DIP – 4. Planning function (B)

DIP – 4. Planning function (B) Lim SeiKee @ cK

Strategic planning is long term and considers where the business wants to be in two to three years time- longer in some cases. • Tactical planning is usually short term; deciding what needs to be done within that year to implement the plan of strategic management • Operational planning translates the goal of tactical management into operational.

There are two barriers to effective planning: (1) the reluctance to establish goals, and (2) resistance to change.

Management by Objectives (MBO) • A management system in which the objectives of an organization are agreed upon so that management and employees understand a common way forward.

MBO - Guidelines • Arranged in order of their importance • Expressed quantitatively, wherever possible • Realistic • Consistent with the organization’s policies • Compatible with one another

MBO - Process • Goal specificity. • Action planning. • Self-control. • Periodic review.

MBO - Advantages • (A) greater efficiency through systematic procedures • (B) greater employee motivation and commitment through participation in the planning process • (C) planning for results instead of planning just for work

MBO - Limitations -lack of involvement and commitment of top level managers- overemphasizing performance appraisal aspects- stifling creative goals and objectives.

DECISION MAKING Decision making includes defining problems, gathering information, generating alternatives, and choosing a course of action.

Risk Objective probabilities Subjective probabilities Certainty Uncertainty Conditions Under Which Decisions are Made(adapted from Figure 8.1)

Models of Decision Making • The rational model prescribes a set of phases that individuals or teams should follow to increase the likelihood that their decisions will be logical and optimal.

3 Search for alternative solutions 2 Set goals 4 Compare and evaluate alternative solutions 7 Follow-up and control results 6 Implement the solution selected 5 Choose among alternative solutions Rational Decision-Making Model(adapted from Figure 8.3) Environmental forces 1 Define and diagnose problem Environmental forces

Models of Decision Making (cont.) • The bounded rationality model contends that the capacity of the human mind for formulating and solving complex problems is small, compared with what is needed for objectively rational behavior.

Bounded Rationality Model(adapted from Figure 8.5) Decision Biases Inadequate Problem Description Limited Search for Alternatives Limited Information Satisficing

Delegation • Delegation involves the assignment to others of the authority for particular functions, tasks, and decisions.

Reduces management stress and workload • Allows senior management to focus on key tasks • Subordinates are empowered and motivated • Better decisions or use of resources (potentially) • Good method of on-the-job training • Cannot / should not delegate responsibility • Depends on quality / experience of subordinates • Harder in a smaller firm • May increase workload and stress of subordinates ADVANTAGES DISADVANTAGES

DIP – 4. Planning function (B)