Chapter 4: Planning and Decision Making P a g e | 1
Effective Management 7th Edition
Chapter 4: Planning and Decision Making
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 4.
Lesson Plan for Lecture (for large sections)
Lesson Plan for Group Work (for smaller classes)
Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment DuPont
Highlighted Assignments Key Points
What Would You Do? After years of falling behind competitors, what kind of plans
and decisions does DuPont need to make to restore its
prestige, performance, and competiveness?
Management Team Decision Students are asked to consider whether a company should
label a limited warranty as lifetime.
Practice Being a Manager This exercise highlights some well-tested tools for
strengthening planning and decision-making skills.
Self-Assessment Students assess their level of self-management (the extent to
which they are organized, goal-oriented, etc.)
Additional Assignments Key Points
Develop Your Career Potential Students get the opportunity to experiment with planning
techniques in the context of career mapping.
Chapter 4: Planning and Decision Making P a g e | 2
Learning Outcomes
4-1 Discuss the benefits and pitfalls of planning.
Planning involves choosing a goal and developing a method for achieving that goal. Planning is one of
the best ways to improve organizational and individual performance. It encourages people to work harder
4-2 Describe how to make a plan that works.
There are five steps to making a plan that works: (1) Set SMART goals, or goals that are specific,
measurable, attainable, realistic, and timely. (2) Develop commitment to the goals from the people who
4-3 Discuss how companies can use plans at all management levels, from top to bottom.
Proper planning requires that the goals at the bottom and middle of the organization support the objectives
at the top of the organization. Top management develops strategic plans that indicate how a company will
4-4 Explain the steps and limits to rational decision making.
Rational decision making is a six-step process in which managers define problems, evaluate alternatives,
and compute optimal solutions. The first step is identifying and defining the problem. Problems exist
Chapter 4: Planning and Decision Making P a g e | 3
4-5 Explain how group decisions and group decision-making techniques can improve decision
making.
When groups view problems from multiple perspectives, use more information, have a diversity of
knowledge and experience, and become committed to solutions they help choose, they can produce better
solutions than individual decision makers. However, group decisions can suffer from these disadvantages:
groupthink, slowness, discussions dominated by just a few individuals, and unfelt responsibility for
decisions. Group decisions work best when group members encourage c-type conflict. However, group
Terms
absolute comparisons
action plan
A-type conflict (affective conflict)
bounded rationality
brainstorming
budgeting
C-type conflict (cognitive conflict)
decision criteria
decision making
Delphi technique
devil’s advocacy
operational plans
options-based planning
policies
problem
procedures
production blocking
proximal goals
purpose statement
rational decision making
relative comparisons
rules and regulations
Lesson Plan for Lecture
Pre-Class Prep for You: Pre-Class Prep for Your Students:
Review chapter and determine what points to
cover.
Bring PPT slides.
Read Chapter 4, bring book.
Warm Up Begin Chapter 4 by asking your students the following questions:
How many of you think youre good at planning?
What kind of things do you plan?
Content
Delivery
Lecture slides: Make note of where you stop so you can pick up at the next class
meeting. Slides have teaching notes on them to help you as you lecture.
Topics PowerPoint Slides Activities
4-1a Benefits of Planning
4-1b Pitfalls of Planning
2: What Would You Do?
3: Planning
4-2 How to Make a Plan
That Works
4-2b Developing
Commitment to Goals
4-2d Tracking Progress
4-2e Maintaining
Flexibility
6: How to Make a Plan
That Works
8: Goal Commitment
9: Developing Effective
11: Effects of Goal
Setting, Training, and
Feedback on Safe
Consider using an example
that students can follow for
to planning a campus
fundraiser).
4-3 Planning from Top
to Bottom
4-3a Starting at the Top
4-3c Finishing at the
Bottom
13: Planning from Top to
Bottom
14: Time Lines for
15: Top Management
16: Middle Management
17: Lower-Level
Chapter 4: Planning and Decision Making P a g e | 5
4-4 Steps and Limits to
Rational Decision
Making
4-4a Define the Problem
4-4b Identify Decision
Courses of Action
4-4e Evaluate Each
Alternative
4-4g Limits to Rational
Decision Making
21: Decisions
22: Steps of the Rational
Decision-Making Process
23: Define the Problem
24: The Decision to Solve
26: Weight the Criteria
27: Absolute Weighting
of Decision Criteria for a
of Home Characteristics
29: Generate Alternative
Courses of Action
30: Evaluate Each
Alternative
34: Bounded Rationality
Ask students, How many
of you think youre good
decision makers? Then
ask, What process do you
go through to make a
think is the biggest obstacle
to you making good
decisions?
4-5 Using Groups to
4-5a Advantages and
4-5b Structured Conflict
4-5c Nominal Group
Technique
4-5e Stepladder Technique
4-5f Electronic
Brainstorming
35: Using Groups to
36: Advantages of Group
Decision Making
38: Pitfalls of Group
Decision Making
40: Introducing C-Type
Conflict
41: Introducing C-Type
Conflict
42: Nominal Group
Technique
43: Delphi Technique
44: What Really Works
45: Stepladder Technique
Remind students of a group
Friday/Saturday night.
with their friends what to
do? Does their technique
match (or come close to
techniques discussed in the
chapter?
Chapter 4: Planning and Decision Making P a g e | 6
Management
Workplace
50: Plant Fantasies Launch video in slide 50.
Questions on slide can
guide discussion.
Lesson Plan for Group Work
Pre-Class Prep for You: Pre-Class Prep for Your Students:
Review material to cover and modify the lesson
plan to meet your needs.
Set the classroom up so that small groups of four to
five students can sit together.
Read Chapter 4, bring book.
Warm Up Begin Chapter 4 by asking your students the following set of questions:
How many of you think youre good at planning?
What kind of things do you plan?
Do you think planning benefits you?
What kind of disadvantages have you experienced with your planning?
Content
Delivery
Lecture on The Benefits and Pitfalls of Planning and How to Make a Plan That Works
(Sections 4-1 and 4-2).
Break for group activity:
“SMART Objectives”
Divide the class into small groups (three to four students). Give each group a list of
objectives developed by real-world companies (companies usually put workable
examples in their annual reports). Have each group critique the objectives and
determine if they meet SMART guidelines. For every objective that does not meet the
criteria, have students indicate why and rewrite the objective.
Segue into a lecture on Planning from Top to Bottom (Section 4-3).
“What Should We Call It?”
Divide the class into small groups of three to four students and allow 5 7 minutes for
them to review the Management Team Decision. Have students work through the
Chapter 4: Planning and Decision Making P a g e | 7
Ask students, How do you go about making a decision? Does anyone have a system for
making tough (or even easy) decisions?
Break for the following activity:
“Campus Decisions”
Divide the class into groups of three to four students to work through deciding where
to live as a new college student. Each group should generate a list of decision criteria,
weight the criteria both in an absolute and relative fashion, and then generate a list of
Segue into the next section by asking students the following question:
Do you think it is easier to make decisions as an individual or as part of a
group?
Lecture on Group Decision Making (Section 4-5).
Once you go through the various group decision-making techniques, let students know
that they will be using them throughout the semester in class to work through group
activities. Begin with the following quick activity:
“Quizzes, Tests, and Exams”
Divide students into small groups of five to seven students and give them the
following problem: how to evaluate students during the semester. They will need to
propose solutions like weekly quizzing, tests for each chapter, one midterm and one
final, weekly quizzing with one comprehensive final, and so forth. Have each group
Conclusion
and
Preview
Assignments:
As an assignment, have students do the Develop Your Career Potential activity,
which guides students through a preliminary career-planning exercise. Questions
2 and 3 in the exercise are probably the easiest to collect as a check that the work
Chapter 4: Planning and Decision Making P a g e | 8
Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment
What Really Happened? Solution
DUPONT
In the case, you learned that the DuPont Corporation, founded in 1802, was a manufacturer of blasting
powder in its first 100 years. In its second 100 years, it became one of the worlds leading chemical
companies, producing products such as Teflon, Lucite, and Kevlar. DuPonts last 25 years, however, have
not been as successful. While profitable, DuPonts product and financial performance ranks just 16th out
of 19 comparison companies. During the recent world financial crisis, sales dropped by 20 percent, 6,500
employees lost their jobs, and the companys annual budget was cut by $1 billion. Lets find out what
happened at DuPont and see what plans CEO Ellen Kullman made and the steps she took to restore
DuPonts prestige, performance, and competitiveness.
First, given sustained weak performance over the last quarter century, do you need to step back and
consider DuPonts purpose, that is, the reason that youre in business? After transitioning from blasting
powder to chemicals, DuPonts slogan became, Better things for better living through chemistry. Is
it time, again, to reconsider what DuPont is all about?
A purpose statement, which is often referred to as an organizational mission or vision, is a statement of a
companys purpose or reason for existing. Purpose statements are typically brief usually no more than
two sentences. They should also be enduring, inspirational, clear, and consistent with widely shared
DuPont CEO Ellen Kullman tells a story in which she shares that she is reading the biography of Alfred
du Pont, one of the sons of founder E.I. du Pont, who later bought and ran the company with his cousins,
Pierre and Coleman du Pont. Kullman says,
The company they bought in 1902 was still very much the explosives company that it had been
throughout the 19th century. But they didn’t look back; they looked forward. In many ways they
invented the large industrial corporation of the 20th century a business model they called
simply, the “Big Company.”
leaders. When the big, unexpected opportunity came, the company was ready.
With this statement, Kullman is linking DuPonts past with its present, but its a past in which the
company succeeded by changing the business that it was in from blasting powder and explosives to
chemicals.
Kullmans predecessor, CEO Charles O. Holliday Jr., began the process of changing DuPonts purpose by
selling Conoco Oil, pharmaceutical divisions, and nylon and textile divisions, the latter of which were
once thought to be the core of the company. In their absence, Holliday stated that DuPont would be the
worlds most dynamic science company. Kullman built on Hollidays changes, declaring that DuPont
was in the innovation and science business.
Chapter 4: Planning and Decision Making P a g e | 9
Consistent with that purpose, Kullman decided to pay $6.3 billion to acquire Danisco, a Danish
biotechnology company that uses industrial enzymes to make ethanol, food, animal feed, and textiles.
From a market standpoint, acquiring Danisco makes DuPont the worlds largest manufacturer of food
additives and the second largest producer of the enzymes used to make biofuels.
But, from the standpoint of DuPonts purpose, the purchase of Danisco, said Kullman, advances
DuPonts position as a clear leader in industrial biotechnology, with science-intensive innovations that
address global challenges in food production and reduced fossil fuel consumption. In other words,
DuPonts business is science and innovation. She goes on to say, Also, with this acquisition we would
add two very attractive businesses to our portfolio that are in the sweet spot of our growth strategy.
Specifically, there is an industrial enzyme business that would enhance our applied biosciences business
and a specialty food ingredient business that is complementary to our nutrition and health business.
Was it time, again, to reconsider what DuPont was all about? Clearly, according to CEO Kullman it was.
For the second time in its 210 year history, DuPont changed why it exists.
Because action plans are sometimes poorly conceived and goals sometimes turn out not to be achievable,
the last step in developing an effective plan is to maintain flexibility. One method of maintaining
flexibility while planning is to adopt an options-based approach. The goal of options-based planning is to
keep options open by making small, simultaneous investments in many alternative plans. Then, when one
or a few of these plans emerge as likely winners, you invest even more in these plans while discontinuing
Chapter 4: Planning and Decision Making P a g e | 10
program is intended to help our business teams identify, test, and implement their best growth engines.
In other words, DuPont not only took an options-based approach to planning by pursuing business across
five growth platforms, it increased the odds of each option or growth platform achieving its goals by
teaching its managers and employees how to pursue and manage high growth businesses.
One of the keys to the combination of a new purpose innovation and science used across the five
growth platforms is to decrease the amount of time it takes to bring new products to market in order to
increase revenues from new products. Thomas Connelly, DuPonts chief innovation officer, says, My
rallying cry is launch hard and ramp fast. Nine years ago, new products accounted for just 22 percent of
revenues. Progress on new product development time has been impressive; however, as roughly 40
percent of DuPonts revenues now come from products introduced in the last five years. That isnt enough
Planning is one of the best ways to improve organizational and individual performance. It encourages
people to work harder (intensified effort), to work hard for extended periods (persistence), to engage in
behaviors directly related to goal accomplishment (directed behavior), and to think of better ways to do
their jobs (task strategies). However, planning also has three potential pitfalls. Companies that are overly
committed to their plans may be slow to adapt to changes in their environment. Planning is based on
assumptions about the future, and when those assumptions are wrong, the plans are likely to fail. Finally,
planning can fail when planners are detached from the implementation of plans.
With DuPont in business to be an innovation and science company pursuing growth across five
different growth platforms, what goal should CEO Ellen Kullman set for the company? And should
there be an overriding goal, or should there be separate goals for different parts of the company?
Kullmans top goal is for DuPont to increase its earnings per share by 20 percent per year. In most
companies, this would be a super aggressive goal, but achieving this goal would return the company to
price-earnings ratios that it was earning five years ago. So while this is an aggressive annual goal, its also
Although R&D budgets were not cut, discretionary travel was eliminated, and every R&D program was
expected to produce customer-valued products that could be profitable. Uma Chowdhry, DuPont’s chief
science and technology officer, explained that DuPont research managers need to show their projects can
Chapter 4: Planning and Decision Making P a g e | 11
Finally, should DuPont have an overriding goal, or should it have separate goals for different parts of the
company? While CEO Kullmans top goal is to increase earnings per share by 20 percent per year, those
Management Team Decision
WHAT SHOULD WE CALL IT?
Purpose
This case gives students an opportunity to partake in the managerial function of decision making.
Students must decide how to present an automobile warranty so that the company can maximize sales, but
must also consider how the companys commitment to honesty will be perceived by consumers.
Setting It Up
You can introduce this case by presenting an object before students. It can be something simple like a
book or something complicated and high-tech like a smartphone or tablet computer. After showing them
the object, tell students that it comes with a lifetime warranty and ask them what they expect the warranty
to cover.
Scenario
Being a marketing manager at GM has been challenging. Youve had the unenviable task of reaching out
to customers through bailouts, bankruptcy, and a thorough reorganization of the company. Some
campaigns went better than others, but with exciting new models, youre quite excited about getting the
word out about GMs high-quality, high-value cars.
One day, your supervisor calls you, asking for some help. It turns out that GM wants to offer an industry-
leading warranty on its Opel- and Vauxhall-branded cars that it sells in Europe. The warranty would
cover any issues, except for accidental damage, for 100,000 miles, with no limitations on date. Sounds
like a great way to sell cars, you tell your boss, so what do you need me for? The problem, he tells
you, is that some executives in the company want to call it a lifetime warranty. How is it that a warranty