Information Structures Exploration As Planning For A Unitary Organization
by Shih-Kung Lai
Planning behavior for a unitary organization is introduced. In particular, a corollary showing how the planner should acquire information is provided in that the information structure of multiple, independent variables obtained should be at least as valuable as the current one. The planning behavior model also considers the case where goal setting is incorporated in terms of probability density functions of the states of the world. The approach introduced links information economics to planning, and depicts explicitly information processing of the planner in making plans.
The paper provides a theoretical basis for an improved understanding of the logic of planning, taking into account information processing. Much has been said about planning methods, i.e., how planning problems should be approached. The behavior of planners and decision makers in making and carrying out plans has seldom been addressed. Exceptions include Knaap, Hokins, and Donaghy (1998); Schaeffer and Hopkins (1987) and Scheshinsky and Intriligator (1989). In previous attempts to explore planning behavior, the proposed planning procedure has not been described explicitly in terms of how information is processed.
The central theme of the paper is that in general planning, like decision making, can be seen as practice of gathering information from which judgments on preference and probability are made. Planning behavior, as in choice behavior, has thus to do with probabilistic and value judgments (March, 1978). The crucial distinction between planning and decision making is that planning considers a set of related decisions at the same time while decision making chooses from a set of alternatives the best based on some criterion. Decision making is an economic activity in that it searches for the best or optimal use of limited resources to attain objectives (Marschak and Radner, 1978, p. 3). Since planning is concerned with gathering information and organizing decisions accordingly, planning behavior is also an economic activity.
Planning and organizational design are partially substitutable. Both are ways to coordinate actions to achieve desired outcomes. The ways in which actions are related in the two forms of activity are different. In an organization, actions are coordinated through explicit structures of decision making and problem solving (Cohen, March, and Olsen, 1972). For example, different decision makers have access to different decision making occasions which tend to vary in terms of capabilities of resolving different problems. In planning, there are no such explicit structures confining which decision makers can attend to which decision making occasions and which problems resolved by which decision making occasions. Planning tends to focus on relatedness of actions in time and space, i. e., temporal and spatial decision making.
There is no sharp conceptual distinction between planning and organizational design in that most planning takes place in organizational contexts, such as corporations, firms, and governments. It is difficult to define planning in any exclusive way, but at least we can identify that planning enhances decision making by reducing uncertainty (Friend and Hickling, 1997; Hopkins, 1981). Organizations are artifacts designed for coordinating actions, i. e., arranging sequences of actions to achieve certain goals. A plan is a set of related, contingent decisions; therefore, planning and organization are in part interchangeable (Lai and Hopkins, 1995).
It is crucial, however, to distinguish between planning with respect to substantive decisions and planning with respect to planning activities (Hopkins, 1981). I provided a typology of planning behavior taking into account such distinction (Lai, 1998). In that typology, eight types of planning behavior were distinguished in terms of whether problems are internal or external to the organization; whether the decision making entity is single or multiple persons; and whether decisions are about substantive problems or about plan making. I then ran a set of simulations focusing on a particular type of planning for an organization resolving external problems through making substantive decisions, to explore effects of planning on organizational choice behavior. Interesting findings were reported in that planning might increase decision making efficiency, but not necessarily resolve more problems.
In this paper, based on a different approach, I explore planning behavior of a similar type. In particular, I focus on planning in the simplest form of organization, a unitary, coherent organization of individuals with consistent preferences, as a starting point to explore how planning should take place in organizational contexts. Incremental improvements on the present model can be made to match more realistic situations, and tested empirically in real or laboratory settings.
The approach I take in the paper is information economics. Viewing planning as information gathering and organizations as settings of information exchange among their members for making decisions, I investigate how such activities should be carried out optimally to yield desired outcomes. Using information economics to describe planning behavior for land development has been studied (Schaeffer and Hopkins, 1987). Instead of leaving detailed transformations of information structures unspecified as formulated earlier, I take one step further here to describe how information and plans should be procesed and made in planning for a unitary organization.