s
e
Y
Does the
decision
respect the
rights of the
individuals
affected?
Is the decision
motivated by
self-serving
interests?
Is the decision
fair and
equitable?
Question 1
Question 2
Question 3
Organizational Response to
Demands for Ethical Behaviour
•Explosion in demand for more ethical
behaviour:
–Ethics specialists
–Ethics officers
–Codes of ethics
–Ethics auditors
•In addition, many companies are creating
mechanisms that encourage employees to
speak up when they see wrongdoing
Demands for Ethical Behaviour
•Explosion in demand for more ethical
behaviour:
–Ethics specialists
–Ethics officers
–Codes of ethics
–Ethics auditors
•In addition, many companies are creating
mechanisms that encourage employees to
speak up when they see wrongdoing
Developing a Meaningful
Code of Ethics
•Clearly state basic principles and expectations.
•Realistically focus on potential ethical dilemmas
that employees face.
•Distribute the code to all employees.
•Enforce violations of the code.
Source: Based on W. E. Stead, D. L. Worrell, and J. G. Stead, “An Integrative Model for Understanding and Managing Ethical Behavior in Business Organizations,” Journal of
Business Ethics9, no. 3 (March 1990), pp. 233-242.
Code of Ethics
•Clearly state basic principles and expectations.
•Realistically focus on potential ethical dilemmas
that employees face.
•Distribute the code to all employees.
•Enforce violations of the code.
Source: Based on W. E. Stead, D. L. Worrell, and J. G. Stead, “An Integrative Model for Understanding and Managing Ethical Behavior in Business Organizations,” Journal of
Business Ethics9, no. 3 (March 1990), pp. 233-242.
Ethical Dilemmas: What Would You Do?
•Your company policy on reimbursement for
meals while travelling on company business is
that you will be repaid for your out-of-pocket
costs, which are not to exceed $50 a day. You
don’t need receipts for these expenses—the
company will take your word. When travelling,
you tend to eat at fast-food places and rarely
spend in excess of $15 a day. Most of your
colleagues submit reimbursement requests in the
range of $40 to $45 a day regardless of what their
actual expenses are. How much would you
request for your meal reimbursements?
•Your company policy on reimbursement for
meals while travelling on company business is
that you will be repaid for your out-of-pocket
costs, which are not to exceed $50 a day. You
don’t need receipts for these expenses—the
company will take your word. When travelling,
you tend to eat at fast-food places and rarely
spend in excess of $15 a day. Most of your
colleagues submit reimbursement requests in the
range of $40 to $45 a day regardless of what their
actual expenses are. How much would you
request for your meal reimbursements?
Ethical Dilemmas: What Would You Do?
•Assume that you’re the manager at a gaming
company, and you’re responsible for hiring a group
to outsource the production of a highly anticipated
new game. Because your company is a giant in the
industry, numerous companies are trying to get the
bid. One of them offers you some kickbacks if you
give that firm the bid, but ultimately, it is up to your
bosses to decide on the company. You don’t mention
the incentive, but you push upper management to
give the bid to the company that offered you the
kickback. Is withholding the truth as bad as lying?
Why or why not?
•Assume that you’re the manager at a gaming
company, and you’re responsible for hiring a group
to outsource the production of a highly anticipated
new game. Because your company is a giant in the
industry, numerous companies are trying to get the
bid. One of them offers you some kickbacks if you
give that firm the bid, but ultimately, it is up to your
bosses to decide on the company. You don’t mention
the incentive, but you push upper management to
give the bid to the company that offered you the
kickback. Is withholding the truth as bad as lying?
Why or why not?
Ethical Dilemmas: What Would You Do?
•You have discovered that one of your
closest friends at work has stolen a large
sum of money from the company. Would
you do nothing? Go directly to an executive
to report the incident before talking about it
with the offender? Confront the individual
before taking action? Make contact with the
individual with the goal of persuading that
person to return the money?
Source: Several of these ethical dilemma scenarios are based on D. R. Altany, “Torn Between Halo and Horns,” IndustryWeek, March 15, 1993, pp. 15-20.
•You have discovered that one of your
closest friends at work has stolen a large
sum of money from the company. Would
you do nothing? Go directly to an executive
to report the incident before talking about it
with the offender? Confront the individual
before taking action? Make contact with the
individual with the goal of persuading that
person to return the money?
Source: Several of these ethical dilemma scenarios are based on D. R. Altany, “Torn Between Halo and Horns,” IndustryWeek, March 15, 1993, pp. 15-20.
Principles of Planning
Principle 1: Contribution to Objectives
•We know that each institution or
enterprise has some predetermined
objectives and goals.
•According to this principle, every plan
and sub-plan should make positive
contributions toward achieving the
objectives and goals of the institution.
131
Principle 1: Contribution to Objectives
•We know that each institution or
enterprise has some predetermined
objectives and goals.
•According to this principle, every plan
and sub-plan should make positive
contributions toward achieving the
objectives and goals of the institution.
131
Principles of Planning…
Principle 2: Planning Promises
•The principle of planning explains
that planning is related to the future
and for the future, there are several
assumptions.
•Hence, whileformulating plans,
complete, clear, and reliable
knowledge should be collected and
forecasts should be well prepared.
132
Principle 2: Planning Promises
•The principle of planning explains
that planning is related to the future
and for the future, there are several
assumptions.
•Hence, whileformulating plans,
complete, clear, and reliable
knowledge should be collected and
forecasts should be well prepared.
132
Principles of Planning…
Principle 3: Efficiency
•The efficiency of planning depends on
the results.
•This principle tells that the maximum
results should be obtained from minimum
cost and effort.
•If this does not become possible, or the
goals are not efficiently achieved, it may
be regarded as the inefficiency of
planning.
133
Principle 3: Efficiency
•The efficiency of planning depends on
the results.
•This principle tells that the maximum
results should be obtained from minimum
cost and effort.
•If this does not become possible, or the
goals are not efficiently achieved, it may
be regarded as the inefficiency of
planning.
133
Principles of Planning…
Principle 4: Forecasting and Anticipating Change
•Effective planningrequires anticipating future
changes and challenges.
•Forecasting involves analyzing trends, market
dynamics, technological advancements, and other
relevant factors to make informed predictions about the
future.
•By identifying potential changes, organizations can
proactively adjust their plans to remain competitive
and adaptive.
134
Principle 4: Forecasting and Anticipating Change
•Effective planningrequires anticipating future
changes and challenges.
•Forecasting involves analyzing trends, market
dynamics, technological advancements, and other
relevant factors to make informed predictions about the
future.
•By identifying potential changes, organizations can
proactively adjust their plans to remain competitive
and adaptive.
134
Principles of Planning…
Principle 5: Primacy
•This principle of planning tells that the targets and
the goals are the first activity.
•Without planning, neither other functions of
management get proper direction, nor their efficient
and effective performance becomes possible.
•Hence, planning is the important andprimary
function of management, to which attention should
be paid, on priority.
135
Principle 5: Primacy
•This principle of planning tells that the targets and
the goals are the first activity.
•Without planning, neither other functions of
management get proper direction, nor their efficient
and effective performance becomes possible.
•Hence, planning is the important andprimary
function of management, to which attention should
be paid, on priority.
135
Principles of Planning…
Principle 6: Flexibility
•According to these principles of planning, plans
should be flexible. Flexibility means to change
according to need.
•Flexible plans may be revised, in accordance with
the changed requirements, and the losses may be
averted or minimized.
•So, planning should be such that it may be
changed and revised, according to the
circumstances. This principle is used for long-
term planning.
136
Principle 6: Flexibility
•According to these principles of planning, plans
should be flexible. Flexibility means to change
according to need.
•Flexible plans may be revised, in accordance with
the changed requirements, and the losses may be
averted or minimized.
•So, planning should be such that it may be
changed and revised, according to the
circumstances. This principle is used for long-
term planning.
136
Principles of Planning…
Principle 7: Navigational Change
•This principle of planning puts emphasis on the
fact that just as a sailor is attentive towards taking
his boat to the destination, by paying regular
attention to the speed, direction, and balance of the
boat, at each moment.
•Similarly, the managers should go on testing the
plants, during the course of their implementations,
and required changes and improvement should be
a continuous process.
137
Principle 7: Navigational Change
•This principle of planning puts emphasis on the
fact that just as a sailor is attentive towards taking
his boat to the destination, by paying regular
attention to the speed, direction, and balance of the
boat, at each moment.
•Similarly, the managers should go on testing the
plants, during the course of their implementations,
and required changes and improvement should be
a continuous process.
137
Principles of Planning…
Principle 8: Commitment
•This principle determines the ‘Time period‘ of
planning.
•According to this principle the planning, the
planning should necessarily be at least we for that
period, which is required for fulfilling commitments
made with its employees, suppliers,
debtors,consumers, etc.
138
Principle 8: Commitment
•This principle determines the ‘Time period‘ of
planning.
•According to this principle the planning, the
planning should necessarily be at least we for that
period, which is required for fulfilling commitments
made with its employees, suppliers,
debtors,consumers, etc.
138
Principles of Planning…
Principle 9: Pervasiveness
•This principle explains the fact that
planning is a pervasive activity, which is
required at all levels ofbusiness management.
•Hence, planning should be in accordance
with the needs of all levels of Management.
139
Principle 9: Pervasiveness
•This principle explains the fact that
planning is a pervasive activity, which is
required at all levels ofbusiness management.
•Hence, planning should be in accordance
with the needs of all levels of Management.
139
Principles of Planning…
Principle 10: Framework
•Policies mean those general principles which
govern the functions of the organization for the
achievement of its objectives.
•This principle of policy determination specifies
that the policies of the institution should be
unambiguous, simple, sound, and justified, to make
its planning effective.
•Besides,components of planningshould also be
kept in view.
140
Principle 10: Framework
•Policies mean those general principles which
govern the functions of the organization for the
achievement of its objectives.
•This principle of policy determination specifies
that the policies of the institution should be
unambiguous, simple, sound, and justified, to make
its planning effective.
•Besides,components of planningshould also be
kept in view.
140
Principles of Planning…
Principle 11: Timing
•This principle of planning Lays emphasis on the
point that while determining the objectives for the
institution, the time limit for achieving various
objectives may also be well determined.
•Plans, sub-plans, and programs should also be
prepared for achieving the objectives.
•Their time limits should also be essentially
determined.
141
Principle 11: Timing
•This principle of planning Lays emphasis on the
point that while determining the objectives for the
institution, the time limit for achieving various
objectives may also be well determined.
•Plans, sub-plans, and programs should also be
prepared for achieving the objectives.
•Their time limits should also be essentially
determined.
141
Principles of Planning…
Principle 12: Cost-Benefit Analysis
•Resources are finite, and planning involves
optimizing their allocation.
•Cost-benefit analysis helps weigh the potential
costs of implementing a plan against the benefits it
is expected to generate.
•This evaluation ensures that the organization’s
resources are utilized judiciously and that the
benefits outweigh the expenditures.
142
Principle 12: Cost-Benefit Analysis
•Resources are finite, and planning involves
optimizing their allocation.
•Cost-benefit analysis helps weigh the potential
costs of implementing a plan against the benefits it
is expected to generate.
•This evaluation ensures that the organization’s
resources are utilized judiciously and that the
benefits outweigh the expenditures.
142
Principles of Planning…
Principle 13: Contingency Planning
•Contingency planning involves preparing for
unexpected events or crises that could disrupt the
organization’s operations.
•By identifying potential risks and developing
alternative courses of action, organizations can
minimize the impact of adverse situations.
•Contingency planning enhances an organization’s
resilience and ability to navigate through
uncertainties.
143
Principle 13: Contingency Planning
•Contingency planning involves preparing for
unexpected events or crises that could disrupt the
organization’s operations.
•By identifying potential risks and developing
alternative courses of action, organizations can
minimize the impact of adverse situations.
•Contingency planning enhances an organization’s
resilience and ability to navigate through
uncertainties.
143
Principles of Planning…
Principle 14: Alternative
•Thesuccess of planningdepends upon thecorrect
decision taken.
•Hence, before asking decisions, various alternatives
should be discovered and necessary information should be
gathered about them, and then the best alternative should be
selected.
•principles of planning in business
•According to this principle, the best, which may
contribute towards achieving the determined objectives in a
decided time, at the lowest cost, be selected.
144
Principle 14: Alternative
•Thesuccess of planningdepends upon thecorrect
decision taken.
•Hence, before asking decisions, various alternatives
should be discovered and necessary information should be
gathered about them, and then the best alternative should be
selected.
•principles of planning in business
•According to this principle, the best, which may
contribute towards achieving the determined objectives in a
decided time, at the lowest cost, be selected.
144
Principles of Planning…
Principle 15: Limiting Factor
•This principle stated that managers
should identify the factors having only
limited achievements of the desired goals
while selecting the best alternatives and
suitable solutions to critical and
objectionable factors should be found.
145
Principle 15: Limiting Factor
•This principle stated that managers
should identify the factors having only
limited achievements of the desired goals
while selecting the best alternatives and
suitable solutions to critical and
objectionable factors should be found.
145
Principles of Planning…
Principle 16: Competitive Strategies
•If any competitive institution exists, then
the planning activities and techniques of
other Institutions should also be kept in
view.
•By doing so,success in business, among
the competition, may be ensured.
146
Principle 16: Competitive Strategies
•If any competitive institution exists, then
the planning activities and techniques of
other Institutions should also be kept in
view.
•By doing so,success in business, among
the competition, may be ensured.
146
Principles of Planning…
Principle 17: Cooperation
•This principle emphasizes that the success of
planning depends upon the cooperation of the
whole organization.
•Hence, inPlanning formulation, sufficient
cooperation of the executives, managers, and
subordinates of various levels should be
obtained, so that plans may be executed
efficiently and unnecessary hurdles may be
removed to get desired results.
147
Principle 17: Cooperation
•This principle emphasizes that the success of
planning depends upon the cooperation of the
whole organization.
•Hence, inPlanning formulation, sufficient
cooperation of the executives, managers, and
subordinates of various levels should be
obtained, so that plans may be executed
efficiently and unnecessary hurdles may be
removed to get desired results.
147
Principles of Planning…
Principle 18: Comprehensive Approach
•A comprehensive approach to planning considers all
relevant factors that can impact an organization’s success.
•This includes internal factors such as resources,
capabilities, and culture, as well as external factors like
market trends, competitive landscape, regulatory changes,
andtechnological developments.
•By taking a holistic view, organizations can develop
plans that are well-rounded and responsive to the
entirebusiness environment.
148
Principle 18: Comprehensive Approach
•A comprehensive approach to planning considers all
relevant factors that can impact an organization’s success.
•This includes internal factors such as resources,
capabilities, and culture, as well as external factors like
market trends, competitive landscape, regulatory changes,
andtechnological developments.
•By taking a holistic view, organizations can develop
plans that are well-rounded and responsive to the
entirebusiness environment.
148
Principles of Planning…
Principle 19: Unity of Direction
•Plans should ensure that efforts are
synchronized and aligned toward common
objectives.
•This principle emphasizes the importance of
minimizing conflicting goals and promoting
cohesion within the organization
149
Principle 19: Unity of Direction
•Plans should ensure that efforts are
synchronized and aligned toward common
objectives.
•This principle emphasizes the importance of
minimizing conflicting goals and promoting
cohesion within the organization
149
Principles of Planning…
Principle 20: Feedback and Review
•The planning process doesn’t end once a plan is
implemented.
•Regular feedback and review mechanisms are
essential to monitor progress and identify deviations
from the intended path.
•By measuring performance against established
benchmarks, organizations can make necessary
adjustments and improvements to ensure the
successful attainment of goals.
150
Principle 20: Feedback and Review
•The planning process doesn’t end once a plan is
implemented.
•Regular feedback and review mechanisms are
essential to monitor progress and identify deviations
from the intended path.
•By measuring performance against established
benchmarks, organizations can make necessary
adjustments and improvements to ensure the
successful attainment of goals.
150
Principles of Planning…
Principle 21: Simplicity
•Complex plans can be difficult to communicate,
understand, and execute.
•The principle of simplicity advocates for keeping
plans as straightforward as possible.
•Clear and concise plans are more likely to be
comprehended and followed by employees at all
levels of the organization.
151
Principle 21: Simplicity
•Complex plans can be difficult to communicate,
understand, and execute.
•The principle of simplicity advocates for keeping
plans as straightforward as possible.
•Clear and concise plans are more likely to be
comprehended and followed by employees at all
levels of the organization.
151
Principles of Planning…
Principle 22: Balanced Planning
•Balanced planning requires organizations to consider
multiple dimensions, such as financial, human
resources, technological, and operational aspects.
•Neglecting any of these dimensions can lead to
imbalances that hinder progress.
•This principle underscores the need for holistic
planning that takes into account all relevant factors.
152
Principle 22: Balanced Planning
•Balanced planning requires organizations to consider
multiple dimensions, such as financial, human
resources, technological, and operational aspects.
•Neglecting any of these dimensions can lead to
imbalances that hinder progress.
•This principle underscores the need for holistic
planning that takes into account all relevant factors.
152
153
Conclusion
•Effective planning is a cornerstone of successful management.
•By adhering to the principles of clear objectives, unity of
direction, forecasting, comprehensive approach, flexibility,
participation, time horizon, cost-benefit analysis, contingency
planning, and feedback, organizations can create plans that drive
growth and innovation.
•These principles have universal applicability across various
industries and levels of management, ensuring that organizations
are well-equipped to navigate the complexities of the business
world.
•While challenges may arise, the adaptability and resilience
fostered by these principles empower organizations to stay agile in
the face of change and uncertainty.
154
•Effective planning is a cornerstone of successful management.
•By adhering to the principles of clear objectives, unity of
direction, forecasting, comprehensive approach, flexibility,
participation, time horizon, cost-benefit analysis, contingency
planning, and feedback, organizations can create plans that drive
growth and innovation.
•These principles have universal applicability across various
industries and levels of management, ensuring that organizations
are well-equipped to navigate the complexities of the business
world.
•While challenges may arise, the adaptability and resilience
fostered by these principles empower organizations to stay agile in
the face of change and uncertainty.
154
Chapter Three Ends
155
155
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