Planning and Decision Making
Domain 2 covers how managers set direction and choose among alternatives: types of plans, planning tools, decision models, group decision techniques, and the biases that distort choice.
Plans and planning tools
- Strategic plans are long-range, organization-wide, and set by top management. Tactical plans translate strategy for a function or division over a shorter horizon. Operational plans cover day-to-day activities.
- Standing plans are used repeatedly: policies (guidelines), procedures (steps), rules (specific do/don't). Single-use plans include programs, projects, and budgets.
- MBO (Drucker): objectives cascade through the organization; goals are set participatively, are specific and measurable, and are reviewed periodically. SMART goals are specific, measurable, achievable, relevant, time-bound.
- SWOT analyzes internal strengths and weaknesses and external opportunities and threats; TOWS matches them into SO, ST, WO, WT strategies.
- Forecasting: quantitative methods include time-series and regression; qualitative methods include jury of opinion, sales-force composite, and Delphi.
Decision models and group techniques
The rational model assumes a clear problem, known criteria, weighted criteria, generated alternatives, and an optimal choice. Simon's bounded rationality says cognitive limits and incomplete information lead managers to satisfice - choose the first acceptable option. Intuitive decisions rely on expertise and pattern recognition. Group techniques: brainstorming generates ideas without criticism; nominal group technique has members write silently, then share and vote; Delphi uses anonymous expert questionnaires over several rounds. Groupthink (Janis) is conformity that suppresses dissent; symptoms include illusion of invulnerability, self-censorship, and pressure on dissenters. Remedies include a devil's advocate, outside experts, and leader impartiality. Common biases: confirmation, anchoring, availability, framing, and escalation of commitment - continuing a failing course because of sunk costs.
Worked example
A company has spent $2 million developing a product that now forecasts weak demand. The champion argues, "We can't waste the $2 million." Under escalation of commitment, the $2 million is sunk. The decision should compare only future incremental costs and revenues of continuing versus stopping. A premortem or devil's advocate can surface the weak-demand evidence the team has been discounting.
Traps
Standing plans are not the same as single-use plans. MBO is not simply top-down assignment; participation and review are central. Satisficing is not the same as irrationality - it is rational under constraints. Don't confuse Delphi (anonymous, iterative, no face-to-face) with nominal group technique (face-to-face, silent writing first). Groupthink is a failure of group process, not the same as brainstorming.