Benefits of Planning
•Creation of task strategies
Pitfalls of Planning
•Impedes change and prevents or slows adaptation
•Creates a false sense of certainty
•Detachment of planners
How to Make a Plan that Works
1. Set Goals
2. Develop commitment
3. Develop effective action plans
4. Track progress toward goal achievement
5. Maintain flexibility
One of the benefits of planning is how it _______.
encourages people to work harder for extended periods
Options-based planning (contingencies)
-keep options open by making small, simultaneous investments in many
Slack resources (buffers)
-a cushion of resources, like extra time or money, that can be used to address and adapt to unanticipated changes
Tactical plans, management by objectives
Operation plans, standing plans, single-use plans
Rational Decision-making process
1. Identification of a problem
2. Identification of decision criteria
3. Allocation of weights to criteria
4. Development of alternatives
5. Analysis of alternatives
6. Selective of an alternative
7. Implementation of the alternative
8. Evaluation of decision effectiveness
Assumptions of Rational Model
•Clear/constant preferences •Actors have sufficient creativity
to identify all possible issues/ options
•No time or cost constraints on information gathering
-Focus on few essential features of problem
-Satisfice: accepting solutions that are “good enough”
Intuitive decision making
-Uses experience, feelings, and accumulated judgment
-See Blink by Gladwell
Directive = efficient, logical
-Make decisions fast
-Use minimal information
-Assess few alternatives
-Focus on short-term
-Careful decision makers
-Able to adapt/cope with new situations
-Broad outlook, consider many alternatives
-Work well with others
-May not pick best alternative for company in order to pick best alternative for avoiding conflict/pleasing others
Common Decision-Making Errors and Biases
-Involve clear goals
-Familiar (have occurred before)
-Easily and completely defined information about the problem is available and complete
-Can be handled by a routine approach
Types of Programmed Decisions
-General guideline for making a decision about a structured problem
-Series of interrelated steps that can be used to respond (applying a policy) to a structured problem
-Explicit statement that limits what you can or cannot do
-New or unusual
-Information ambiguous or incomplete
-Requires custom solutions
-Unique and nonrecurring
-Generate unique responses
Organizational Constraints on Decision Makers
• Performance evaluation
• Reward systems (risk tolerance) • Policies/Regulations – programs decisions
at cost of limiting decision-makers choices
• System-imposed time constraints (budgets)
• Historical Precedents – ghosts that
haunt current choices
• Anti-precedent – never been done before
Six Characteristics of an Effective Decision-Making Process
1. Focuses on what is important
2. Logical and consistent
3. Acknowledges both subjective and objective thinking and blends analytical with intuitive thinking
4. Straightforward, reliable, easy to use,
5. Requires only as much information and analysis as is necessary to resolve a
6. Encourages and guides gathering of relevant
information and informed opinion
At what level of management are most of the problems you deal with unstructured?
From 1980 to 2005, firms less than five years old account for ____ net job growth in the United States.
How do Angel investors differ from Venture Capital investors?
-Angel investment may vary in size depending on the company and the investment group but are usually smaller.
– Angel investors are not likely to become board members at the portfolio company especially because they work at their own free will. Venture capitalists always require a confirmed seat on board of director position.
Venture Capitalists Differ in that…
-Raise large amounts of capital from investors who run big institutions
-Gather a set of experienced partners or individuals like the CEOs of companies et cetera who can provide hand-on expertise in building the product followed by the company.
-Arrange for evaluating each deal with close attention with the help of extensive due diligence as well as broad partner consensus.
-Employ a space for strong governance in order to protect the large amount of capital that is deployed in each deal. This also included board seats as well as complex deal terms, which help in controlling financings.
-Arrange space for managing own resources in an effective manner by measuring and keeping a track of the amount of capital, number of partners or maximum number of board seats per partner so as to derive a minimum amount of capital that is needed to invest in each deal.
Examples of companies backed by American Angels
Myspace, Best Buy, Facebook, Yahoo, Costco, Starbucks, Google, PayPal, Cisco, Amaxzon
A greal angel helps an entrepreneur:
1. See around the corner
2. Gain a sober second opinion
3. Network with people who can help build business
4. By being an ambassador
5. Gain credibility in a field
Premise on Angel Groups
– Creating new class of invest that is entrepreneur-friendly, develops sophistication/ excellent process, grows geographic diversity
-Market efficiencies developing, entrepreneurs locate more easily, investors get better quality deal flow, individuals remain anonymous, builds partnerships with other angel groups
-Beginning to close capital gap
Finding an Angel
– Business plan top shape
-Website – exercise caution
-Find or provide follow-on investments
-Introduction to potential partners or customers
-very little interaction
Two minute verbal summary: product, opportunity, differentiation
2-4 page written summary
20 Minute verbal presentation cover whole plan
Find serious investors
Full Business Plan
20-50 pages plus appendices
Validation scorecard (due diligence)
Basis for all other plan forms
There are three kinds of ____ plans. They are single-use plans, standing plans, and budgets.
The term decision making is used to refer to the process of choosing a solution from available alternatives.
Standing plans deal with unique, one-time-only events.
Budgeting is a critical management task, one that most managers could do better.
One method of weighing decision criteria uses ____, which is a process where each decision is compared directly to every other criterion.
Planning consists of a total of five steps:
(1) setting goals, (2) developing commitment to the goals, (3) developing effective action plans, (4) tracking progress toward goal achievement, and (5) maintaining flexibility in planning.
(6) Revise exisiting plan or begin planning process anew.
A strategic objective is a statement of a company’s purpose or reason for existing.
Neither Chile nor Peru have a mass-market café culture, but that fact has not stopped Starbucks from engaging in ____ to determine how best to expand into those markets.
The process of rational decision making emphasizes the use of systematic procedures to arrive at optimal solutions. Not all processes of decision making follow suit.
All decision making by management is rational.
a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.
flows from the vision, is a more specific goal that unifies company-wide efforts, stretches and challenges the organization, and possesses a finish line and a timeframe.
a statement of a company’s purpose or reason for existing.
assigns weights to different aspects by comparing the importance of each factor to the importance of every other factor
emotional reactions can get in the way of solving problems
Strategy involves the future vision of the business; tactics involve the actual steps needed to achieve that vision.
Strategic management provides overall direction to the enterprise. Strategy formulation requires examining where the company is now, deciding where it should go, and determining how to get it there
Operational control regulates day-to-day output relative to schedules, specifications, and costs.
Compliance Program Steps:
1. Establish standards and procedures
2. Assign upper-level managers to be in charge
3. Delegate decision-making authority only to ethical employees
4. Encourage employees to report violations
5. Train employees on standards and procedures
6. Enforce standards consistently and fairly
7. Improve program after violations
Hierarchy of Social Responsibility
A manager _____ the status quo.
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