PLANNING

AND
DECISION
MAKING
WHY IS PLANNING IN
BUSINESS
ORGANIZATIONS
IMPORTANT?
Introduction
■For every goal – personal or business – there are several
ways of reaching it.
■The success of attaining such a goal primarily depends on
“good planning”.
■Success requires the proper allocation and efficient use of
productive resources: manpower, money, machine,
material, and method.
■Success would not be possible without planning.
PLANNING defined
■Planning is the process of establishing objectives and
appropriate courses of action before taking action.
- Prof. James Stoner
■Planning is preparing now for tomorrow. Aside from people,
funds, machines, materials, and technologies, planning
involves time for accomplishing the established goals.
■Planning exists in all levels of business organizations.
However, top managers perform long-term planning. Their
scope of planning encompasses the whole organization.
TYPES OF PLANS
1. Strategic Plan
- Focused on the entire business operations. It involves
the three (3) levels of management. Top management
formulates the corporate objectives while the lower levels of
management develop relevant objectives and plans on how
to attain them.
- Strategic planning prepares the business enterprise
for its operation in the future.
TYPES OF PLANS
2. Tactical Plan
- A series of tactical plans constitute a strategic plan.
- Division managers are involved in tactical planning which is
shorter in time frames–usually one year or less. They plan
what to do, how to do it, and who will do it.
3. Operating Plan
- provides the specifics as to how the strategic plan will
be attained. Managers use operating plans to accomplish job
responsibilities.
PRINCIPLES OF PLANNING
1) Planning must be realistic.
2) Planning must be based on felt needs.
3) Planning must be flexible.
4) Planning must be democratic.
5) Planning must start with simple projects.
6) Planning must include social responsibility.
BASIC STEPS in PLANNING
1. Establish objectives.
2. Evaluate the environment.
3. Determine the best alternative strategy.
4. Implement the action plan.
5. Evaluation of results.
EFFECTIVE PLANNING
■Some of the planning barriers are:

1. Incompetence in planning.
2. Lack of dedication.
3. Incomplete and inaccurate information.
4. Short-sightedness.
5. Dependence on the planning department.
THE IMPORTANCE OF
BUSINESS PLANNING
1. Planning can eliminate business risks.
2. Planning can minimize costs of production.
3. Planning can detect the weaknesses of the business
operations.
STEPS in DECISION MAKING
1. Define the problem. The root cause of the problem
must be identified.
2. Gather data about the problem. Research for the real
cause/s of the problem.
3. Organize and analyze the data. Through this, the real
cause/s of the problem can be made clear and specific.
4. Develop alternative solutions. These prevent managers
from solving their problems too quickly or prematurely.
STEPS in DECISION MAKING
5. Analyze the alternatives. Each alternative must be
implementable and effective in solving the problem.
6. Select the best alternative. The best alternative is one
that has the most advantages in terms of costs or profits.
7. Implement and monitor the decision. Resources and
schedules have to be mobilized to support the decision.
Progress reports have to be prepared. Adjustments and
correction have to be made to eliminate or minimize negative
effects of the decision.
In a nutshell …
■Planning is the first function of management. Without it,
the other functions are most likely not in order.
Management has to plan its goals, its strategies of
accomplishing its goals, and the efficient utilization of its
productive resources.
■In addition, planning is vital in making management
decisions. Wrong planning results in wrong decisions.
ORGANIZING
INTRODUCTION
■Plans establish the objectives of the organization. however,
the key to the successful implementation of the plans is a
good organizational structure.
■It is the organizational structure that transforms objectives
into realities.
■When productive resources are properly organized in
terms of allocation and utilization, peak performance is
attainable.
■And that is the goal of any organization, whether it is for
profit or for service.
ORGANIZING defined
■Organizing is the process of arranging an organization’s
structure and coordinating its managerial practices, and
the use of resources to achieve its goals.
- Prof. James Stoner
■Organizing is a management function that establishes
relationships between activity and the authority.
- Prof. Warren Plunkett
ORGANIZING defined
■In plain language, Organizing is defined as the process of
combining and coordinating productive resources in order
to accomplish efficiently and effectively the established
objectives of the organization.
RELATIONSHIP BETWEEN
PLANNING AND
ORGANIZING
■The objectives of any organization are set up in the planning
stage.
■The organizing process is also based on plans.
■In short, organizing as a basic function of management needs
planning to place it in the right direction.
■The resources and activities have to be organized. It is not
possible to perform efficiently without planning.
■Otherwise, resources would be wasted, and activities may
result in confusion, duplication, or imbalance.
THE IMPORTANCE OF
ORGANIZING
1. Clear and specific job description – every employee
knows what to do. The tasks and duties of all
employees/departments are clearly stated.
2. Existence of coordination – this reduces confusions and
conflicts. For every designated task, there is one person
who has the authority to coordinate all plans for the task.
3. Presence of formal structure – by means of organizational
chart, the formal superior-subordinate relationships are
indicated.
PRINCIPAL
ORGANIZATIONAL
CONCEPTS
1. Authority. It is the right to give orders and make decisions.
a) Line Authority – it is a direct supervisory relationship
between superior and subordinate. Line authority moves
from the top to the bottom of the organization.
b) Staff Authority – it provides advice or technical
assistance to top management. Such advisory authority has
no direct control over subordinates, or activities of other
departments, except within the staff manager’s own
department.
PRINCIPAL
ORGANIZATIONAL
CONCEPTS
c) Functional Authority – it is the authority delegated to the
members of the staff department to control the activities
of the other departments that are related to specific staff
responsibilities.
Example: the Civil Service Commission (CSC) controls the
compliance of hiring, promotion, or removal of government
employees.
PRINCIPAL
ORGANIZATIONAL
CONCEPTS
2. Delegation. It is the assignment of formal authority from a
superior to a subordinate. The idea is to facilitate work or to
develop subordinates.
• Two (2) principles of effective delegation:
a) Scalar principle. It is a clear line of authority from the top
level to the bottom level of the organization. This principle
makes delegation more effective and easier.
PRINCIPAL
ORGANIZATIONAL
CONCEPTS
b) Unity of Command. Each employee in the organization
should report to only one supervisor.

3. Span of Control. It refers to the number of subordinates a

manager should direct. There is no prescribed number for the
span of control. The appropriate number under a supervisor
depends on the qualifications of the manager and his
subordinates.
PRINCIPAL
ORGANIZATIONAL
CONCEPTS
4. Centralization. This is the extent of authority in an
organization. If the authority for making decisions is in the
hands of one or a few individuals at the top of the
organization, it is a centralized organization. On the other
hand, if such authority is in the hands of many in the lower
levels of the organization, it is a decentralized one.
INFORMAL ORGANIZATION
■An informal organization is a group of individuals which has
emerged out of personal and group needs of the members.
■It is an interpersonal kind of relationship in the
organization. Such relationships develop camaraderie,
friendship, unity, and cooperation among members.
■Informal groups may be classified as horizontal, vertical, or
mixed.
INFORMAL GROUPS
1. Horizontal Groups – are composed of employees in the same
department, or across departmental lines which operate at
the same organizational level.
Example: clerks in the marketing, production and personnel
departments.
2. Vertical Groups – are composed of employees from the
different levels of the organization.
Example: a manager and some subordinates; or workers and
the president of the corporation.
INFORMAL GROUPS
3. Mixed Groups – these are combinations of employees from
different levels of the organization and from the different
work areas.
Example: a marketing manager may make friends with the
motor pool manager, or a vice president may cultivate a
personal and social relationship with the chief security officer.
FUNCTIONS OF THE
INFORMAL
ORGANIZATION
1. Reinforce and sustain the cultural and social values of the
members.
2. Provide members the opportunities to satisfy their
psychological needs.
3. Generate a faster system of communication for the
members.
4. Influence operation of the formal organization.
STAFFING
REVIEW QUESTION:

What is the most

important productive
resource of an
organization?
INTRODUCTION
■As mentioned several times, people are the most important
productive resources in any organization.
■It is the people who plan, organize, decide, implement, and
so forth. It is the people who use money, materials,
machines, and methods. With their knowledge, skills,
attitudes, values, and intelligence, they can move their
organizations to greater heights.
■In short, the success of an organization depends on people.
INTRODUCTION
■In view of the vital role of people in the operations of an
organization, the process of staffing must therefore be done
properly.
■An organization must be able to recruit the best and the
brightest. It must be the right person for the right job at the
right time.
What is Staffing?
STAFFING defined
■Staffing is a management function which is composed of
a series of steps that intend to provide the organization
with the right people in the right jobs.
■Some authors of management consider staffing as
human resource management.
■There are eight (8) steps in the staffing or HRM process:
STEPS in the STAFFING
PROCESS:
1. Human resource planning
2. Recruitment
3. Selection
4. Orientation
5. Training and development
6. Performance appraisal
7. Transfer, promotion and demotion
8. Separation/resignation
HUMAN RESOURCE PLANNING
■Human resource planning is primarily concerned with
matching the future demand for and supply of personnel
requirements of the organization.
■Personnel needs depend on the strategic plans of the
organization, and on the potential change in the external
environment of the organization.
■For instance, a plan for expansion of an organization
requires more employees.
RECRUITMENT
■The aim of recruitment is to get many job applicants, for
the organization to choose the most qualified ones.
■Before recruitment is done, a job analysis should be
developed to determine job description and job
specification.
■Example of a job description for advertising manager,
“Supervises and trains advertising staff, administers
advertising department; is responsible for the performance
of his department; and reports to the vice president for
marketing.”
RECRUITMENT
■Example of a job specification for advertising manager,
“Has excellent communication and interpersonal skills; has
at least five years experience as manager in an advertising
firm, preferably on consumer products; has ability to work
under pressure; and is creative. Computer literacy is an
added advantage.”
SELECTION
■ The most suitable job applicants are hired. They pass through a selection
process. However, a highly qualified professional or executive, does not
undergo any of the screening devices or selection process anymore. He is
courted by several organizations. The steps in the selection process are:
1. Completion of job application form
2. Preliminary interview
3. Testing/examination
4. Background investigation
5. In-depth interview
6. Physical examination
7. Job offer
ORIENTATION
■ The purpose of orientation or socialization is to provide the new
employee with information about his job, history of the
organization, policies, work rules, the vision and mission of the
organization, and employee benefits.
■ Usually, an employee’s manual is issued to the employee.
■ The new employee is introduced to his superiors and co-workers.
■ All those orientation activities are planned to make the new
employee comfortable and perform effectively in the
organization.
■ The orientation phase is extremely important.
TRAINING AND DEVELOPMENT
■ The objective of training programs is to improve present job
performance, while development programs are preparations for future
job performance. The various training techniques are:
1. On-the-job training;
2. Vestibule training (simulated work environment); and
3. Classroom setting (seminars and other non-formal education)
In the case of development programs, the various approaches are:
4. Seminars and workshops conducted by a university, government
agency, etc.,
5. Free MBA/MA program, and
6. Job rotation.
PERFORMANCE APPRAISAL
TYPES of PERFORMANCE APPRAISAL:
1. Informal Performance Appraisal – the manager or
supervisor monitors the activities of his subordinates on
a day-to-day basis. The manager tells his subordinates if
the work has been done well or poorly in a friendly and
informal manner.
2. Formal Performance Appraisal – it is a structured and
systematic process of rating performance of
subordinates which is conducted semi-annually or
annually.
TRANSFER,
PROMOTION, AND
DEMOTION
■ Transfers have several purposes: to fill temporary job
vacancies; to train an employee for a higher job in
preparation for a replacement of an employee who is
about to resign or retire; or to place employees who are
not performing well in other jobs.
■Promotions serve as recognition of superior performance.
These are incentives to deserving and dedicated
employees. Nevertheless, it is extremely important that
promotions should be fair and reasonable.
TRANSFER,
PROMOTION, AND
DEMOTION
■ Demotion are ways of punishing inefficient employees.
However, many organizations prefer to give suspensions or
financial penalty. A demoted employee becomes angry or
resentful. He does not become efficient in a lower-status
position. In most cases, a demoted employee looks for
another job in other organizations. For those who are
about to retire, when they are demoted, they just swallow
their pride until the day of their retirement.
SEPARATION
■It is not easy to fire employees. They are protected by labor
laws, human rights, and the constitution. Top management
can only terminate their employees in accordance with the
due process of law. Employees have their labor unions
which promote and protect their rights and interests.
■For voluntary separation – resignation and retirement –
there are no legal problems.
 LEADING
THROUGH
MOTIVATION
INTRODUCTION
■The accomplishment of the objectives of an organization
is not the job alone of the manager. He has to work with
his subordinates. The ability of the manager to lead his
subordinates towards the attainment of organizational
objectives primarily depends on his effective motivation
and leadership.
■The manager must know and understand the needs and
interests of his subordinates. To motivate them to reach
peak performance is to satisfy first their needs and
interests.
MOTIVATION defined
■Motivation refers to those factors that are responsible for
stimulating proper responses towards the accomplishment
of established goals. These factors are the needs of the
people.
■Thus, when physical needs of people are satisfied, and they
are treated as human beings, they are happy. This makes
them productive or efficient workers.
MOTIVATION Theories
1. Maslow’s Hierarchy of Needs theory – Abraham Maslow
has presented five levels of needs. These are composed of
basic needs and higher needs. Maslow said that the basic
needs have to be satisfied first before satisfying the higher
needs. The hierarchy of needs are:
a) Basic physical/physiological needs
b) Safety and security
c) Belonging and social needs
d) Esteem and status
e) Self-actualization and fulfillment
MOTIVATION Theories
2. Herzberg’s two-factor theory – Frederick Herzberg has
discovered one set of factors that creates job satisfaction and
motivation, and another set that produces the opposite effects.
He called those factors which produce job dissatisfaction
hygienic factors and those which lead to job satisfaction
motivation factors.
* The Hygienic Factors are: salary, job security, working
conditions, status, company policies, technical supervision, and
interpersonal relations.
* The Motivation Factors are: achievement, recognition,
responsibility, advancement, and professional growth.
MOTIVATION Theories
3. McClelland’s Need Achievement Theory – David
McClelland relates three needs: achievement, power, and
affiliation. However, his study was centered on the
achievement motivation. The study shows that people are
motivated to perform their jobs due to the compelling need
for personal achievement, rather than for reasons of financial
rewards. Top management should spot achievement-oriented
workers, develop them, and utilize their services for the
organization.
MOTIVATION Theories
4. Expectancy Theory – Victor Vroom explains that motivation
is a result of strong desires (valence) and strong beliefs
(expectancy). Based on this theory, motivation leads to action
or effort to reach the goal. The degree of effort depends on
expected rewards for performance and the probability of
achieving the goal, and then satisfaction.
MOTIVATION Theories
5. Reinforcement Theory – the behaviors of people depend
on the attitudes of or treatments by their superiors. If they are
told they are winners, they become winners. If they told they
are losers, they become losers. Successful enterprises like
IBM, let their employees feel that they are winners.
MOTIVATION Theories
6. Equity theory – Equity means fair. Rewards or punishments
in relation to performance should be fair. Otherwise, they
adversely affect the morale of employees. If an employee gets
a lower pay than others, and yet they have the same positions
and the same job inputs, he feels that management is unfair.
Bitterness crops up and less effort is exerted by the underpaid
employee. To properly motivate employees, management
should therefore be fair in its rewards to its employees.
Discriminations and favouritism in rewards can only destroy
the organization.
EFFECTIVE MOTIVATION
STRATEGIES FOR MOTIVATING WORKERS:
1) Managers must actively motivate their subordinates.
2) Managers should understand first their own strengths and
weaknesses before attempting to change the behaviors of their
subordinates.
3) Managers should bear in mind that employees do not have the same
motives and abilities.
4) Jobs should be designed to offer challenge and variety.
5) Rewards should be based on performance, not on seniority.
6) Employees should be encouraged to participate in improving the
performance of the organization.
LEADERSHIP
■Leaders are a special breed of individuals who can move
people towards the attainment of established goals. Such
power does not emanate through the use of force or fear.
■True leaders inspire and motivate people to perform
activities in line with the objectives of the organization.
■The leader creates a vision. The manager implements a
vision. Hence, the manager who is also a leader has a
competitive advantage.
LEADERSHIP defined
■In general, leadership may be defined as “the power to
influence the behaviors of people to perform activities
that are required to accomplish goals.”
■Leadership is simply an influence on an individual or
group of individuals. But such influence is easier said than
done.
■Leadership is an act or process of influencing people to
act in line with the achievement of goals.
LEADERSHIP ROLE of
MANAGERS
■Managers to be successful in their functions must play
four (4) basic leadership roles:

1. Educator. Manager teach job skills to their subordinates

through their daily personal contacts with them.
2. Counselor. Managers act as guidance counselors. They
listen to the problems of their subordinates, and they
give them advice or help them solve problems.
LEADERSHIP ROLE of
MANAGERS
3. Judge. Managers evaluate the work performance of their
subordinates. They enforce the policies and regulations
of the organization.
4. Spokesperson. Managers should support the legitimate
interests or demands of their subordinates. They speak
for their groups in calling the attention of top
management.
LEADERSHIP STYLES
1. Autocratic leaders – impose their authority and decision-
making power on their subordinates. This is a dictatorial
form of leadership. It is a one-man rule. However, there
are autocratic leaders who are positive in their
motivational styles. These are called benevolent
autocrats. They generate productivity and job satisfaction
in the organization.
LEADERSHIP STYLES
2. Participative leader – this is a democratic form of
leadership. Members of the group participate in planning,
decision-making, and implementation. Such a style of
leadership is in consonance with human nature. People
like to be involved in matters affecting their interests. In
addition, people experience a feeling of belongingness
and importance when they are encouraged to participate.
LEADERSHIP STYLES
3. Free-rein leaders – this is a laissez faire form of
leadership. The leader allows the members of the group to
make their plans, and to establish their own goals. The
leader gives his power to the group. This style of leadership
is devoid of motivation on the part of the leader.
CONTROLLIN
G
What is Controlling?
INTRODUCTION
■Controlling is the last basic function of the manager. But
it is not the least important. The other basic functions of
management – planning, organizing, leading or directing
– must be controlled in order to achieve the objectives of
the organization effectively and efficiently.
■Without control, the productive resources of the
organization are likely to be wasted, and the activities do
not move efficiently towards the established
organizational goals.
CONTROL defined
■Control is a systematic effort to set performance standards
with planning objectives; to design information feedback
systems; to compare actual performance with those
predetermined standards; to determine whether there are
any deviations and to measure their significance; and to
take action required to assure that all corporate resources
are being used in the most effective and efficient way
possible in achieving corporate objectives.
■Management control is the process of assuring that actual
activities conform to planned activities.
THE CONTROL PROCESS
■There are three (3) basic steps in the control process:
1) Establish standards of performance – Standards or
objectives must be SMART (Specific, Measurable,
Attainable, Realistic, Time-Bounded). It must also be
acceptable by workers/employees involved.
2) Measure the performance – if the results are equal to
the standards, there are no problems. this means that
the sale targets have been achieved by all sales
representatives. If performance is below standard, then
the sales manager has to find out the possible
deviations, and then take corrective action.
THE CONTROL PROCESS
3) Take corrective action – this is to be done to stop
deviations. However, the action to be taken depends on three
factors: the standard, the accuracy in measuring deviation,
and the analysis made by the person or device investigating
the cause or causes for deviations. Standards can be low or
high. Measurements can be defective or inaccurate.
Managers or supervisors could use poor judgment in
determining the corrective action to be done. Nevertheless,
in the case of production standards/targets, deviations can be
corrected by means of mechanical process or quality control.
TYPES OF CONTROL
■ Based on the book Constructive Control by William Newman,
there are four basic types of control:

1. Pre-action control – these require the proper allocation or

budgeting of productive resources prior to the activity. When
the activity begins, all the required resources are made
available.
2. Steering control – these are intended to detect deviations
from the established standards or objectives. Such controls
allow corrective actions before the activity is completed.
TYPES OF CONTROL
3. Screening control – these provide the conditions to be
met before operations continue. For example, if there are
many loan applicants in a small credit cooperative, the first-
time borrowers are given first priority. Funds are limited, so
there is a need to control loans by means of priority basis.
4. Post-action control – these measure the results of a
completed activity. Causes of deviations are analysed, and the
findings are used in similar future activities. Thus deviations
may not occur anymore in such activities.
 FEATURES OF AN
EFFECTIVE CONTROL
SYSTEM
1) Accurate and adequate – data are important in any control
system. They pinpoint the causes of deviations. If data are
inadequate and inaccurate, the control system cannot properly
solve the problems. Wrong data result in wrong solutions.
2) Timely and relevant – data should not only be appropriate, but
also timely to enhance the effectiveness of any control system.
It is difficult to solve problems if data are not relevant to the
problems. Likewise, if such relevant data are not available on
time, managers cannot act on the problems. At least,
managers should have enough time to respond quickly to
 FEATURES OF AN
EFFECTIVE CONTROL
3)SYSTEM
Economically and organizationally realistic – the cost of
installing a control system should be less or equal to the
benefits to be generated. Obviously, a control system which
is more expensive than its benefits is a losing venture. In
addition, a control system should be compatible with the
organizational realities. For instance, employees should
understand the relationships between performance and
reward. They are naturally eager to achieve realistic
standards if there are corresponding incentives.
FEATURES OF AN
EFFECTIVE CONTROL
SYSTEM
4) Objective, measurable, and comprehensible – subjective and
qualitative data are not measurable. Such data make it difficult to
compare actual activities and planned activities. Moreover, a
control system which is difficult to understand creates confusion,
frustration, and perhaps, noncompliance.
5) Flexible and acceptable – a control system is a dynamic
process. It conforms to the changing internal and external
environment of the organization. Flexibility is essential. Also, a
control system should be acceptable by employees. Acceptability
on the part of the employees depends on meaningful objectives
whose activities are familiar to them.