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GENERAL MANAGEMENT
CHECK POINT 5: PRINCIPLES OF DECISION MAKING

Please Select Any Topic In Check Point 5 Below And Click.

1. Critical Importance Of The Decision-Making Process
2. Key Questions In The Decision-Making Process
3. Eight Steps In The Decision-Making Process
4. Evaluate The Existing Situation With SWOT Analysis
5. small business example
Evaluate The Existing Situation
6. Define Problems And Identify Root Causes
7. small business example
Define Problems And Identify Root Causes
8. small business example
Develop And Evaluate Optional Strategies
9. small business example
Select The Most Suitable Strategies And Develop a Plan Of Action
10. small business example
Assign The Responsibility For Implementing The Plan Of Action
11. small business example
Implement The Plan Of Action
12. small business example
Evaluate Results And Make Adjustments
13. Repeat The Process Whenever Necessary
14. For Serious Business Owners Only
15. the latest information online
 

DO I NEED TO KNOW THIS CHECK POINT?

 

WELCOME TO CHECK POINT 5

TUTORIAL 1 General Management TUTORIAL 2 Human
Resources Management
TUTORIAL 3 Financial Management TUTORIAL 4 Operations Management TUTORIAL 5 Marketing
And Sales Management
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
2 7 12 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97
3 8 13 18 23 28 33 38 43 48 53 58 63 68 73 78 83 88 93 98
4 9 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
 

HOW CAN YOU BENEFIT FROM CHECK POINT 5?

 
The main purpose of this check point is to provide you and your management team with detailed information about the Principles Of Decision-Making and how to apply this information to maximize your company's performance.
 
In this check point you will learn:
 
• About the difference between strategic and operational decision-making.
• About the key questions in the decision-making process.
• About the eight steps in the decision-making process.
• How to evaluate your company’s existing situation.
• How to define operational problems in your company and identify root causes.
• How to develop and evaluate optional strategies to improve your company’s performance.
• How to select the most suitable strategies and develop your company’s plan of action.
• How to assign the responsibility for implementing your company’s plan of action.
• How to implement your company’s plan of action.
• How to evaluate results and make adjustments in your company… and much more.
 

LEAN MANAGEMENT GUIDELINES FOR CHECK POINT 5

 
You and your management team should become familiar with the basic Lean Management principles, guidelines, and tools provided in this program and apply them appropriately to the content of this check point.
 
You and your team should adhere to basic lean management guidelines on a continuous basis:
 
Treat your customers as the most important part of your business.
Provide your customers with the best possible value of products and services.
Meet your customers' requirements with a positive energy on a timely basis.
Provide your customers with consistent and reliable after-sales service.
Treat your customers, employees, suppliers, and business associates with genuine respect.
Identify your company's operational weaknesses, non-value-added activities, and waste.
Implement the process of continuous improvements on organization-wide basis.
Eliminate or minimize your company's non-value-added activities and waste.
Streamline your company's operational processes and maximize overall flow efficiency.
Reduce your company's operational costs in all areas of business activities.
Maximize the quality at the source of all operational processes and activities.
Ensure regular evaluation of your employees' performance and required level of knowledge.
Implement fair compensation of your employees based on their overall performance.
Motivate your partners and employees to adhere to high ethical standards of behavior.
Maximize safety for your customers, employees, suppliers, and business associates.
Provide opportunities for a continuous professional growth of partners and employees.
Pay attention to "how" positive results are achieved and constantly try to improve them.
Cultivate long-term relationships with your customers, suppliers, employees, and business associates.

1. CRITICAL IMPORTANCE OF THE DECISION-MAKING PROCESS

CRITICAL IMPORTANCE OF THE DECISION-MAKING PROCESS

Business owners and managers must always remember that sound and effective decision-making process is critical in successful business management.

The decision-making process concerns with development and selection of a suitable course of action toward meeting organizational objectives in the most cost-effective manner.

As a business owner or manager, you are constantly required to make Decisions throughout the process of planning, organizing, leading, and controlling your company. For this reason, you must ensure an effective and meaningful Decision-Making Process* within your organization, and accept this as one of your most important managerial responsibilities.

The more important decisions deal with Strategic Activities related to your organization. These decisions involve finding out what the existing situation is and how to change it in the future to ensure successful business performance. Other managerial decisions relate to Operational Activities and necessitate evaluation of the existing human, material and physical resources and their most effective application within the organization on a short-term basis.

 

CLASSIFICATION OF DECISION-MAKING ACTIVITIES

Strategic Decision-Making

Operational Decision-Making

Strategic decision-making relates to overall long-term activities of the organization based on a one to five year time span.

Strategic decision-making is one of the prime responsibilities of the company's top management and concerns with all business issues on a company-wide basis.

Strategic decision-making will address the following questions:






  • What to do?
  • Why to do it?
  • How much will it cost?
  • Where will the money come from?
Operational decision-making relates to specific short-term activities of the organization during the next twelve months.

Operational decision-making is one of the prime responsibilities of the company's top management or departmental managers, depending upon the company’s size.

Operational decision-making will address the following questions:






  • How to do it?
  • When to do it?
  • Who will do it?
  • How to measure results?
 
 
* Note:

The decision-making process described in this check point is based on Western-style management guidelines. You should also learn about the decision-making process used by Lean Organizations, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

2. KEY QUESTIONS IN THE DECISION-MAKING PROCESS

THE COMMON ERROR IN MANAGEMENT DECISIONS

The most common error by management in the decision-making process is the emphasis on finding correct answers rather than searching for correct questions.

Your personal ability to ask correct questions in various business situations will help you to achieve your business objectives. The two most important questions that you should always ask yourself are:

Is this question relevant?
Does this question really make sense?

Typical Key Questions* which you should be asking yourself and members of your management team are presented below.(12)

KEY QUESTIONS IN THE DECISION-MAKING PROCESS

Management
Activity

Key
Question

Planning Activity










  • What is the basic mission and overall goals of our company?
  • Should we adopt lean management guidelines in our company?
  • Are customers satisfied with the value of our products and services?
  • What should be our company's short- and long-term objectives?
  • How can we maximize the value of our products and services?
  • What are the buying trends in the marketplace?
  • What are the competition trends in the marketplace?
  • How will these trends affect our company in the future?
  • What strategies should we adopt to reach our objectives?

Organizing Activity







  • How should we streamline our operational activities?
  • How should we minimize waste in our company?
  • How should we organize the working units to create a continuous flow?
  • How should we allocate work load in our company?
  • What decisions should employees be allowed to make?
  • What should be changed within our company's structure?
  • How can we improve the operational activities in our company?

Leading Activity






  • How can we provide a better leadership to our employees?
  • What specific needs do our employees have?
  • How are these needs being satisfied through working toward the organization's objectives?
  • What are the reasons for decreased productivity of employees?
  • How can we increase the productivity and motivation of our employees?

Controlling Activity






  • How should we measure our company's performance?
  • How often should we measure our company's performance?
  • How close are we in meeting our company's objectives?
  • What are the reasons for not meeting the planned objectives?
  • What corrective measures should we take to improve our company's performance?
 
* Note:

Typical key questions described in this check point are based on Western-style management guidelines. You should also read Ten Questions And Answers in the business decision-making process, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.
 

ADDITIONAL INFORMATION ONLINE

Decision Making By Henry Mintzberg.
Decision Making In Five Steps By Dee Reavis.
Decision Making Process By Easy Presentations 1.
Decision Making By Baba Shiv Stanford University.
Five Steps To Smarter Business Decisions By Mark Stebbing.

3. EIGHT STEPS IN THE DECISION-MAKING PROCESS

THE DECISION-MAKING PROCESS

A typical Decision-Making Process*, outlined below, entails eight steps and may apply to a broad range of business situations.

EIGHT STEPS IN THE DECISION-MAKING PROCESS

Step 1: Evaluate The Existing Situation.

Step 2: Define Problems And Identify Root Causes.

Step 3: Develop And Evaluate Optional Strategies.

Step 4: Select The Most Suitable Strategies And Develop A Plan Of Action.

Step 5: Assign The Responsibility For Implementing The Plan Of Action.

Step 6: Implement The Plan Of Action.

Step 7: Evaluate Results And Make Adjustments.

Step 8: Repeat The Process Whenever Necessary.

 
* Note:

The eight steps in the decision-making process described in this check point are based on Western-style management guidelines. You should also learn about the decision-making process used in Hoshin Planning, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

4. EVALUATE THE EXISTING SITUATION WITH SWOT ANALYSIS

STEP 1: EVALUATE THE EXISTING SITUATION

Situation Analysis* represents the first step in the business decision-making process.

When conducting situation analysis of your company, you need to ask specific questions, which relate to your company’s current and past performance results. You must also evaluate your operational activities, taking into account what is happening around your company in the marketplace. Some of the typical questions related to situation analysis are outlined below. Several examples that follow are designed to clarify each step in the business decision-making process.

FOUR BASIC SITUATION ANALYSIS QUESTIONS

1.

What is the existing situation?

2.

What happened in the recent past?

3.

What has been the trend so far?

4.

What may happen in the near future if the same trend continues?

These four basic questions may apply to your company’s overall operational performance, a specific department within your company, a selected product or service line, a particular project, or to any person.

SWOT ANALYSIS

SWOT Analysis, also known as SWOT Matrix, represents a structured method for evaluating four critical factors related to a particular business organization, or a specific business project, product, service, or person:

Strengths.
Weaknesses.
Opportunities.
Threats.

SWOT analysis was developed in the U.S. in the 1960’s by Albert S. Humphrey, who was a management consultant specializing in organizational management.

SWOT analysis represents a practical management tool which is often used by business owners and managers in any type of a small, medium-sized, or large business organization.

FOUR FACTORS IN THE SWOT ANALYSIS

Internal Factors External Factors

Strengths

Weaknesses

Opportunities

Threats

What are the strong points in the current situation that relate to our company, project, or product?

Our current strengths represent a business advantage in the marketplace.

What are the weak points in the current situation that relate to our company, project, or product?

Our current weaknesses represent a business disadvantage in the marketplace.

What are the current opportunities in the marketplace that relate to our company, project or product?

Our current opportunities represent a business advantage in the marketplace.

What are the current threats from competition in the marketplace that relate to our company, project or product?

Our current threats represent a business disadvantage in the marketplace.

 
 

THE SWOT MATRIX

  These Factors Are Helpful These Factors Are Harmful
Internal
Factors
Strengths (S) Weaknesses (W)
External
Factors
Opportunities (O) Threats (T)

The SWOT Matrix is frequently used by business owners and managers for decision-making purposes. A typical SWOT matrix example is shown below.

THE SWOT MATRIX EXAMPLE

Identify the company’s strengths and weaknesses - enter only one “V” per line.
Internal Factors
What Are Our Strengths? What Are Our Weaknesses?
We have a strong customer base. V We have a weak customer base. --
We offer best value to customers. -- We offer poor value to customers. V
We have a suitable product range. -- We don’t have a suitable product range. V
We have a strong management team. V We have a weak management team. --
We have well-trained employees. -- We don’t have well-trained employees. V
We have an efficient operational facility. V We have an inefficient operational facility. --
We meet our financial objectives. -- We don’t meet our financial objectives. V
External Factors
What Are Our Opportunities? What Are Our Threats?
We have new potential markets. -- We don’t have new potential
markets.
V
We have reliable suppliers. -- We have unreliable suppliers. V
We have weak competition. -- We have very strong competition. V
We can get better prices from suppliers. -- We can’t get better prices from suppliers. V
The economy in our market is booming. -- The economy in our market is weak. V
We have access to brand new technology. V We don’t have access to new technology. --

* Note:

Situation analysis in the decision-making process described in this check point is based on Western-style management guidelines. You should also learn about the situation analysis process used in Hoshin Planning, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

ADDITIONAL INFORMATION ONLINE

SWOT Analysis By Cate Costa.
SWOT Analysis - A Tool For Success By Bill Blake.
Strategic Planning: SWOT And TOWS Analysis By Ian Johnson.
How To Complete A SWOT Analysis By Alanis Business Academy.
SWOT Analysis: How To Perform One For Your Organization By Erica Olsen.

5. SMALL BUSINESS EXAMPLE
EVALUATE THE EXISTING SITUATION

STEP 1: ANALYZE THE EXISTING SITUATION

Imagine that you have been in business for the last five years and now you would like to complete your company’s Situation Analysis on a professional basis.

You can use SWOT Analysis guidelines and even add more questions relevant to your business activities. However, you must be candid and self-critical by giving yourself measurable grades (A, B, C, D, or F), like a school teacher.

A B C D F
Very Good Good Fair Poor Very Poor
81% - 100% 61% - 80% 41% - 60% 21% - 40% 0% – 20%

A SWOT analysis example is presented next.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 1: EVALUATE THE EXISTING SITUATION

ABC Corporation
SWOT Analysis
Internal Factors A B C D F
Very Good Good Fair Poor Very Poor
1. How strong is our customer
base?
  V      
2. How good is the value of products or services offered to our customers?     V    
3. Do we have a suitable product or service range for our customers?     V    
4. Do we have a strong management
team?
  V      
5. Do we have well-trained
employees?
    V    
6. Do we have an efficient operational
facility?
  V      
7. Do we meet our financial objectives on a regular basis?     V    
  External Factors          
8. Do we have new potential markets for our products or services?     V    
9. Do we have reliable
suppliers?
      V  
10. Are we competitive in the
marketplace?
      V  
11. Do we get good prices from our
suppliers?
    V    
12. Is the economy strong in our
marketplace?
      V  
13. Do we have access to new
technology?
    V    
Total Score     V    
Prepared: Approved: Date:
 

PERFORMANCE EVALUATION VARIANCE

At a later stage, during your next situation analysis, you will be able to compare the future performance evaluation results with the current performance evaluation results, presented above, and determine the Performance Evaluation Variance*, or simply Variance, between both results.

Obviously, a positive variance will indicate performance improvement, while a negative variance will indicate performance deterioration. Your ability to measure the variance in the future will enable you to control your business performance, measure actual improvements, and take corrective action whenever necessary.

FINANCIAL PERFORMANCE EVALUATION

Financial Performance Evaluation represents an integral part of every business decision-making process and it is discussed in detail in this program.

Continuing with your decision-making process, you should also examine your company latest financial results and previous results during the last three fiscal periods, or fiscal years, to find out whether or not your company is on the right track. Information contained in your financial statements indicates that your company earned net profit before tax of $130,000 during the first six month in 2013. Additional results from preceding fiscal periods are presented below.

SUMMARY OF ANNUAL NET PROFIT BEFORE TAX

2009 2010 2011 2012
330,000 $300,000 $290,000 $275,000

It is critical during the Financial Analysis stage to look not only at the current financial performance results, but also to evaluate the financial performance during at least three preceding fiscal periods, if possible, and determine the Trend developed during that period.

The trend of a specific value for a two-year period is a ratio of the latest value against the previous year value, which represents 100% for calculation purposes. Such trend can be determined for any number of previous years.

TREND OF ANNUAL NET PROFIT BEFORE TAX

2009 2010 2011 2012
330,000 330,000 - $300,000 330,000 $300,000 - $290,000 $300,000 $290,000 - $275,000 $290,000
100% 90.9% 96.6% 94.8%
330,000 $300,000 x 100% $330,000 $290,000 x 100% $300,000 $275,000 x 100% $290,000
100% 9.1% decrease 3.4% decrease 5.2% decrease

The Trend Analysis of the company's net profit before tax indicates the following:

  • 9.1% net profit decrease in 2010 in comparison with 2009.
  • 3.4% net profit decrease in 2011 in comparison with 2010.
  • 5.2% net profit decrease in 2012 in comparison with 2011.

Hence, if the same trend continues, the company's net profit before tax in the year 2013 may drop again by about 3% - 9%. This obviously constitutes an undesirable condition and presents a potential problem which should be prevented.

* Note:

The decision-making process described in this check point is based on Western-style management guidelines. You should also learn about the decision-making process used in PDCA Cycle, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

6. DEFINE PROBLEMS AND IDENTIFY ROOT CAUSES

STEP 2: DEFINE PROBLEMS AND IDENTIFY ROOT CAUSES

In order to avoid any undesirable conditions, it is essential to identify specific problems and get to the root of each problem in a systematic manner. Defining Problems And Identifying Root Causes, therefore, represents the second step in the business decision-making process.

The “5 Why’s?” Method is one of the most powerful, practical, and simple problem-solving techniques designed to get to the root of a specific problem in the shortest period of time. This method was developed by Sakichi Toyoda and it is widely used in a decision-making process in lean organizations*.

The “5 Why?” method will enable you and your management team to get to the root of your particular operational problems and determine an effective plan of action designed to eliminate each problem as efficiently as possible. This method entails asking “Why?” at least five times, or more, depending upon a particular problem, by using “reversed sequence”.

The previous SWOT analysis example (refer to Line 10 above) indicates that your company is not competitive in the marketplace. To improve this situation, you and your management team must start asking relevant questions which will enable you to get to the root of this specific problem, as explained below.

THE “5 WHY’S?” METHOD EXAMPLE

Questions And Answers

1.

Why are we not competitive in the marketplace?
Because the value of our products is not as good as our competitors.

2.

Why is the value of our products not as good as our competitors?
Because our product quality is not always acceptable by customers.

3.

Why is our product quality not always acceptable by customers?
Because our employees sometimes overlook product defects during the production stage.

4.

Why do our employees sometimes overlook product defects during the production stage? Because some of our employees are not sufficiently trained to do their job.

5.

Why are some of our employees not sufficiently trained to do their job?

Because we cut our employee training budget for this year.

 

THE “5 WHY’S?” METHOD CONCLUSIONS

As you can see from this simple example, your company is not competitive in the marketplace because you cut your employee training budget for this year. Furthermore, there may be several reasons for any particular problem and it will be your task to identify all of them to improve your company’s performance. Once you and your management team identify root causes of your company’s specific problems, you will be ready to go the next step and solve these problems as efficiently as possible.

* Note:

Lean Management is discussed in detail in Tutorial 1.

THE ENGINEERING APPROACH TO SOLVING BUSINESS PROBLEMS

Complete identification of a Business Problem often represents a challenging task since various parts of organizational activities are closely interrelated.

You are advised, therefore, to break the overall business problem into smaller parts and subsequently resolve smaller problems related to each part separately.

This type of approach is frequently used by engineers in resolving technical problems and it usually provides effective results. This approach also provides the foundation of the Lean Business Engineering Method presented in this program.

BREAK YOUR OVERALL BUSINESS PROBLEM INTO SMALLER PARTS
AND THEN IDENTIFY AND RESOLVE EACH PART SEPARATELY

Identify Problems
In General Management

Identify Problems
In Human Resources Management

Identify Problems
In Financial Management

Identify Problems
In Operations Management

Identify Problems
In Marketing And Sales Management

Identify
And Resolve Problems
In 20
Check Points (1-20)

Identify
And Resolve Problems
In 20
Check Points (21-40)

Identify
And Resolve Problems
In 20
Check Points (41-60)

Identify
And Resolve Problems
In 20
Check Points (61-80)

Identify
And Resolve Problems
In 20
Check Points (81-100)

 

7. SMALL BUSINESS EXAMPLE
DEFINE PROBLEMS AND IDENTIFY ROOT CAUSES

STEP 2: DEFINE PROBLEMS AND IDENTIFY ROOT CAUSES

Continuing with the business decision-making process, you and your management team must Define Problems And Identify Root Causes* for each problem. This entails detailed examination of your company's performance in various areas of operational activities outlined below. 

To ensure effective identification of operational problems and related root causes, you and your management team must become familiar with management guidelines related to each operational area on a cross-functional basis. This will enable you to set appropriate Performance Standards in each operational area and subsequently examine your company’s performance in terms of those standards.

BECOME FAMILIAR WITH MANAGEMENT GUIDELINES
IN FIVE MAIN AREAS OF OPERATIONAL ACTIVITIES

General Management Guidelines

Human Resources Management Guidelines

Financial Management Guidelines

Operations Management Guidelines

Marketing And Sales Management Guidelines

20
Check Points (1-20)

20
Check Points (21-40)

20
Check Points (41-60)

20
Check Points (61-80)

20
Check Points (81-100)

 

As a result of the detailed examination of your company’s current operational activities, you have identified a number of problems in several operational areas summarized below.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 2: DEFINE PROBLEMS AND IDENTIFY ROOT CAUSES

1 2 3
Specify The
Operational
Area
Specify
The Problem
Identify
The Root Cause Of
The Problem
General Management 1. Some managers are confused about the company’s mission. Poor strategic planning and mission statement.
2. Some managers don’t have clear objectives and often lose control. Poor management by objectives procedures.
3. Some employees are reporting to more than one manager. Poorly defined management structure.
4. Some employees in various departments waste a lot of time. Poor communication procedures between departments.
Human Resources Management 1. Some employees are not always clear about their duties. Absence of job descriptions and job specifications.
2. Some employees are not properly trained to do their job. Absence of a comprehensive employee training program.
3. Some managers are losing track of their duties. Absence of management development program.
4. Some employees perform below their capacity. Poor employee motivation methods and procedures.
Financial Management 1. Financial statements are sometimes inaccurate. Outdated accounting software system.
2. The operating budget is not
realistic.
Poor budgeting procedures.
3. Many accounts payable are substantially overdue. Poor credit control procedures.
4. Many operating costs are substantially above budget. Outdated equipment causes
frequent breakdowns and delays.
Operations Management 1. Managers sometimes disagree on weekly plan objectives. Inefficient operational planning.
2. Frequent delays because of plant and equipment breakdowns. Absence of plant and equipment preventive maintenance program.
3. Excessive waste of raw materials inventory. Poor inventory control.
4. Many products must be reworked before completion. Poor quality control.
Marketing And Sales Management 1. Many sales are lost due to high product prices. Absence of a sound pricing strategy for products.
2. Customers don’t learn about our new products from the Internet. The website is not optimized for organic traffic online.
3. The marketing and sales budget is not realistic. Poor marketing and sales budget procedures.
4. Some sales consultants are not meeting their objectives. Poor sales training methods.

* Note:

Definition of problems and identification of root causes described in this check point is based on Western-style management guidelines and it is similar to the process used in lean organizations. You should also learn about the problem-identification process used during Kaizen Events and development of Standardized Work, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

 

ADDITIONAL INFORMATION ONLINE

5 Whys Presentation By Else Inc.
Using The 5 Whys Worksheet By Velaction Videos.
5 Whys - Root Cause Analysis By Six Sigma Money Belt.
5 Whys Root Cause Analysis Problem Solving Tool By Velaction Videos.
Introduction To Root Cause Analysis By D. Robitaille, Paton Professional.

8. SMALL BUSINESS EXAMPLE
DEVELOP AND EVALUATE OPTIONAL STRATEGIES

STEP 3: DEVELOP AND EVALUATE OPTIONAL STRATEGIES

Once the root causes of specific operational problems are identified, it is necessary to determine what kind of action will be required to eliminate these causes and subsequently resolve each problem. Thus, during the third step in the business decision-making process you and your management team will be required to Develop And Evaluate Optional Strategies*. These strategies may be generated by one individual or by a group of employees within your organization, depending upon the nature of a particular problem.

It is apparent from the problem identification stage (Step 2 above) that there are several interrelated problems which have to be solved in order to improve your company's operational performance. For this reason it is necessary to Evaluate Each Optional Strategy* in terms of its consequences. This entails providing answers (Y for “Yes” or N for “No”) to such questions (Q1 - Q3) as:

Q1: Does the optional strategy help the company to achieve its objective?
Q2: Does the optional strategy carry any undesirable consequences or negative side effects? Q3: Can our company afford a particular optional strategy at this time?

If the answer to any of these questions is unsatisfactory, this indicates that a particular strategy is not suitable at this time. Subsequently, it is necessary to find more suitable alternatives to resolve all current problems in all areas of the company’s operational activities. This leads to the next step in the decision-making process: Selection Of The Most Suitable Strategies And Development Of A Plan Of Action.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 3: DEVELOP AND EVALUATE OPTIONAL STRATEGIES

1 2 3 4 5
Specify The Operational Area Develop
Optional Strategies
Evaluate Each
Optional Strategy
Develop
A Plan
Of Action

Assign
Responsible Manager
(Enter Name)

Q 1 Q 2 Q 3
Y N Y N Y N Y N
General
Management
1 Develop new strategic
plan.
Y     N Y        
2 Implement MBO
procedures.
Y     N Y        
3 Revise management
structure.
Y     N Y        
4 Revise communication
procedures.
Y     N   N      
Human Resources Management 1 Prepare new job
descriptions.
Y     N Y        
2 Design new employee
training program.
Y     N Y        
3 Design management
development program
Y     N   N      
4 Develop new employee
motivation procedures.
Y     N   N      
Financial Management 1 Implement updated
accounting software.
Y     N Y        
2 Revise operating
budget.
Y     N Y        
3 Develop new credit control procedures. Y     N Y        
4 Revise capital expenditure
budget
Y     N Y        
Operations Management 1 Revise operational planning system. Y     N Y        
2 Develop new plant maintenance program. Y     N Y        
3 Revise inventory control procedures. Y     N Y        
4 Revise quality control
procedures.
Y     N Y        
Marketing And Sales Management 1 Develop new pricing strategy for products. Y     N Y        
2 Implement SEO
services.
Y     N   N      
3 Revise marketing and sales budgets. Y     N Y        
4 Revise sales training
methods.
Y     N Y        

* Note:

Development and evaluation of optional strategies described in this check point are based on Western-style management guidelines. You should also learn about the development of optional strategies during Kaizen Events and evaluation of these strategies during Value-Added Analysis, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

9. SMALL BUSINESS EXAMPLE
SELECT THE MOST SUITABLE STRATEGIES AND DEVELOP A PLAN OF ACTION

STEP 4: SELECT THE MOST SUITABLE STRATEGIES AND DEVELOP A PLAN OF ACTION

Continuing with the business decision-making process, you must Select The Most Suitable Strategies And Develop A Plan Of Action* to improve your company's operational performance and profitability. 

You should consider a number of factors and consult with other members of your management team prior to reaching a final decision. Selection of the most suitable strategy is often based on a "trade off" between various positive and negative consequences in relation to future activities of the organization. This, in turn, will require a delicate balancing of the proposed strategy and your "diplomatic" approach to the decision-making process. Ultimately, you should reach a consensus with other members of your management team and confirm each Selected Strategy in your plan of action (Column 4) in the worksheet below (Y or “Yes” column).

THE DECISION-MAKING PROCESS EXAMPLE
STEP 4: SELECT THE MOST SUITABLE STRATEGIES AND DEVELOP A PLAN OF ACTION

1 2 3 4 5
Specify The Operational Area Develop
Optional Strategies
Evaluate Each
Optional Strategy
Develop
A Plan
Of Action

Assign
Responsible Manager
(Enter Name)

Q 1 Q 2 Q 3
Y N Y N Y N Y N
General
Management
1 Develop new strategic
plan.
Y     N Y   Y    
2 Implement MBO
procedures.
Y     N Y   Y    
3 Revise management
structure.
Y     N Y   Y    
4 Revise communication
procedures.
Y     N   N   N  
Human Resources Management 1 Prepare new job
descriptions.
Y     N Y   Y    
2 Design new employee
training program.
Y     N Y   Y    
3 Design management
development program
Y     N   N   N  
4 Develop new employee
motivation procedures.
Y     N   N   N  
Financial Management 1 Implement updated
accounting software.
Y     N Y   Y    
2 Revise operating
budget.
Y     N Y   Y    
3 Develop new credit control procedures. Y     N Y   Y    
4 Revise capital expenditure
budget
Y     N Y   Y    
Operations Management 1 Revise operational planning system. Y     N Y   Y    
2 Develop new plant maintenance program. Y     N Y   Y    
3 Revise inventory control procedures. Y     N Y   Y    
4 Revise quality control
procedures.
Y     N Y   Y    
Marketing And Sales Management 1 Develop new pricing strategy for products. Y     N Y   Y    
2 Implement SEO
services.
Y     N   N   N  
3 Revise marketing and sales budgets. Y     N Y   Y    
4 Revise sales training
methods.
Y     N Y   Y    

* Note:

Selection of the most suitable strategies described in this check point is based on Western-style management guidelines. You should also learn about the selection of the most suitable strategies during Value-Added Analysis and Hoshin Planning process, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

10. SMALL BUSINESS EXAMPLE
ASSIGN THE RESPONSIBILITY FOR IMPLEMENTING THE PLAN OF ACTION

STEP 5: ASSIGN THE RESPONSIBILITY FOR IMPLEMENTING THE PLAN OF ACTION

Continuing with the business decision-making process, you must proceed with Assigning The Responsibility For Implementing The Plan Of Action*, to various members of your management team.

Assignment of management responsibilities in a small or medium-sized organization is usually based on the guidelines outlined below*.

ASSIGNMENT OF MANAGEMENT RESPONSIBILITIES IN A COMPANY

President

Responsible for implementation of solutions in the areas of general management and human resources management.

Vice-President,
Finance

Responsible for implementation of solutions in the financial management area.

Vice-President, Operations

Responsible for implementation of solutions in the operations management area.

Vice-President, Marketing
And Sales

Responsible for implementation of solutions in the operations management area.

* Note:

Depending upon budget allocations, some companies employ a Human Resources Manager, who will be responsible for implementation of human resources management solutions.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 5: ASSIGN THE RESPONSIBILITY FOR IMPLEMENTING THE PLAN OF ACTION

1 2 3 4 5
Specify The Operational Area Develop
Optional Strategies
Evaluate Each
Optional Strategy
Develop
A Plan
Of Action

Assign
Responsible Manager
(Enter Name)

Q 1 Q 2 Q 3
Y N Y N Y N Y N
General
Management
1 Develop new strategic
plan.
Y     N Y   Y   A. Smith
(President)
2 Implement MBO
procedures.
Y     N Y   Y   A. Smith
(President)
3 Revise management
structure.
Y     N Y   Y   A. Smith
(President)
4 Revise communication
procedures.
Y     N   N   N A. Smith
(President)
Human Resources Management 1 Prepare new job
descriptions.
Y     N Y   Y   A. Smith
(President)
2 Design new employee
training program.
Y     N Y   Y   A. Smith
(President)
3 Design management
development program
Y     N   N   N A. Smith
(President)
4 Develop new employee
motivation procedures.
Y     N   N   N A. Smith
(President)
Financial Management 1 Implement updated
accounting software.
Y     N Y   Y   B. Jones
(VP Finance)
2 Revise operating
budget.
Y     N Y   Y   B. Jones
(VP Finance)
3 Develop new credit control procedures. Y     N Y   Y   B. Jones
(VP Finance)
4 Revise capital expenditure
budget
Y     N Y   Y   B. Jones
(VP Finance)
Operations Management 1 Revise operational planning system. Y     N Y   Y   C. White
(VP Operations)
2 Develop new plant maintenance program. Y     N Y   Y   C. White
(VP Operations)
3 Revise inventory control procedures. Y     N Y   Y   C. White
(VP Operations)
4 Revise quality control
procedures.
Y     N Y   Y   C. White
(VP Operations)
Marketing And Sales Management 1 Develop new pricing strategy for products. Y     N Y   Y   D. Brown
(VP Sales)
2 Implement SEO
services.
Y     N   N   N D. Brown
(VP Sales)
3 Revise marketing and sales budgets. Y     N Y   Y   D. Brown
(VP Sales)
4 Revise sales training
methods.
Y     N Y   Y   D. Brown
(VP Sales)

11. SMALL BUSINESS EXAMPLE
IMPLEMENT THE PLAN OF ACTION

STEP 6: IMPLEMENT THE PLAN OF ACTION

Continuing with the business decision-making process, you and each member of your management team must proceed with Implementation Of The Plan Of Action* developed earlier.

At this stage it is essential to ensure the following:

1. Each selected strategy must be supported by defined operational activities and measurable objectives which will specify what must be done and when it must be accomplished.
2. Each member of the management team must be assigned the responsibility for implementing defined operational activities and achieving measurable objectives based on selected strategies.
3. Each member of the management team must confirm full commitment to the assigned responsibilities for achieving measurable objectives.

The process of assigning measurable objectives to various members of the management team and other employees is called Management By Objectives (MBO). This process is discussed in detail in Tutorial 1.

MANAGEMENT BY OBJECTIVES (MBO) GUIDELINES

1.

Specify The Operational Area.
Specify the operational area included in the plan of action, such as: general management, human resources management, financial management, operations management, or marketing and sales management.

2.

Specify The Selected Strategy.
Specify the selected strategy which has been approved by the management team and included in the plan of action.

3.

Specify Activities And Measurable Objectives.
Specify operational activities and measurable objectives, approved by the management team, designed to support the selected strategy in the plan of action.

4.

Specify The Completion Date.
Specify the planned completion date for each approved operational activity. Upon completion of the implementation process, specify actual completion date.

5.

Summarize Results And Comments.
Specify actual results and summarize comments related to the implementation of the specific operational activity and accomplishment of planned results.
 

SPECIFY THE OPERATIONAL AREA IN YOUR PLAN OF ACTION

General Management
Plan Of Action
Human
Resources Management
Plan Of Action
Financial Management
Plan Of Action
Operations Management
Plan Of Action
Marketing
And Sales Management
Plan Of Action
         

You and each member of your management team must follow the MBO Guidelines outlined above and apply these guidelines to the MBO Report, based on your specific area of management responsibility. This MBO report example is based on the financial management plan of action and it is completed by the VP Finance, as shown below.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 6: IMPLEMENT THE PLAN OF ACTION – THE MBO REPORT

1. Specify The Operational Area: Financial Management
2. Specify The Selected Strategy 4. Specify The Completion Date 5. Summarize
Results And Comments
# 3. Specify Activities And
Measurable Objectives
Planned Actual
1. Selected Strategy: Implement updated accounting software.
1.1 Purchase new Quickbooks
accounting software.
8.1.13    
1.2 Install new accounting
software.
9.1.13    
1.3 Test all modules in the new
accounting software.
10.1.13    
2. Selected Strategy: Revise operating budget.
2.1 Increase sales budget
by 10%
8.1.13    
2.2 Decrease material expense
budget by 5%
8.1.13    
2.3 Increase management salaries
by 7%
8.1.13    
3. Selected Strategy: Develop new credit control procedures.
3.1 Reduce accounts receivable
over 90 days by 30%
8.1.13    
3.2 Reduce accounts receivable
over 60 days by 20%
8.1.13    
3.3 Reduce accounts receivable
over 30 days by 10%
9.1.13    
4. Selected Strategy: Revise capital expenditure budget.
4.1 Prepare budget for new NC
machine
8.1.13    
4.2 Prepare budget for new paint
shop
9.1.13    
4.3 Prepare budget for new
packaging machine.
9.1.13    
Prepared By: B. Jones Position: VP Finance Date: 7.1.2013
Approved By: A. Smith Position: President Date: 7.5.2013

* Note:

Implementation of the plan of action, based on the management by objectives, described in this check point is based on Western-style management guidelines. You should also learn about the implementation of the plan of action during the Hoshin Planning process, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

ADDITIONAL INFORMATION ONLINE

Hoshin Kanri By Mike Hoseus, Lean Sensei.
Policy Deployment: Hoshin Kanri By EMS Consulting Group.
How To Apply Hoshin Kanri To Your Business By Gemba Academy.
Hoshin Kanri - Strategic Business Improvement By David Hutchins.
Why Use Hoshin Planning? By Wes Wald, Breakthrough Management Group.

12. SMALL BUSINESS EXAMPLE
EVALUATE RESULTS AND MAKE ADJUSTMENTS

STEP 7: EVALUATE RESULTS AND MAKE ADJUSTMENTS

Continuing with the business decision-making process, you and each member of your management team must proceed with the Evaluation Of Results And Making Adjustments*.

All relevant information must be entered into the MBO report developed earlier and cover all operational activities specified in your company’s Plan Of Action.

THE DECISION-MAKING PROCESS EXAMPLE
STEP 7: EVALUATE RESULTS AND MAKE ADJUSTMENTS–THE MBO REPORT

1. Specify The Operational Area: Financial Management
2. Specify The Selected Strategy 4. Specify The Completion Date 5. Summarize
Results And Comments
# 3. Specify Activities And
Measurable Objectives
Planned Actual
1. Selected Strategy: Implement updated accounting software.
1.1 Purchase new Quickbooks
accounting software.
8.1.13 8.1.13 OK
1.2 Install new accounting
software.
9.1.13 9.20.13 System was installed three weeks later.
1.3 Test all modules in the new
accounting software.
10.1.13 11.1.13 System was tested one month later.
2. Selected Strategy: Revise operating budget.
2.1

Increase sales budget

by 10%

8.1.13 8.1.13 OK
2.2 Decrease material expense
budget by 5%
8.1.13 8.1.13 OK
2.3 Increase management salaries
by 7%
8.1.13 8.1.13 OK
3. Selected Strategy: Develop new credit control procedures.
3.1 Reduce accounts receivable
over 90 days by 30%
8.1.13 9.1.13 One month delay
3.2 Reduce accounts receivable
over 60 days by 20%
8.1.13 10.1.13 Two months delay.
3.3 Reduce accounts receivable
over 30 days by 10%
9.1.13 11.1.13 Two months delay.
4. Selected Strategy: Revise capital expenditure budget.
4.1 Prepare budget for new NC
machine
8.1.13 8.1.13 OK
4.2 Prepare budget for new paint
shop
9.1.13 9.1.13 OK
4.3 Prepare budget for new
packaging machine.
9.1.13 9.1.13 OK
Prepared By: B. Jones Position: VP Finance Date: 7.1.2013
Approved By: A. Smith Position: President Date: 7.5.2013

Evaluation of results represents the prime element of the Management Control Function, which is discussed in detail in Tutorial 1.

* Note:

Evaluation of results, related to the implementation of the plan of action, described in this check point is based on Western-style management guidelines. You should also learn about the evaluation of results and implementation of the plan of action during the Hoshin Planning process, based on lean management guidelines provided in this program.

Lean Management is discussed in detail in Tutorial 1.

13. REPEAT THE PROCESS WHENEVER NECESSARY

STEP 8: REPEAT THE PROCESS WHENEVER NECESSARY

As a business owner or manager, you should never "rest on your laurels".

It is of a paramount importance that you and your management team continue to evaluate your company's performance on a regular basis to ensure that your company is on the right track and there are no surprises on the horizon. This is essential regardless of your company’s current performance and the level of profitability. You must be prepared, therefore, to repeat all steps in the decision-making process described above at least once a year to ensure successful performance of your company in the future.

Remember, that in life you may have three possibilities: "up", "down", or "steady" (no change in status). However, in business you have only two possibilities: "up" or "down".

If your business continues to perform on a “steady” basis, this actually means "down", because when your competition "goes up", it will outperform you in the marketplace.

Your best guarantee for future success in business is your knowledge in various areas of operational business management. For this reason, you and each member of your management team should continue to improve your personal knowledge in various areas of operational business management on a cross-functional basis as outlined below.

CONTINUE TO IMPROVE YOUR KNOWLEDGE IN ALL OPERATIONAL AREAS

General
Management
Human
Resources Management
Financial
Management
Operations
Management
Marketing
And Sales Management

20
Check Points (1-20)

20
Check Points (21-40)

20
Check Points (41-60)

20
Check Points (61-80)

20
Check Points (81-100)

         

Hopefully, you and each member of your management team will follow the decision-making process guidelines presented in this check point to secure best management solutions.

14. FOR SERIOUS BUSINESS OWNERS ONLY

ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY?

Reprinted with permission.

15. THE LATEST INFORMATION ONLINE

WOULD YOU LIKE TO LEARN MORE?

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When you are ready:

1.

Learn about the Membership Benefits, join Lean Business Club, and never feel lonely at the top again.

2.

Complete the Membership Form, or the Student Membership Form, and receive your free first-year membership.

3.

Save up to 75% off the regular subscription rate for complete access to the Lean Business 2100 Management Program online.

If you are U.S. Veteran, your membership in Lean Business Club and complete access to the Lean Business 2100 Management Program online will be available to you free of charge for an unlimited period.

 

LESSON FOR TODAY:
You Must Decide Today To Be Decisive Tomorrow!