UNIT - 2 PLANNING Learning Objectives At the end of the Lesson the student should be able to 1.

State the nature and importance of Planning 2. Describe the Purpose of Planning 3. Differentiate between a Vision, a Purpose and a Mission 4. List the characteristic of objectives and define the requirements of sound objectives 5. Distinguish between the types of plans & types of decisions 6. Enumerate the steps in Planning, planning premise and decision making. 7. Discuss the Hierarchy of plans and Limitations of Plans VTU Syllabus UNIT - 2 PLANNING: Nature, importance and purpose of planning process - objectives - Types of plans (Meaning only) - Decision making - Importance of planning - steps in planning & planning premises - Hierarchy of plans. Meaning of Planning and Key Features of Planning Planning fixes a goal and outlines future course of action in order to achieve the goal or set objective - Planning is looking ahead - Planning is logical thinking before doing - Planning is the process of deciding in advance what is to be done, how, when and by whom. - Planning is the process of visualizing / anticipating future by evaluating the past & assessing the present - Planning is a trap laid down to capture the future. - Failure to plan properly is planning to fail Nature of Planning Basic Function Blueprint Thinking in Advance Planning decides Planning is the most basic function of management. It is a blueprint to which all accomplishment must confirm. Planning is Thinking in Advance, also referred to as Deciding in Advance. on questions viz. What to do, why to do that, where to do it, when to do, who has to do what, for whom it should be done, how to do it, etc. Continuous Process According to Koontz and ODonnell planning is a continuous process. A manager has to keep watch on the progress of the plan like the ships navigator of a ship who constantly checks its position and direction Selection Planning involves selection of objectives and determines ways and means of achieving them. Bridge Planning is a bridge betw.where one is now & where one wants to be at a later date. Dynamic Planning in not only non-static but on the other hand it is dynamic. A plan should be rigid enough to have the goal focused and at the same time flexible enough to adjust, withstand and overcome fluctuations and changes in conditions of market, finance, personnel, organisation, etc. without undue cost additions. Application Planning applies to all levels of management. Top level management is concerned with long range planning spanning three to five years, middle level management is concerned with planning for a few months to a year and lower management plans for a day, week or a month. Nature of Planning indicates essential qualities or general characteristics of planning. Any planning involves four essential qualities 1. Planning must contribute to accomplish the purpose and objectives set While objectives are ends sought to be achieved by an organisation every plan and its supportive plans must contribute towards meeting the objective. At every step of planning the following questions must be answered Why am I making this plan? What am I trying to accomplish with it? What resources are required to execute this plan?

The answers must provide clarity to the objectives. Clear plans not only help defining objectives but also help achieving them. 2. It must be considered as a parent exercise or a primary exercise. in all processes (Primacy of Plng.) Organising, staffing, leading, controlling are designed to accomplish the objectives set. These activities can only be carried out when effective plans are in place. Therefore the primacy of planning is unique and leads to all other management functions. The goal to be achieved, the method in which to achieve it, The structure of the organisation, the number and kind of people required to perform various jobs, how to control them, etc are decided by proper planning 3. It must spread through all management functions OR it must be all pervasive. Planning drives an organisation. It is applicable to all organisations. It applies to every level of management in an hierarchy. While decision taken by top management affects all the people in the organisation, the lower managers plan or decision would affect only those under him. But no manager can do without planning. Hence planning is all pervasive or spreads throughout the organisation touching all levels of management. 4. It must be efficient in such a manner that it achieves desired goals at least cost It is a measure of the degree of achievement of the objective. Efficiency of plan refers to the contribution of the plan towards achieving the objective. Plans are said to be efficient if they are able to achieve the objectives with minimum resource consumption. Importance of Planning Without planning business decisions are difficult. Planning is important because 1. It overcomes uncertainty and change and minimizes risk 2. It facilitates effective control 3. It focuses attention and concentration only on the objectives of the enterprise 4. It makes for economic operation and leads to success 5. It forms the bridge between the present and the future 6. Trains Executives 1. It overcomes uncertainty and change and minimizes risk Todays world is full of uncertainties and rapidly changing situations. Intuition alone cannot be depended upon to take key decisions as was done in the olden days. A proper goal having fixed, it becomes easier for a manager to take a proper decision from a variety of choices available. The one that suits best and leads towards the goal is easier to chose than if there were no goal at all. Therefore planning reduces uncertainty and thereby minimizes risk. If a day is cloudy and you had to go some place (which was your goal) you would start with and umbrella to achieve the goal rather than be stranded half way. Similarly a manager accesses the conditions of his machines today and feels that towards achieving the company goals he has to have two machines within the next two years and three more the year after that. He has to initiate action with in the required lead time for procure the same. Else he would cut a sorry figure at a later date. The targets would be affected. Buying a machine at short notice at the 11 th hour would also be costly, which in turn also affects the goal. 2. It facilitates effective control Once the goal is fixed by planning a manager is aware as to what his yearly, monthly, daily target is. He acts towards achieving the targets. It becomes easy to check and control activity on a daily basis as well as to take corrective measures towards maintaining the target. One can know precisely whether one is on schedule or lagging behind the goal. If there were no planning and no goal there would be no control at all on the pace at which one is working or on its quality (No quality goal set). 3. It focuses attention and concentration only on the objectives of the enterprise When organizational goals are in place it becomes easy to focus on it and steer towards it. All resources and activities are coordinated by the manager towards the goal. Every individual and department is focused on the goal. It helps managers take steps in advance to ensure smooth progress towards achieving target. (Like taking machines for preventive maintenance or taking action for procuring new ones). Needless activities are avoided, overlapping exercises are set right and the process is streamlined. 4. It makes economic operation and leads to success Constantly being in focus of the goal and having effective control naturally leads to success. If no proper planning was in place this would not have been possible. In the industry it is a known fact that in a crises situation the decisions taken by companies having plans have done much better than those not

having them. This is possible only when there is a goal, all are focused towards achieving it and decisions in a crisis situation are also picked that suit the situation and at the same time do not sacrifice the goal. Unlike this one without a goal would take an adhoc decision which would solve the problem on hand but set him behind in his activity overall. In fact, there are instances that by proper planning companies have outperformed their targets year after year. Military victories are an example of planning and execution. 5. It forms the bridge between the present and the future The vast gap between what we are today and what we want to be at a future date can be filled or bridged by proper planning and planning only. Planning not only includes setting the goals but also arranges for providing the resources as well as deploying it in a phased manner towards achieving the set goal. Without proper planning bridging the gap between today and tomorrow is an Herculean task. 6. Trains Executives When proper plans are in place and meticulous execution is taking place every individual working within the organisation is affected by the system, the atmosphere, the procedures, the execution, the work culture, etc. One naturally learns and gets trained even without ones conscious effort. This is the best way of learning since one is impressed by it, one like it and what one likes one does not forget. Eg. stations.

Purpose of Planning Planning is the starting point of all functions of management. The purpose of planning could be listed to be as under: 1. To select a proper goal or objective for the organisation from many alternatives available. 2. To select from many available alternatives the best method so as to achieve the objectives of the organisation efficiently, economically and effectively. 3. To direct all other functions of management 4. To set the goals in proper perspective within a given environment 5. To help planned goals of an enterprise to break-up into more easily handlable additivesegmented goals department wise, level wise, area wise, 6. To form the basis of budget. 7. To forecast the future to avoid uncertainty and change 8. To provide effective control 9. To focus vision on the objectives and plans Objectives Objectives by definition are goals which one whishes to achieve. All activities are focused towards it and all management activity organising, staffing, directing, controlling etc - starts after the objectives are fixed. It is interesting to distinguish between objectives and three other common words Vision, Purpose and Mission A Vision is that which drives an entrepreneur towards setting his objectives. It is the dream that he has of his future. A company has a vision of being the No. 1 in its field of activity in terms of quality or service. A Purpose is the primary role defined by a society which the organisation has to play. It applies to all functioning organisations of the same type within a society. Viz. a university is for imparting knowledge to students, hospitals are for treating people, etc. Thus it is a broad aim. A Mission is that unique aim of an organisation which sets it apart from other organisations of the same type within the society. A hospital having a mission to treat the poor free of cost. A college imparting free education to the needy. An organisation having a mission to provide free meals to school students. Characteristics of Objectives Some of the characteristics of objectives are 1. Objectives are multiple in number Every business enterprise has a package of objectives set out in key areas. Peter Drucker in his book The Practice of Management indicates that there are eight areas in which objectives of performance are to be set.

2. 3.

4.

5.

They are a) Market Standing, b) Innovation, c) Productivity, d) Physical and Financial Resources, e) Profitability, f) Manager Performance and Development, g) Worker Performance and Attitude and h) Public Responsibility Other than fixing a turnover target the objectives of a service oriented organisation could be viz. to be the best service provider in its field of activity, to spread its services to rural areas also, to increase its service offices to ten more cities and twenty more towns, to have a specified number of service outlets within the specified time, etc. Objectives are either tangible or intangible in nature. Market standing, productivity, physical and financial resources are tangible objectives while manager performance, development, worker morale etc are not tangible. Objectives have a priority. At some point of time some objectives take over-riding priority while at other times they do not. E.g. picnic crossing a forest area before nightfall is more important than taking time off for tea. Priority also speaks of relative importance of some objectives to others. Eg. Although a shipping company promises to delivery goods safely, in a condition of a leak developed the safety of the ship or its survival is important and to save it some of the goodas it is carrying could be jettisoned. Objectives are generally arranged in a hierarchy. Corporate objectives of any organisation are at the top. Next follow the Divisional objectives, then the department ones and so on, up to individual objectives. The objectives of each level are the means of achieving the objectives of the one above it in the hierarchy. Thus objectives at all levels serve as both ends as well as the means except the top level objective. Objectives sometimes clash with each other. In any large organisation there are departments handling production, marketing, finance etc. Each is assigned an objective and is responsible of achieving it. This leads to potential goal conflict and suboptimisation where in the achieving the goal of one unit jeopardizes the goal of another. e.g. a production unit in achieving its goal may sacrifice on quality a little bit which sales and marketing has been canvassing and has a goal of sell high quality products. The resolution of the problem is to strike a balance between the goals of the two with the understanding that neither is to maximize its goal. This situation is known as suboptimisation of goals. The relative form and weight to be given to each unit is a managers dilemma, yet it is his job and responsibility to take such decisions.

Requirements of Sound Objectives The following are some of the requirements of good objectives : 1. Objectives must be realistic and valid Objectives must not be unachievable or unrealistic which would render it Not pursuable and all concerned would soon loose interest in it. Also the objective should have a relation with the stake holders preferences 2. Objectives must be clear and acceptable. How clear an objective is, is known from the clarity in peoples understanding of the objective. Whether the lowest rung official or worker also understands it is a yard stick of the objective clarity. Next is whether the objective is acceptable to all concerned. It is said that in an organisation every employee sets himself a scope or range of behaviour or functioning. If the objectives are felt to be within the scope set by each they feel it is acceptable if not they would not pursue it, which would not be in the interest of the organisation. A foreman could find umpteen number of valid reasons for not performing if he is required to push his subordinates beyond limits which they also feel to be unreasonable. 3. Objectives must support one another. As mentioned in an earlier example it is to be ensured that the goals of production and marketing units are not too much at cross roads. There should be proper coordination and balancing of needs of the units in question, keeping the company goals in focus. Further there should be a link or relationship between short term goals and long term ones. The short term ones must be a foundation for the subsequent ones. 4. They must be precise and measurable A quantifiable element in a goal makes it measurable. This would ensure the following It is easier to decide how to achieve precise and measurable goals than vague ones viz. earn a good name in society They are better motivators than general, vague goals It is easier for lower level managers to split up the goals into more achievable small term goals.

It is also easy to monitor and keep track of precise and acceptable goals. Advantages of Objectives The following are the benefits of objectives - They form the basis of planning. Further plans viz. policies, budgets, procedures are based on it - They act as motivators for people to act. Their activity has a sense of purpose - They eliminate haphazard action which otherwise would have had undesirable consequence - They facilitate coordinated behaviour of different departments which otherwise would be pulling in different directions. - They function as a basis for managerial control, since targets help set standards against which performance can be measured - They facilitate better management by providing basis of leading, guiding, directing, controlling - They lessen misunderstanding and conflict. They facilitate communication among people by minimizing jurisdictional disputes. - They provide legitimacy to organisations activities. Types of plans or objectives Basic Function Planning is a basic function and is the same for all managers. However it could vary depending on the nature and type of the organisation and the level of management. Elaborate & Meticulous Some plans could be elaborate and meticulous to the last detail. Concise Some plans could be concise and reflect only the targets required to be achieved. Top to Bottom Most plans originate at the top and are communicated to those below in the hierarchy. Bottom to Top However some plans may originate at the bottom and are conveyed to the top for approval. Joint Plans Some plans could be taken jointly by the top and middle or lower management. Multi Organisations Some plans may involve many organisations placing their view and ideas for an industrial policy decision Select People Or the same could be decided by a few select top executives and technocrats. It is seen that there are different forms of plans big and small. However the one useful and accepted way of classification is distinguishing between strategic plan and tactical plan. Strategic planning involves long term planning setting major goals for the organisation, the policies that it needs to follow to meet the goals, what the standing of the organisation should be in a decade from now, in what businesses, etc. These are mostly based on external information and uncertain data with regard to market conditions and forecast, technological advancements anticipated, future trends and demands, customer tastes, moods, Tactical planning on the other hand are short term plans which deal with specific deployment of available resources to meet set targets. Strategic Plan Tactical Plan 1. Long Term Short term 2. Done by Top Management Done by Lower Management 3. It consist of major goals & objectives of the It consists of details to use of facilities and resources Organisation and the resources to accomplish it towards achieving goals 4. It is less detailed, focuses only on long term goalsIt is detailed catering to day-to-day operations 5. It is based on long term forecasts, technology, It is based on past performance and near future environment political, financial, etc and is requirement Therefore is less uncertain is therefore more uncertain Examples Tatas plan to produce a car for Rs 1,00,000 was a strategic plan. The shifting of the plant from the unfriendly location in WB to their Aurangabad plant, to keep up its promise to the public was a tactical move. The move might have been a costly one but the monetary loss in terms of shifting, relocating, etc was gained in the for of goodwill for the Tata brand equity, that Tatas deliver what they promise. Maybe belatedly, due to unforeseen circumstances. Military exercise, strategic plan, tactical execution, devastating result. Brought Bangladesh into existence. It must be noted at this point that in a large organisation the distinction between strategic and tactical plan is not much. In pursuit of the strategic plan set by a large organisation a division of the organisation

comes up with a tactical plan. This tactical plan however could serve as a strategic plan for the sub units of the division. The sub units would have their one weekly or monthly tactical plans. The Bangladesh example - For the Field Marshall the strategic plan was attack East Bengal and to win the war in as short a time as possible. The precise deployment of resources was tactical. The result was devastating and stunning. In an organisation based on the hierarchal order, at the top are the objectives which are planned by the top management. Then come the strategic plans which are towards achieving the goals. Then come two type of plans Single-use plans and Standing plans. Single-use plans are, as the name suggest, plans that are set for achieving a specific end. Once the end is achieved the plan ceases to exist. Most common single use plans are a programme to be conducted, the budget for the same. Example of Single use Plan Shifting the entire activity from WB to Aurangabad and still sticking to the original price for a specific quantity of vehicles is a typical case of Single-use plan Standing Plans are those in force for longer periods of time since the market situation continues to exist or demand for a product continues to exist. The major types of standing plans are policies, procedures, methods, rules etc. These are applicable to all, at all times. For example a loan from the bank for house buying or construction. The policy stipulates the rate of interest for buying / construction for a short term / long term loan, fixed rate or floating rate. The procedure, methods, rules, etc. in place stipulate the paperwork to be done, the documents to be submitted, number of copies of documents, etc. The sanctioning authority based on the loan amount sought could be the branch manager, divisional manager, zonal manager or the head office etc. Another eg. of Standing Plan Tata Nano - Once the specified qty. of vehicles as promised are delivered at Rs 1 lakh the price applicable is revised. Future vehicles to be sold at the higher price. That is a standing plan until reconsidered and changed. Also, the plant could be shifted to a more permanent location exclusive for the product, the tactical plan, of having delivered the Re 1 lakh vehicles, having been served. Decision making - Importance of decision Making Decision making is a part and parcel of planning activity. Decision is picking the best suited alternative from the many available. It involves choosing what to do, how to do, etc. It requires knowledge, wisdom and experience to choose the best alternative. Where there are no alternatives there is no voluntary choice or decision. Decisions taken my managers are always such that they take them closer to the goals set. Types of Decisions Decisions could be classified in many ways They are 1. Programmed and non programmed Decisions 2. Individual and Group or Collective Decisions 3. Minor and Major Decisions 4. Strategic and Routine Decisions 5. Simple and Complex Decisions 6. Temporary (Adhoc) and Permanent Decisions 1. Programmed and non programmed Decisions Programmed decisions are those based on the policies made by the management. There is no complication involved in a manager arriving at decisions based on policies. These decisions are repetitive viz. salary calculations, calculations when leave has been taken, decision to place order for materials, follow up with customers, handling of feed back from them, etc. Non programmed decisions need to be taken in problems and cases which crop up for the first time and they do not have a precedence within the company. What to do about a failing product

line, how to handle increasing customer dissatisfaction. These types of problems require custom tailored decisions which fall in the non-programmed category. Since programmed decisions are based on existing policies any manager following the same set of policies would arrive at the same decision. On the contrary in non programmed decisions the managers knowledge, experience, views, beliefs, values, etc also come into play in arriving at the decision. Therefore decisions taken by two different managers for the same problem need not be the same. Each would claim his or her decision to be the best and rational. The difference between good, effective managers and ineffective ones is known from their non programmed decisions. Most managers are involved full time in taking routine programmed decisions. They do not have time to take important, non routine, non programmed decisions. This state is referred to as Greshams Law of Decision-Making 2. Individual and Group or Collective Decisions Some decisions are taken by an individual. These are within the individuals group where he has jurisdiction. Decisions that affect individuals in more than a group are collectively taken by representatives from the involved groups. Routine decisions are individual in nature. Strategic decisions which may effect all in the organisation are taken by a group. The Dialectic Method of decision making requires managers from different participating departments to foster a structured debate of opposing view points before arriving at a decision. The Devils Advocate method appoints a manager to act as a devils advocate in which the person finds and narrates all negative aspects of the likely decision before bringing the decision into effect or force. This was started by the church before elevating a person to sainthood. Some advantages of group decisions are - Increased acceptance by those affected Group decisions are accepted by group members and they help in decisions being accepted by others also. - Easier Co-ordination Group decisions reduce problems in coordination which necessary to implement it - Easier communication Group decisions reduce communication required to implement them - More information processed Since more people are involved in a group more information is put forward, discussed while arriving at a decision. Some disadvantages of group decisions - It takes longer time to arrive at decisions - Groups can be indecisive discussions are dragged and no decisions taken. One blames the other for lack of progress.(Agreed to Disagree !- R K Laxman, cartoonist) - Groups can be dominated A higher ranked individual could influence others in a group to choose his or her views. This negates the very purpose of a group discussion - Groups may have a prior commitment to a particular solution This may be due to connections to persons outside the group. Managers must weigh the advantages and disadvantages of submitting a subject to a group for discussion. A problem of research or study requiring individual study cannot be given to a group. A group comes in handy when it is required to criticize the results of the research paper. Not before it. The fact that a group can produce both good and bad consequences should be borne in mind always. A group could help management to implement its policies while, when it is at loggerheads with the management it could play havoc too. Therefore correct understanding of group dynamics is required to enhance desirable consequences and reduce undesirable ones. Two approaches have recently been proposed as alternatives to conventional group decisions. Nominal Group Technique The steps involved in this technique are - Members give their ideas regarding a problem independently in writing - They present their ideas one by one without discussions. These are written on a board - The recorded ideas are then discussed for clarification and evaluation - Each member silently, independently rates the different ideas in a voting system The group decision is the pooled result of individual votes In nominal group as the name suggests, the group is for name only. No open discussions are held as in conventional groups. It purposefully attempts to reduce verbal interaction Delphi Technique In this technique the members of the group do not meet each other at all. They send their ideas through mail. Their opinion is sought on a carefully designed questionnaire which is sent to them. The responses of the questionnaire are summarized

into a feedback report and sent back to them with a second questionnaire which is designed to probe their ideas in-depth. Generally a final summary is developed based on the responses received the second time. Disadvantages of the system - There may be a bias in the ways the questions are worded or designed. Two groups of experts may not reach the same conclusion. 3. Minor and Major Decisions Decisions taken during the course of routine days activity are considered to be minor while decisions taken by the upper management are considered to be major. The relative significance of the decisions can be measured in four ways a) Degree of Futurity - When a decision has a long term effect, commits the company for longer period of time, it is known as a major decision. viz. change in product, replacing old machinery, etc. b) Impact of decision on other functional areas If a decision affects only one functional area it is minor. When it affects other functional areas also it is major c) Qualitative factors that enter the decision A decision involving a subjective or qualitative aspect is an important or weighty decision. Eg. an illegal gratification sought by an Sales Tax inspector, how so ever small needs to be decided by the concerned top management executive. d) Recurrence of decisions Non recurring decisions which are rare and have no precedence are made by the top management and are considered to be major. Repetitive decisions which are routine are considered to be minor whether taken at the top and lower level of management. 4. Strategic and Routine Decisions Decision which relate to the present viz. house keeping, cafeteria, lighting, air-conditioning, parking facility which all relate to achieving a higher degree of efficiency are called routine decisions. Strategic decisions have a more profound effect on the companys future viz. change of product line, lowering or increasing the product cost, etc. While routine decisions which do not require elaborate discussions and do not cost much are taken by middle or lower management strategic decisions are discussed in detail and are more cost sensitive. These are taken by the top management. 5. Simple and Complex Decisions When the variables involved in a problem solving are few it is considered to be a simple problem while when the variables are more it is considered to be complex. When the two types of decisions are combined with low or high certainty of their outcomes we get four types of decisions Mechanistic or Routine decisions Simple Problem High degree of outcome certainty. Standards operating procedures developed by managers to solve problems Judgemental Decisions Simple Problem but having low degree of outcome certainty. Marketing decisions, investment decisions. Analytical Decisions Complex problems having high degree of outcome certainty. Decisions in the area of production are of this type. A variety of computational techniques are used viz. linear programming, network analysis, queuing theory etc. are used to arrive at good decisions. Adaptive Decisions Complex problems having low degree of outcome certainty. Changes in corporate plan and changes in policy to meet environmental changes, technological changes are decisions in this type. 6. Temporary (Adhoc) and Permanent Decisions Some decisions are taken depending on the situation till a solution is found. These are temporary decisions. Permanent decisions are long lasting. Adhoc decision decision to pay and min. amount to pay to affected people pending final figures Permanent Decision deciding amt. to be paid after complete loss analysis and grievances. Steps in decision Making

Recognition of Problem Deciding Priorities among problems Problem Diagnosis-----------------------------------------------Development of alternate solutions--------------l 1 l Studying and comparing the effect of alternatives==== l 1 l Implement the decision into action=========-----l ------------------------------Study the result l l l l l

Recognition of Problem It is necessary to be on the lookout for problems and recognize that there is a problem. This is the first stem in decision making. If one realises a problem late then it might be too late. Generally there exists a problem when - there is a deviation from the past experience. Current sales are less than the figure for the same period last year; expenses have increased, rejections are more, absenteeism is more. - there is a deviation from the plan. Sales not as much as planned. Project is off schedule machine problems, people problem, process out of control, - other people bring problem to the manager customer complaints about quality or late delivery, lower manager complains about over load, workers complain about work conditions. Production problem, transport problem - competitors outperform the managers company other companies have developed better methods of economic manufacture and are capturing the market. Deciding Priorities among problems A manager must decide whether the problem is one that is to be solved by him or at his level. If it is a problem pertaining the policy or involving other departments or with information available only at upper levels he should refer the problem to his higher ups who could solve it, speedily, effectively. If it is solvable by his subordinates he should encourage and help them solve it at that level. If it is to be solved by him, he has to analyse whether the problem needs to be attended to immediately or could be held for a few days, whether it is the right time to solve it, whether he can solve it alone or he requires help. At the soonest possible he should address the problem. There are also instances when problems are deliberated not solved immediately since given time most problems resolve themselves. Eg. Napoleon was known not to open his mail for 3 weeks. After which he was always happy to find that most of the problems were resolved and he had to address only a few. Problem Diagnosis It is necessary that a problem is correctly diagnosed. Only then it could be properly addressed and solved. The problem should be analysed from all angles before giving a solutions. Many a times the problem does not lie where it appears to be. For eg. a drop is sales might be attributed lack of proper marketing, stiff competition, market saturation, etc. The real problem could be the slow response of the management to changing tastes or trend of the customer. It could also be that the competitor is offering a better deal to the distributor for pushing their product. Development of alternate solutions After diagnosing the problem comes finding alternate solutions. Every problem has more than one solution. Many a times there appears to be only one solution which one feels is not the right one. Eg. Problem Demand is more, production needs to be increased Alternatives set up a new plant, increase current plant capacity by adding equipment, increase a shift, provide overtime and incentive to existing workers. In general alternatives come with limitations. Increasing plant capacity might be limited by funds/credit crunch. The labour force attitude or mood might not be favourable for the other two options. Two simple ways of finding a solution are i.) Is there a precedent ? and ii) How do other companies solve such problems ? However, even if there are precedents it need not be an apt solution in changed times and circumstances today. Also, other companys methods of solving such problems might not apply to the

policies of ones organisation. The manager then has to use his one experience, intuition and come up with appropriate alternative solutions. In this the manager has to be creative. Scientists and inventors have shown that it is possible to come up with brilliant ideas by Saturation involves knowing the problem thoroughly, fully. Having all info. about it. All options. All alternatives from all angles. One needs to be saturated with the problem parameters Deliberation Thinking about the problem from various view points and angles. Incubation When no ideas flash, sleep over it. Clearing ones mind. Not thinking about it all. Illumination In all likelihood an idea flashes with all pieces falling into place. Accomodation Proposing the idea after refining. It is known that intuition is a function of the right side of the brain which works when it is calm or still. In logical thinking, analysing etc. the left side of the brain is more predominant. Creativity is more in a permissive atmosphere than in a conservative one. Different managers could come up with different ideas. Another method is brainstorming in which members of a group of 5 or 10 furnish ideas, how-so-ever bizarre or silly they may appear to be. No analysis of ideas is done at that stage. Later The ideas are analysed logically later. Eg. Nun being chased. Studying and comparing the effect of alternatives Suitability In decision making, once the alternatives are available, it is necessary to evaluate them to see which suits best for the company. The alternatives must lead the company towards its goals and at the same time suit its policies and mission commitments. Consequences The consequences of the alternatives both long and short term must also be analysed. In essence they must be analysed for their quality and acceptability. Tangibility The quality of the solution is assessed for its tangible and intangible consequences. Tangible consequences are measurable ones viz. extent of increased target possible, in crease in costs for achieving the same, cost verses the permanency of the increased target, cost of additional shift, overtime costs, etc. Intangible consequences are the effect of the continual overtime on the health of the labour force, the likely change in attitude of the work force once the additional income they earn is stopped once the OT is withdrawn, consequence of buying from a cheaper supplier not as reliable as another one who is costlier, etc. It is always a dilemma for the deciding manager to pick from intangible alternatives. He has then to depend on his instincts, experience and beliefs. Acceptability of a solution is very important. All concerned must readily and willing accept the solution for its whole hearted implementation. Generally, in matters of finance, production, engineering, purchase etc the qualitative aspect of the solution takes preference while in solutions pertaining working condition, office layout, etc where human matters are involved the acceptability takes preference although it may cost more. A manager must always strike the right balance. There are instances the manager must consider the quality of the solution not only from his own dept. point of view but also from that of the other departments. In a seasonal requirement product when one decides to manufacture the quantity required over the entire year uniformly over all the months, it is natural that his inventory would go up. Thus his intention of reducing his costs has loaded the stores and warehousing department. In the process the total cost is sub-optimised which is not ideal for the os goal. There occur situations where the alternatives are arrived at based on insufficient information. In such instances a pilot-testing is done. A product is launched locally for a short while to study how it performs, an advertisement is broadcast in a part of the country to see its acceptance and response, a new technique is applied in a branch unit etc. before launching them countrywide. Depending on the external factors over which the decision maker has no control a solution may have several outcomes. A decision maker must take the consequences and costs of such external conditions also assuming that would occur at some time in the future. Implement the decision into action After arriving at an accepted alternative it is to be brought into action. This requires communication of the decision to all levels of the organisation and to the employees who are required to carry out the plans accordingly.

It is necessary that the decisions are made known to the workers without ambiguity. It is also required that they accept it. If not their full cooperation might not be forthcoming. It would then be required to convince them. Ideally, at some stage of the decision making and discussing alternatives, worker participation must be allowed. Many a times they come up with viable suggestions which are likely to be overlooked by managers due to lack of information or his limitations. When employees are involved in the decision making process they accept as well as implement decisions whole heartedly. Study the result and follow up Once implemented a manager should study the way the implementation. He should have follow up plans to oversee the implementation. In the event he sees some hitherto unforeseen obstacles he must make appropriate minor changes to the decision to ensure smooth flow of work. During the process of decision making the managers face many difficulties. Some of them are: Incomplete Information Non-conducive Environment Opposition by Subordinates Improper communication Wrong Timing Statutory Regulation Govt. Regulations External Influence Lack of Support Steps in planning & planning premises Steps involved in planning are 1. Being aware of opportunities. This is the first step is setting objectives. One should be aware of the available opportunities 2. Establishing Verifiable Objectives Or Goals to be achieved Once the opportunities available are analysed the objectives are set for the organisation. The objectives could be numerous based on the top managements belief, its mission, the values the managers hold, etc. The objectives could volume of business, new products to be launched, area of operations to be increased, etc. Each bigger goal is in turn broken down into smaller ones by departments and sections under each dept. The values and beliefs of top men viz. J N Tata, Birla led to development of enterprises in India ` which benefited the public at large and contributed to the Indian economy. 3. Establishing planning premises. The premise on which the planning is formed is the foundation for the success of the plan. The plan is based of pertinent data pertaining to the future as the population trend, market condition, competition, availability of resource, government control, etc. Planning premises are based on a. Internal and external premise The premise may be either within the company or outside it. The premise with in the company include sales forecast, companys programmes and policies, extent of capital investment, machinery in use, competency of the management, skill of the workers, etc. External premises would fall under three groups business environment, factors influencing the demand for the product and factors affecting resource availability. The external premises may include the following - General business and economic environment - Technological changes - Govt. Policies and Regulations - Population Growth - Political stability - Sociological factors - Demand for industry product b. Tangible and Intangible premise Quantitatively measurable factors viz. population growth, industry demand, resources, etc are tangibles. Political stability, sociological factor, environmental factors are egs. of intangibles. c. Controllable and uncontrollable premise There are controllable factors viz. resources made available, skill of labour, competence of managers, etc. Uncontrollable factors include, floods, earthquakes, wars, strikes, wars, etc. Since uncontrollable premises are not in the hands of the management it is required that the objectives are reviewed and revised based on the prevailing conditions.

4. Deciding the Planning period Once the goal is set by the management and the planning premises are established it becomes necessary for the plan period to be set. Some select one year while others select decades. The period however is based on the companys capacity to predict the future. Either way there is some logic on which the period is chosen. Other than a predictable futuristic factor choice of a period has the following factors which govern it: a) Lead time in developing and commercializing a new product Depends on the size of the product. Large heavy engg. item would take a few years while a smaller product would take less. b) Time required to recover capital investment OR pay back period. Depends of the investment made, cash inflow per year, borrowings, interest payable, etc. c) Length of commitments already made. Length of plan should be long enough to meet the commitments made to customers. 5. Determination of alternative courses of Actions There is no plan which does not have an alternative. With changing scenarios it is necessary to look for alternatives to meet goals by new methods, new technologies, better machines, proper training, etc. 6. Evaluating the alternatives and selecting the best course of action Evaluating the best alternative available which is in line with the planning premise and best suited to meet the companys objectives. 7. Formulating derivative plan The plans must be translated into action. For this departments, sub-units must form their own plans based on the main plan. These are known as derivative plans which nmeed to be set into action towards meets in the goals. These derivative plans must also be realistic and based on strengths and weakness of the units, sub-units. 8. Measuring and controlling the progress Without a check the plan if running would go out of hand. It needs to be monitopred and corrective actions taken according to the measurements and findings. It could also be necessary to revamp the plan if unrealistic. Limitations of Planning Planning encounters the following limitations - It is expensive and time consuming. Gathering statistical information, conduction market surveys, etc all take time and money. Further it is not guaranteed that the organisations objectives would be served as expected 100%. Therefore smaller industrial units do not undertake a formal planning, since they cannot afford it. - Planning restricts activity to risk-free and rational operations. A trend setting managers intuition and drive do not find fruit. On the contrary plans, rules and regulations may delay decision taking when in an emergency a manager has to take a spot decision. - In industries governed by rapidly changing trends and tastes planning has its own limitations since it is just not possible to plan and organize for rapid changes. The best possibility is to have short term plans and open plans and keep changing along with the trends. Hierarchy of plans.
Objectives Strategies ---------------------------------------------------------------------- for non repetitive for repetitive activities activities Single-use Plans Standing Plans ACTION PLANS

Hierarchy of Plans

Plans have an hierarchal order. At the top are the primary goals or objectives are set by the top management towards which the entire activity of the organisation is focused. Then come the strategies or Strategic Plans which are in place formed by top management which include policies, procedures, rules, regulations, etc. which are set and are to be to be followed for achieving the target. Then come the single use plan and standing plan which are executed by the middle management. Further down in the hierarchy of plans are the action plan formed by the foremen, supervisors for carrying out day to day activity Goals and Objectives Strategies Middle Management Single Use Plans Standing Plans Foremen and Supervisors Top Management

Action Plans

Note : Student has to draw the pyramid and levels Review / Assignment Questions 1. Define Planning and discuss its importance 4 marks Dec. 2008 2. Define objectives. Discuss characteristics of Business objectives 6 M Dec. 2011 3. Briefly explain steps in decision making 8 M Dec 2008 4. Briefly explain the steps involved in Planning 10 M 5. What are the major drawbacks in Planning? Explain 10 Dec 2010 6. Explain Hierarchy of Plans 10 m Dec 2009 7. What are the different types of Plans? Explain. 05 M Dec 2009 8. What is Planning premise? Explain classification of planning premise with examples 8 M Dec 11 Assignment submission due date Thursday, 21st February, 2013