Dr. hab. Jerzy Supernat Institute of Administrative Sciences University of Wrocław

Dr. hab. Jerzy SupernatInstitute of Administrative Sciences

University of Wrocław

Planningand Decision Making

Planning and Decision Making

dr hab. Jerzy Supernat

Planning and decision making

constitute the first managerial function

that organizations must address.



All planning and decision making

occurs within an environmental context.

Thus understanding the environment is

essentially

the first step in planning and decision making.



Decision making is the cornerstone of planning. It is the catalyst that drives the planning process:

• organization’s goals follow from decisions made by various managers

• the best plan for achieving particular goals reflects a decision to adopt one course of action as opposed to others

Decision making underlies every aspect of setting goals and formulating plans.



Purposes of goals

• goals provide guidance and a unified direction for people in the organization

• (effective) goal setting promotes good planning, and good planning facilities future goal setting

• (specific and moderately difficult) goals can serve as a source of motivation to employees of the organization (es-pecially if attaining the goal is likely to result in rewards)

• goals provide a mechanism for control and evaluation



Kinds of goals. Organization’s goals vary by:

• level (an organization’s mission, strategic goals, tactical goals, operational goals)

• area (goals for operations, marketing, finance, quality, productivity and so forth)

• time frame (long-term goals, intermediate-term goals, short-term goals; nb. some goals have an explicit time frame and others have an open-ended time horizon)



John A. Pearce II, Fred David:

An organization mission is a statement of its fundamen-tal, unique purpose that sets a business apart from other firms of its type and identifies the scope of the business’s operations in product and market terms.

Jelfa SA mission statement:

The mission of Jelfa SA is to enhance the quality of life and prolong the life span of society by manufacturing phar-maceuticals that come up to the highest world standards.


dr. hab. Jerzy Supernat

A. Campbell, S. Yeung:Creating a sense of mission, Long Range Planning, August

1991

Mission

a relatively unchartered area of management a meaningless term – no two academics or managers

agree on the same definition: some describe mission in terms of organization

strategy (strategic view of mission) the other express mission in terms of philosophy and

ethics (mission is the cultural glue that enables an organization to function as a collective unity)



Different interpretations of mission can be synthesized into a comprehensive single description of mission. (…) it is an issue that involves both the hearts (culture) and minds (strategy) of employees.

Our definition includes four elements:

purpose

strategy

behaviour standards

values

A strong mission exists when the four elements of mission link tightly together, resonating and reinforcing each other.



Purpose

What is an organization for? For whose benefit is all the effort being put in? Why should a manager or an employee do more than the minimum required?

For an organization the above questions are the equivalent of a person asking, Why do I exist? The questions are deeply philosophical and can lead managers and employees into heated debate.

Organizations that exist to satisfy some of its stakeholders.

Organizations that exist to satisfy all its stakeholders.

Organizations that seek to identify a purpose that is greater from the combined needs of the stakeholders, something to which all the stakeholders can feel proud of contributing. In short, they aim toward a higher ideal.

We believe that leaders will find it easier to create employees with commitment and enthusiasm if they choose a purpose aimed at higher ideal. […] Purposes expressed in terms of stakeholders tend to emphasize their different selfish interests. Purposes aimed at higher ideals seek to deny these selfish interests or at least dampen their legitimacy. This makes it easier to bind the organization together.



Purpose of the European Union, the Treaty on EU, art. 3:

1. The Union’s aim is to promote peace, its values and the well-being of its peoples.

2. The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime. 3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance. It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child. It shall promote economic, social and territorial cohesion, and solidarity among Member States. It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe’s cultural heritage is safeguarded and enhanced.

4. The Union shall establish an economic and monetary union whose currency is the euro.

5. In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.

6. The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties.



Strategy

To achieve a purpose there needs to be a strategy.

Four components of strategy:

• scope/domain• resource allocation/deployment• distinctive competence (competitive advantage)• synergy

H. Igor Ansoff: Synergy is any effect which can produce a combined return on the organization’s resources greater than the sum of its parts.



Behaviour standards

Purpose and strategy are empty intellectual thoughts unless they can be converted into action, into the policy and behavior guidelines that help people to decide what to do on a day-to-day basis.



Values

Values are the beliefs and moral principles that lie behind the organization’s culture. Values give meaning to the norms and behaviour standards in the organization.

Linda Smircich:Organizational culture „is a possession – a fairly stable set of taken-for-granted assumptions, shared meanings, and values that form a kind of backdrop for action”



Values of the European Union, the Treaty on EU, art. 2:

The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.



Mission and Sense of Mission

A sense of mission is an emotional commitment felt by people toward the organization’s mission. […] A sense of mission occurs (…) when there is a match between the values of an organization and those of an individual. […] The greater the link between organization policies and individual values, the greater the scope for the individual sense of mission. We see the values match as the most important part of the a sense of mission because it is through values that individuals feel emotional about their organizations.

Personal nature of a sense of mission has two implications:

No organization can hope to have 100 per cent of its employees with a sense of mission, unless it is very small. People are too varied and have too many individual values for it to be possible for a large organization to achieve a values match for all its employees.

Careful recruitment is essential. People’s values do not change when they change organizations. By recruiting people with compatible values, organizations are much more likely to foster a sense of mission.



Francis Bacon:

Nature is often hidden, sometimes overcome, seldom extinguished.

Nature draws more than ten oxen.



Mission and Sense of Mission

Mission is an intellectual concept that can be analyzed and discussed unemotionally.

Sense of mission is not an intellectual concept: it is an emotional and deeply personal feeling. The individual with a sense of mission has an emotional attachment and commitment to the organization, what it stands for, and what it is trying to do.

An organization with a clear mission does not necessarily have employees with a sense of mission: some individuals may have a sense of mission with varying degrees of intensity; many will not.

Over time the number of employees with a sense of mission will increase as the policies of the mission become implemented and embedded in the organization culture.



Managing Multiple Goals

Organizations set many different kinds of goals and sometimes ex-perience conflicts or contradictions among goals. To address such pro-blems, managers must understand the concept of optimizing. Optimizing involves balancing and reconciling possible conflicts between goals. Managers must look for inconsis-tencies and decide whether to:

pursue one goal to the exclusion of another

find a midrange target between the extremes



Kinds of organizational plans

Given the clear link between organizational goals and plans it is obvious that organizations establish many dif-ferent kinds of plans. At a general level, these include:

strategic plans

tactical plans

operational plans



Strategic Plans

Strategic plans are the plans developed to achieve stra-tegic goals. They are long-range plans and address ques-tions of

• scope / domain• resource allocation / deployment• competitive advantage• synergy



Tactical Plans

Tactical plans aim at achieving tactical goals. They are intermediate plans developed to implement specific parts of a strategic plan. Thus tactical plans are concerned more with actually getting things done than with deciding what to do.



Operational Plans

Operational plans are short-range plans and focus on car-rying out tactical plans to achieve operational goals. Two basic forms of operational plans are:

Single-use plans (developed for nonrecurring situations)

programs projects

Standing plans

policies standard operating procedures rules and regulations



Murphy’s Law

To err is human, to forgive is not company policy.



Contingency Planning

Contingency planning is important for most organizations and necessary for those operating in particularly complex or dynamic environments. The essence of contingency planning is the determination of alternative courses of action to be taken if an intended plan of action is un-expectedly disrupted or rendered inappropriate.

Contingency: an event which may or may not occur; that which is possible or pro-bable; a fortuitous event; a chance.

Contingency plans should be periodically updated and revised.

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Peter F. Drucker(1909-2005)

http://www.washingtonpost.com/wp-dyn/content/article/2005/11/11/AR2005111101938_pf.html



Peter F. Drucker on decision making

• Making good decisions is a crucial skill at every level.

• Decision making is the specific executive task.

• Most discussions of decision making assume that only senior executives make decisions or that only senior executives' decisions matter. This is a dangerous mistake.

• Whenever you see a successful business, someone once made a courageous decision.

• Plans are only good intentions unless they immediately degenerate into hard work.



Whatever a manager does he does through making decisions.

Those decisions may be made as a matter of routine. In-deed, he may not even realize that he is making them. Or they may affect the future existence of the enterprise and require years of systematic analysis. But management is always a decision-making process.



Progressive stages of decision-making process

defining the problem

analyzing the problem

developing alternative solutions

deciding upon the best solution

converting the decision into effective action



Stage 1: Defining the problem • finding the real problem and defining it

• determining the objectives for the solution and the ru-les that limit the solution



Quod tibi fieri non vis, alteri ne feceris (Do not do unto others what you do not want done to yourself).

The Gospel according to Matthew 7, 12:

„Do for others what you want them to do for you”.

George Bernard Shaw (1856-1950):

Do not do unto others as you would expect they should do unto you. Their tastes may not be the same.



Peter M. Senge (born 1947) distinguishes:

• fundamental solutions

• symptomatic solutions

Peter F. Drucker:

The manager (…) must assume that symptoms do lie. Knowing that very different organizational problems produce the same set of symptoms, and that the same problem manifests itself in an infinite variety of ways, the manager must analyze the problem rather than use symptomatic diagnosis.



The manager will never be able to get all the facts he should have. Most decisions have to be based on incomplete knowledge – either because the information is not available or because it would cost too much in time and money to get it.

Stage 2: Analyzing the problem

• classifying the problem the futurity of the decision the impact of the decision on

other areas and functions the number of qualitative

considera-tions that enter into the decision

the uniqueness or periodicity of the decision

• finding the facts (relevant data)



Aaron Bernard Wildavsky (1930-1993): Orga-nizations exist to suppress data. Some data are screened in but most are screened out. The very structure of organizations – the units, the levels, the hierarchy – is designed to reduce the data to manageable and manipula-table proportions. (…) at each level there is not

only compression of data but absorption of uncertainty. It is not the things in themselves but data – reduction sum-maries that are passed up until, at the end, executives are left with mere chains of inferences. Whichever way they go, error is endemic: If they seek original sources, they are easily overwhelmed; if they rely on what they get, they are easily misled.

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Some problems are so complex that you have to be high-ly intelligent and well-informed just to be undecided about them.

Laurence J. Peter

Stage 3: Developing alternative solutions

Alternative solutions are the heart of what is meant by the scientific method. It is the characteristics of the really first-class scientist that he always considers alternative explanations, no matter how familiar and commonplace the observed phenomena.

What the alternatives are will vary with the problem. But one solution should always be considered: taking no action at all.



Alex F. Osborne (1888-1966) – the man who invented brainstorming:

It is easier to tone down a wild idea than to think up a new one.



Stage 4: Deciding upon the best solution

There are four criteria for picking the best from among the possible solutions:

• risk• economy of effort• timing• limitation of resources

No decision can be better than the people who have to carry it

out.



Stage 5: Converting the decision into effective ac-tion

(…) it is of the essence of manager’s decision that other people must apply it to make it effective. A manager’s de-cision is always a decision concerning what other people should do. (…) It requires that any decision become „our decision” to the people who have to convert it into action. This in turn means that they have participate responsibly in making it.



Decision making and problem solving

Decision making

sensu stricto

Stage 1

Stage 4

Stage 2

Stage 3

Stage 5

Decision making sensu largo

Decision making sensu largissimo

Problem solving sensu stricto

Problem solving sensu largo

Peter F. Drucker: Management is not concerned with knowledge for its own sake; it is concerned with performance.

Dr. hab. Jerzy Supernat Institute of Administrative Sciences University of Wrocław

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