Management 310 second exam

Describe different decision-making styles and discuss how biases affect decision making Linear thinking -style - characterized by a person's preference for using external data and processing this information through rational, logical thinking. Nonlinear thinking style - characterized by a preference for internal sources of information and processing this information with internal insights, feelings, and hunches.

A person's thinking style reflects two things: the source of information you tend to use (external or internal) and how you process that information (linear or nonlinear). These four dimensions were collapsed into two styles. The linear thinking style is characterized by a person's preference for using external data and processing this information through rational, logical thinking. The nonlinear thinking style is characterized by a preference for internal sources of information and processing this information with internal insights, feelings, and hunches. The 12 common decision-making errors and biases include overconfidence, immediate gratification, anchoring, selective perception, confirmation, framing, availability, representation, randomness, sunk costs, self-serving bias, and hindsight. The managerial decision making model helps explain how the decision-making process is used to choose the best alternative(s), either through maximizing or satisficing and then implement and evaluate the alternative. It also helps explain what factors affect the decision-making process, including the decision-making approach (rationality, bounded rationality, intuition), the types of problems and decisions (well structured and programmed or unstructured and nonprogrammed), the decision-making conditions (certainty, risk, uncertainty), and the decision maker's style (linear or nonlinear).

Procedure - a series of sequential steps used to respond to a well-structured problem Rule - an explicit statement that tells managers what can or cannot be done Policy - a guideline for making decisions

A procedure is a series of sequential steps a manager uses to respond to a structured problem. The only difficulty is identifying the problem. Once it's clear, so is the procedure. For instance, a purchasing manager receives a request from a warehouse manager for 15 tablets for the inventory clerks. A rule is an explicit statement that tells a manager what can or cannot be done. Rules are frequently used because they're simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and fairly. The third type of programmed decisions is a policy, a guideline for making a decision. In contrast to a rule, a policy establishes general parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker.

-A single-use plan is a one-time plan designed to meet the needs of a unique situation. -Standing plans are ongoing plans that provide guidance for activities performed repeatedly.

A single-use plan is a one-time plan designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.

Innovation and Design Thinking •A strong connection exists between design thinking and innovation. •With a design thinking mentality, the emphasis is on getting a deeper understanding of what customers need and want

A strong connection exists between design thinking and innovation. "Design thinking can do for innovation what TQM did for quality." Just as TQM provides a process for improving quality throughout an organization, design thinking can provide a process for coming up with things that don't exist. When a business approaches innovation with a design thinking mentality, the emphasis is on getting a deeper understanding of what customers need and want.

Evidence-based management (EBMgt) - the systematic use of the best available evidence to improve management practice

"Any decision-making process is likely to be enhanced through the use of relevant and reliable evidence, whether it's buying someone a birthday present or wondering which new washing machine to buy." That's the premise behind evidence-based management (EBMgt), the "systematic use of the best available evidence to improve management practice. EBMgt is quite relevant to managerial decision making. The four essential elements of EBMgt are the decision maker's expertise and judgment; external evidence that's been evaluated by the decision maker; opinions, preferences, and values of those who have a stake in the decision; and relevant organizational (internal) factors such as context, circumstances, and organizational members.

An effective decision-making process (cont.) encourages and guides gathering relevant information and informed opinions Is straightforward, reliable, easy to use, and flexible Design thinking - "approaching management problems as designers approach design problems."

(5) encourages and guides gathering relevant information and informed opinions; and (6) is straightforward, reliable, easy to use, and flexible. The five habits of highly reliable organizations are (1) not being tricked by their successes; (2) deferring to experts on the front line; (3) letting unexpected circumstances provide the solution; (4) embracing complexity; and (5) anticipating, but also recognizing, limits. Design thinking is "approaching management problems as designers approach design problems." It can be useful when identifying problems and when identifying and evaluating alternatives.

External

-Changing consumer needs and wants -New governmental law -Changing technology -Economic change

Internal

-New organization strategy -Change in composition -New equipment -changing employee attitude

Well written goal

-written in terms of outcome rather than action -Measurable and quantifiable -clear as to time frame -challenging yet attainable -written down -communicated to all necessary organizational members

steps in goal setting 4.Write down the goals and communicate them to all who need to know 5.Review results and whether goals are being met.

4. Write down the goals and communicate them to all who need to know. Writing down and communicating goals forces people to think them through. The written goals also become visible evidence of the importance of working toward something. 5. Review results and whether goals are being met. If goals aren't being met, change them as needed. Once the goals have been established, written down, and communicated, a manager is ready to develop plans for pursuing the goals.

•How Can Managers Use Environmental Scanning? -Environmental scanning - screening information to detect emerging trends -Competitor intelligence - gathering information about competitors that allows managers to anticipate competitors' actions rather than merely react to them

A manager's analysis of the external environment may be improved by environmental scanning, which involves screening information to detect emerging trends. One of the fastest-growing forms of environmental scanning is competitor intelligence, gathering information about competitors that allows managers to anticipate competitors' actions rather than merely react to them. It seeks basic information about competitors: Who are they? What are they doing? How will what they're doing affect us?

Bounded Rationality - decision making that's rational, but limited (bounded) by an individual's ability to process information. Satisfice - accepting solutions that are "good enough." Escalation of commitment - an increased commitment to a previous decision despite evidence it may have been wrong

A more realistic approach to describing how managers make decisions is the concept of bounded rationality, which says that managers make decisions rationally, but are limited (bounded) by their ability to process information. Because they can't possibly analyze all information on all alternatives, managers satisfice, rather than maximize. That is, they accept solutions that are "good enough." They're being rational within the limits (bounds) of their ability to process information.

•CHANGING ORGANIZATIONAL CULTURE Cultures are naturally resistant to change. •Conditions that facilitate cultural change: -The occurrence of a dramatic crisis -Leadership changing hands -A young, flexible, and small organization -A weak organizational culture

An organization's culture is made up of relatively stable and permanent characteristics tends to make it very resistant to change. A culture takes a long time to form, and once established it tends to become entrenched. Strong cultures are particularly resistant to change because employees have become so committed to them.

goals and plans •Goals (objectives) - desired outcomes or targets •Plans - documents that outline how goals are going to be met

Goals (objectives) are desired outcomes or targets. They guide management decisions and form the criterion against which work results are measured. That's why they're often described as the essential elements of planning. You have to know the desired target or outcome before you can establish plans for reaching it. Plans are documents that outline how goals are going to be met. They usually include resource allocations, schedules, and other necessary actions to accomplish the goals. As managers plan, they develop both goals and plans.

Structural Variables •An organic-type structure positively influences innovation. •The availability of plentiful resources provides a key building block for innovation. •Frequent communication between organizational units helps break down barriers

An organization's structure can have a huge impact on innovativeness. An organic-type structure positively influences innovation. Because this structure is low in formalization, centralization, and work specialization, it facilitates the flexibility and sharing of ideas that are critical to innovation. The availability of plentiful resources provides a key building block for innovation. With an abundance of resources, managers can afford to purchase innovations, can afford the cost of instituting innovations, and can absorb failures. For example, at Smart Balance Inc., the heart-healthy food developer uses its resources efficiently by focusing on product development and outsourcing almost everything else, including manufacturing, product distribution, and sales. The company's CEO says this approach allows them to be "a pretty aggressive innovator" even during economic downturns. Third, frequent communication between organizational units helps break down barriers to innovation

The strategic management process •Step 2: Doing an external analysis -The environmental scanning of specific and general environments •Focuses on identifying opportunities and threats

Analyzing that environment is a critical step in the strategic management process. Managers do an external analysis so they know, for instance, what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In an external analysis, managers should examine the economic, demographic, political/legal, sociocultural, technological, and global components to see the trends and changes. Once they've analyzed the environment, managers need to pinpoint opportunities that the organization can exploit and threats that it must counteract or buffer against. Opportunities are positive trends in the external environment; threats are negative trends

•Step 4: Formulating strategies -Develop and evaluate strategic alternatives. -Select appropriate strategies for all levels in the organization that provide relative advantage over competitors. -Match organizational strengths to environmental opportunities. -Correct weaknesses and guard against threats.

As managers formulate strategies, they should consider the realities of the external environment and their available resources and capabilities in order to design strategies that will help an organization achieve its goals. The three main types of strategies managers will formulate include corporate, competitive, and functional.

Two Views of change process -Lewin's description of the change process as a break in the organization's equilibrium state. •Unfreezing the status quo •Changing to a new state •Refreezing to make the change permanent •White-Water Rapids Metaphor -The lack of environmental stability and predictability requires that managers and organizations continually adapt (manage change actively) to survive.

At one time, the calm waters metaphor was fairly descriptive of the situation managers faced. It's best discussed using Kurt Lewin's three-step change process. According to Lewin, successful change can be planned and requires unfreezing the status quo, changing to a new state, and refreezing to make the change permanent.

How can stress be reduced Job-related factors begin with employee selection. A realistic job preview during the selection process can minimize stress by reducing ambiguity over job expectations. Performance planning program such as MBO (management by objectives) will clarify job responsibilities, provide clear performance goals, and reduce ambiguity

Because stress can never be totally eliminated from a person's life, managers want to reduce the stress that leads to dysfunctional work behavior. How? Through controlling certain organizational factors to reduce job-related stress, and to a more limited extent, offering help for personal stress. Things managers can do in terms of job-related factors begin with employee selection. Managers need to make sure an employee's abilities match the job requirements. When employees are in over their heads, their stress levels are typically high. A realistic job preview during the selection process can minimize stress by reducing ambiguity over job expectations. Improved organizational communications will keep ambiguity-induced stress to a minimum. Similarly, a performance planning program such as MBO (management by objectives) will clarify job responsibilities, provide clear performance goals, and reduce ambiguity through feedback. Job redesign is also a way to reduce stress. If stress can be traced to boredom or to work overload, jobs. should be redesigned to increase challenge or to reduce the workload.

Classify decisions and decision-making conditions Certainty is a situation in which a manager can make accurate decisions because all outcomes are known Risk is a situation in which a manager can estimate the likelihood of certain outcomes. Uncertainty is a situation in which a manager is not certain about the outcomes and can't even make reasonable probability estimates.

Certainty is a situation in which a manager can make accurate decisions because all outcomes are known. Risk is a situation in which a manager can estimate the likelihood of certain outcomes. Uncertainty is a situation in which a manager is not certain about the outcomes and can't even make reasonable probability estimates. When decision makers face uncertainty, their psychological orientation will determine whether they follow a maximax choice (maximizing the maximum possible payoff); a maximin choice (maximizing the minimum possible payoff); or a minimax choice (minimizing the maximum regret— amount of money that could have been made if a different decision had been made).

plan•Organizational Development (OD) - techniques or programs to change people and the nature and quality of interpersonal work relationships. •Global OD - OD techniques that work for U.S. organizations may be inappropriate in other countries and cultures.

Changing people involves changing attitudes, expectations, perceptions, and behaviors— something that's not easy to do. Organizational development (OD) is the term used to describe change methods that focus on people and the nature and quality of interpersonal work relationships. Managers need to recognize that some techniques that work for U.S. organizations may not be appropriate for organizations or organizational divisions based in other countries.

Understand cultural differences Create standards for good decision making Know when it's time to call it quits Use an effective decision making process Build an organization that can spot the unexpected and quickly adapt to the changed environment

Decision making is serious business. Your abilities and track record as an effective decision maker will determine how your organizational work performance is evaluated and whether you'll be promoted to higher and higher positions of responsibility. Here are some guidelines to help you be a better decision maker. Understand cultural differences. Managers everywhere want to make good decisions. However, is there only one "best" way worldwide to make decisions? Or does the "best way depend on the values, beliefs, attitudes, and behavioral patterns of the people involved?" Create standards for good decision making. Good decisions are forward-looking, use available information, consider all available and viable options, and do not create conflicts of interest. Know when it's time to call it quits. When it's evident that a decision isn't working, don't be afraid to pull the plug. Use an effective decision-making process. Build an organization that can spot the unexpected and quickly adapt to the changed environment.

Step 1: Identify a Problem Problem - an obstacle that makes it difficult to achieve a desired goal or purpose. Every decision starts with a problem, a discrepancy between an existing and a desired condition Example - Amanda is a sales manager whose reps need new laptops

Every decision starts with a problem, a discrepancy between an existing and a desired condition. For our example, Amanda is a sales manager whose reps need new laptops because their old ones are outdated and inadequate for doing their job. To make it simple, assume it's not economical to add memory to the old computers and it's the company's policy to purchase, not lease. Now we have a problem—a disparity between the sales reps' current computers (existing condition) and their need to have more efficient ones (desired condition). Amanda has a decision to make.

The strategic Management Process •Step 1: Identifying the organization's current mission, goals, and strategies -Mission: a statement of the purpose of an organization •The scope of its products and services -Goals: the foundation for further planning •Measurable performance targets

Every organization needs a mission—a statement of its purpose. Defining the mission forces managers to identify what it's in business to do. But sometimes that mission statement can be too limiting. For example, the co-founder of the leading Internet search engine Google says that while the company's purpose of "organizing the world's information and making it universally accessible and useful" has served them well, they failed to see the whole social side of the Internet and have been playing catch-up.

•Goal-setting involves these steps: review the organization's mission; -Evaluate available resources -Determine the goals individually or with input from others -Write down the goals and communicate them to all who need to know them -Review results and change goals as needed

Goal-setting involves these steps: review the organization's mission; evaluate available resources; determine the goals individually or with input from others; write down the goals and communicate them to all who need to know them; and review results and change goals as needed.

•Classify the types of goals organizations might have and the plans they use. -Goals are desired outcomes. -Plans are documents that outline how goals are going to be met. -Strategic plans apply to the entire organization while operational plans encompass a particular functional area.

Goals are desired outcomes. Plans are documents that outline how goals are going to be met. Goals might be strategic or financial and they might be stated or real. Strategic plans apply to the entire organization while operational plans encompass a particular functional area.

Step 3: Allocate Weights to the Criteria If the relevant criteria aren't equally important, the decision maker must weight the items in order to give them the correct priority in the decision. The weighted criteria for our example are shown in Exhibit 6-2.

If the relevant criteria aren't equally important, the decision maker must weight the items in order to give them the correct priority in the decision. How? A simple way is to give the most important criterion a weight of 10 and then assign weights to the rest using that standard. Of course, you could use any number as the highest weight. The weighted criteria for our example are shown in Exhibit 6-2.

Step 7: Implement the Alternative Putting the chosen alternative into action - Conveying the decision to and gaining commitment from those who will carry out the alternative

In Step 7 in the decision-making process, you put the decision into action by conveying it to those affected and getting their commitment to it. We know that if the people who must implement a decision participate in the process, they're more likely to support it than if you just tell them what to do. Another thing managers may need to do during implementation is reassess the environment for any changes, especially if it's a long-term decision. Are the criteria, alternatives, and choice still the best ones, or has the environment changed in such a way that we need to reevaluate?

Contemporary issues in planning •How Can Managers Plan Effectively in Dynamic Environments? -In an uncertain environment, managers should develop plans that are specific, but flexible. -Managers need to recognize that planning is an ongoing process

In an uncertain environment, managers should develop plans that are specific, but flexible. Although this may seem contradictory, it's not. To be useful, plans need some specificity, but the plans should not be set in stone. Managers need to recognize that planning is an ongoing process. The plans serve as a road map although the destination may change due to dynamic market conditions. They should be ready to change directions if environmental conditions warrant.

Approaches to planning •In the traditional approach, planning is done entirely by top-level managers often are assisted by a formal planning department •Formal planning department - a group of planning specialists whose sole responsibility is helping to write organizational plans

In the traditional approach, planning is done entirely by top-level managers who often are assisted by a formal planning department, a group of planning specialists whose sole responsibility is to help write the various organizational plans. Under this approach, plans developed by top-level managers flow down through other organizational levels, much like the traditional approach to goal-setting. As they flow down through the organization, the plans are tailored to the particular needs of each level. Although this approach makes managerial planning thorough, systematic, and coordinated, all too often the focus is on developing "the plan"—a thick binder (or binders) full of meaningless information that's stuck on a shelf and never used by anyone for guiding or coordinating work efforts

•Compare and contrast approaches to goal-setting and planning. -In traditional goal-setting, goals are set at the top of the organization and then become subgoals for each organizational area -MBO (management by objectives) is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance.

In traditional goal-setting, goals are set at the top of the organization and then become subgoals for each organizational area. MBO (management by objectives) is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance.

Approaches to setting goals •Traditional goal-setting - an approach to setting goals in which top managers set goals that then flow down through the organization and become subgoals for each organizational area •Means-ends chain - an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level

In traditional goal-setting, goals set by top managers flow down through the organization and become subgoals for each organizational area. This traditional perspective assumes that top managers know what's best because they see the "big picture." And the goals passed down to each succeeding level guide individual employees as they work to achieve those assigned goals. When the hierarchy of organizational goals is clearly defined it forms an integrated network of goals, or a means-ends chain. Higher-level goals (or ends) are linked to lower-level goals, which serve as the means for their accomplishment. In other words, the goals achieved at lower levels become the means to reach the goals (ends) at the next level. And the accomplishment of goals at that level becomes the means to achieve the goals (ends) at the next level and on up through the different organizational levels. That's how traditional goal-setting is supposed to work.

Human Resource Variables •Idea champion - individuals who actively and enthusiastically support new ideas, build support, overcome resistance, and ensure that innovations are implemented

Innovative organizations actively promote the training and development of their members so their knowledge remains current; offer their employees high job security to reduce the fear of getting fired for making mistakes; and encourage individuals to become idea champions, actively and enthusiastically supporting new ideas, building support, overcoming resistance, and ensuring that innovations are implemented.

Cultural variables •Accept ambiguity - too much emphasis on objectivity and specificity constrains creativity. •Tolerate the impractical - What at first seems impractical might lead to innovative solutions •Keep external controls minimal - rules, regulations, policies, and similar organizational controls are kept to a minimum.

Innovative organizations tend to have similar cultures. They encourage experimentation, set creativity goals, reward both successes and failures, and celebrate mistakes. An innovative organization is likely to have the following characteristics. Accept ambiguity. Too much emphasis on objectivity and specificity constrains creativity. Tolerate the impractical. Individuals who offer impractical, even foolish, answers to what-if questions are not stifled. What at first seems impractical might lead to innovative solutions. Encourage entrepreneurial thinking. Keep external controls minimal. Rules, regulations, policies, and similar organizational controls are kept to a minimum.

•Innovative organizations try to minimize extreme time pressures on creative activities. •Studies show that an employee's creative performance was enhanced when an organization's structure explicitly supported creativity

Innovative organizations try to minimize extreme time pressures on creative activities despite the demands of whitewater rapids environments. Although time pressures may spur people to work harder and may make them feel more creative, studies show that it actually causes them to be less creative.

Approaching to setting goals •Management by objectives (MBO) - a process of setting mutually agreed upon goals and using those goals to evaluate employee performance

Instead of using traditional goal-setting, many organizations use management by objectives (MBO), a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. MBO programs have four elements: goal specificity, participative decision making, an explicit time period, and performance feedback. Instead of using goals to make sure employees are doing what they're supposed to be doing, MBO uses goals to motivate them as well. The appeal is that it focuses on employees working to accomplish goals they've had a hand in setting.

-Long-term plans are those with a time frame beyond three years. Short-term plans cover one year or less. -Specific plans are clearly defined and leave no room for interpretation. -Directional plans are flexible and set out general guidelines.

Long-term plans are those with a time frame beyond three years. Short-term plans cover one year or less. Specific plans are clearly defined and leave no room for interpretation. Directional plans are flexible and set out general guidelines.

Decision - making a choice from two or more alternatives

Managers at all levels and in all areas of organizations make decisions. That is, they make choices. Although decision making is typically described as choosing among alternatives, this view is too simplistic. Why? Because decision making is (and should be) a process, not just a simple act of choosing among alternatives.

Classify decisions and decision-making conditions Programmed decisions are repetitive decisions that can be handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined (structured). Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete.

Programmed decisions are repetitive decisions that can be handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined (structured). Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete.

Identify effective decision-making techniques. An effective decision-making process Focuses on what's important Is logical and consistent Acknowledges both subjective and objective thinking and blends both analytical and intuitive approaches Requires only "enough" information as is necessary to resolve a problem

Managers can make effective decisions by understanding cultural differences in decision making, knowing when it's time to call it quits, using an effective decision-making process, and building an organization that can spot the unexpected and quickly adapt to the changed environment. An effective decision-making process (1) focuses on what's important; (2) is logical and consistent; (3) acknowledges both subjective and objective thinking and blends both analytical and intuitive approaches; (4) requires only "enough" information as is necessary to resolve a problem;

•Structure -Changing an organization's structural components or its structural design •Technology -Adopting new equipment, tools, or operating methods that displace old skills and require new ones •Automation - replacing certain tasks done by people with machines •Computerization •People -Changing attitudes, expectations, perceptions, and behaviors of the workforce

Managers face three main types of change: structure, technology, and people. Changes in the external environment or in organizational strategies often lead to changes in the organizational structure. Because an organization's structure is defined by how work gets done and who does it, managers can alter one or both of these structural components. Technological changes usually involve the introduction of new equipment, tools, or methods; automation; or computerization. Competitive factors or new innovations within an industry often require managers to introduce new equipment, tools, or operating methods. Changing people involves changing attitudes, expectations, perceptions, and behaviors— something that's not easy to do.

Steps in goal-setting 1.Review the organization's mission, or purpose. 2.Evaluate available resources 3.Determine the goals individually or with input from others 4.Write down the goals and communicate them to all who need to know 5.Review results and whether goals are being met.

Managers should follow five steps when setting goals. 1)Review the organization's mission, or purpose. A mission is a broad statement of an organization's purpose that provides an overall guide to what organizational members think is important. Managers should review the mission before writing goals because goals should reflect that mission. ● 2)Evaluate available resources. You don't want to set goals that are impossible to achieve given your available resources. Even though goals should be challenging, they should be realistic. After all, if the resources you have to work with won't allow you to achieve a goal no matter how hard you try or how much effort is exerted, you shouldn't set that goal ● 3)Determine the goals individually or with input from others. The goals reflect desired outcomes and should be congruent with the organizational mission and goals in other organizational areas. These goals should be measurable, specific, and include a time frame for accomplishment.

•Organizational Change - any alterations in the people, structure, or technology of an organization. •Change Agents - persons who act as catalysts and assume the responsibility for managing the change process.

Most managers, at one point or another, will have to change some things in their workplace. We classify these changes as organizational change, which is any alteration of people, structure, or technology. Organizational changes often need someone to act as a catalyst and assume the responsibility for managing the change process—that is, a change agent. Change agents can be a manager within the organization, but could be a nonmanager—for example, a change specialist from the HR department or even an outside consultant.

Unstructured Problems - problems that are new or unusual and for which information is ambiguous or incomplete. Nonprogrammed decisions - unique and nonrecurring and involve custom made solutions.

Not all the problems managers face can be solved using programmed decisions. Many organizational situations involve unstructured problems, new or unusual problems for which information is ambiguous or incomplete. Whether to build a new manufacturing facility in China is an example of an unstructured problem.

planning and performance •Formal planning is associated with: -Positive financial results - higher profits, higher return on assets, and so forth -The quality of planning and implementation affects performance more than the extent of planning -The external environment can reduce the impact of planning on performance -The planning-performance relationship seems to be influenced by the planning time frame

Numerous studies shown generally positive relationships between planning and performance. Formal planning is associated with positive financial results—higher profits, higher return on assets, and so forth. Ding a good job planning and implementing those plans play a bigger part in high performance than how much planning is done. In those studies where formal planning didn't lead to higher performance, the external environment often was the culprit. When external forces—think governmental regulations or powerful labor unions—constrain managers' options, it reduces the impact planning has on an organization's performance. Finally, the planning-performance relationship seems to be influenced by the planning time frame. It seems that at least four years of formal planning is required before it begins to affect performance

Step 2: Identify Decision Criteria Decision criteria are factors that are important (relevant) to resolving the problem Example - Amanda decides that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision.

Once a manager has identified a problem, he or she must identify the decision criteria important or relevant to resolving the problem. Every decision maker has criteria guiding his or her decisions even if they're not explicitly stated. In our example, Amanda decides after careful consideration that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision.

Step 5: Analyze Alternatives Appraising each alternative's strengths and weaknesses An alternative's appraisal is based on its ability to resolve the issues related to the criteria and criteria weight.

Once alternatives have been identified, a decision maker must evaluate each one. How? By using the criteria established in Step 2. Exhibit 6-3 shows the assessed values that Amanda gave each alternative after doing some research on them. Keep in mind that these data represent an assessment of the eight alternatives using the decision criteria, but not the weighting. When you multiply each alternative by the assigned weight, you get the weighted alternatives as shown in Exhibit 6-4. The total score for each alternative, then, is the sum of its weighted criteria. Sometimes a decision maker might be able to skip this step. If one alternative scores highest on every criterion, you wouldn't need to consider the weights because that alternative would already be the top choice. Or if the weights were all equal, you could evaluate an alternative merely by summing up the assessed values for each one. (Look again at Exhibit 6-3.) For example, the score for the HP ProBook would be 36, and the score for the Sony NW would be 35.

The strategic Management process •Step 5: Implementing strategies -Implementation - effectively fitting organizational structure and activities to the environment. -The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements. •Step 6: Evaluating results -How effective have strategies been? -What adjustments, if any, are necessary?

Once strategies are formulated, they must be implemented. No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren't implemented properly. The final step in the strategic management process is evaluating results. How effective have the strategies been at helping the organization reach its goals? What adjustments are necessary?

•Discuss contemporary issues in planning. -Dynamic environments - usually means developing plans that are specific but flexible -Contemporary planning issue involves using environmental scanning to help do a better analysis of the external environment. -One form of environmental scanning, competitive intelligence, can be especially helpful in finding out what competitors are doing.

One contemporary planning issue is planning in dynamic environments, which usually means developing plans that are specific but flexible. Also, it's important to continue planning, even when the environment is highly uncertain. Finally, because there's little time in a dynamic environment for goals and plans to flow down from the top, lower organizational levels should be allowed to set goals and develop plans. Another contemporary planning issue involves using environmental scanning to help do a better analysis of the external environment. One form of environmental scanning, competitive intelligence, can be especially helpful in finding out what competitors are doing.

•Classify types of organizational change -Organizational change is any alteration of people, structure, or technology -Changing structure involves any changes in structural components or structural design -Changing technology involves introducing new equipment, tools, or methods; automation; or computerization -Changing people involves changing attitudes, expectations, perceptions, and behaviors

Organizational change is any alteration of people, structure, or technology. Making changes often requires a change agent to act as a catalyst and guide the change process. Changing structure involves any changes in structural components or structural design. Changing technology involves introducing new equipment, tools, or methods; automation; or computerization. Changing people involves changing attitudes, expectations, perceptions, and behaviors.

what causes stress •Interpersonal demands - pressures created by other employees •Organization structure - excessive rules and an employee's lack of opportunity to participate in decisions •Organizational leadership - the supervisory style of the organization's managers

Organizational leadership represents the supervisory style of the organization's managers. Some managers create a culture characterized by tension, fear, and anxiety. They establish unrealistic pressures to perform in the short run, impose excessively tight controls, and routinely fire employees who don't measure up. This style of leadership filters down through the organization and affects all employees.

•Explain how to manage resistance to change -People resist change because of uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization's best interest. -Techniques for reducing resistance to change include: education and communication , participation, facilitation and , negotiation, manipulation and co-optation, and coercion.

People resist change because of uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization's best interest. The techniques for reducing resistance to change include education and communication (educating employees about and communicating to them the need for the change), participation (allowing employees to participate in the change process), facilitation and support (giving employees the support they need to implement the change), negotiation (exchanging something of value to reduce resistance), manipulation and co-optation (using negative actions to influence), and coercion (using direct threats or force).

Personal Factors that can create stress •Type A personality - people who have a chronic sense of urgency and an excessive competitive drive. •Type B personality - people who are relaxed and easygoing and accept change easily.

Personal factors that can create stress include family issues, personal economic problems, and inherent personality characteristics. Because employees bring their personal problems to work with them, a full understanding of employee stress requires a manager to be understanding of these personal factors. Type A personality is characterized by chronic feelings of a sense of time urgency, an excessive competitive drive, and difficulty accepting and enjoying leisure time. The opposite of Type A is Type B personality. Type Bs don't suffer from time urgency or impatience. Until recently, it was believed that Type As were more likely to experience stress on and off the job. A closer analysis of the evidence, however, has produced new conclusions. Studies show that only the hostility and anger associated with Type A behavior are actually associated with the negative effects of stress. And Type Bs are just as susceptible to the same anxiety-producing elements.

•Define the nature and purposes of planning -Planning involves defining the organization's goals, establishing an overall strategy for achieving those goals, and developing plans for organizational work activities. -The four purposes of planning include providing direction, reducing uncertainty, minimizing waste and redundancy, and establishing the goals or standards used in controlling.

Planning involves defining the organization's goals, establishing an overall strategy for achieving those goals, and developing plans for organizational work activities. The four purposes of planning include providing direction, reducing uncertainty, minimizing waste and redundancy, and establishing the goals or standards used in controlling. Studies of the planning-performance relationship have concluded that formal planning is associated with positive financial performance, for the most part; it's more important to do a good job of planning and implementing the plans than doing more extensive planning; the external environment is usually the reason why companies that plan don't achieve high levels of performance; and the planning-performance relationship seems to be influenced by the planning time frame.

what is planning •Planning - defining the organization's goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities. •Formal planning -Specific goals covering a specific time period -Written and shared with organizational members

Planning involves defining the organization's goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities. It's concerned with both ends (what) and means (how). When we use the term planning, we mean formal planning. In formal planning, specific goals covering a specific time period are defined. These goals are written and shared with organizational members to reduce ambiguity and create a common understanding about what needs to be done. Finally, specific plans exist for achieving these goals.

what causes stress •Role Conflicts - work expectations that are hard to satisfy. •Role Overload - having more work to accomplish than time permits. •Role Ambiguity - when role expectations are not clearly understood.

Role demands relate to pressures placed on an employee as a function of the particular role he or she plays in the organization. Role conflicts create expectations that may be hard to reconcile or satisfy. Role overload is experienced when the employee is expected to do more than time permits. Role ambiguity is created when role expectations are not clearly understood and the employee is not sure what he or she is to do.

Satisficing - when decision makers accept solutions that are good enough. Escalation of commitment - managers increase commitment to a decision even when they have evidence it may have been a wrong decision. Intuitive decision making means making decisions on the basis of experience, feelings, and accumulated judgment. Evidence-based management, a manager makes decisions based on the best available evidence.

Satisficing happens when decision makers accept solutions that are good enough. With escalation of commitment, managers increase commitment to a decision even when they have evidence it may have been a wrong decision. Intuitive decision making means making decisions on the basis of experience, feelings, and accumulated judgment. Using evidence-based management, a manager makes decisions based on the best available evidence.

Techniques for reducing resistance to change •Education and communication •Participation •Facilitation and support •Negotiation •Manipulation and co-optation •Coercion

Several strategies have been suggested in dealing with resistance to change. These approaches include education and communication, participation, facilitation and support, negotiation, manipulation and co-optation, and coercion. Education and communication can help reduce resistance to change by helping employees see the logic of the change effort. This technique, of course, assumes that much of the resistance lies in misinformation or poor communication. Participation involves bringing those individuals directly affected by the proposed change into the decision-making process. Their participation allows these individuals to express their feelings, increase the quality of the process, and increase employee commitment to the final decision. Facilitation and support involve helping employees deal with the fear and anxiety associated with the change effort. This help may include employee counseling, therapy, new skills training, or a short paid leave of absence. Negotiation involves exchanging something of value for an agreement to lessen the resistance to the change effort. This resistance technique may be quite useful when the resistance comes from a powerful source. Manipulation and co-optation refer to covert attempts to influence others about the change. It may involve distorting facts to make the change appear more attractive. Finally, coercion can be used to deal with resistance to change. Coercion involves the use of direct threats or force against the resisters.

why do managers plan •Four reasons for planning -Provides direction -Reduces uncertainty -Minimizes waste and redundancy -Sets the standards for controlling

So why should managers plan? We can give you at least four reasons. First, planning provides direction to managers and nonmanagers alike. When employees know what their organization or work unit is trying to accomplish and what they must contribute to reach goals, they can coordinate their activities, cooperate with each other, and do what it takes to accomplish those goals. Next, planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. Although planning won't eliminate uncertainty, managers plan so they can respond effectively. In addition, planning minimizes waste and redundancy. When work activities are coordinated around plans, inefficiencies become obvious and can be corrected or eliminated. Finally, planning establishes the goals or standards used in controlling. When managers plan, they develop goals and plans. When they control, they see whether the plans have been carried out and the goals met.

Types of plans •Single-use plan - a one-time plan specifically designed to meet the needs of a unique situation •Standing plans ongoing plans that provide guidance for activities performed repeatedly

Some plans that managers develop are ongoing while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. In contrast, standing plans are ongoing plans that provide guidance for activities performed repeatedly. Standing plans include policies, rules, and procedures.

Structured Problems - straightforward, familiar, and easily defined problems. Programmed decision - a repetitive decision that can be handled by a routine approach

Some problems are straightforward. The decision maker's goal is clear, the problem is familiar, and information about the problem is easily defined and complete. Such situations are called structured problems because they're straightforward, familiar, and easily defined. Because it's not an unusual occurrence, there's probably some standardized routine for handling it. This is what we call a programmed decision, a repetitive decision that can be handled by a routine approach. Because the problem is structured, the manager doesn't have to go to the trouble and expense of going through an involved decision process. The "develop-the-alternatives" stage of the decision-making process either doesn't exist or is given little attention. Why? Because once the structured problem is defined, the solution is usually self-evident or at least reduced to a few alternatives that are familiar and have proved successful in the past.

Types of goals •Stated goals - official statements of what an organization says, and what it wants its various stakeholders to believe, its goals are •Real goals - goals that an organization actually pursues, as defined by the actions of its members

Stated goals are official statements of what an organization says, and what it wants its stakeholders to believe, its goals are. However, stated goals—which can be found in an organization's charter, annual report, public relations announcements, or in public statements made by managers—are often conflicting and influenced by what various stakeholders think organizations should do. If you want to know an organization's real goals—those goals an organization actually pursues—observe what organizational members are doing. Actions define priorities.

what is strategic measures? •Strategic management - what managers do to develop the organization's strategies. •Strategies - the plans for how the organization will do what it's in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. •Business model - how a company is going to make money.

Strategic management is what managers do to develop the organization's strategies. It's an important task involving all the basic management functions—planning, organizing, leading, and controlling. What are an organization's strategies? They're the plans for how the organization will do whatever it's in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. One term often used in strategic management is business model, which simply is how a company is going to make money. It focuses on two things: (1) whether customers will value what the company is providing and (2) whether the company can make any money doing that.

Employee stress •Stress - the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities. •Stressors - factors that cause stress.

Stress is the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities. Stress isn't always bad. Although it's often discussed in a negative context, stress can be positive, especially when it offers a potential gain. For instance, functional stress allows an athlete, stage performer, or employee to perform at his or her highest level at crucial times. Stress can be caused by personal factors and by job-related factors called stressors. Clearly, change of any kind—personal or job-related— has the potential to cause stress because it can involve demands, constraints, or opportunities. Organizations have no shortage of factors that can cause stress.

Anchoring Effect - fixating on initial information and ignoring subsequent information. Selective Perception Bias - selecting, organizing and interpreting events based on the decision maker's biased perceptions. Confirmation Bias - seeking out information that reaffirms past choices while discounting contradictory information.

The anchoring effect describes how decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. First impressions, ideas, prices, and estimates carry unwarranted weight relative to information received later. When decision makers selectively organize and interpret events based on their biased perceptions, they're using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the alternatives they develop. Decision makers who seek out information that reaffirms their past choices and discount information that contradicts past judgments exhibit the confirmation bias.

•Compare and contrast views on the change process -Calm waters metaphor - change is an occasional disruption and can be planned and managed as it happens -White-water rapids metaphor - change is ongoing and managing it is a continual process -Lewin's three-step: unfreezing, changing, and refreezing

The calm waters metaphor suggests that change is an occasional disruption in the normal flow of events and can be planned and managed as it happens. In the white-water rapids metaphor, change is ongoing and managing it is a continual process. Lewin's three-step model says change can be managed by unfreezing the status quo (old behaviors), changing to a new state, and refreezing the new behaviors.

Swot analysis •SWOT analysis - an analysis of the organization's strengths, weaknesses, opportunities, and threats. •Resources - an organization's assets that are used to develop, manufacture, and deliver a product to its customers. •Capabilities - an organization's skills and abilities in doing the work activities needed in its business.

The combined external and internal analyses are called the SWOT analysis, an analysis of the organization's strengths, weaknesses, opportunities, and threats. After completing the SWOT analysis, managers are ready to formulate appropriate strategies—that is, strategies that (1) exploit an organization's strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses.

Stimulating innovation •Creativity - the ability to combine ideas in a unique way or to make an unusual association. •Innovation - turning the outcomes of the creative process into useful products, services, or work methods.

The definition of innovation varies widely, depending on who you ask. We're going to define it by first looking at the concept of creativity. Creativity refers to the ability to combine ideas in a unique way or to make unusual associations between ideas. The outcomes of the creative process need to be turned into useful products or work methods, which is defined as innovation. Thus, the innovative organization is characterized by its ability to generate new ideas that are implemented into new products, processes, and procedures designed to be useful—that is, to channel creativity into useful outcomes.

Step 4: Develop Alternatives List viable alternatives that could resolve the problem Example - Amanda, identifies eight laptops as possible choices. (See Exhibit 6-3.)

The fourth step in the decision-making process requires the decision maker to list viable alternatives that could resolve the problem. In this step, a decision maker needs to be creative, and the alternatives are only listed—not evaluated—just yet. Our sales manager, Amanda, identifies eight laptops as possible choices. (See Exhibit 6-3.)

Framing Bias - selecting and highlighting certain aspects of a situation while ignoring other aspects. Availability Bias - losing decision-making objectivity by focusing on the most recent events. Representation Bias - drawing analogies and seeing identical situations when none exist. Randomness Bias - creating unfounded meaning out of random events.

The framing bias is when decision makers select and highlight certain aspects of a situation while excluding others. By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or omitting other aspects, they distort what they see and create incorrect reference points. The availability bias happens when decisions makers tend to remember events that are the most recent and vivid in their memory. The result? It distorts their ability to recall events in an objective manner and results in distorted judgments and probability estimates. When decision makers assess the likelihood of an event based on how closely it resembles other events or sets of events, that's the representation bias. Managers exhibiting this bias draw analogies and see identical situations where they don't exist. The randomness bias describes the actions of decision makers who try to create meaning out of random events. They do this because most decision makers have difficulty dealing with chance even though random events happen to everyone, and there's nothing that can be done to predict them.

Step 6: Select an Alternative Choosing the best alternative The alternative with the highest total weight is chosen.

The sixth step in the decision-making process is choosing the best alternative or the one that generated the highest total in Step 5. In our example (Exhibit 6-4), Amanda would choose the Dell Inspiron because it scored higher than all other alternatives (249 total).

The strategic management process •Strategic management process - a six-step process that encompasses strategic planning, implementation, and evaluation.

The strategic management process (see Exhibit 9-1) is a six-step process that encompasses strategy planning, implementation, and evaluation. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important! Even the best strategies can fail if management doesn't implement or evaluate them properly.

Certainty - a situation in which a manager can make accurate decisions because all outcomes are known Risk - a situation in which the decision maker is able to estimate the likelihood of certain outcomes Uncertainty - a situation in which a decision maker has neither certainty nor reasonable probability estimates available

The ideal situation for making decisions is one of certainty, a situation where a manager can make accurate decisions because the outcome of every alternative is known. For example, when Wyoming's state treasurer decides where to deposit excess state funds, he knows exactly the interest rate offered by each bank and the amount that will be earned on the funds. He is certain about the outcomes of each alternative. As you might expect, most managerial decisions aren't like this. Far more common situation is one of risk, conditions in which the decision maker is able to estimate the likelihood of certain outcomes. Under risk, managers have historical data from past personal experiences or secondary information that lets them assign probabilities to different alternatives. What happens if you face a decision where you're not certain about the outcomes and can't even make reasonable probability estimates? We call this condition uncertainty. Managers face decision-making situations of uncertainty. Under these conditions, the choice of alternative is influenced by the limited amount of available information and by the psychological orientation of the decision maker.

•Step 3: Doing an internal analysis -Assessing organizational resources, capabilities, and activities: •Strengths create value for the customer and strengthen the competitive position of the firm. •Weaknesses can place the firm at a competitive disadvantage. Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats

The internal analysis provides important information about an organization's specific resources and capabilities. An organization's resources are its assets—financial, physical, human, and intangible—that it uses to develop, manufacture, and deliver products to its customers. They're "what" the organization has. On the other hand, its capabilities are its skills and abilities in doing the work activities needed in its business—"how" it does its work. The major value-creating capabilities of the organization are known as its core competencies. After completing an internal analysis, managers should be able to identify organizational strengths and weaknesses. Any activities the organization does well or any unique resources that it has are called strengths. Weaknesses are activities the organization doesn't do well or resources it needs but doesn't possess.

Step 8: Evaluate Decision Effectiveness The soundness of the decision is judged by its outcomes. How effectively was the problem resolved by outcomes resulting from the chosen alternatives? If the problem was not resolved, what went wrong?

The last step in the decision-making process involves evaluating the outcome or result of the decision to see whether the problem was resolved. If the evaluation shows that the problem still exists, then the manager needs to assess what went wrong. Was the problem incorrectly defined? Were errors made when evaluating alternatives? Was the right alternative selected but poorly implemented? The answers might lead you to redo an earlier step or might even require starting the whole process over.

Types of plans •Strategic plans - plans that apply to the entire organization and establish the organization's overall goals •Operational plans - plans that encompass a particular operational area of the organization

The most popular ways to describe organizational plans are breadth (strategic versus operational), time frame (short term versus long term), specificity (directional versus specific), and frequency of use (single use versus standing). Strategic plans are plans that apply to the entire organization and establish the organization's overall goals. Plans that encompass a particular operational area of the organization are called operational plans. These two types of plans differ because strategic plans are broad while operational plans are narrow.

•Environmental Uncertainty -When uncertainty is high, plans should be specific, but flexible. -Managers must be prepared to change or amend plans as they're implemented. -At times, they may even have to abandon the plans

The second contingency factor is environmental uncertainty. When uncertainty is high, plans should be specific, but flexible. Managers must be prepared to change or amend plans as they're implemented. At times, they may even have to abandon the plans.

•Discuss contemporary issues in managing change. -Shared values that comprise an organization's culture are relatively stable, which makes it difficult to change. -Successfully change involves focusing on making the organization change capable, making sure managers understand their own role in the process, and giving individual employees a role in the process

The shared values that comprise an organization's culture are relatively stable, which makes it difficult to change. Managers can do so by being positive role models; creating new stories, symbols, and rituals; selecting, promoting, and supporting employees who adopt the new values; redesigning socialization processes; changing the reward system, clearly specifying expectations; shaking up current subcultures; and getting employees to participate in change. Stress is the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities. To help employees deal with stress, managers can address job-related factors by making sure an employee's abilities match the job requirements, improve organizational communications, use a performance planning program, or redesign jobs. Addressing personal stress factors is trickier, but managers could offer employee counseling, time management programs, and wellness programs. Making change happen successfully involves focusing on making the organization change capable, making sure managers understand their own role in the process, and giving individual employees a role in the process.

Sunk Costs Errors - forgetting that current actions cannot influence past events and relate only to future consequences. Self-Serving Bias - taking quick credit for successes and blaming outside factors for failures. Hindsight Bias - mistakenly believing that an event could have been predicted once the actual outcome is known (after-the-fact).

The sunk costs error occurs when decision makers forget that current choices can't correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future consequences. Instead of ignoring sunk costs, they can't forget them. Decision makers who are quick to take credit for their successes and to blame failure on outside factors are exhibiting the self-serving bias. Finally, the hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known.

•The two main approaches to planning include -The traditional approach, which has plans developed by top managers that flow down through other organizational levels and which may use a formal planning department. -The other approach is to involve more organizational members in the planning process

The two main approaches to planning include the traditional approach, which has plans developed by top managers that flow down through other organizational levels and which may use a formal planning department. The other approach is to involve more organizational members in the planning process.

Design thinking - approaching management problems as designers approach design problems.

The way managers approach decision making—using a rational and analytical mindset in identifying problems, coming up with alternatives, evaluating alternatives, and choosing one of those alternatives—may not be best and certainly not the only choice in today's environment. That's where design thinking comes in. Design thinking has been described as "approaching management problems as designers approach design problems."

Contingency factors in planning Length of future commitments Commitment Concept: Current plans affecting future commitments must be sufficiently long-term in order to meet those commitments.

Three contingency factors affect the choice of plans: organizational level, degree of environmental uncertainty, and length of future commitments

Cultural variables •Tolerate risk. Employees are encouraged to experiment without fear of consequences should they fail. •Tolerate conflict. Diversity of opinions is encouraged. •Focus on ends rather than means. - individuals are encouraged to consider alternative routes toward meeting the goals

Tolerate risk. Employees are encouraged to experiment without fear of consequences should they fail. "Failure, and how companies deal with failure, is a very big part of innovation." Treat mistakes as learning opportunities. Tolerate conflict. Diversity of opinions is encouraged. Harmony and agreement between individuals or units are not assumed to be evidence of high performance. Focus on ends rather than means. Goals are made clear, and individuals are encouraged to consider alternative routes toward meeting the goals. Focusing on ends suggests that several right answers might be possible for any given problem.

Cultural variables •Use an open-system focus - managers closely monitor the environment and respond to changes as they occur. •Provide positive feedback. Managers provide positive feedback, encouragement, and support. •Exhibit empowering leadership - leaders lets organizational members know that the work they do is significant

Use an open-system focus. Managers closely monitor the environment and respond to changes as they occur. For example, at Starbucks, product development depends on "inspiration field trips to view customers and trends." Provide positive feedback. Managers provide positive feedback, encouragement, and support so employees feel that their creative ideas receive attention. Exhibit empowering leadership. Be a leader who lets organizational members know that the work they do is significant. Provide organizational members the opportunity to participate in decision making. Show them you're confident they can achieve high performance levels and outcomes. Being this type of leader will have a positive influence on creativity.

Rational Decision-Making - describes choices that are logical and consistent while maximizing value. Assumptions of Rationality The decision maker would be fully objective and logical The problem faced would be clear and unambiguous The decision maker would have a clear and specific goal and know all possible alternatives and consequences and consistently select the alternative that maximizes achieving that goal

We assume that managers will use rational decision making; that is, they'll make logical and consistent choices to maximize value. After all, managers have all sorts of tools and techniques to help them be rational decision makers. Managers aren't always rational. What does it mean to be a "rational" decision maker? A rational decision maker would be fully objective and logical. The problem faced would be clear and unambiguous, and the decision maker would have a clear and specific goal and know all possible alternatives and consequences. Finally, making decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal.

Types of goals Financial Goals - related to the expected internal financial performance of the organization. Strategic Goals - related to the performance of the firm relative to factors in its external environment (e.g., competitors).

We can classify most company's goals as either strategic or financial. Financial goals are related to the financial performance of the organization, while strategic goals are related to all other areas of an organization's performance. For instance, McDonald's states that its financial targets are 3 to 5 percent average annual sales and revenue growth, 6 to 7 percent average annual operating income growth, and returns on invested capital in the high teens. Here's an example of a strategic goal from Bloomberg L.P.: "We want to be the world's most influential news organization."

Types of plans •Long-term plans - plans with a time frame beyond three years •Short-term plans - plans covering one year or less •Specific plans - plans that are clearly defined and leave no room for interpretation •Directional plans - plans that are flexible and set out general guidelines

We define long-term plans as those with a time frame beyond three years. Short-term plans cover one year or less. Any time period in between would be an intermediate plan. Although these time classifications are fairly common, an organization can use any planning time frame it wants. Specific plans are clearly defined and leave no room for interpretation. A specific plan states its objectives in a way that eliminates ambiguity and problems with misunderstanding. Directional plans are flexible plans that set out general guidelines. They provide focus but don't lock managers into specific goals or courses of action.

•Well-written goals have six characteristics 1.Written in terms of outcomes 2.Measurable and quantifiable 3.Clear as to time frame 4.Challenging but attainable 5.Written down 6.Communicated to all organizational members who need to know them.

Well-written goals have six characteristics: (1) written in terms of outcomes, (2) measurable and quantifiable, (3) clear as to time frame, (4) challenging but attainable, (5) written down, and (6) communicated to all organizational members who need to know them.

Understanding the situational factors •Dramatic crisis -. an unexpected financial setback, the loss of a major customer, or a dramatic technological innovation by a competitor •Leadership changes hands - new top leadership can provide an alternative set of key values •The organization is young and small. •Culture is weak

What "favorable conditions" facilitate cultural change? One is that a dramatic crisis occurs, such as an unexpected financial setback, the loss of a major customer, or a dramatic technological innovation by a competitor. Such a shock can weaken the status quo and make people start thinking about the relevance of the current culture. Another condition may be that leadership changes hands. New top leadership can provide an alternative set of key values and may be perceived as more capable of responding to the crisis than the old leaders were. Another is that the organization is young and small. The younger the organization, the less entrenched its culture.

Intuitive decision- making Making decisions on the basis of experience, feelings, and accumulated judgment.

What is intuitive decision making? It's making decisions on the basis of experience, feelings, and accumulated judgment. Researchers studying managers' use of intuitive decision making have identified five different aspects of intuition, which are described in Exhibit 6-6.

Heuristics - using "rules of thumb" to simplify decision making. Overconfidence Bias - holding unrealistically positive views of oneself and one's performance. Immediate Gratification Bias - choosing alternatives that offer immediate rewards and avoid immediate costs.

When managers make decisions, they not only use their own particular style, they may use "rules of thumb," or heuristics, to simplify their decision making. Rules of thumb can be useful because they help make sense of complex, uncertain, and ambiguous information. Even though managers may use rules of thumb, that doesn't mean those rules are reliable. Why? Because they may lead to errors and biases in processing and evaluating information. Let's look at each. When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance, they're exhibiting the overconfidence bias. The immediate gratification bias describes decision makers who tend to want immediate rewards and to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more appealing than those with payoffs in the future.

•The ambiguity and uncertainty that change introduces •The comfort of old habits •A concern over personal loss of status, money, authority, friendships, and personal convenience •The perception that change is incompatible with the goals and interest of the organization

Why do people resist change? The main reasons include uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization's best interest. Change replaces the known with uncertainty. Another cause of resistance is that we do things out of habit. The third cause of resistance is the fear of losing something already possessed. Change threatens the investment you've already made in the status quo. A final cause of resistance is a person's belief that the change is incompatible with the goals and interests of the organization.

why is strategic management important 1.It results in higher organizational performance. 2.It requires that managers examine and adapt to business environment changes. 3.It coordinates diverse organizational units, helping them focus on organizational goals.

Why is strategic management so important? There are three reasons. The most significant one is that it can make a difference in how well an organization performs. In other words, it appears that organizations that use strategic management do have higher levels of performance. And that fact makes it pretty important for managers. Another reason it's important has to do with the fact that managers in organizations of all types and sizes face continually changing situations. They cope with this uncertainty by using the strategic management process to examine relevant factors and decide what actions to take. Finally, strategic management is important because organizations are complex and diverse. Each part needs to work together toward achieving the organization's goals; strategic management helps do this.

Linear Thinking Style - a person's tendency to use external data/facts; the habit of processing information through rational, logical thinking. Nonlinear Thinking Style - a person's preference for internal sources of information; a method of processing this information with internal insights, feelings, and hunches.

Your thinking style reflects two things: (1) the source of information you tend to use (external data and facts OR internal sources such as feelings and intuition), and (2) whether you process that information in a linear way (rational, logical, analytical) OR a nonlinear way (intuitive, creative, insightful). These four dimensions are collapsed into two styles. The first, linear thinking style, is characterized by a person's preference for using external data and facts and processing this information through rational, logical thinking to guide decisions and actions. The second, nonlinear thinking style, is characterized by a preference for internal sources of information (feelings and intuition) and processing this information with internal insights, feelings, and hunches to guide decisions and actions.