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IB BUsiness MAnagement:
1.7 Organisational Planning Tools HL

There is an element of risk associated with almost any business decision. It is the role of skilled managers to ensure that that business decision-making carries as much quantifiable risk as possible - to ensure that decisions are made in a rational way. 

Key Learning Outcomes:

  • Evaluate the value of a business using a given organisational planning tool.
  • Apply a formal decision-making framework to a business situation
  • Prepare a fishbone diagram analysis for a business situation
  • Construct and interpret decision trees and evaluate this technique
  • Examine the uses of Lewin's force-field analysis and the relative importance of driving and restraining forces
  • Construct and interpret decision trees and evaluate this technique
  • Apply decision-making processes and planning tools
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Planning is an essential skill for any successful business

Organisational planning tools

Planning for the future and taking effective decisions are two very important management functions that are linked. Planning means establishing the future direction the business should take and setting overall objectives and targets. Organisational planning tools can facilitate effective decision-making.

Strategic decision-making focuses on making choices between different strategies so that the objectives of the business are more likely to be achieved.

 Decision-Making

Decision-making can be intuitive or scientific. Intuitive decision-making involves making decisions based on instinct or 'gut feeling' (perhaps based on the manager's experience) for a situation and the options available . Scientific decision-making on the otherhand involves basing decisions on a formal framework and a data analysis of both the problem and the options available. This topic 

The Framework - 
Stages in formal decision-making:

  1. Set objectives
  2. Assess the problem or the situation
  3. Gather data to analyse both the extent of the problem and the information needed at assess the options available
  4. Consider all the options available
  5. Decide between the alternative ideas or options using decision-making tools
  6. Plan and implement the decision
  7. Control and review

Gantt Charts

A Gantt chart is an organisational planning tool that is a simple representation of a project’s schedule – a business project will be plotted within the project’s timeframe enabling managers to plan and schedule the business project and monitor its progress. 

The purpose of a Gantt chart is to enable managers to schedule and successfully complete a project that requires a large number of jobs to be completed in the minimum amount of time. Some activities will be critical, in that, if their deadline are missed then the whole project will be delayed and times and schedules will need to be altered.

Below is a Gantt chart for a firm’s development of a new product to bring to market.

Strengths and Limitations of gantt charts

 Preparing a gantt chart

  1. It is presented as a horizontal bar chart which shows all sequentially scheduled tasks (on the vertical axis) needed across a period of time (on the horizontal axis).
  2.  Each task is shown by its own horizontal rectangular bar, the length of which depicts the length of time required to complete the activity, with start and finish times obvious.
  3. Critical and non-critical tasks are shown.  Critical tasks need to be completed by deadline, if they are not then the entire activity is delayed. Non-critical tasks can experience time over-runs without delaying start times of other projects, any of this slack time is shown.
  4. The links between predecessor-successor tasks are shown, these are tasks that require other tasks to be completed before they can begin.

Steps to construct a gantt chart

  1. Identify all tasks involved in completing the project.
  2. Estimate the length of time required for separate tasks to be completed.
  3. Identify the tasks which cannot begin until other tasks have been completed; i.e., the dependencies.
  4. Identify which tasks can run at the same time – this will minimise the time to complete the project.
  5. Identify slack time in non-critical tasks.
  6. Prepare the Gantt hart by placing all tasks in the correct sequence and identifying associated dates or time periods.

DECISION TREES

A decision tree is a diagram that sets out the options connected with a decision and the outcomes and economic returns that may result.

Definition:

The expected value is the likely financial result of an outcome obtained by multiplying the probability of an event occurring by the forecast economic return if it does occur.
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An example decision tree - sell property now or wait a further year

Mr Burton explains:
Decision Trees

Constructing decision trees:

  • It is constructed left to right.
  • Each branch of the tree represents an option together with a range of outcomes and the chances of these occurring.
  • Decision nodes are represented by a square
  • A circle shows the range of outcomes may result from a decision - a chance node.
  • Probabilities are shown alongside each of these possible outcomes. These probabilities are the numerical values of an event occurring - they measure the 'chance' of an outcome occurring.
  • The economic returns are the expected financial gains or losses of a particular outcome - the 'pay off'.

Lewin's Force Field Analysis

Force Field analysis is an analytic process used to map the opposing forces within an organisation where change is taking place.

Driving and Restraining Forces

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To plan change it is necessary to identify the driving and restraining forces for change

Force field analysis explained

Force Field Analysis

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The weightings of forces in a force field analysis are subjective and therefore open to manipulation by management

Using Lewin's model

  • The force-field diagram helps managers weigh up the importance of these tow types of forces.
  • It helps identify the people most likely to be affected by the change.
  • It encourages an examination of how to strengthen the forces supporting the decision and reduce the forces opposed to it.
  • The use of a leadership style that reduces opposition and resistance to change is highlighted as being more effective than forcing through unpopular changes in an autocratic manner.

Ishikawa's Fish Bone Diagram - Cause and Effect Diagrams

Cause and Effect Diagrams:
Ishikawa's Fishbone Model

A graphical representation of the most likely causes and effects of an important decisions. It is a management tool used to identify the root causes of a problem or issue. It is useful when dealing with a problem that has several elements or root causes.

Cause and Effect diagrams explained
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There is a set layout that is required for the Cause and Effect diagram
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Ishikawa Fishbone Cause and Effect example

1.7 Organisational Planning Tools:
  Summary PowerPoint notes

1.7 Organisational Planning Tools: 
Mr Burton explains 

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