Chapter 3

PLANNING & DECISION MAKING

Power Point by:

A S Edu Car e Institute

MEANING OF PLANNING
 Planning “Involves selecting missions and
objectives and deciding on the action to achieve
them; it requires decision-making, that is,
choosing course of action from among
alternatives.”
 Planning is the most basic of all managerial
functions, and it is about deciding in advance
‘what is to be done, by whom, how, when and
where’
Nature & Characteristics of Planning:
 Focus on objectives
 It is an intellectual process
 Planning is pervasive
 Planning is an integrated process
 Planning is directed towards efficiency
 Planning is flexible
 Planning is the most basic of all management functions
 Planning is a continuous & never-ending process
 The efficiency of planning is measured by what it
contributed to the objectives
Essentials of a good plan:
The essentials of a good plan are as follows:
 It should be based on a clearly defined objective
 It must be simple
 It should be comprehensive
 It should prove for a proper analysis & classification of
action
 It must be flexible
 It must be balanced
 It must use all available resources & opportunities utmost
before creating new authorities & new resources
 It should be free from social & psychological bases of the
planners as well as the sub-ordinates
 There should be proper co-ordination among short-term &
long-term plans
Objectives of planning:
 Planning helps in effective forecasting
 Planning provides certainty in the activities
 Planning gives a specific direction to the organization
 It establishes co-ordination in the enterprise
 It is helpful in creating a healthy competition
 It provides economy in the management
 It can forecast the risk
 It provides important information
 It is helpful in facing competition
 It is very much helpful in the accomplishment of
budgets
Is Planning a necessity in an
organization?

In organizations, planning is the process of setting goals

& choosing the means to achieve those goals. Without
plans, managers cannot know how to organize people
& resources effectively. Without a plan, managers &
their followers have little chance of achieving their
goals. Faulty plans affect the future of an entire
organization. Hence, planning is crucial.
Benefits of Good Planning:
 Reduces uncertainty
 Ensures economical operations
 Facilitates control
 Encourages innovation & creativity
 Improves motivations
 Gives competitive edge to the enterprise
 Ensures better co-ordination & avoids duplication of
efforts
Peter Drucker & 6 P’s of planning:
1. Purpose
2. Philosophy
3. Premise
4. Policies
5. Plans
6. Priorities
The hierarchy of organizational
plans:
Founder, Board of Directors, or Top Managers

• Mission statement: Broad organizational goal which

justifies an organization's existence.

Top & Middle Managers

• Strategic plans:Plans designed to meet an organization's

broad goals.

Middle & First Line Managers

• Operational plans: Plans that contain details for carrying

out, or implementing, the strategic plans in day-to-day
activities.
Principles of planning:
 Principle of contribution to objectives
 Principle of pervasiveness of planning
 Principle of flexibility
 Principle of limiting factors
 Principle of changes
 New plans

Controlling: No
undesirable
Plannin Implementatio comparing
deviations
n of plans plans with
g results
from plans

Undesirable
deviation

Corrective
action

Close Relationship Of Planning and

Controlling.
 TYPES OF PLANS

 MISSION or PURPOSE:
The mission and purpose identifies the basic purpose or
function or tasks of an enterprise or agency or any part of it.
Mission implies that the identified tasks should enable the
organization to link its activities to the need of society and
legitimize its existence by social expression of its business
purpose.

 OBJECTIVES or GOALS:
Objectives or goals are the ends towards which activity is
aimed. Objectives emanate primarily from the mission statement
of the organization .Objective should be expressed as specifically
as possible so that results can be seen and verified.
 STRATEGIES:
Strategies is defined as the determination of the basic long – term
objectives of an enterprise and the adoption of courses of action and allocation
of resources necessary to achieve these goals. Strategies refer to a framework of
grand plans formulated to meet the challenges of special circumstances.
Strategy is a term that was originally used in military science to mean plans to
counter what as adversary might or might not do. Strategy usually has the
implication of action for countering completion by prior planning, and it is
widely used in today’s industry.

 POLICIES:
Policies are also plans in that they are general statement or understandings
that guides or channel thinking in decision-making. Policies defined an area
within which a decision is to be made and ensure that the decision will be
consistent with, and contribute to an objective. Policies in an organization can
thus be major or minor in nature, but they all serve the purpose of bringing
uniformity in decisions and action.

 PROCEDURES:
Procedures are plans that establish a required method of handling future
activities .chronological sequences of required actions. Guides to action, rather
exact manner in which certain activities must be accomplished.
 RULES:
The essence of a rule is that it reflects a managerial decision
that a certain action must-or must-not- be taken. Rules are
different from policies in that policies are meant to guide decision
making which managers can use their discretion, while rules allow
no discretion in their application.

 PROGRAMS:
Programs are a complex of goals, policies, procedures, rules,
task assignment, steps to be taken, resources to be employed, and
other element necessary to carry out a given course of action. The
dimension of a programme can vary with the nature and purpose
of the progamme, and can be termed major or minor.

 BUDGETS:
A budget is a statement of expected results expressed in
numerical terms. Budget should be expressed in financial or
physical units, and must relate to a specific period of time.
STEPS IN PLANNING
 BEING AWARE OF OPPORTUNITIES:
An awareness of opportunities in the external environment as
well as within the organization is the real starting point for planning
.All managers should take a preliminary look at possible future
opportunities and see them clearly and completely know where
company stands in light of its strength and weaknesses, understand
what problems it has to solve and why, and know what it can expect
to gain.

 ESTABLISHING OBJECTIVES :
The second step in planning is to establish objectives for the
entire enterprise and then for each subordinate work unit. This is to
be done for a long term as well as for the short range. Objectives
specify the expected result and indicate the end points of what is to
be done, where the primary emphasis is to be placed. Enterprise
objectives give direction to the major plans, which, by reflecting
these objectives of every major department. Major departmental
objectives, in turn, control the objectives of subordinate
departments, and so on down the line .In other words objectives
from a hierarchy.
 DEVELOPING PREMISES:
Premises are assumption about the environment in which the
plan is to be carried out. It is important for all managers involve in
the plan to agree on the premises. In fact, the major Principle of
planning premises is this: the more thoroughly individual
charged with planning understand and agree to utilize consistent
planning premises, the more coordination enterprise planning will
be.

 DETERMINING ALTERNATIVE COURSES:

The forth step is planning is to research for and examine
alternative courses of action. The more common problem is not
finding alternatives but reducing the number of alternatives so
that the most promising may be analyzed. The planner must
usually make a preliminary examination to discover the most
fruitful possibilities.

 EVALUTATIN ALTERNATIVE COURSES :

After seeking out alternative courses and examining their
strong and weak points, the next step is to evaluate the alternatives
by weighing them in light of premises and goals.
 SELECTING A COURSES:
This is the point at which the plan is adopted-the real
point of decision-making.

 FORMULATING DERIVATIVE PLANS :

When a decision is made, planning is seldom
complete. Derivative plans are almost invariably
required to support the basic plans.

 QUANTIFYING PLANS BY BUDGETING:

After decisions are made and plans are set, the final
step is to quantify them by converting them into
budgets. Budget of an enterprise represents the sum
total of income and expenses, with resultant profit.
The Steps Of the Planning
Process
8 Budgeting.

7 Formulating Derivative Plans

6 Selecting a Course.

5 Evaluating Alter native Courses.

4 Determining Alternative Courses.

3 Developing Premises.

2 Establishing Objectives.

1 Being aware of Opportunities.

 OBJECTIVES
 Objectives are important ends towards which
organizational and individuals activities are directed.
 Objectives can be long-term or short-term, broad or
specific.
Nature Of Objectives
 Objectives need to be supported by sub-objectives.
 Objectives form a hierarchy as well as network.
 Managers have multiple goals.
 Choosing between short-term and long-term
performance and personal interests may have to be
subordinated to organizational objectives.
Hierarchy Of Objectives
 Social purpose such as contributing to welfare of
people by providing goods and services.
 Mission of the business.
 Specific overall objectives such as those in the key
result areas.
 Divisions, departments and units down to the lowest
level of the organization.
 Socio-
economic
purpose
Board Of Directors

Mission

Overall Objective Of
The Organization
(Long-Range, Top-Level Managers
Strategic)
More Specific Overall
Objective (e.g. in key result
areas)

Division Objectives
Middle-Level Managers

Department And Unit Objectives

Individual Objective (1) Performance (2) Personal

Development objective Lower-Level Managers

Hierarchy Of Objectives Organizational Hierarchy

Quantitative and Qualitative objectives
 Nonverifiable objective
1. To make a reasonable profit.
2. To improve communication.
3. To improve productivity of the
production department.
 Verifiable Objective
1. To achieve a return on
investment of 12% at the end of
the current fiscal year.
2. To issue a two-page monthly
newsletter beginning July 1,
2005, involving not more than
40 working hours of preparation
time (after the first issue)
3. To increase production output
by 5% by December 31, 2005,
without additional cost while
maintaining the current quality
level.
Management by objective
 Management by Objectives (MBO) is
a process to accept objectives within an
organization so that management and
employees agree to the objectives and
understand what they are in the
organization.
Benefits of Management by
objectives:
Improvement of managing through
results-oriented planning
Clarifications
Encouragement
Development
INPUTS (GOAL STRATEGIC ORGANIZATIONAL
INPUTS) PLANNING DEVELOPMENT

• REENERGIZING • TRANFORMATION • OUTPUTS

THE SYSTEM PROCESS
Failure of MBO:
 Failure to give guidelines to goal setters is often a
problem

 Managers need to plan premises and knowledge of

major company policies

 Goal should be right degree of flexibility

Recommendations for improving MBO:
Organizational commitment
Training
Adequate time and resources
Take care of the necessary mechanics
Timely feedback
Politics
PROCESS OF MBO OBJECTIVE IS:

S - SPECIFIC
M- MEASURABLE
A - ACHIEVABLE
R - REALISTIC
T - TIME BASED
Thank You