PLANNING, DECISION MAKING AND CONTROL

DEFINITION OF PLANNING Prioritise what needs to be done first, and how it is going to be done. Being done formally or informally, the process should involve the information from internal or external sources. These processes of collecting, translating, understanding, and delivering information which could help in fixing the quality of current decision which is based on the future expectation.

Planning means management in: o What needs to be done in future? o How it is to be done? o When it is to be done? o Who is going to do it? Planning is meant for future; thus uncertainty is always there.

PLANNING TERMS Mission Objectives Plans Policy

Planning Terms Mission: Description of the purpose of the organization as a whole Objectives: Statement of aims or goals to be achieved Plans: Statements of specific actions and activities to achieve objectives (Plans are sometimes described as strategies) Policies: Limits to acceptable behavior expressed in terms of priorities, ethical and moral values, standards, social responsibilities and so on.

Objectives The objectives of the organization are usually of two levels of detail. The highest level – broad general terms intended to be relatively permanent. The tactical or operational level – specific so that it is possible to assess.

Objectives The nature of overall or strategic objectives is influenced by many factors including: the attitudes of the owners, political pressures which reflect different views of society, the history of the organization, the type of business or service and so on.

Policies Policy is a guide to managers causing them to take actions in certain ways. They express the organization’s official attitude to various forms of behavior. When the organization’s objectives have been established, policies provide guidance on the way they will be achieved. Policies are formal expressions of organization’s culture and belief systems.

PLANNING LEVELS Management at all levels should have plans. The paramount is strategic planning. Tactical and operational parts should abide to strategic planning.

PLANNING LEVELS Operation and transaction (Current) What is the operation that should be operated with facilities available to cater to the output needs in a future operation?

PLANNING LEVELS Operational Planning (1-12 months)  What are the best ‘products’, ‘production planning’ and ‘marketing’, which matches the objectives?  What are the materials, facilities and etc, needed to be operated?  What is the best method to organise the operation?

PLANNING LEVELS Tactical Planning (1-5 Years) Which products to be added or discarded? Which of the financial investment to cater to strategic needs? What is the best ‘price pattern’? What are the latest facilities, systems or new way of gaining the strategic planning?

PLANNING LEVELS Strategic Planning (5 years and above) Which business should involve organization? Financial and financing? Organization structure? sources distributions?

TYPES AND SOURCES OF PLANNING INFORMATION Environmental information is crucial for a long term planning. At lower short term stage, internal information is important, unlike for long term planning, external information is more crucial.

TYPES OF EXTERNAL INFORMATION Market and competition Demographic trend Industrial structure Social factors Political factors Technological changes

TYPES OF INTERNAL INFORMATION Sale and marketing– performance, profit and etc. Financial- cost, profit, investment and etc. Operation and production- abilities, time, qualities and etc. Research and development. Staff- skills, training and etc.

MODELS Helps the management in planning and decision making. Management Model based on Computer o Optimization Model (linear programming) Suitable in structural decision making and to be used at tactical and operational stage. o Simulation Model Enable for different kind of situation to be explored.

MODELS o Simulation Model Deterministic Model o Assume certainty by using single point estimate Probabilistic Model o Incorporate uncertainty by allowing multi-point estimate Both models are suitable to analyze the risk, uncertainty and complex relationship and answer “what if…” question. Useful to all stages.

MODELS Formation of Model o In order to form a realistic and enough quality in forecasting model, the management and information expertise should work together.

DECISION MAKING Decision making is part of management and happens in all functions at all levels. Process(H.A. Simon) o Finding occasions for making decisions o Finding possible course of action (alternatives) o Choosing the course of action o Evaluating past choices

DECISION MAKING Phase 1: Intelligence (searching the environment for conditions calling for decisions) Phase 2: Design (Inventing, developing and analyzing possible course of action. This involves processes to understand the problem, to generate solutions and the testing of solutions for feasibility) Phase 3: Choice (selecting an alternative or course of action from those available. A choice is made and implemented) Phase 4: Review (Assessing past choices)

DECISION MAKING Decision making based on information: o Information is the trigger to knowing there is a problem o Information is needed to define and structure the problem o Information is needed to explore and choose between alternative solutions o Information is needed to review the effects of the implemented choice

DECISION MAKING Programmed Decision o Repeated, routine, knows the rules or decision procedure, often automatic, machines always involve, and can be delegated to a lower level in an organization. o Inventory control, scheduling Unprogrammed Decision o Unroutine, unknown decision procedure, high level of uncertainty, cannot be delegated to the lower level, involves machines and manpower. o Acquisition, merging in new products launch, staff appointment.

DECISION MAKING Relationship point between the level of management and type of decision. Programmed decision (Structured) at lower level and non- programmed decision (unstructured) at the upper level.

DECISION MAKING Decision that could be categorised based on knowledge is the result of various alternative. o Provision Only one result for each alternative and there will be information on the result which is complete and accurate. o Risks A few of probability may be resulted from each of the alternatives, and the value and probability could be given to each result. o Uncertainty The sum of the result, the value and probability is unknown.

DECISION MAKING AND MIS The role of MIS o Provide information, examine alternatives and provide support. o MIS self-decision making  suitable with the routine operational decision, where the procedure is known.

DECISION MAKING AND MIS Strategic: o Type of decision: unstructured o Information support system: Executive Information Systems Tactical: o Type of decision: Semi structured o Information support system : Expert System, DSS

DECISION MAKING AND MIS Operational Type of Decision: Structured Information support system : TPS, Automatic Decision-Making

CONTROL

CONTROL Is the process to make sure that the operation is undergo as planned. Management control can be defined as a systematic effort by management to compare performance to predetermined standards, plans or objectives, in order to determine whether performance is in line with these standards and presumably in order to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives.

Circle of Control Element A standard specifying the expected performance A measurement of actual performance Comparison of standard and measurement Feedback of deviations or variations to a control unit (single loop) Actions by the control unit to alter performance in accordance with the plan Feedback to a higher level control unit regarding large variations between performance and plan and upon the results of the lower control units action (double loop)

Control in Organization Operation Control o Repeated and structured. o Determined rules and procedures. Management Control System o The core decision of top management is attended to and implemented at all levels of the organization.

CONTROL FEATURES Level of Operation o Decision Maker Supervisor, foreman, operation manager. o Data Source Internal– the results of the operation o Information Complexity Easy to be manipulated and applied. o Frequency of Observation Frequent o Control width Limited o Type of decision procedure Structured and involvement of qualitative data. o Type of MIS Mostly formal

CONTROL FEATURES Strategic Level o Decision Maker Top manager/ Board of Directors o Data Source Mostly external o Information Complexity Complex to be manipulated or to be used. o Frequency of Observation Rarely o Control width Wide o Type of decision procedure Unstructured and uses qualitative and quantitative information. o Type of MIS Mostly informal

OPERATION CONTROL SYSTEM Control system is a rational system. Depends on set procedure Fundamental Discipline used are economic and physical science. Narrow and brief scope. Mostly uses mathematical model. Repeated control Control is balanced and predictable.

OPERATION CONTROL SYSTEM Data used for control is based on exact and current time. Accurate and correct data. Measurement unit could be in cash or non-cash Data is gathered and reported every day, hour and etc. Data detail Controlled cost Other measurement is mechanical and technical. Report is ‘score card’ base.

OPERATION CONTROL SYSTEM MIS at this stage is needed as: o Transaction processing o Control report production o Manages inquiries.

Management Control System Control which tries to influence or behavior control to make sure the policy could be implemented and strategic objectives achieved. Complicated and tries to control too mane factors.

MANAGEMENT CONTROL SCOPE Management control attention to the current achievement and future objectives which could be divided into different function field, namely: o Financial management control o Production management control o Research and development management control o Management marketing control o Staff management control

MANAGEMENT CONTROL SCOPE Example: o Staff management control New staff intake, interview Internal and external training Welfare activities Study Scheme Industrial relationship activity Health and security Operation control and staff rating