Corporate Learning Course Seminar 3.5 Planning and Decision Making

Objectives 1. Define planning in an organizational setting 2. Describe the steps in the planning process 3. Explain the importance of strategic planning to an organization 4.Identify the two components in the process of decision making 5.Describe the context factors associated with decision making 6.Explain the decision support process

Decision making is crucial to effective managing…

Planning Process 1.State organizational objectives 2.List alternatives for reaching objectives 3.Develop assumptions about each alternative 4.Choose the best alternative 5.Develop plans to pursue the chosen alternative 6.Put the plans into action

Types of Planning Strategic Planning  Long-range planning that focuses on the entire organization  Involves managers at the highest levels  3-5 years for long-range planning  Strategies must be consistent with the purpose and mission of the organization

Types of Planning (cont.) Tactical Planning  Short-term planning  One year or less  Mid-level managers  More detailed than strategic planning

Types of Planning (cont.) Contingency Planning  What an organization does when something unexpected happens or when something needs changing  May cause manager to go back to the original plan or look for other alternatives  “What if” way of thinking

Two Components of Decision Making  Judgment – a process of evaluating alternatives  Choice – a process of selecting a specific alternative to implement

Characteristics of Human Information Processors  Selective perception – select relevant information and ignore irrelevant information  Framing – how a decision is oriented and organized  Escalation of commitment to a failing course of action – failure to ignore sunk costs (investments that are already gone and cannot be recovered)  Risk propensity – the orientation of the decision maker to either seek risk or avoid it  Hindsight bias – inability of a decision maker to remember correctly the circumstances that existed prior to implementing a choice once action has been taken  Over-confidence, complacency – give yourself credit for being more capable than you are / becoming more comfortable with a situation than is warranted by the level of risk

Context Factors for Decision Making  Degree of Certainty | | | | | Certainty Risk Uncertainty Ambiguity  Urgency – how quickly do you have to decide  Importance – how much impact will the decision have  Life-span of Problem/Opportunity – how likely is the issue to go away on its own

Creating a Decision Support Process 1.Recognize need for a choice 2.Diagnose causal relationships 3.Identify criteria for evaluation of alternatives and establish weights for criteria 4.Identify all relevant alternatives 5.Assess each alternative against the criteria – the judgment process 6.Determine “score” for each alternative 7.Choose alternative with “best” score

Steps in Decision Making 1.Identify the problem. 2.List alternatives. 3.Select the best alternative. 4.Implement the chosen alternative. 5.Evaluate.

Models of Individual Decision Making  Classical – aka Rational, Economic  Administrative – aka Behavorial  Intuitive – aka Seat of the Pants Selection  Political  Social

Summary 1.Planning determines how an organization can get to where it wants to go. 2.Steps in the planning process include: Stating organizational objectives, Listing alternatives for reaching objectives, Developing assumptions about each alternative, Choosing the best alternative, Developing plans to pursue the chosen alternative and putting the plans into action. 3.An organization needs strategic planning to develop strategies for achieving the objectives consistent with the purpose and mission of the organization over a long-range period.

Summary (cont.) 4. Two components in the process of decision making are judgment and choice. 5. The context factors associated with decision making are:  Selective perception – Select the relevant information and ignore the irrelevant information  Framing – how a decision is oriented and organized  Escalation of commitment to a failing course of action – failure to ignore sunk costs (investments that are already gone and cannot be recovered)  Risk propensity – orientation of the decision maker to either seek risk or avoid it  Hindsight bias – the inability of a decision maker to remember correctly the circumstances that existed prior to implementing a choice  Over-confidence, complacency – give yourself credit for being more capable than you actually are, being more comfortable with a situation than is warranted by the level of risk

Summary (cont.) 6. The decision support process includes:  Recognize need for a choice  Diagnose causal relationships  Identify criteria for evaluation of alternatives and establish weights for criteria  Identify all relevant alternatives  Assess each alternative against the criteria – the judgment process  Determine “score” for each alternative  Choose alternative with “best” score

Exercise – Winter Survival 1.Divide class into 2-3 groups of 5-7 people 2.Present situation 3.Rank items according to importance to your survival 4.Background information 5.Score results with key