notes2_management concepts & practices.pptx
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This document discusses the essential aspects of planning in management, emphasizing that planning is an ongoing, intellectual process requiring flexibility and adaptation to changing circumstances. It categorizes various types of plans, including strategic, tactical, operational, and outlines the importance of setting clear objectives to guide decision-making and performance evaluation. Additionally, it describes the planning process, effective techniques, and the role of organizational structure in achieving goals.
![Decision Making Under Risk
• A state of risk exists when a decision maker makes decisions
under a condition in which the availability of each alternative
and its potential payoffs and costs are all associated with
probability estimate.
• Decisions such as these are based on past experiences,
relevant information, the advice of others and one’s own
judgment.
• Decision is ‘calculated’ on the basis of which alternative has
the highest probability of working effectively. [union
negotiations, Porsche’s SUV focus vs high-performance sports
cars]](https://image.slidesharecdn.com/notes2mcp-240922084838-210ae6bc/85/notes2_management-concepts-practices-pptx-77-320.jpg)
notes2_management concepts & practices.pptx
- 1. Types of Plans UNIT 2: PLANNING 1
- 2. Planning Planning is an intellectual process which requires a manager to think before acting. Planning is continuous process. Plan must be flexible. Change direction to adept to changing situation Technology ( changing need) Market (Marketing Strategies) Finance (Obtain Fund) Personnel (Job Rotation) Organization (organizational structure )
- 3. Planning Importance or Advantages • Minimize risk and uncertainty • Leads to success • Focus attention on the organization's goals • Facilitates control • Trains executives
- 4. Planning Types • Strategies Competitive Advantage SWOT Analysis • Operational Plans Policies Procedures Methods Rules
- 5. Types of Plans Used by Managers • Types of plans – Long-term plans look three or more years into the future – Short-term plans typically cover one year or less 5
- 6. Types of Plans Used by Managers 6 Most of us • 3 month time frame A few of us • 1 year time frame Very few of us • 20 year time frame
- 7. Types of Plans Used by Managers • Strategic plans — set broad, comprehensive, and longer-term action directions for the entire organization • Vision – clarifies purpose of the organization and what it hopes to be in the future 7
- 8. Types of Plans Used by Managers • Tactical plan – helps to implement all or parts of the strategic plan • Functional plans – indicate how different operations within the organization will help accomplish the overall strategy • Production plans • Financial plans • Facilities plans • Logistics plans • Marketing plans • Human resource plans 8
- 9. Types of Plans Used by Managers • Operational plans — identify short-term activities to implement strategic plans – Policies are standing plans the communicate guidelines for decisions – Procedures are rules that describe actions to be taken in specific situations – Budgets are plans the commit resources to projects or activities • Zero based budgets allocate resources as if each budget were brand new 9
- 10. STEPS IN PLANNING (PROCESS) UNIT 2: PLANNING 2
- 11. STEPS IN PLANNING BEING AWARE OF OPPORTUNITIES OBJECTIVES OR GOALS PLANNING PREMISES IDENTIFY ALTERNATIVES NUMBERIZE PLANS BY MAKING BUDGETS FORMULATE SUPPORTING PLANS CHOOSE AN ALTERNATIVE COMPARE ALTERNATIVES IN LIGHT OF GOALS SOUGHT
- 12. Planning Process • Identify the available opportunities • Establishing variable goals or Set of goals to be Achieved • Establishing planning Premises – Internal and External Premises – Tangible and Intangible Premises – Controllable and non controllable Premises
- 13. Planning Process • Deciding the planning Period Lead time in Product Development Capital Investment & Payback Period • Finding Alternative course of Action • Evaluating & Selecting a course of action • Developing derivative Plan • Establishing Action Plan • Measuring and Controlling the Process
- 14. OBJECTIVES, MBO UNIT 2: PLANNING 3
- 15. ORGANIZATIONAL OBJECTIVES “If you don’t know where you are going, you’ll end up someplace else.” Yogi Berra, former MLB player
- 16. 16 What are objectives? • Objectives are statements of desired outcomes or expectations “Managing Without Objectives Is Like Taking A Trip Without Knowing The Destination”
- 17. 17 Objectives Are Necessary “Objectives Are Necessary If Performance Results Influence Company Survival & Growth” Peter Drucker
- 18. 18 What Do Objectives Do? • Focus Attention – People, Money, Equipment • Justify Reasons for Orders • Provide a Planning Base • Give Direction • Provide Data • Indicate Problems
- 19. 19 FEATURES OF A GOOD OBJECTIVE CAN BE DONE WRITTEN CAN BE UNDERSTOOD SPECIFIC CURRENT FLEXIBLE A GOOD OBJECTIVE
- 20. 20 Example (bad) “The Restaurant Will Receive Few Complaints Next Month.” • Unclear - How many is few - not measurable • Interpreted differently by different supervisors • A vague Goal
- 21. 21 Example (Good) “The hotel will achieve 85% room occupancy in the next quarter.” • Clear – • Measurable – • Attainable (?)
- 22. The Nature of Objectives • Objectives are the goals of the business. They represent the outcomes or targets that the business wants to gain in order to achieve its aims. • The objectives of a business are derived from its aims. • Well defined objectives are important. • They will help the business to be clear about what it wants to achieve. • The performance of a business could be assessed by how effectively it achieves its objectives.
- 23. Characteristics of SMART Business Objectives • Specific – stating exactly what it is trying to achieve. • Measurable – able to be measured to decide if they have been achieved. • Agreed – have the approval and understanding of everyone involved. • Realistic – able to be achieved by the business taking into account its resources, competition, market, etc. • Time Specific – state a time by which they should be achieved.
- 24. Factors Which Determine the Corporate Objectives of a Business • The size and status of the business. • The power of stakeholders. • Ownership. • Long and short-term objectives. • External and internal pressures. • Risks • Corporate and business culture. • Number of years the business has been operating.
- 25. 25 Setting Objectives The OBJECTIVE Who is responsible How will it be accomplished What is to be accomplished When is it to be accomplished
- 26. 26 How do you start setting objectives? • Be Realistic Sometimes resources are not available • Concentrate on what is important Not all objectives have equal importance Prioritize
- 27. 27 How do you start setting objectives? • Ask relevant questions You must know exactly what is to be accomplished How, When, Who & Why • Be results oriented Be clear with your goals & communication Know what exactly you want to achieve
- 28. 28 How do you start setting objectives? • Assign responsibility Give specific responsibility for assignment areas • Fix time frames Set deadlines for results to be achieved by
- 29. 29 How do you start setting objectives? • Measure & Monitor Evaluate & compare - seek / give feedback - revise plan if necessary - develop future objectives & plans
- 30. Types of Objectives • Short term vs Long term • Strategic • Tactical (Operational) • Ethical • CSR
- 31. Strategic Objectives • Long term plans that usually affect the entire business – Growth – Image and reputation – Budgets – Market share – Profitability – Market decisions • In reality, businesses may have several strategic objectives taking place during the same time • Made by top executives usually
- 32. Examples: Strategic Objectives • A bigger market share. • Quicker design-to-market times than rivals. • Higher product quality than rivals. • Better customer service than rivals • Recognition as a leader in technology
- 33. Tactical (Operational) • Short term objectives that are mainly departmentalized – More sales; lower costs etc • Survival – especially in tough economic times – For example, a company may have a corporate objective of becoming a global operator in ten years, getting established in Europe within one year may be a tactical objective
- 34. Ethical Objectives • Ethics are the moral principles that guide decision-making and strategy • An ethical business is likely to treat its workers, customers, shareholders and the environment in a responsible manner
- 35. 35 Qualitative and quantitative objectives again can split into: • Decision oriented objectives – If a decision is made to remedy a particular problem - that will determine objectives • Routine objectives – Relate to everyday work operations – concerned mainly with routine / repetitive jobs
- 36. 36 Qualitative and quantitative objectives again can split into: • Creative objectives – Involve new ideas, applied in a creative or flexible way to enhance productivity, profitability or both • Personal objectives – Specific goals you seek to accomplish in your own work
- 37. Management by objectives (MBO) Defi. • MBO is comprehensive managerial system that integrate many key managerial activities in a systematic manner, consciously directed towards the effective & efficient achievement of organizational objectives. Approach & Philosophy to management Affect every management technique MBO is an objectives Objective setting & Performance review
- 38. Management by objectives (MBO) MBO is the process whereby, • Superiors & subordination jointly identify the common objectives, • Set the result that should be achieved by subordinates, • Asses the contribution of each individual and integrate individuals with the organization, • So as to make best use of organizational recourses.
- 39. Objectives of MBO • To measure and judgment • Relate individual performance to organizational goal • Expectation & accomplishment • Increase competence & growth of subordinates • Communication between superior & subordinate • Basis of salary and Promotion
- 40. Process of MBO • Set corporate objectives • Set and Align employee objectives • Monitor performance • Evaluate performance • Reword employee
- 41. MBO Advantages Disadvantages • Better management of organization • Clarity in organizational action • Personnel satisfaction • Organizational change • Time & Cost • Failure of MBO philosophy • Problems in objectives setting • Inflexibility
- 42. AIMS MISSION CORPORATE OBJECTIVES DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES The business over all purpose. The long-term goals which a business hopes to achieve. No two companies will have the same corporate aims. A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. Its an attempt to condense the purpose of the business’s existence into one statement. INDIVIDUAL TARGETS These are the goals of the business. They are the outcomes or targets the business want to gain in order to achieve its aims. The objective of a business can be derived from its aims Specific targets for separate divisions. Targets for each department Individual goals/targets Management By Objectives (MBO) THE HIERARCHY OF OBJECTIVES
- 43. INDIVIDUAL TARGETS TO MAXIMISE SHAREHOLDERS VALUE TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT OVERHEADS BY 5% MARKETING: Increase Profits by 10%; FINANCE : Reduce Long- term borrowing by 5%; R&D: Develop one innovative product each year. E.G IN THE MARKETING DEPARTMENT • Increase Sales by an average of 5% per client. • Introduce five more clients to the business each year. AIMS CORPORATE OBJECTIVES DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES Management By Objectives (MBO) THE HIERARCHY OF OBJECTIVES
- 44. 44 Management by objectives COMPANY PLANS DEPARTMENTAL & INDIVIDUAL MANAGERS’ PLANS IMPROVEMENT PLANS REVIEW MEETINGS CONTROL OF INFORMATION
- 45. PLANNING PREMISES UNIT 2: PLANNING 4
- 46. PREMISING.. • Planning Premises are the anticipated environment in which plans are expected to operate. • they include assumptions and forecasts that will affect the operations of plans.
- 47. PREMISES… • Premises are planning assumptions. • for both external and internal environments • future environment of plans are complex- hence not realistic . • premises are therefore limited to plans which are strategic or critical to the company.
- 48. PRINCIPLE.. • the more individuals charged with planning understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be.
- 49. • Fayol called it Prevoyance… • Peter Drucker says– not an activity which an intelligent man should indulge in.
- 50. PREMISING.. • Environment of plans • Types of premises- 1. External and Internal 2. Quantitative and Qualitative 3. Degree of controllability
- 51. PREMISING.. • Environmental Forecasting - values of forecasting - economic forecasting - technological forecasting - social and political forecasting
- 52. PREMISING… • the sales forecast – key plan and premise • making premising effective
- 53. BARRIERS TO EFFECTIVE PLANNING UNIT 2: PLANNING 5
- 54. • Demands on the Manager’s Time • Ambiguous and Uncertain Operating Environments • Resistance to Change Barriers to Effective Planning
- 55. Overcoming the Barriers to Planning • Involve Employees in Decision Making – Input from all levels of a firm is essential for successful planning. • Tolerate a Diversity of Views – Diverse views lead to a broader assessment of organizational problems and opportunities. • Encourage Strategic Thinking – Effective strategic thinking can be developed through training and practice.
- 56. RATIONAL DECISION MAKING, Limiting Factors UNIT 2: PLANNING 6
- 57. RATIONAL DECISION MAKING MODEL 1. RECOGNIZE, DEFINE • PROBLEM • OPPORTUNITY
- 58. RATIONAL DECISION MAKING MODEL • GATHER “RELEVANT” INFO • DIAGNOSE CAUSE(S) • ASSUMPTIONS! • BE AWARE OF THEM UNDERSTAND THEM
- 59. PROBLEMS WITH DEFINING PROBLEM • TASK INSTRUCTIONS • PERCEPTIONS • “EXPERIENCE” • “MENTAL SETS” • JUDGEMENTAL
- 60. PROBLEMS WITH DEFINING PROBLEM(CONT’D) • “SOLUTION MINDED” • NOT ENOUGH INFORMATION • NOT ENOUGH TIME • CONFUSING PROBLEM AND CAUSE(S) • INITIAL “SUCCESS/FAILURE”
- 61. PROBLEMS WITH DEFINING PROBLEM(CONT’D) • LIMITED/BOUNDED RATIONALITY – LIMITED CAPACITY/CAPABILITY – SATISFICING – SEQUENTIAL ATTENTION – BARGAINING “BEHAVIORAL MODEL”
- 62. RATIONAL DECISION MAKING MODEL 2. DEVELOP ALTERNATIVES 3. EVALUATE ALTERNATIVES – UNDERSTAND CONSEQUENCES
- 63. RATIONAL DECISION MAKING MODEL 4. CHOOSE (DECIDE) 5. IMPLEMENT 6. EVALUATE, CONTROL
- 64. TYPES OF DECISIONS • PROGRAMMED – REPETITIVE – ROUTINE – HANDLED WITH DEFINITE APPROACH
- 65. TYPES OF DECISIONS • NON-PROGRAMMED – UNIQUE – NONRECURRING – HANDLED WITH CUSTOM RESPONSE
- 66. DECISION CONDITIONS • CERTAINTY – 100% SURE • RISK – REASONABLE ESTIMATE OF PROBABILITY • UNCERTAINTY – CANNOT EVEN ESTIMATE PROBABILITY
- 67. DECISION MAKING STYLES • DELIBERATE/RATIONAL • IMPULSIVE
- 68. DECISION MAKING TECHNIQUES • INDIVIDUAL • GROUP – BRAINSTORMING – NOMINAL – DELPHI
- 69. FOCUS • STRATEGIC • OPERATING • TACTICAL
- 70. TOOLS • MARGINAL ANALYSIS • COST-BENEFIT • EXPERIENCE • EXPERIMENTATION
- 71. TOOLS • MATHEMATICAL MODELS • DECISION TREE • CHARTS
- 73. “WE SELDOM HAVE TIME FOR THE IMPORTANT BECAUSE WE ARE WORKING ON THE IMMEDIATE AND THE IMMEDIATE IS SELDOM THE IMPORTANT” - Peter Drucker
- 74. Decision Making under certainty, uncertainty and risk. UNIT 2: PLANNING 8
- 75. Decision-Making Conditions • Decision Making Under Certainty • •Decision Making Under Risk • •Decision Making Under Uncertainty
- 76. Decision Making Under Certainty • A state of certainty exists when a decision maker knows, with reasonable certainty, what the alternatives are and what conditions are associated with each alternative. • Very few organizational decisions, however, are made under these conditions. • The complex and turbulent environment in which businesses exist rarely allows for such decisions. 76
- 77. Decision Making Under Risk • A state of risk exists when a decision maker makes decisions under a condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimate. • Decisions such as these are based on past experiences, relevant information, the advice of others and one’s own judgment. • Decision is ‘calculated’ on the basis of which alternative has the highest probability of working effectively. [union negotiations, Porsche’s SUV focus vs high-performance sports cars]
- 78. Decision Making Under Uncertainty • A state of uncertainty exists when a decision maker does not know all of the alternatives, the risks associated with each, or the consequences each alternative is likely to have. • Most of the major decision making in today’s organizations is done under these conditions. • To make effective decisions under these conditions, managers must secure as much relevant information as possible and approach the situation from a logical and rational view. • Intuition, judgment and experience always play major roles in the decision-making process under these conditions. 78
- 79. A View of Decision-Making Conditions Risk & Uncertainty Probabilities and expected outcomes are unknown Some knowledge of probabilities and expected outcomes Probabilities and expected outcomes are known Level of ambiguity and chances of making a bad decision Lower Moderate Higher
- 80. ORGANISING
- 81. Organizational Structure Structure: the sum total of ways in which its labor is divided into distinct tasks and then its coordination is achieved among these tasks. Five coordinating mechanisms have been proposed to explain the fundamental ways in which organizations coordinate their work. They are the glue that holds organization together.
- 82. Coordinating Mechanisms • Mutual adjustment • Direct supervision • Standardization of work processes • Standardization of work output • Standardization of skills and konwledge
- 83. The Five Basic Parts of an Organization Strategic apex Middle line Operating core Technostructure Support staff
- 84. ORGANIZATIONAL STRUCTURE • Structure follows strategy; but then strategy must follow structure • Objective of organizational structure is to balance: – the economic advantages of specialization, with – the problems and costs of coordination and motivation, i.e. bureaucratic costs • Bureaucratic costs arise from: – supervisory monitoring – motivation problems – coordination activities – opportunism and information distortions
- 85. Importance of Organizational Structure Structure Impacts: •Decision making •Costs & efficiencies •Overall success and sustainability
- 86. Developing Organizational Structure Organizational Structure – The arrangement or relationship of positions within an organization.
- 87. Developing Organizational Structure Structure Develops – •Managers assign work tasks to individuals & groups •Coordination of diverse activities to attain objectives
- 89. Organizational Chart What the Organizational Chart Shows – •Organizational structure •Chain of command (lines of authority) •Other relationships (staff, committees, etc.) •Lines of communication
- 90. The Organization Chart – What it Shows Organization charts convey five major points about an organization’s structure: 1. Activities of the organization: the chart as a whole indicates the range of activities in which the organization is involved. 2. Subdivisions of the organization: each box represents a subdivision of the organization responsible for a portion of the work. 3. Type of work performed: the label in each box indicates the department’s area of responsibility.
- 91. The Organization Chart – What it Shows II 4. Levels of management: the chart shows the management hierarchy; all persons who report to the same individual are on the same management level, or horizontal level on the chart. 5. Lines of Authority: the lines that connect the boxes show the official lines of authority and channels of communication for the organization.
- 92. The Organization Chart – What it Doesn’t Show There are a number of things the organization chart does not show about the firm: 1. Degree of responsibility and authority of individuals; 2. Degree of decentralization that exists; 3. Staff and line functions; 4. Position status or importance; 5. Lines of actual communication; 6. Relationships among members; and 7. The ‘informal’ organization.
- 93. The Chain of Command
- 94. Line Organization Chart Board of Directors President VP - Finance VP - Operations Region 1 Region 2 Region 3 VP - Marketing
- 95. Line & Staff Organization Chart
- 96. Functional Authority in a Line-Staff Organization
- 97. Fully-Developed Functional Authority in a Line-Staff Organization
- 98. Personal Staff vs Professional Staff
- 99. Span of Control Span of Control is the number of employees who report to a single manager or supervisor.
- 100. Height of the Hierarchy The hierarchy describes who reports to whom and the span of control of each manager. The hierarchy is depicted by the vertical lines on the organization chart. The hierarchy is related to the span of control. When spans are narrow the height of the hierarchy will be large (tall). When spans are wide, the height of the hierarchy will be low (flat).
- 101. Span of Control - Illustration
- 102. Factors Influencing the Span of Control • Competence of supervisor and subordinates • Physical dispersion of subordinates • Extent of non-supervisory work in manager’s job • Degree of interaction required • Extent of standardized procedures • Similarity of tasks being performed • Frequency of new problems • Preferences of supervisors and subordinates