Session12-22.Planning

Planning & Decision-Making : 

Planning & Decision-Making

Planning a House !! : 

Planning a House !!

What Is Planning? : 

What Is Planning? It involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work .

Financial planning : 

Financial planning

Why Do Managers Plan? : 

Why Do Managers Plan? Planning is the primary management function that establishes basis for all management functions Planning establishes coordinated effort Planning reduces uncertainty Planning reduces overlapping and wasteful activities Planning establishes goals and standards used in controlling

Nature of Planning : 

Nature of Planning Involves rational approach It is a process It is an open System Approach Planning is future oriented Involves choice from among alternatives Planning occurs at all levels of Mgt. It is flexible Pervasive & Continuous

The Planning Process : 

The Planning Process Perceive the problem at hand Establish what do you want to achieve about it Establish the planning premises Find out what all can be done to achieve your aim Evaluate the various choices you have Choose one appropriate plan and keep alternative plans ready Work out the finer points of the selected plan Establish which activities need to be done and arrange them in a proper sequence Implement the plan

Types of plans : 

Types of plans -Strategic plans - apply to the entire organization establish organization’s overall goals seek to position the organization in terms of its environment - Operational plans - specify the details of how the overall goals are to be achieved tend to cover short time periods

Planning In The Hierarchy Of Organizations : 

Planning In The Hierarchy Of Organizations Top Executives Middle-Level Managers First-Level Managers

Types of Plans : 

Types of Plans Long-term plans - time frame beyond three years definition of long term has changed with increasingly uncertain organizational environments Short-term plans - cover one year or less Specific plans - clearly defined with little room for interpretation required clarity and predictability often do not exist Directional plans - flexible plans that set out general guidelines provide focus without limiting courses of action

Types Of Plans : 

Types Of Plans Breadth Strategic Operational Specificity Directional Specific Frequency of Use Single use Standing Time Frame Long term Short term

Specific Versus Directional Plans : 

Specific Versus Directional Plans

Types of Plans : 

Types of Plans Single-use plans - one-time plans specifically designed to meet the needs of a unique situation Standing plans - ongoing plans that provide guidance for activities performed repeatedly include policies, procedures, and rules

Management By Objectives (MBO) : 

Management By Objectives (MBO) “A comprehensive managerial system that integrates many key managerial activities in a systematic manner and is consciously directed towards the effective and efficient achievement of organizational and individual objectives” - Koontz

Steps in a Typical MBO Program : 

Steps in a Typical MBO Program The organization’s overall objectives and strategies are formulated. Major objectives are allocated among divisional and departmental units. Unit Managers collaboratively set specific objectives for their units with their superiors. 4 Specific objectives are collaboratively set for departmental members

Steps in a Typical MBO Program : 

Steps in a Typical MBO Program 5 Action Plans, defining how objectives are to be achieved, are specified and agreed upon by managers and subordinates. 6 The action plans are implemented. 7 Progress towards objectives is periodically reviewed, and feedback is provided. 8 Successful achievement of objectives is reinforced by performance bases rewards.

Features of MBO : 

Features of MBO A philosophy not a technique Short term & long term objectives Performance appraisal Planning is an Integral part

Advantages of MBO : 

Advantages of MBO Self Esteem & Self Actualization Emphasis on results Org. roles & structures clarified Increased commitment Improved controls

Weaknesses of MBO : 

Weaknesses of MBO Failure to teach philosophy Lack of guidelines to goal setters Goal setting becomes subjective Disregards potential of Employees Tech. not leveraged

Decision Making : 

Decision Making

Decision Making : 

Decision Making The selection of a course of action from among alternatives It is a comprehensive process, not simply choosing alternatives Decision making is the core of planning Ashpillai GJ - IMT

Overview of Managerial Decision Making : 

Overview of Managerial Decision Making Decision-Making Process Ashpillai GJ - IMT

Types of Decisions : 

Types of Decisions Programmed Applied to Structured & routine problems Relies on established criteria It is decision making by precedent Non-Programmed Unstructured, novel & ill defined situations of a non-recurring nature Require subjective judgments Ashpillai GJ - IMT

Decision Making Conditions : 

Decision Making Conditions Certainty - Only one state of nature exists i.e., complete certainty about the future Uncertainty - More than one states of nature exists, but sufficient info is not present so probabilities of states are unknown Risk - More than one states exists, sufficient info is there to assign probabilities to each state. Uncertainty Certainty Risk Ashpillai GJ - IMT

UNCERTAINITY : 

UNCERTAINITY Crop sowing/ harvesting is dependant on weather/monsoons…

Types of Decisions at Various Levels : 

Types of Decisions at Various Levels Programmed Decisions Nonprogrammed Decisions Ashpillai GJ - IMT

Decision Making Process : 

Decision Making Process Identification of a problem Evaluation of Alternatives Dev of Alternatives Allo. Weights to Criteria Id. Of Decision Criteria Selection of Alternative IMPLEMENTATION Ashpillai GJ - IMT

Process in buying computers : 

Process in buying computers y a laptop How actual decision making process works ?

Slide 29: 

Problem Identification “My managers need new computers” Identification of Decision Criteria Price Battery life Warranty Screen type Reliability Dust Proof Serviceability Allocation of Weights to Criteria Reliability 10 Serviceability 10 Price 9 Dust proof 8 Warranty 8 Battery life 7 Screen type 3 Development of Alternatives Acer Compaq Assembled HP Apple NEC Sony Toshiba Implementation of an Alternative Acer Evaluation of Decision Effectiveness Evaluation of Alternatives Acer Compaq Assembled HP Sony Toshiba Apple NEC Selection of an Alternative Acer Compaq Assembled HP Apple NEC Sony Toshiba Decision Making Ashpillai GJ - IMT

What would you have done? : 

What would you have done? You are the head of a Quality Training initiative in coca cola India. You launched a massive training program in which all 1500 employees were trained on problem solving, decision making, process management etc. Three years down the line all of them forgot what they have learned; reason being they never had a chance to use these tools in the workplace. What solution or decision will help?

Selection of Alternative : 

Selection of Alternative How to Select an Alternative?? CHOICE MADE!! Experimentation Research & Analysis Reliance on Past Ashpillai GJ - IMT

EXPERIMENTATION : 

EXPERIMENTATION An Airplane manufacturer may draw from personal experiences and that of other plane manufacturers. Generally a prototype is constructed and tested and on the basis of these tests, production is done according to the revised design.

Evaluation of Alternatives : 

Evaluation of Alternatives Quantitative & Qualitative Factors Marginal Analysis Cost Effectiveness Analysis Ashpillai GJ - IMT

Marginal Analysis : 

Marginal Analysis Evaluating alternatives may involve utilizing the techniques of marginal ananlysis to compare additional revenues arising from additional costs.

Cost Effectiveness Analysis : 

Cost Effectiveness Analysis It is basically cost benefit analysis. It means finding the least costly way of reaching an objective or getting the greatest value for given expenditures.

Modern Approaches to Decision Making Under Uncertainty : 

Modern Approaches to Decision Making Under Uncertainty Risk Analysis Decision Trees Preference theory Ashpillai GJ - IMT

Risk Analysis : 

Risk Analysis Risk occurs whenever we cannot predict an alternative’s outcome with certainty but we do have enough information to predict the probability. Eg The risk involved in launching a moon mission is very high for the very first time. Probability : A statistical measure of chance a certain event or outcome will occur.

Decision Tree : 

Decision Tree It depicts ,in the form of a “tree”, the decision points, chance events,& probabilities involved in various courses that might be undertaken. The decision tree approach makes it possible to see at least the major alternatives and the fact that subsequent decisions may depend on events in the future. Eg Decision tree helps in deciding in a new product launch between the following two choices ; Install expensive permanent Equipment Undertake cheaper, temporary tooling involving high manufucturing cost but lower capital investment.

Decision Tree Exercise : 

Our friend David is the manager of a famous golf club. Sadly, he is having some trouble with his customer attendance. There are days when everyone wants to play golf and the staff are overworked. On other days, for no apparent reason, no one plays golf and staff have too much slack time. David’s objective is to optimise staff time by predicting when people will play golf. To accomplish that he needs to understand the reasons people decide to play. He assumes that weather must be an important underlying factor, so he decides to use the weather forecast for the upcoming week. So during two weeks he has been recording: The outlook, whether it was sunny, overcast or raining. The temperature (in degrees Fahrenheit). The relative humidity in percent. Whether it was windy or not. Whether people attended the golf club on that day. David compiled this dataset into a table shown in next slide. Decision Tree Exercise

Golfing. Customer attendance : 

Golfing. Customer attendance

Golfing. Customer attendance : 

Golfing. Customer attendance

Algorithms…Decision Tree : 

Algorithms…Decision Tree Formulae The algorithms that are used for constructing decision trees work by choosing a variable at each step that is the next best variable to use in splitting the set of items. "Best" is defined by how well the variable splits the set into subsets that have the same value of the target variable. Different algorithms use different formulae for measuring "best". This section presents a few of the most common formulae. These formulae are applied to each candidate subset, and the resulting values are combined (e.g., averaged) to provide a measure of the quality of the split. Gini impurity Used by the , Gini impurity is a measure of how often a randomly chosen element from the set would be incorrectly labelled if it were randomly labelled according to the distribution of labels in the subset. Gini impurity can be computed by summing the probability of each item being chosen times the probability of a mistake in categorizing that item. It reaches its minimum (zero) when all cases in the node fall into a single target category. To compute Gini impurity for a set of items, suppose y takes on values in {1, 2, ..., m}, and let fi = the fraction of items labelled with value i in the set.

Golfing. Customer attendance : 

A decision tree is a model of the data that encodes the distribution of the class label (again the Y) in terms of the predictor attributes. in form of a tree. The top node represents all the data. The classification tree algorithm concludes that the best way to explain the dependent variable, play, is by using the variable "outlook". Using the categories of the variable outlook, three different groups were found: One that plays golf when the weather is sunny, One that plays when the weather is cloudy, and One that plays when it's raining. David's first conclusion: if the outlook is overcast people always play golf, and there are some fanatics who play golf even in the rain. Then he divided the sunny group in two. He realised that people don't like to play golf if the humidity is higher than seventy percent. Finally, he divided the rain category in two and found that people will also not play golf if it is windy. Golfing. Customer attendance

Golfing. Customer attendance : 

Solution : David dismisses most of the staff on days that are sunny and humid or on rainy days that are windy, because almost no one is going to play golf on those days. On days when a lot of people will play golf, he hires extra staff. The decision tree helped David turn a complex set of data into an explanation he could use in decision-making. Golfing. Customer attendance

Decision tree advantages : 

Decision tree advantages Simple to understand and interpret.. Requires little data preparation. Able to handle both numerical and categorical data.. Possible to validate a model using statistical tests. That makes it possible to account for the reliability of the model. Robust. Perform well with large data in a short time. Large amounts of data can be analysed using personal computers in a time short enough to enable stakeholders to take decisions based on its analysis.

Decisions in the Management Functions : 

Decisions in the Management Functions GJ - IMT

SWOT ANALYSIS : 

SWOT ANALYSIS Analyze the strength, weaknesses and identify opportunities and threats of the organization i.e. SWOT Analysis baseline. SWOT analysis is used as the basis for future improvements.

SWOT : 

SWOT Do a swot analysis of your any Current planning.

Creativity & Innovation : 

Creativity & Innovation Creativity refers to the ability and power to develop new ideas. Innovation on the other hand means the use of these ideas.

Brainstorming :Technique to Enhance Creativity : 

Brainstorming :Technique to Enhance Creativity Brainstorming :One of the best known techniques developed by Alex.F.Osborn ,father of brainstorming. The purpose is to improve problem solving by finding new and unusual solutions.

Rationality in Decision Making : 

Rationality in Decision Making Analysis requiring a clear goal, a clear understanding of alternatives by which a goal can be achieved An analysis and evaluation of alternatives in terms of goals sought, needed information and a desire to optimize Ashpillai GJ - IMT

Manager As Rational Decision Maker : 

Manager As Rational Decision Maker Assumptions of Rationality – decision maker would: be objective and logical carefully define a problem have a clear and specific goal select the alternative that maximizes the likelihood of achieving the goal make decision in the firm’s best economic interests Ashpillai GJ - IMT

Assumptions Of Rationality : 

Assumptions Of Rationality Rational Decision Making Problem is clear and unambiguous Single, well- defined goal is to be achieved All alternatives and consequences are known Preferences are clear Preferences are constant and stable No time or cost constraints exist Final choice will maximize payoff Ashpillai GJ - IMT

Bounded Rationality : 

Bounded Rationality Rational action limited due to lack of information, time, or ability to analyze alternatives in light of a goal sought; unclear goals; or a lack of ability to take a risk Ashpillai GJ - IMT

Satisficing : 

Satisficing Tendency of managers to make decisions while facing a situation of bounded rationality Usually the course of action “good enough” is chosen Ashpillai GJ - IMT

Satisficing : 

Satisficing Tendency of managers to make decisions while facing a situation of bounded rationality Usually the course of action “good enough” is chosen Ashpillai GJ - IMT

Manager As Intuitive Decision Maker : 

Manager As Intuitive Decision Maker Intuitive decision making - Subconscious process of making decisions on the basis of experience and accumulated judgment does not rely on a systematic or thorough analysis of the problem generally complements a rational analysis Ashpillai GJ - IMT

What Is Intuition? : 

What Is Intuition? Decisions based on experience Decisions based on feelings and emotions Decisions based on ethical values or culture Decisions based on subconscious data Decisions based on skills, knowledge, or training Intuition Affect- initiated decisions Experienced- based decisions Values or ethics-based decisions Subconscious mental processing Cognitive- based decisions Ashpillai GJ - IMT

Decision-Making Styles : 

Decision-Making Styles Analytic Directive Behavioral Conceptual Ashpillai GJ - IMT

What’s your style ?? : 

What’s your style ??

Features of Effective Decisions : 

Features of Effective Decisions Action Oriented Goal Direction Efficiency in Implementation

To Make Effective Decisions . . . : 

To Make Effective Decisions . . . Categorical Interpretation Application of Limiting Factor Adequate Information Considering others’ Views Timeliness