Unit - four

Planning and Decision Making

Kiran Kumari Sah

 Meaning of Planning
• Initial and basic function of management
• Logical thinking process which determines when, where, how, why
and who will do the specific job to achieve desired goal
• Process of outlining and deciding future courses of actions in
advanced for attaining organizational goals
• Involves goal determining, formulating policies,
developing procedures and programs, budgeting etc.
• Bridges the gap between the present state and desired
future state
According to Richard Steers - planning is the process by which
managers define goals and take necessary step to ensure that these
goals are achieved.
According to Peter Ducker – Planning is the continuous process of
making present entrepreneurial decisions systematically and with the
best possible knowledge their futurity, organising systematically the
efforts needed to carry out these decisions and measuring the results
of these decisions against the expectation through organized
systematic feedback.
 Characteristics of planning
Following at the characteristics of planning
i. primary function and focus on goal
ii. future oriented
iii. intellectual activities
iv. pervasive in nature
v. continuous and flexible activities
vi. bounded in time frame
vii. besed on environmental analysis
viii.set of priority of product and market
 Levels of Planning
• Strategic Plan; corporate or grand plans stating how a business
organization will achieve the mission and predetermined objectives;
specifies organization’s mission, vision and objectives; prepared by top level
management by considering long-term objectives; way of approaching
business opportunities and threats.
Characteristics of Strategic Planning
i. Long term focus and Goal oriented
ii. Based on environmental analysis (SWOT)
iii. Involvement of top management
• Tactical plan/Business plan ; second level plan prepared by middle
level management considering the targets of the department or
branch; consistent with strategic plan and short-term in nature;
involves allocation of divisional work,resources and utilization of
them properly to support strategic plan; production plan, finance
plan etc.
Characteristics of business plan
i. it is concerned with the gaining competitive advantage in the market
ii. It is derived from strategic plan
•Operational plan; plans prepared by lower level
management to achieve operational goals; considers the
tactical plans of the respective department and specifies the
procedures, schedules and processes for day to day activities
of the operational unit; emphasizes on the best utilization of
resources; maintenance plan is an example of operational
plan
Characteristics of operational plan
i. It emphasis is on planning the routine activities of the business.
ii. its scope is narrow and specific for 12 months only.
iii. it is prepared to achieve the tactical objective of the business.
iv. it is shortest one among three types of planning.
• Unit Plan - Unit plan can be defined as a plan created by the
selection of learning activities in a particular way as a means of
presenting a complete picture. Unit planning is a methodical
arrangement of subject matter and involves a series of learning
experiences.
 Steps in planning/Planning process
• Environmental Analysis: pre-step in planning essential to analyses the
strengths, weakness, opportunity and threats(SWOT) from the dynamic and
complex environment for successful implementation of planning.

• Setting Goals: objectives or goals are targets that provide pathways and
mechanism to organizational activities; objectives should be SMART; overall
objectives and specific objectives should be developed by considering
strengths and opportunities.
• Developing Planning Premises: premises are certain assumptions
about environment; market conditions, availability of resources,
government policy, competition should be predicted.
• Identifying Alternatives: there may be various methods, persons,
resources as alternatives to operate activities to attain goal; all the
possible alternatives should be identified

• Evaluating Alternatives: each alternative should be examined

logically on the basis of cost, time, risk, return etc. evaluation
facilitates comparison

• Selecting the best Alternative: after evaluating the alternatives,

planner has to select the best alternative by considering past
experience, present situation and future contingencies
• Formulating Action Plan/Derivative Plans: action plan for all
departments and units should be formulated after selecting the best
alternative; derivative plans are secondary plans or supportive plans and
they support in implementation of main plan

• Implementation of the Plan: brings all the procedures, programs,

budget and policies of plan into action otherwise, plan remains in
paper only; involves providing instructions, supervision, control

• Review and Follow up: review of the process provides feedback to the
planner to measure effectiveness and weakness of the process and
 Tools for Planning
• Forecasting: an important quantitative tool for planning; techniques such
as time series analysis, regression analysis, extrapolation method etc. are
used to estimate sales, income, expenses etc.
• Network Method: technique mostly associated with planning,
implementation and controlling of project; planner should list out all the
activities, events and critical time interval affecting entire project; PERT
(Program Evaluation Review Technique) and CPM (Critical path method)
are common network methods.
• Linear Programming: mathematical tool for getting optimal solution
by making optimum combination of scarce resources and activities;
generally used for maximizing profit and minimizing cost.
• Simulation: means to imitate the operation of real world based on
assumptions; mostly applicable in very complex situation where
diverse constraints and opportunities are found; computer
programming is used for combining variables.

• Break-Even Analysis: technique identifying the sales unit at which

revenue is just sufficient to cover total cost; helpful to analyze cost,
quantity and profits.

• Flow Chart: is used to eliminate wasted steps and activities to simplify

work ; involves defining, standardizing and communicating the process;
works as the guide for a program.
 Pitfalls/Limitations of Planning
• Inflexibility: no scope for modification or improvement by middle
or lower level even when they feel it to be ineffective

• Lack of control: external environmental factors are not under the

control of managers that may not as per planning premises; those
forces greatly influence proper implementation of planning

• Avoid intuition and creativity: provides roadmap of organizational

functioning and employees are more focused on it which may
inhibit employee intuition and creativity
• Time consuming: takes more time in thinking, analysis,
estimation, evaluation and implementation; due to long time
planning may be ineffective

• Expensive: needs more money to analyze environment, develop and

evaluate alternatives and so on, it may also need experts, and
consultants for proper suggestions

• Insufficient information: chances of not getting reliable, sufficient

and up to date information; managers have to formulate plan on the
incomplete and current data only
 Improving Planning
• Setting clear goals: overall goals, departmental goals and individual goals
should be clear, specific and synchronized

• Proper understanding: participative management should support for proper

understanding

• Management Information System: provides reliable, relevant and

sufficient data for formulating effective plan

• Flexibility: plan should be modified and adjusted as per situational

change; should have provision for making change in its components
according to requirement
• Economical: process should not be expensive; managers should
analyze the planning process from cost benefit perspective

• Managerial efficiency: planner must be dynamic person having

good managerial ability; s/he must have knowledge of
environmental analysis, forecasting, evaluation etc.

• Planning must start at the top: at the first, strategic plan should be
developed by the top level ,then departmental and operational plans
should be formulated to support strategic and tactical plans
 Decision
Making
Meaning
Decision making is the process of selecting the best alternative out of
many alternatives for solving a problem. A decision is a choice from the
available alternatives. Decision making is the process of developing and
analyzing alternatives and making a choice.
According to J.L. Massie, “A decision is a course of action consciously
chosen from the relevant alternatives for the purpose of achieving desired
goals.”
 Types of Decisions
• Programmed and Non-Programmed Decisions
A fairly structured and repetitive in nature, it deals with routine
problems and has a routine procedure for handling it, have short term
impact on organizational activities, lower level managers can easily
make such decisions, eg. granting leave to an employee
A relatively unstructured decisions and non repetitive in nature,
it requires more time, energy, skills and resources for exploring the
situation from all perspective; highly intellectual capacity, intuition,
experience, creativity and judgement are essential for making such
decisions; decision of opening new branch, launching new product etc.
 Types of Decisions
• Strategic, Tactical and Operational Decisions
Very complex and multi-dimensional decisions often made by top
level management are called strategic decision; have long term
impact on organization and represent a complex aspect of planning
Medium term or departmental decisions made by middle level
Management are called tactical decisions, such decisions are made
to support strategic decisions, have medium term implications
Short term decisions made by lower level management to solve
day to day problems are called operational decisions; have short
term implication; should be consistent with tactical decision
 Types of Decisions
• Individual and Group Decisions
Individual decisions are those decisions in which only one person
involves in decision making process; there is no participation of other
people hence single person makes decision including his/ her idea,
experience, knowledge
When two or more people combine their ideas, knowledge,
experiences in taking decisions such decisions are called group
decisions; all participants actively share their ideas in discussion and
after consensus or majority decisions are made
 Types of Decisions
• Routine and Basic Decisions
Decisions related to day to day activities are called routine
decisions; programmed decisions are routine decisions; they are
carried out easily and quickly but authority should be provided the
decision makers
Very important decisions those affecting the long term
organizational goals are called basic decisions; they are related to the
policy, strategy and mission of the organization; for instance, changing
the product line, enter into merger, lowering price of product
 Decision Making
Process
• Identification of problem; problem is base of decision which should
be identified properly; the root causes of problem should be
correctly understood that solves the half problem
• Developing Alternatives; problem may have several alternative
solutions, decision maker should identify all the possible alternatives ;
it provides many choices to select the best one
• Evaluation of Alternatives; act of determining value of each
alternative in term of cost, time, profit and risk; essential to know the
strong and weak points of each alternative and to make comparison
 Decision Making
Process
• Selection of the best Alternative; the best alternative should be
selected on the basis of evaluation; decision maker should
consider past experience, present
situation and future consequences in selecting the alternative
• Implementation of Alternative; decisions are worthless if they are
not implemented properly in time; it is the operational part of the
process; for this purpose, authority should be granted to the
workers
• Review and Follow up; results and the effects of implementation
should be regularly reviewed and monitored to minimize the
chances of losses; it helps to take corrective action in time for
improvement
 Decision Making
Conditions
• Condition of Certainty; condition when decision maker is well informed about
possible alternatives and their outcomes; it is very easy situation for making
decision but rarely found in real world in practice; exists in case of routine
decisions
• Condition of Risk; a common condition when decision maker is aware
about the alternatives but unaware about the outcomes; it is
more difficult situation managers can only guess the outcomes of the
decision
• Condition of Uncertainty; a complex situation when decision maker is fully
unknown about the alternatives and outcomes; it exists when the future
environment is unpredictable and more dynamic; decision makers should
have to make certain assumptions about situation depend on their judgement
and experiences