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This module explains, how to plan and make decisions, and how to implement them.
Management is the coordination of resources, such as money and production capacity, to reach a specific goal. Managing also means to make decisions: What goal should be reached and how. At least, the management is also responsible for the realization of projects and the planning of the whole business.
When doing business, you need to make decisions every day: Do I have do order raw materials? To what date? Where? Sometimes, however, you need to make decisions with a high impact on the future of your business: Should I enlarge the capacity of my workshop? Should I hire or fire workers? Should I change my products? Because of their importance, these latter decisions need to be well-reasoned. For that reason, it’s worth thinking about a process which leads to such well-reasoned decisions. The following hints may help to improve your decision-making ability.
Before you can make a decision, you have to know, what are the problems to solve, what are your goals, what are the possibilities you have to solve the problems and what advantages and disadvantages every solution has. Thus, the process of making good decision is as follows:
Step 1
Analyse your situation!
First, analyse the actual situation and consider the most likely future possibilities. See appendix A for the type of questions, you should make.
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Mr. Garcias is not satisfied with his business. He would like to improve the situation. First, he analyses his situation; Mr. Garcia makes a list of his most important problems: 1. He cannot live from his tile-making business. Why not? He does not sell enough tiles. Why not? Only a few people know about his tiles; others do not trust their quality. 3. The quality of the tiles is not very good. |
Step 2
Set goals!
Now, think about your goals. How would you like the situation to be?
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Mr. Garcia has the following goals: · Mr. Garcia’s ultimate goal is to make enough money for his family to live on and to be able to save enough money to buy new equipment after five years. · His customers’ needs should be found out and fulfilled. For his business to be successful, he needs to sell his products. To sell his products, he needs to know what is needed and what will be bought by the customers. · Be able to withdraw LU 20’000 from his business every month for the living costs of his family. This means he has to sell a certain number of tiles every month. |
Step 3
Determine your possibilities!
Determine what the possibilities are for reaching your goals.
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Mr. Garcia, together with his foreman, goes to a friend who is a good businessman to discuss his problems as identified above. Together they work out a few possibilities for solving these problems and for thus reaching the goals: 1. Mr. Garcia could advertise in local newspapers, on radio or television. He could put up posters all over town. He could write letters to all the architects and building contractors in town. 3. The quality of his tiles could be improved by educating and training the workers. |
Step 4
Make an assessment of the possibilities!
Every possibility has its strong and its weak points. This is the reason why you have to analyse the possibilities to see whether they would help to solve your problems. It is also important to calculate the costs of each possibility and assess whether it corresponds to your goals.
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Mr. Garcia writes down all the possibilities and estimates their costs and benefits: 1. Marketing activities: · Advertising in newspapers: medium costs, low benefit, 2. Equipment: · Overhauling the old vibrating table would be much cheaper - about a quarter of the cost - than buying a new one and the additional lifespan would be three years. 3. Quality of tiles: · Sending all the workers to a training course offered by a special organisation would be expensive. · Sending the foreman to such a training course would be less expensive. He could then train his workers |
Step 5
Decide!
You now have enough information to make important decisions about the future of your business. However, your resources (money, equipment and workers) are limited. You cannot solve all your problems or take advantage of all opportunities all at once. You will have to decide which problems to address first, and which opportunities offer the best chance of improving your business. In other words, it is necessary to set priorities and make plans.
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Mr. Garcia makes a ranking of his business problems from the most important to the least important problem: · Marketing activities, At the moment the resources of the business are limited. Only the expansion of marketing activities can be financed. Mr. Garcia decides to do the following: 1. Write letters to all the architects and building contractors in his town. In his letter he will explain the many benefits of FCR/MCR tiles as a roofing material and offer discounts for bulk purchases of his tiles. 2. Put up posters in town. |
The projects, you decided for should be implemented, because without implementation the best idea is not worth very much. The implementation of projects is the primary responsibility of the business owner or manager.
The following steps will help you implement any project:
Step 1
Determine, how to do it!
Decide how to implement your project. List on a sheet of paper the whole way of implementation, step by step. This list is your action plan (see next page for an example).
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Mr. Garcia decided to put up posters in town. Now, he thinks about the implementation of this decision: First he needs attractive posters to put up. However, he is not an artist Thus, he needs an artist, who could create posters. He knows a few artists. But, who is the best? He has to evaluate one artist. When the artist comes along with his ideas, he has to decide for one idea. Then the artist needs some time to create the poster. NOW the poster has to be printed. When the posters are ready, there are workers needed to fasten them all around the city. He has not enough workers to do so, he needs to hire additional workers. Then, he has to instruct his workers. When the workers have done their work, he has to check it and, if necessary, fasten some additional posters. He writes all these actions down, step by step. Then he thinks about the dates and the responsibilities. |
Step 2
Determine the dates, when specific steps have to be completed!
Set the date when each step should be completed.
Step 3
Determine the responsabilities!
Determine who is responsible for each step.
Step 4
Instruct your workers!
Make sure every worker knows what he has to do and when he has to do it.
Step 5
Check the work!
Find the answers to the following questions:
· Are there problems which require the help of others?
· Is the quality of work satisfactory?
· Is the work being done on time?
Checking should be done as frequently as necessary.
Step 6
Keep your action plan up to date!
Your action plan is an important tool and should be kept up to date.
Example of an action
plan
Everyone makes plans as part of their day-to-day activities. Before going to the market you think about the things you will need to buy - and plan for the money to pay for them, the time needed to shop, and how to transport them. Before buying an expensive item, such as a car, you think about your present and future financial situation - do you have enough money?
Business planning is the same process as personal or household planning. You should estimate your future sales, make a cash-budget, plan your production and think about the future of your products.
Customer preferences may change from time to time. The demand for a certain type of tile may change. It is important to be aware of these changes and to react in time.
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Mr. Garcia produces only gray tiles. When a competitor starts producing red tiles his sales increase white Mr. Garcia’s decrease. If Mr. Garcia wants to be competitive he will also have to start producing red tiles! |
The capacity of your workshop should be big enough to meet the demand for tiles. On the other hand, the equipment should be in use full-time, to minimize the fixed costs per tile. From time to time you will have to decide whether the capacity should be increased or decreased. This decision always depends on the market situation - will the overall demand increase or decrease? This is a difficult, but very important question.
In order to plan production and make a cash management plan, it is necessary to estimate future sales. Every six months you should estimate and record the expected sales for the next six months.
During production you need raw materials and workers. You must plan for raw materials and workers in advance. Employees should be hired or scheduled and raw materials should be ordered on time. If you know the amount of raw materials needed per day, you can calculate exactly when you have to order more raw materials. It is best to keep some extra stock for unforeseen events!
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During normal production, Mr. Garcia uses 1 bag of cement per day. When he orders cement, he has to wait 10 working days until the cement is delivered to his workshop. Mr. Garcia always likes to have at least 5 bags of cement in reserve. When does he order new cement? He orders cement when his stock is down to 15 bags. Thus when delivery is made after ten days, ho will still have 5 bags in reserve. |
If you have no cash you cannot do business. In most businesses the cash level varies considerably: sometimes there is a lot of cash and at other times there is almost no cash in the cash box. You should try to avoid running out of cash. Before ordering equipment or raw materials, make sure that you have enough cash to pay for them. Module 3 (“Cash and Credit Management”) will explain how you can plan and manage your cash and avoid cash bottlenecks.
· Marketing area
· Are you selling enough tiles? If not, why not?· What type of customer buys your tiles?
· What types of roofs and tiles do your customers like?
· Are their needs changing?
· How do the shape, selling price and quality of your tiles compare with those of your competitors?
· What are the strong and weak points of the competitors’ tiles and other roofing materials?
· What are the strong and weak points of your tiles compared to the tiles and roofing materials of your competitors?
· What are the trends in the roofing and tile market?
· How is the general economic situation and in what direction is it developing? What are the plans of the government and how could they influence your business?
· Production area
· Is the quality of the raw materials good?· Is the quality of your tiles good?
· Is the capacity of your workshop satisfactory? Or is it too small or too large?
· What are your production costs?
· Is your equipment in good condition? Should it be repaired or adapted to improve quality and productivity? Do you have equipment breakdowns? How often?
· Do you know of any new technologies? If so, what influence could they have on your own business? Is the technology level of your equipment still competitive?
· Personnel area
· Do your workers produce tiles of a good quality?
· Is the productivity of the workers satisfactory?
· Are their levels of education and training high enough?
· Are your workers motivated? How is the working atmosphere?
· How are their wages?
· Do you have the right number of workers?
· Is your employee turnover high? If so, why? How does this affect the productivity of your workshop?
· Financial area
· Do you have enough money available to continue production?
· Is your business profitable? Is there a trend in your profit? Is it decreasing or increasing?
· Do you have money set aside to buy new equipment?
· Can you repay your loans? Will you be able to get a new loan?
1. Decision-making
Think about your own business and do the following:
· Analyse your present situation and write down the most important problems.· Analyse your future potential: What are the market trends? What will be the direction of technical development? What are the expected government strategies? Write down the expected effects of these aspects on your business.
· Think about your goals. Write them down, ranking them according to their priorities.
· Think about your problems and your goals. What problem has the highest priority? Make a ranking and write it down.
· Consider potential solutions to your problems. Write them down.
· Rate every potential solution. What advantages and disadvantages do they have? How much do they cost and how much labour capacity would they involve? Rank the solutions and for every problem decide on the best solution. Write this down.
· Think about your resources. Write down how much money and labour you could invest in a project to improve your situation.
· Make some decisions. What problem(s) should be solved first and which solution(s) should be chosen?
2. Implementation
Considering the problem(s) and solution(s) you have chosen, think about implementation:
· Make an action plan of things to be done.· Your action plan should indicate:
· What action is necessary.
· Who is responsible for each action.
· When each action should be carried out.
· Write down the specific instructions for each person who has responsibility for part of the action plan.· Use your action plan to manage implementation. Follow up frequently and check to see if each action was carried out as planned.
3. Planning
Write down what planning activities you should do, why you should do them and when you should do them.
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