ORGANIZATION AND MANAGEMENT

1ST QUARTER
MODULE 3
Lesson 6: Planning and Decision Making (continuation of Lesson 5)

I. INTRODUCTION

In this chapter, you will begin to study planning, the first management function, which sets an
organization’s agenda. Establishing plans based on set goals will provide direction to the organization’s
activities and, thus, reduce uncertainties and wastage. You will see the planning is an extremely complex
process since it requires a systematic method for recognizing and analyzing the elements of the
organization’s external environment and matching them with the firm’s internal environment’s factors and
capabilities. Since plans are done in an environment of uncertainty, you will also begin to understand how
assumptions are formulated based on forecasts of expected situations.

At the end of this lesson, the learners should be able to apply appropriate planning techniques and
tools in decision-making.

We will be proceeding with our lesson proper with the use of the following e-learning platforms:
1. Edmodo;
2. Zoom;
3. Google meet; and
4. Messenger/messenger chat room.

Techniques and Tools in Decision Making

1. Qualitative Evaluation. This term refers to evaluation of alternatives using intuition and subjective
judgment. Managers tend to use this approach when: the problem is fairly simple; the problem is familiar;
the costs involved are not great; and immediate decisions are needed
a. Brainstorming is common technique used by groups of planners in selecting a common solution for a
problem. It stimulates thinking and allows the group to work together in generating ideas. There is no
restrictions to the flow of ideas which makes this technique informal and unstructured.
b. Nominal group technique is defined as a structured method for group brainstorming that encourages
contributions from everyone and facilitates quick agreement on the relative importance of issues,
problems, or solutions. Team members begin by writing down their ideas, then selecting which idea they
feel is best. Once team members are ready, everyone presents their favorite idea, and the suggestions
are then discussed and prioritized by the entire group using a point system. NGT combines the
importance ratings of individual group members into the final weighted priorities of the group.
c. Delphi technique is a highly structured technique similar to the nominal group technique. However, the
difference lies in the means of formulating courses of action. This technique does not require group
meeting. Rather, the group leader distributes questionnaires to all group members to collect and
assimilate their ideas. In this technique, the participants in planning do not need to know each other. It is
the group leader that facilitates the collection of data and manages the flow of information.
2. Quantitative Evaluation. This term refers to the evaluation of alternatives using any technique in a group
classified as rational and analytical. The type of quantitative techniques are as follows:
a. Decision Tree. It is an excellent tool for weighing different alternatives. It consists of a graph showing
potential and alternative decision paths for the proposed plan. This method is useful for decisions that
involve a succession of small decisions.
 b. Payback Method. Managers use this method in evaluating alternatives in purchasing PPE. Managers
consider certain factors such as length of use or utility, warranties, cost of repair, maintenance cost, and
sales generated for a specific period before actually buying the product.

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Decision Making and the Common Types of Decision Models

1. Rational or Logical Decision Model

2. Intuitive Decision Model do not use objective methods in decision making but instead use their “gut feeling”
and instincts. The intuitive decision model is most suited for managers who have several years of managerial
experience.
3. Predisposed Decision Model. The manager, once he or she decides on a solution, will no longer look for
other alternative solutions. The chosen solution is considered the most applicable and effective solution and
the manager then gathers the needed resources to implement the decision.

Cognitive Biases
This refers to the tendency to look at situations based on subjective standards or perspectives.
Cognitive biases often lead managers to wrong, illogical conclusions regarding certain situations and people.
1. Escalating commitment happens when a manager, despite his or her knowledge of a project’s failure,
continues to acquire more resources to pursue the project instead of abandoning it to protect his or her
reputation.
2. Prior hypothesis bias happens when a manager holds on to his or her prior belief that a project will succeed
even when evidence to the contrary has been provided. The manager will strongly pursue the said project
while only accepting opinions that agree with his or her views.
3. Representativeness. It is the tendency to make generalizations based on a small sample or a single
experience. This happens every time a new product becomes popular and starts a trend.
4. Reasoning by analogy refers to the tendency to conclude that the results of one situation can be repeated
in a similar situation.
5. Illusion of control is a type of error that many top-level managers commit when they become overconfident
regarding their ability to solve problems. Using their many years of experience and replying on their status in
the industry, they tend to underestimate the problems they encounter. This attitude clouds their judgment
and eventually leads to poor decisions.
6. Framing bias occurs when people make a decision based on the way the information is presented, as
opposed to just on the facts themselves. The same facts presented in two different ways can lead to people
making different judgments or decisions.
7. Availability error is committed by managers when they immediately use available resources on a project
that is expected to immediately provide profit, rather than holding off and waiting for a later opportunity that
will generate even greater profit.

Contemporary Structured Decision-Making Models

1. Kepner-Tregoe Matrix Model (K-T Method) offers a systematic way of evaluating alternatives by
implementing a rational process of analyzing aspects of a situation or problem. It aims to remove the pressure
from planners and minimize the risks of chosen alternatives. This approach was developed by Charles
Kepner and Benjamin Tregoe in 1960s. To break through this traditional pattern Charles
Kepner and Benjamin Tregoe came up with four rational processes in which four fundamental questions are
reflected:
a. Situation analysis clarifies the problem situation (what happened).
b. Problem analysis. Here the actual cause of the problem and the relationship between cause and
result are searched for (why did it happen).
c. Decision analysis. Based on the decision making criteria, choices are made to arrive at potential
problem resolutions (how should we act).
d. Potential Problem analysis. Here potential future problems are anticipated and preventative
actions are developed (what will the result be).
2. Vroom-Yetton-Jago Decision Model was originally developed by Victor Vroom and Phillip Yetton in 1973,
and revised in 1988 in collaboration with Arthur Jago. This model focuses on selecting the best leadership
style suited for planning and decision-making. This model identifies five leadership styles:
a. Autocratic1 (A1): You use the information that you already have to make the decision, without
requiring any further input from your team.
b. Autocratic2 (A2): You consult your team to obtain specific information that you need, and then
you make the final decision.
c. Consultative1 (C1): You inform your team of the situation and ask for members' opinions
individually, but you don't bring the group together for a discussion. You make the final decision.
d. Consultative2 (C2): You get your team together for a group discussion about the issue and to seek
their suggestions, but you still make the final decision by yourself.
e. Collaborative2 (G2): You work with your team to reach a group consensus . Your role is mostly
facilitative, and you help team members to reach a decision that they all agree on.
3. Observe-Orient-Decide-Act (OODA) Loop Model. This model was brought about by the application of
military tactics in business situations. The OODA Loop was developed by US Air Force Colonel John Boyd.
According to him, decision-making is essentially a cycle of actions that an individual does in quick succession
to address a situation.

V. APPLICATION
Directions: Follow the instructions below.
1 Interview your parents regarding the methods they use in making decisions for your family. Compare their
personal decision-making methods with the methods, techniques, and models in this lesson. Which among
these are most closely related to your parents’ decision-making style or method?
2. Show how you can implement one of the decision models in your life. Identify a personal issue or problem
and use your chosen model to plan and formulate strategies to address it. Write a journal, outlining your
decision model.

VI. REFERENCES

Organization and Management by Cabrera, Altarejos and Riaz published by Vibal

Organization and Management for Senior High School by Cynthia A. Zarate published by C & E Publishing,
Inc.
Business Organization and management by Medina 2015 published by REX Book Store
Organization and Management 2016 by Payos, Espinoza, Zorilla published by REX Book Store