HUT 310

Module - 2
Jinshah B S

June 20, 2022

Introduction
Planning
Definition
Selecting missions and objectives as well as the actions to achieve them, which requires
decision-making, that is, choosing a course of action from among alternatives.

Plans can be classified as

1. missions or purposes,
2. objectives or goals,
3. strategies,
4. policies,
5. procedures,
6. rules,
7. programs, and
8. budgets.
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Missions or Purposes
Definition
The mission or purpose (the terms are often used interchangeably), identifies the basic
purpose or function or tasks of an enterprise or agency or any part of it.
I Every kind of organized operation has, or at least should have a meaningful mission
or purpose.
I In every social system, enterprises have a basic function or task assigned to them by
society.
Example
For example, the purpose of a business generally is the production and distribution of
goods and services. The purpose of a state highway department is the design, building,
and operation of a system of state highways. The purpose of the courts is the
interpretation of laws and their application. The purpose of a university is teaching,
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research, and providing services to the community.
Objectives or Goals

Definition
Objectives or goals (the terms are used interchangeably in this book), are the ends toward
which activity is aimed.

I They represent not only the end point of planning but also the end toward which
organizing, staffing, leading, and controlling are aimed.

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Strategies

Definition
strategy 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.

I For years, the military used the word strategies to mean grand plans made in light of
what it was believed an adversary might or might not do.
I While the term still usually has a competitive implication, managers increasingly use
it to reflect broad areas of an enterprise’s operation.

4
Policies
Definition
Policies also are plans in that they are general statements or understandings that guide or
channel thinking in decision-making. Not all policies are “statements”; they are often
merely implied from the actions of managers.

I Policies define an area within which a decision is to be made and ensure that the
decision will be consistent with and contribute to an objective.
I Policies help decide issues before they become problems, make it unnecessary to
analyze the same situation every time it comes up, and unify other plans, thus
permitting managers to delegate authority and still maintain control over what their
subordinates do.
I There are many types of policies

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Policies

Example
Examples include policies of hiring only university-trained engineers, encouraging
employee suggestions for improved cooperation, promoting from within, conforming
strictly to a high standard of business ethics, setting competitive prices, and insisting on
fixed, rather than cost-plus, pricing.

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Procedures
Definition
Procedures are plans that establish a required method of handling future activities. They
are chronological sequences of required actions. They are guides to action, rather than to
thinking, and they detail the exact manner in which certain activities must be
accomplished.

Example (A few examples illustrate the relationship between procedures and policies.)
Company policy may grant employees vacations; procedures established to implement
this policy will provide for scheduling vacations to avoid disruption of work, setting rates
of vacation pay and methods for calculating them, maintaining records to en- sure each
employee of a vacation, and spelling out the means for applying for leave.

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Rules
Definition
Rules spell out specific required actions or nonactions, allowing no discretion. They are
usually the simplest type of plan.

Example
“No smoking” is a rule that allows no deviation from a stated course of action.

I The essence of a rule is that it reflects a managerial decision that a certain action
must or must not be taken.
I Rules are different from policies in that policies are meant to guide decision-making
by marking off areas in which managers can use their discretion, while rules allow no
discretion in their application.

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Programs

Definition
Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be
taken, resources to be employed, and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets.

Example
They may be as major as an airline’s program to acquire a $400 million fleet of jets or a five
year program to improve the status and quality of its thousands of supervisors. Or they
may be as minor as a program formulated by a single supervisor to improve the morale of
workers in the parts manufacturing department of a farm machinery company.

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Budgets

Definition
A budget is a statement of expected results expressed in numerical terms. It may be called
a “quantified” plan. In fact, the financial operating budget is often called a profit plan.

I A budget may be expressed in financial terms; in terms of labor-hours, units of

product, or machine-hours; or in any other numerically measurable terms.
I It may deal with operation, as the expense budget does; it may reflect capital outlays,
as the capital expenditure budget does; or it may show cash flow, as the cash budget
does.

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STEPS IN PLANNING
Steps in planning

1. Being Aware of Opportunities

2. Establishing Objectives
3. Developing Premises
4. Determining Alternative Courses
5. Evaluating Alternative Courses
6. Selecting a Course
7. Formulating Derivative Plans
8. Quantifying Plans by Budgeting

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Being Aware of Opportunities

I Although it precedes actual planning and is therefore not strictly a part of the
planning process, an awareness of opportunities* in the external environment as well
as within the organization is the real starting point for planning.
I All managers should take a preliminary look at possible future opportunities and see
them clearly and completely, know where their company stands in light of its
strengths and weaknesses, understand what problems it has to solve and why, and
know what it can expect to gain.
I Setting realistic objectives depends on this awareness. Planning requires a realistic
diagnosis of the opportunity situation.

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Establishing Objectives
I The second step in planning is to establish objectives for the entire enterprise and
then for each subordinate work unit.
I This is to be done for the long term as well as for the short range.
I Objectives specify the expected results and indicate the end points of what is to be
done, where the primary emphasis is to be placed, and what is to be accomplished by
the network of strategies, policies, procedures, rules, budgets, and programs.
I Enterprise objectives give direction to the major plans, which, by reflecting these
objectives, define the objective of every major department.
I Major departmental objectives, in turn, control the objectives of subordinate
departments, and so on down the line. In other words, objectives form a hierarchy.
I The objectives of lesser departments will be more accurate if subdivision managers
understand the overall enterprise objectives and the derivative goals.
I Managers should also have the opportunity to contribute ideas for setting their own
goals and those of the enterprise.
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Developing Premises

I The next logical step in planning is to establish, circulate, and obtain agreement to
utilize critical planning premises such as forecasts, applicable basic policies, and
existing company plans.
I Premises are assumptions about the environment in which the plan is to be carried
out.
I It is important for all the managers involved in planning to agree on the premises.
I In fact, the major principle of planning premises is this: the more thoroughly
individuals charged with planning understand and agree to utilize consistent
planning premises, the more coordinated enterprise planning will be.

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Forecasting is important in premising:
I What kinds of markets will there be?
I What volume of sales?
I What prices?
I What products?
I What technical developments?
I What costs?
I What wage rates?
I What tax rates and policies?
I What new plants?
I What policies with respect to dividends?
I What political or social environment?
I How will expansion be financed?
I What are the long-term trends?
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Determining Alternative Courses

1. The fourth step in planning is to search for and examine alternative courses of action,
especially those not immediately apparent.
2. There is seldom a plan for which reasonable alternatives do not exist, and quite often
an alternative that is not obvious proves to be the best.
3. The more common problem is not finding alternatives but reducing the number of
alternatives so that the most promising may be analyzed.
4. Even with mathematical techniques and the computer, there is a limit to the number
of alternatives that can be thoroughly examined.
5. The planner must usually make a preliminary examination to discover the most
fruitful possibilities.

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Selecting a Course

1. This is the point at which the plan is adopted, the real point of decision-making.
2. Occasionally, an analysis and evaluation of alternative courses will disclose that two
or more are advisable, and the manager may decide to follow several courses rather
than the one best course

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Formulating Derivative Plans

1. When a decision is made, planning is seldom complete, and a seventh step is

indicated. Derivative plans are almost invariably required to support the basic plan

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Quantifying Plans by Budgeting

1. After decisions are made and plans are set, the final step in giving them meaning, as
was indicated in the discussion on types of plans, is to quantify them by convert ing
them into budgets.
2. The overall budget of an enterprise represents the sum total of income and expenses,
with resultant profit or surplus, and the budgets of major balance sheet items such as
cash and capital expenditures.
3. Each department or program of a business or some other enterprise can have its own
budgets, usually of expenses and capital expenditures, which tie into the overall
budget. If done well, budgets become a means of adding the various plans and set
important standards against which planning progress can be measured.

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Coordination of Short and Long Range Plans
I Often short-range plans are made without reference to long-range plans. This is
plainly a serious error.
I The importance of integrating the two types can hardly be overemphasized, and no
short-run plan should be made unless it contributes to the achievement of the
relevant long-range plan.
I Much waste arises from decisions about immediate situations that fail to consider
their effect on more remote objectives.
I Responsible managers should continually review and revise immediate decisions to
determine whether they contribute to long-range programs, and subordinate
managers should be regularly briefed on long-range plans so that they will make
decisions consistent with the company’s long-range goals.
I Doing this is far easier than to correct inconsistencies later, especially since
short-term commitments tend to lead to further commitments along the same line.
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OBJECTIVES
Introduction

“ Objectives were defined as the important ends toward which organiza-

tional and individual activities are directed.

I Objectives state end results, and overall objectives need to be supported by

”
sub-objectives. Thus, objectives form a hierarchy as well as a network.
I Care should be taken to avoid conflicts if multiple objectives are there.

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Hierarchy of objectives

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Hierarchy of objectives
I Objectives form a hierarchy, ranging from the broad aim to specific individual
objectives.
I The zenith of the hierarchy is the purpose or mission, which has two dimensions.
I First, there is the social purpose, such as contributing to the welfare of people by
providing goods and services at a reasonable price.
I Second, there is the mission or purpose of the business, which might be to furnish
convenient, low-cost transportation for the average person.
I The stated mission might be to produce, market, and service automobiles.
I At any rate, these aims are in turn translated into general objectives and strategies,
such as designing, producing, and marketing reliable, low-cost, fuel-efficient
automobiles.

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Hierarchy of objectives

I The next level of the hierarchy contains more specific objectives, such as those in the
key result areas.
I These are the areas in which performance is essential for the success of the
enterprise.
I Although there is no complete agreement on what the key result areas of a business
should be—and they may differ between enterprises—Peter F. Drucker sug- gests the
following: market standing, innovation, productivity, physical and financial
resources, profitability, manager performance and development, worker
performance and attitude, and public responsibility.
I The objectives have to be further translated into those of divisions, departments, and
units down to the lowest level of the organization.

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Strategies, Policies, and Planning
Premises
Introduction

“
Conceptually, strategic planning is deceptively simple: analyze the cur-
rent and expected future situation, determine the direction of the firm,

”
and develop means for achieving the mission.

In reality, this is an extremely complex process that demands a systematic approach for
identifying and analyzing factors external to the organization and matching them with the
firm’s capabilities

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Introduction

I Planning is done in an environment of uncertainty.

I No one can be sure if the external as well as the internal environment will be the same
even next week, much less several years from now.
I Therefore, people make assumptions or forecasts about the anticipated environment.
I Some of the forecasts become assumptions for other plans.

Example
For example, the gross national product forecast becomes the assumption for sales
planning, which in turn becomes the basis for production planning, and so on.

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THE NATURE AND PURPOSE OF STRATEGIES AND POLICIES

“
Strategies and policies are closely related. Both give direction, both are
the framework for plans, and both are the basis of operational plans, and

”
both affect all areas of managing.

Definition
Strategy refers to the determination of the mission (or the fundamental purpose) and the
basic long-term objectives of an enterprise, followed by the adoption of courses of action
and allocation of resources necessary to achieve these aims. Therefore, objectives are part
of strategy formulation.

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THE NATURE AND PURPOSE OF STRATEGIES AND POLICIES
Definition
Policies are general statements or understandings that guide managers’ thinking in
decision-making. They ensure that decisions fall within certain boundaries. They usually
do not require action but are intended to guide managers in their commitment to the
decision they ultimately make
I The essence of policy is discretion.
I Strategy, on the other hand, concerns the direction in which human and material
resources will be applied in order to increase the chance of achieving selected
objectives.
I The action plans through which strategies are executed are known as tactics.
Strategies must be supported by effective tactics
I To be effective, strategies and policies must be put into practice by means of plans,
with increasing details until they get down to the nuts and bolts of operation.
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THE STRATEGIC PLANNING PROCESS
Steps in the strategic planning process

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Industry Analysis

The formulation of a strategy requires the evaluation of the attractiveness of an industry

by analyzing the external environment. The focus should be on the kind of
1. competition within an industry,
2. the possibility of new firms entering the market,
3. the availability of substitute products or services, and
4. the bargaining positions of the suppliers as well as the buyers or customers.

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Enterprise Profile

I The enterprise profile is usually the starting point for determining where the
company is and where it should go.
I Thus, top managers determine the enterprise’s mission and clarify its geographic
orientation, such as whether it should operate in selected regions, throughout the
home country, or even in different countries.
I In addition, managers assess the competitive position of their firm.

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Orientation, Values, and Vision of Executives

I The enterprise profile is shaped by people, especially executives; and their

orientation and values are important for formulating the strategy.
I They set the organizational climate, and they determine the direction of the firm
through their vision that answers the question “What do we want to become?”
I Consequently, their values, their preferences, and their attitudes toward risks have to
be carefully examined because they have an impact on the strategy.

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Mission (Purpose), Major Objectives, and Strategic Intent

“
Strategic intent is the commitment to win in the competitive environ-
ment.

”
Companies that had achieved global leadership had an obsession with winning, not only
at the top level but also throughout the organization. This obsession is called strategic
intent

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Present and Future External Environment

I The present and future external environment must be assessed in terms of threats
and opportunities.
I The evaluation focuses on the competitive situation as well as on economic, social,
political, legal, demographic, and geographic factors.
I In addition, the environment is scanned for technological developments, for products
and services in the market, and for other pertinent factors in determining the
competitive situation of the enterprise.

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Internal Environment

I Similarly, the firm’s internal environment should be audited and evaluated with
respect to its resources and its weaknesses and strengths in research and
development, production, operation, procurement, marketing, products, and
services.
I Other internal factors that are important for formulating a strategy should be
assessed, including human and financial resources, as well as the company image,
organization structure and climate, planning and control system, and relations with
customers.

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Development of Alternative Strategies
Strategic alternatives are developed on the basis of an analysis of the external and internal
environments.
I An organization may pursue many different kinds of strategies, It may specialize or
concentrate
I Alternatively, a firm may diversify, extending the operation into new and profitable
markets.
I Another strategy is international expansion to other countries.
I Other examples of possible strategies are joint ventures and strategic alliances, which
may be appropriate for some firms. They are especially suitable for big undertakings
in which firms have to pool their resources.
I Under certain circumstances, a company may have to adopt a liquidation strategy by
terminating an unprofitable product line or even dissolving the firm.
I But in some cases, liquidation may not be necessary, but a retrenchment strategy
may be sufficient. In such a situation, the company may curtail its operation
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temporarily.
Evaluation and Choice of Strategies

The various strategies have to be carefully evaluated before the choice is made.
I Strategic choices must be considered in light of the risks involved in a particular
decision. Some profitable opportunities may not be pursued because failure in a risky
venture could result in bankruptcy of the firm.
I Another critical element in choosing a strategy is timing. Even the best product may
fail if it is introduced to the market at an inappropriate time.
I Moreover, the reaction of competitors must be taken into consideration.

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Consistency Testing and Contingency Planning

I The last key aspect of the strategic planning process is testing for consistency and
preparing for contingencies.
I During all phases of the strategic planning process, consistency testing is essential.
I Since the future cannot be predicted with a high degree of certainty, contingency
plans need to be prepared.

Example
For example, a strategy may be prepared with the assumption that the gross national
product may increase 3 percent annually over the next three years. A contingency plan
may also be made in which the scenario includes a major recession.

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THE TOWS MATRIX
I Today, strategy designers are aided by a number of matrices that show the
relationships of critical variables, such as the Boston Consulting Group’s business
portfolio matrix.
I For many years, the SWOT analysis has been used to identify a company’s strengths,
weaknesses, opportunities, and threats. However, this kind of analysis is static and
seldom leads to the development of distinct alternative strategies based on it.
I Therefore, the TOWS Matrix has been introduced for analyzing the competitive
situation of the company or even of a nation that leads to the development of four
distinct sets of strategic alternatives.

“ The TOWS Matrix is a conceptual framework for a systematic analysis that

facilitates matching of the external threats and opportunities with the in-
ternal weaknesses and strengths of the organization.

” 39
 I It is common to suggest that companies should identify their strengths and
weaknesses, as well as the opportunities and threats in the external environment, but
what is often overlooked is that combining these factors may require distinct strategic
choices.
I To systematize these choices, the TOWS Matrix has been proposed, where T stands for
threats, O for opportunities, W for weaknesses, and S for strengths.
I The TOWS model starts with the threats (T in TOWS) because in many situations, a
company undertakes strategic planning as a result of a perceived crisis, problem,
or threat.

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The WT strategy
The WT strategy aims to minimize both weaknesses and threats and may be called the
Mini–Mini (for “minimize–minimize”) strategy. It may require that the company, for
example, form a joint venture, retrench, or even liquidate.

The WO strategy
The WO strategy attempts to minimize the weaknesses and maximize the opportunities.
Thus, a firm with weaknesses in some areas may either develop those areas within the
enterprise or acquire the needed competencies (such as technology or persons with
needed skills) from outside in order to enable it to take advantage of opportunities in the
external environment.

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The ST strategy
The ST strategy is based on using the organization’s strengths to deal with threats in the
environment. The aim is to maximize the former while minimizing the latter. Thus, a
company may use its technological, financial, managerial, or marketing strengths to cope
with the threats of a new product introduced by its competitor.

The SO strategy
The SO strategy, which capitalizes on a company’s strengths to take advantage of
opportunities, is the most desirable. Indeed, it is the aim of enterprises to move from
other positions in the matrix to this one. If they have weaknesses, they will strive to
overcome them, making them strengths. If they face threats, they will cope with them so
that they can focus on opportunities.

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Assignment

1. Business Portfolio Matrix by Boston Consulting Group

2. SWOT analysis

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MAJOR KINDS OF STRATEGIES AND
POLICIES
For a business enterprise, the major strategies and policies that give an overall direction to
operation are likely to be in the areas of growth, finance, organization, personnel, public
relations, products or services, and marketing.
Products or Services
I A business exists to furnish products or services.
I In a very real sense, profits are merely a measure, although an important one, of how
well a company serves its customers.
I New products or services, more than any other single factor, determine what an
enterprise is or will be.

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The key questions in this area can be summarized as follows:
1. What is our business?
2. Who are our customers?
3. What do our customers want?
4. How much will our customers buy and at what price?
5. Do we wish to be a product leader?
6. What is our competitive advantage?
7. Do we wish to develop our own new products?
8. What advantages do we have in serving customer needs?
9. How should we respond to existing and potential competition?
10. How far can we go in serving customer needs?
11. What profits can we expect?
12. What basic form should our strategy take?

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Marketing
I Marketing strategies are designed to guide managers in getting products or services
to customers and in encouraging customers to buy.
I Marketing strategies are closely related to product strategies; they must be
interrelated and mutually supportive.
I A business can scarcely survive without at least one of these functions and preferably
both.
The key questions that serve as guides for establishing a marketing strategy are these:
1. Where are our customers, and why do they buy?
2. How do our customers buy?
3. How is it best for us to sell?
4. Do we have something to offer that competitors do not?
5. Do we wish to take legal steps to discourage competition?
6. Do we need, and can we supply, supporting services?
7. What are the best pricing strategy and policy for our operation?
8. How can we best serve our customers?
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PREMISING AND FORECASTING
One of the essential and often overlooked steps in effective and coordinated planning is
premising, which is the establishment of and the agreement by managers and planners to
utilize consistent assumptions critical to plans under consideration.

“ Planning premises are defined as the anticipated environment in which

plans are expected to operate. They include assumptions or forecasts of
the future and known conditions that will affect the operation of plans.

”
A distinction should be drawn between forecasts that are planning premises and forecasts
that are translated into future expectancies, usually in financial terms, from actual plans
developed.

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Example
For example, a forecast to determine future business conditions, sales volume, or political
environment furnishes premises on which to develop plans. However, a forecast of the
costs or revenues from a new capital investment translates a planning program into future
expectations.

“ In the first case, the forecast is a prerequisite of planning; in the second

case, the forecast is a result of planning.

At the same time, plans themselves and forecasts of their future effects often become
premises for other plans.
”
Example
The decision by an electricity company to con- struct a nuclear generating plant, for
example, creates conditions that give rise to premises for transmission line plans and
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other plans necessarily dependent on the generating plant being built.
Values and areas of forecasting: Forecasting has values aside from its use.
1. First, the making of forecasts and their review by managers compel thinking ahead,
looking to the future, and providing for it.
2. Second, preparation of the forecast may disclose areas where necessary control is
lacking.
3. Third, forecasting, especially when there is participation throughout the
organization, helps unify and coordinate plans.
By focusing attention on the future, it assists in bringing a singleness of purpose to
planning.
The environmental areas that are frequently chosen for making forecasts include the
economic, social, political/legal, and technological environments.

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Forecasting with the Delphi technique
One of the attempts to make technological forecasting more accurate and meaningful is
the Delphi technique. This technique, developed by Olaf Helmer and his colleagues at the
RAND Corporation, has a degree of scientific respectability and acceptance. A typical
process of the Delphi technique is as follows:
1. A panel of experts on a particular problem area is selected, usually from both inside
and outside the organization.
2. The experts are asked to make (anonymously, so that they will not be influenced by
others) a forecast as to what they think will happen, and when, in various areas of
new discoveries or developments.
3. The answers are compiled, and the composite results are fed back to the panel
members.
4. With this information at hand (but still with individual anonymity), further estimates
of the future are made.
5. This process may be repeated several times.
6. When a convergence of opinion begins to evolve, the results are then used as an
acceptable forecast.

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The Nature of Organizing
For an organizational role to exist and be meaningful to people, it must incorporate
1. verifiable objectives, which are a major part of planning;
2. a clear idea of the major duties or activities involved; and
3. an understood area of discretion or authority so that the person filling the role knows
what he or she can do to accomplish goals.
4. In addition, to make a role work out effectively, provision should be made for
supplying needed information and other tools necessary for performance in that role.

“ The term organization implies a formalized intentional structure of roles

or positions.

” 52
What does intentional structure of roles mean?

1. In the first place, as already implied in the definition of the nature and content of
organizational roles, people working together must fill certain roles.
2. In the second place, the roles people are asked to fill should be intentionally designed
to ensure that required activities are done and that activities fit together so that
people can work smoothly, effectively, and efficiently in groups.
3. Certainly, most managers believe they are organizing when they establish such an
intentional structure.

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Formal vs informal organization
Formal organization
Formal organization means the intentional structure of roles in a formally organized
enterprise. Describing an organization as formal, however, does not mean there is
anything inherently inflexible or unduly confining about it. If a manager is to organize well,
the structure must furnish an environment in which individual performance, both present
and future, contributes most effectively to group goals.

I A formal organization must be flexible.

I There should be room for discretion, for beneficial utilization of creative talents, and
for recognition of individual likes and capacities in the most formal of organizations.
I Yet, individual effort in a group situation must be channeled toward group and
organizational goals.

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Informal organization
The informal organization is a network of interpersonal relationships that arise when
people associate with each other. Thus, informal orga nizations, relationships not
appearing on an organization chart might include the machine shop group, the sixth floor
crowd, the Friday evening bowling gang, and the morning coffee “regulars.”

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The Department

Definition
The word department designates a distinct area, division, or branch of an organization
over which a manager has authority for the performance of specified activities.

I A department, as the term is generally used, may be the production division, the sales
department, the West Coast branch, the market research section, or the accounts
receivable unit.
I In some enterprises, departmental terminology is loosely applied; in others,
especially large ones, a stricter terminology indicates hierarchical relationships.
I Thus, a vice president may head a division; a director, a department; a manager, a
branch; and a chief, a section.

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Organizational Levels and the Span of Management
I While the purpose of organizing is to make human cooperation effective, the reason
for levels of organization is the limitation of the span of management.
I In other words, organizational levels exist because there is a limit to the number of
persons a manager can supervise effectively, even though this limit varies depending
on situations.
I The relationships between the span of management and organizational levels are
divided into two.

“ A wide span of management is associated with few organizational levels;

a narrow span, with many levels.

” 57
58
59
Narrow spans

Advantages Disadvantages
Close supervision Superiors tend to get too involved in subor-
dinates’ work
Close control Many levels of management
Fast communication between subordinates High costs due to many levels
and superiors
Excessive distance between lowest level and
top level

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Wide spans

Advantages Disadvantages
Superiors are forced to delegate Tendency of overloaded superiors to be-
come decision bottlenecks
Clear policies must be made Danger of superior’s loss of control
Subordinates must be carefully selected Requires exceptional quality of managers

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“ The principle of span of management states that there is a limit to the
number of subordinates a manager can effectively supervise, but the ex-
act number will depend on the impact of underlying factors.

”
The dominant current guideline is to look for the causes of limited span in individual
situations rather than to assume that there is a widely applicable numerical limit.

Examining what consumes the time of managers in their handling of superior subordinate
relationships and ascertaining devices that can be used to reduce these time pressures
will be not only a helpful approach for determining the best span in individual cases but
also a powerful tool for finding out what can be done to extend the span without
destroying effective supervision.

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Factors Determining an Effective Span
Narrow spans Wide spans
Little or no training of subordinates Thorough training of subordinates
Inadequate or unclear authority delegation Clear delegation and well-defined tasks
Unclear plans for non-repetitive operations Well-defined plans for repetitive operations
Non-verifiable objectives and standards Verifiable objectives used as standards
Fast changes in external and internal envi- Slow changes in external and internal envi-
ronments ronments
Use of poor or inappropriate communica- Use of appropriate techniques, such as
tion techniques, including vague instruc- proper organization structure and written
tions and oral communication
Ineffective interaction of superior and sub- Ineffective interaction of superior and sub-
ordinate ordinate
Ineffective meetings Effective meetings
Greater number of specialties at lower and Greater number of specialties at upper lev-
middle levels els (top managers concerned with external
environment)
Incompetent and untrained manager Competent and trained manager 63
The Structure and Process of Organizing
The organizing process consists of the following six steps, although steps 1 and 2 are
actually part of planning:
1. Establishing enterprise objectives
2. Formulating supporting objectives, policies, and plans
3. Identifying, analyzing, and classifying the activities necessary to accomplish these
objectives
4. Grouping these activities in light of the human and material resources avail- able and
the best way, under the circumstances, of using them
5. Delegating to the head of each group the authority necessary to perform the activities
6. Tying the groups together horizontally and vertically, through authority rela-
tionships and information flows

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Looking at organizing as a process requires that several fundamentals be considered.

In the first place, the structure must reflect objectives and plans because activities derive
from them.

In the second place, it must reflect the authority available to an enterprise’s management.
Authority in a given organization is a socially determined right to exercise discretion; as
such, it is subject to change.

In the third place, an organization structure, like any plan, must reflect its environ- ment.
Just as the premises of a plan may be economic, technological, political, social, or ethical,
so may be those of an organization structure. It must be designed to work, to permit
contributions by members of a group, and to help people achieve objectives efficiently in
a changing future. In this sense, a workable organization structure can never be static.
There is no single organization structure that works best in all kinds of situations: an
effective organization structure depends on the situation. 65
In the fourth place, since the organization is staffed with people, the grouping of activities
and the authority relationships of an organization structure must take into account
people’s limitations and customs. This is not to say that the structure must be designed
around individuals instead of around goals and accompanying activities. But an important
consideration is the kinds of people who are to staff it.

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