PRINCIPLES AND PRACTICES OF MANAGEMENT – I SEM BBA

MODULE -2
PLANNING AND DECISION MAKING

INTRODUCTION
Planning is the beginning of the process of management. A manager must plan before he can possibly
organize, staff, direct or control. Because planning sets all other functions into action, it can be seen as the
most basic function of management. Without planning other functions becomes merely an activity,
producing nothing but disorder.
Meaning of Planning
Planning refers to a predetermined course of action to achieve a specified aim or goal. It is with deciding in
advance what is to be done, when, where, how and by whom it is to be done.
Definitions
According to Koontz and O'Donnell, "Planning is deciding in advance what to do, how do, when to
do it and who is to do it, planning bridges the gap from whore we are, to when we want to go. It
makes it possible for things to occur which would not otherwise happen.”

Henri Fayol states that "Planning involves forecasting and preparing for the future, deciding on the
objectives and the means of achieving them."
NATURE OF PLANNING
 Future orientation: Planning is always future oriented. It is processes which looks ahead or think ahead
and making provision to tackle future event. While planning for the future managers would consider the
situations and events of present and past within and outside the organisation.

 Information base: Information is the basis of planning. Without information planning is not possible.
Information about present, future and past are needed for the good planning. It will help the managers to
evaluate the present and future situations and plan accordingly for the future.

 Rationality: why planning is said to be a purposeful and conscious managerial function and is backed
by necessary information, understanding and knowledge. Planning decisions are made with the
awareness of their consequences. Managers are unemotional in their approach to planning.

 Formal and informal Nature: Formal planning is done through investigation and analysis of various
factors. It will be a step-by-step process to achieve the goal. Whereas, informal planning is done by the
managers and communicated them to others through the word mouth which is flexible. Informal
planning is considered as a trial-and-error process.
 Intellectual Process: Planning is a process which needs the ability to think in a logical way and
understanding things. It needs the ability or skill to view the future opportunity and threats.
 Decision making: Planning involves decision making and problem solving. It also involves
identification of the issues which needs to be addressed, collection of relevant information facts and
finding out the most appropriate alternative course of action or choice.
 Dynamism: Planning is a dynamic process and it is based on the external and internal changes of
environment. Delay in planning may cause huge losses changes and current fashion trends are to be
taken in to consideration while planning.

IMPORTANCE OF PLANNING
 Planning offsets future uncertainty and change: Proper planning brings with it a higher degree of
certainty and order in the organisation; it helps the organisation in foreseeing the risks and uncertainties
in the future and in advance in the best possible way and in preparing the plan on the basis of decisions
in the past and present. In short, planning helps to reduce uncertainties and changes in future.
 Facilitates unity of direction and coordination: Planning facilitates coordination through its well-
defined objectives, well publicized policies, programmes and procedures. Planning facilitates the
coordination of all the inter-connected activities and avoids duplication of activities and delays in the
execution of activities.
 Facilitates Control: Planning helps maintain control by setting clear expectations for tasks,
responsibilities, timelines, and costs. This allows for easy comparison between actual and planned
performance. If there are differences, corrective actions can be taken to get back on track.
 Management by objectives: it makes the management formulate the objectives of the organisation in
clear-cut terms and take the right course of action to realize specific objectives.
 Focuses attention on Organisational goals: Planning sharpens the focus on organizational goals by
making them clear and concrete. It ensures that all activities are aligned with these goals and helps
everyone in the organization understand what needs to be achieved
 Improves Adaptability: Planning helps adaptability ie. planning helps the organisation in coping with
the changing business environment. The anticipation of future events and changing conditions, implied
in planning, prepares the organisation to meet them effectively.
 Improves Competitive Strength: Planning enhances a firm's competitive edge by anticipating
changes in technology and consumer preferences. It helps identify new opportunities for growth
and allows for improvements in work methods and product quality. Companies that plan effectively
are better positioned to stay ahead of their competitors.
 Improves Motivation: Planning ensures the participation of all managers in the determination of the
goals, policies, programmes etc, of the organisation; this improves the motivation and morale of the
managers.
 Encourages Innovation and Creativity: Planning promotes or encourages innovation and creativity on
the part of managers, in the sense that many new ideas come the minds of managers during planning,
which is basically a deciding function of management.

PURPOSE OF PLANNING
Planning is vital and crucial to the maintenance and sustenance of the business. The incorporator of the
business needs to plan before venturing into the business. Once the business is started, the management
needs to plan out its strategies for operations, production, marketing, investments and growth. Different
categories of plans are required at all stages and phases of the business. Plans are classified under short,
medium- and long-term plans. Every business draws out its daily, weekly, quarterly and yearly plans.
 Just as no two organisations are alike, neither are their plans. It is therefore important to prepare a plan
keeping in view the necessities of the enterprise. A plan is an important aspect of business.
It serves the following critical functions:
(i) Helps management to clarify, focus and research their business's or projects development and prospects.
(ii) Provides a considered and logical framework within which a business can develop and pursue business
strategies over the next three to five years.
(iii) Offers a benchmark against which actual performance can be measured and reviewed.
(iv) Function: Before chalking out a plan, the organisation usually takes stock of the scenario in which it is
currently operating in. This is done so by studying the external and internal environments of the
business.
(v) Significance: Planning helps integrate and connect all the departments in the organisation. The
departments are the production, marketing, IT, systems, HR, finance and accounting departments.

(vi) Types: Different plans are used for different situations. A start-up plan helps assess the feasibility and
funding of a new business. After starting, each department makes its own plan to guide operations. A
strategic plan selects the best options to boost profits and reduce risks. A growth plan is needed when a
company wants to expand its products and markets.

(vii) Time Frame: Plans are classified by duration: short-term (less than a year) for daily operations,
medium-term (1-3 years) for growth and diversification, and long-term (3-5 years) for corporate
strategies

(viii) Benefits: Several benefits accrue with planning. The organisation is able to gauge and analyze all the
options it has for producing its ware, marketing them and financing its operations and choose the one
that is best suited to it. Also once all strategic functions have been planned for, implementing them
becomes relatively for the business.

Types of Plans
Planning may be classified in different forms. Basically, it is classified on the basis of
(a) Time
(b) Managerial levels
(c) Repetitiveness of the operations in the firm
(d) Scope.
(a) Based upon time, the plan is classified as
1) Long range plan

2) Medium range plan, and

3) Short range plan

(1) Long term plans:

Long term plans are the plans with a time frame of beyond three years. Since, future being uncertain, these
plans should foresee the environment charges and prepare the organizations to accept these changes as and
when they occur. These plans aim at achieving the strategic objectives or goals of an organization.

(2) Short term plans:

Short term plans are the plans covering one year or less. Some examples are adjustment of production within
a given capacity, competition in the market, retain or promote its sales, keeping the workers satisfied,
budgeting future costs, employees training, inventory plans, etc.
(3) Medium term plans:
Medium term plans are generally prepared for a period of more than one year. These plans are the supportive
plans in that they help in the achievement of long term plans and they tends to define the organization's
activities.

(b) Based upon managerial levels, the plan is classified as

➢ Strategic plans,

➢ Tactical plans, and

➢ Operational plans

They are explained as follows:

Strategic Plan
A strategic plan is a high-level overview of the entire business, its vision, objectives, and value. This plan is
the foundational basis of the organization and will dictate decisions in the long-term. The scope of the plan
can be two, three, five or even ten years.
Managers at every level will turn to the strategic plan to guide their decisions. It will also influence the
culture within an organization and how it interacts with customers and the media. Thus, the strategic plan
must be forward looking, robust but flexible, with a keen focus on accommodating future growth.
Example: Diversification of business into new lines, types of products to be offered, planned growth rate in
profit, etc.
Tactical Plan
The tactical plan describes the tactics the organization plans to use to achieve the ambitions outlined in the
strategic plan. It is a short range (i.e. with a scope of less than one year), low-level document that breaks
down the broader mission statements into smaller, actionable chunks. If the strategic plan is a response to
“What?”, the tactical plan responds to “How?”. Creating tactical plans is usually handled by mid-level
managers. The tactical plan is a very flexible document; it can hold anything and everything required to
achieve the organization’s goals. That said, there are some components shared by most tactical plans:
Specific Goals with Fixed Deadlines Budgets Resources Marketing, Funding, etc
Operational Plan
The operational plan describes the day to day running of the company. The operational plan charts out a
roadmap to achieve the tactical goals within a realistic timeframe. This plan is highly specific with an
emphasis on short-term objectives. “Increase sales to 150 units/day”, or “hire 50 new employees” are both
examples of operational plan objectives.

PLANNING PROCESS

As planning is an activity, there are certain reasonable measures for every manager to follow:

(1) Setting Objectives

 This is the primary step in the process of planning which specifies the objective of an organisation,
i.e. what an organisation wants to achieve.
 The planning process begins with the setting of objectives.
 Objectives are end results which the management wants to achieve by its operations.
 Objectives are specific and are measurable in terms of units.
 Objectives are set for the organisation as a whole for all departments, and then departments set their
own objectives within the framework of organisational objectives.
Example: A mobile phone company sets the objective to sell 2,00,000 units next year, which is double the
current sales.

(2) Developing Planning Premises

 Planning is essentially focused on the future, and there are certain events which are expected to
affect the policy formation.
 Such events are external in nature and affect the planning adversely if ignored.
 Their understanding and fair assessment are necessary for effective planning.
 Such events are the assumptions on the basis of which plans are drawn and are known as planning
premises.
Example: The mobile phone company has set the objective of 2,00,000 units sale on the basis of forecast
done on the premises of favourable Government policies towards digitisation of transactions.

(3) Identifying Alternative Courses of Action

 Once objectives are set, assumptions are made.

 Then the next step is to act upon them.
 There may be many ways to act and achieve objectives.
 All the alternative courses of action should be identified.
Example: The mobile company has many alternatives like reducing price, increasing advertising and
promotion, after sale service etc.

(4) Evaluating Alternative Course of Action

 In this step, the positive and negative aspects of each alternative need to be evaluated in the light of
objectives to be achieved.
 Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the
planning premises and within the availability of capital.
Example: The mobile phone company will evaluate all the alternatives and check its pros and cons.

(5) Selecting One Best Alternative

 The best plan, which is the most profitable plan and with minimum negative effects, is adopted and
implemented.
 In such cases, the manager’s experience and judgement play an important role in selecting the best
alternative.
Example: Mobile phone company selects more T.V advertisements and online marketing with great after
sales service.

(6) Implementing the Plan

 This is the step where other managerial functions come into the picture.
 This step is concerned with “DOING WHAT IS REQUIRED”.
 In this step, managers communicate the plan to the employees clearly to help convert the plans into
action.
 This step involves allocating the resources, organising for labour and purchase of machinery.
Example: Mobile phone company hires salesmen on a large scale, creates T.V advertisement, starts
online marketing activities and sets up service workshops.

(7) Follow Up Action

 Monitoring the plan constantly and taking feedback at regular intervals is called follow-up.
 Monitoring of plans is very important to ensure that the plans are being implemented according to
the schedule.
 Regular checks and comparisons of the results with set standards are done to ensure that objectives
are achieved.
Example: A proper feedback mechanism was developed by the mobile phone company throughout its
branches so that the actual customer response, revenue collection, employee response, etc. could be
known.
ADVANTAGES OF PLANNING
1. Focus on Objectives: Planning helps clearly define and prioritize objectives, directing management's
focus on achieving them.
2. Minimizing Uncertainties: Planning helps anticipate future changes, reducing uncertainties by basing
decisions on past experiences and current situations
3. Efficient Resource Utilization: Planning allows for proper allocation of resources, minimizing waste
and ensuring optimal use.
4. Economic Operations: By evaluating alternatives and selecting the best course of action, planning helps
achieve goals at the lowest cost
5. Better Coordination: Planning ensures all activities are well-coordinated, avoiding duplication and
delays.
6. Encourages Innovation and Creativity: Planning stimulates new ideas and creative solutions among
managers.
7. Facilitates Control: Planning sets measurable targets, making it easier to monitor performance and
identify deviations.
8. Management by Exception: Planning allows managers to focus on strategic activities, intervening only
when things go off track.
9. Facilitates Delegation: Planning clarifies goals and facilitates the delegation of authority necessary to
achieve them.

DISADVANTAGES OF PLANNING
1. Lack of Accuracy: Planning is based on predictions about the future, which is uncertain. If the data used
is incorrect, the plan may not be useful.
2. High Costs: Planning can be expensive in terms of time and money. If the plan doesn’t yield significant
benefits, the resources spent are wasted.
3. Rigidity: Some plans are rigid, making it difficult to adapt quickly to changes in the environment.
4. Delays in Action: Planning takes time for analysis and decision-making. In emergencies, this delay can
cause missed opportunities.
5. Human Errors: Planning depends on human judgment, which can be biased or flawed, leading to
ineffective plans.
6. Limited Flexibility: Significant changes in a plan can disrupt other related plans, leading to wasted time
and effort.
7. Resistance to Change: People in organizations often resist change, making it difficult to implement new
plans effectively.
8. Time-Consuming and Costly: Planning requires significant time and resources, which can delay action.
Rushed planning may result in unrealistic plans.
9. Improper Planning: Setting goals too low or too high can lead to either false confidence or
unachievable targets, both of which are problematic.
10. External Limitations: External factors, like sudden political or economic changes, can limit the
effectiveness of planning.
DECISION MAKING
INTRODUCTION
Decision-making is an indispensable part of life. Innumerable decisions are taken by human beings in day-to-
day life. In business undertakings, decisions are taken at every step. All managerial functions viz., planning,
organizing, staffing, directing, coordinating and controlling are carried through decisions. Decision-making is
thus the core of managerial activities in an organisation.
DEFINITION
According to George R.Terry, “Decision-making is the selection based on some criteria from two or more
possible alternatives”.
A decision can be defined as a course of action consciously chosen from available alternatives for the purpose
of desired result —J.L. Massie.

Importance of Decision Making

Decision-making is integral to management and leadership roles in any organization. The importance of
decision-making can be highlighted through the following points:
  Guides Organizational Strategy: Decisions determine the course an organization takes, shaping its
strategy and direction.
 Ensures Resource Optimization: Effective decision-making helps in the optimal allocation and
utilization of resources, including time, money, and human capital.
 Affects Organizational Performance: Good decisions lead to successful outcomes, while poor
decisions can result in failures and losses.
 Enhances Problem-Solving: Decision-making is often required to solve problems, making it
essential for overcoming challenges and obstacles.
 Encourages Innovation: The decision-making process can foster creativity and innovation by
encouraging the exploration of various alternatives.
 Builds Leadership: Sound decision-making is a key trait of strong leadership, inspiring confidence
among team members and stakeholders.

STEPS INVOLVED IN DECISION MAKING PROCESS

Step 1: Identify the Purpose of the Decision
Analyze the Problem: Start by understanding the problem. Ask yourself:
 What exactly is the problem?
 Why does this problem need to be solved?
 Who will be affected by this problem?
 Is there a deadline to solve the problem?
Step 2: Gather Information
Collect Relevant Data: Identify all the stakeholders involved and gather as much information as possible
about the factors affecting the problem. Tools like 'Check Sheets' can be useful to organize this information.
Step 3: Set Criteria for Judging Alternatives
Define Baseline Principles: Establish criteria to judge the alternatives. Consider the organization’s goals and
culture. For example, most companies avoid decisions that reduce profits unless absolutely necessary. Set
clear guidelines for evaluating options.
Step 4: Brainstorm and Analyze Alternatives
Generate Ideas: Use brainstorming to list all possible solutions. Before this, understand the causes of the
problem and prioritize them. Tools like Cause-and-Effect Diagrams and Pareto Charts can help identify and
prioritize the causes.
Develop Alternatives: Based on your analysis, generate all possible solutions to the problem.
Step 5: Evaluate the Alternatives
Weigh Pros and Cons: Use your established criteria to evaluate each alternative. Consider the positives and
negatives of each option, using your experience and judgment.
Step 6: Choose the Best Alternative
Make an Informed Decision: After evaluating the options, choose the best alternative. This should be an
informed choice since you've followed a structured process.
Step 7: Implement the Decision
Action Plan: Turn your decision into a clear plan or a sequence of actions. Execute this plan either by
yourself or with the help of your team.
Step 8: Evaluate the Outcome
Review Results: After implementing the decision, evaluate the results. Learn from the outcome and make
corrections if necessary. This step will help you improve your decision-making skills over time.

MANAGEMENT BY OBJECTIVE (MBO)

Meaning of MBO
Management By Objectives (MBO) is a process of defining objectives within an organisation so that
management and employees agree to the objectives and understand what they are in the organisation
It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his “ The
Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a
management philosophy which values and utilizes employee contribution. Application of MBO in the field
of performance appraisal is a recent thinking.
MBO aims to increase organisational performance by aligning goals and subordinate objectives throughout
the organisation. Ideally, employees get strong input to identifying their objectives, time lines for completion
etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

MANAGEMENT BY EXCEPTION (MBE)

Management by Exception involves measurement of current performances. It helps the managers to know
the current state of affairs in the organization. It frees managers from the time-consuming involvement in
routine matters. Thus, they can concentrate on major problems. This ensures better utilization of
managerial talents
Meaning of Management by Exception (MBE)
Management by Exception is a policy by which management devotes it's time to investigating only those
situations in which actual results differ significantly from planned results. The idea is that management
should spend its valuable time concentrating on the more important items.

ORGANIZATION

Organising can be defined as an ongoing and interactive process of arranging things systematically or
placing things in order throughout the life of a business.

Organising is the process of identifying and grouping the work to be performed, defining and delegating
responsibility and authority, and establishing relationships for the purpose of enabling people to work most
effectively together in accomplishing objectives.

Definition

 According to Theo Haimann, 'Organising is the process of defining and grouping the activities of the
enterprise and establishing authority relationships among them”.
  Henry Fayol states that "An organization is a whole consisting of parts that are coordinated and
harmonized to achieve a common goal."

Process of organising

Organizing is a step-by-step process. At each step, an important task is performed by the administrators
working at the top-level of management. The process of organizing includes the blowing
1. In this general eight-stepped process, the top management first fixes the common objectives of the
organization.
2. In the second step, they (top management) identify all the activities (i.e. works or jobs) which are
required to achieve these predefined objectives.
3. in the third step, they group similar (related) activities and make their individual
4. In the fourth step, they define the responsibilities (duties) of all the staff members (employees and
managers).
5. In the fifth step, they delegate authority to staff members.
6. In the sixth step, the authority relationships between and subordinates are
7. In the seventh step, they provide the staff members with all the essential requirements like money,
machines, materials etc., which are used for achieving the objectives.
8. In the eighth final step, they co-ordinate the efforts of all staff members and direct it towards
achieving the common objectives of the organization.

Organisation structure

Organizational structure (OS) is the systematic arrangement of human resources in an organization so as to

achieve common business objectives. It outlines the roles and responsibilities of every member of the organization
so that work and information flow seamlessly, ensuring the smooth functioning of an organization.
The organisational structure can be classified under various categories which are as follows:
1. Functional Structure
2. Divisional structure
3. Matrix structure
4. Team Based structure
5. Network Structure
6. Hybrid structure

1. Functional Structure: Grouping of jobs of similar nature under functional and organising these
major functions as separate departments creates a functional structure. All departments report to a
coordinating head.
For example, in (d) It a manufacturing concern division of work into key functions will include
production, purchase, marketing. accounts and personnel. These departments may be further divided
into sections. Thus, a functional further structure is an organisational design that groups similar or
related jobs together.

2. Divisional Structure: In a divisional structure, the organisation structure comprises of separate

business units or divisions. Each unit has a divisional manager responsible for performance and who
has authority over the unit. Generally, manpower is grouped on the basis of different products
 manufactured. division is multifunctional because within each division functions like production.
marketing, finance, purchase etc.

3. Matrix Structure: Matrix organisation is the latest form of organisation that is a combination of
functional and project organisation. In such organisations there are two lines of authority, the
functional part of the organisation and project management part of the organisation and they have
vertical and horizontal flow of authority, respectively
4. Team-Based Structure: In a team-based structure, the focus is on teamwork, collaboration, and
shared responsibility, where employees work in cross-functional teams, bringing diverse skills
together. This approach fosters innovation, flexibility and higher employee engagement, but it
requires strong leadership to ensure alignment and progress toward common goals.

5. Network Structure: The network structure is decentralized and flexible, often involving external
partners. It promotes collaboration, innovation, and quick adaptation to market changes, making
efficient use of resources, though it can be complex to manage and requires strong communication to
coordinate effectively.

6. Hybrid Structure: The hybrid structure combines elements from different organizational
frameworks, offering flexibility and efficient resource utilization. However, its complexity demands
careful management to ensure all components function harmoniously.

7. Formal Organisation Structure: A formal organization structure is a deliberately designed

framework that defines the roles, responsibilities and hierarchy within an organization. It establishes
clear lines of authority and communication, ensuring that everyone understands their duties and how
they contribute to the organization's goals. This structure is governed by official rules, policies, and
procedures, providing consistency, accountability and efficiency in operations.

8. Informal Organisation: an informal organization structure emerges naturally based on personal

and social relationships among employees. It operates alongside the formal structure, creating
networks of communication and influence that are not officially defined but significantly impact the
workplace. Informal structures can foster strong interpersonal connections, improve morale, and
 facilitate communication, but they can also introduce complexities that need to be managed carefully
to align with the organization’s formal goals.

FORMAL AND INFORMAL ORGANISATION

Points of Formal Organisation Informal Organisation

Differentiation
1. Meaning Formal organisation is a prescribed Informal organisation is a natural and
structure of roles and relationships spontaneous structure arising out of the
which are consciously coordinated social tendency of the people so as to
towards a common objective. associate and interact.

2. Formed by A formal organisation is formed by the An informal organisation is formed

Whom? top-level management. by social forces within the formal
organisation.

3. Rules and The members of a formal organisation have The members of an informal
Regulations to follow certain rules and regulations. organisation do not have to follow
These rules are available in writing any rules and regulations.
(documented). If the members follow these
rules properly, then they will be rewarded.
However, if they do not follow these rules,
they will be punished.
4. Duties and In a formal organisation, the duties, In an informal organisation. there
Responsibilities responsibilities, authority and are no fixed duties. responsibilities,
accountability of each member is well authority. accountability, etc. for the
defined. members.

5. Objectives or In a formal organisation, the objectives or In an informal organisation. the

Goals goals are specific and well-defined. The objectives are not specific and
main objectives of a formal organisation well- defined. The main objectives
areproductivity, growth and expansion. of an informal organisation are
friendship.security, common
interest, individual
6. Stability A formal organisation is stable. and group satisfaction,
An informal etc.is not stable.
organisation
7. Channels of A formal organisation uses formal An informal organisation uses
Communication channels of communication. informal channels of communication
(i.e.,grapevine)
8. Organisation A formal organisation is shown on the An informal organisation is not
Chart organisation chart. shown on the organisation chart.

9.Superior- In a formal organisation, there exists a In an informal organisation, there is

Subordinate superior subordinate relationship. no such superior subordinate
Relationship relationship.
10. Benefits for The members of the formal The members of informal
Members organisation get financial benefits and organisation get social and personal
perks like wages or salaries, bonus, benefits like friend circle,
travelling allowances, health insurance, community, groups.
etc.

QUESTION BANK
SECTION -A (2 MARKS)

1. Define planning.
Planning is a predetermined course of action to achieve a specified aim or goal. It involves deciding
in advance what is to be done, when, where, how, and by whom it is to be done.

2. What is Management by Objectives (MBO)?

Management by Objectives (MBO) is a process of defining objectives within an organization so that
management and employees agree to and understand the goals. It was introduced by Peter F. Drucker
in 1954 to align individual objectives with organizational goals.

3. What is Management by Exception (MBE)?

Management by Exception (MBE) is a policy where management focuses only on significant
deviations from planned results, allowing them to concentrate on major issues rather than routine
matters.

4. What is meant by ‘decision making’?

Decision-making is the process of selecting the best course of action from two or more alternatives
to achieve a desired result.

5. What is a strategic plan?

A strategic plan is a high-level overview of an organization's vision, objectives and strategies for
achieving long-term goals, typically over two to ten years.

6. Differentiate between strategic and tactical plans.

Strategic plans are long-term and focus on the overall direction of the organization, while tactical
plans are short-term and focus on specific actions to achieve strategic goals.

7. What is an operational plan?

An operational plan details the day-to-day activities required to achieve the tactical goals within a
specific timeframe, focusing on short-term objective.

8. List the steps involved in the decision-making process.

The steps involved in the decision-making process include identifying the problem, gathering
information, setting criteria, brainstorming alternatives, evaluating alternatives, choosing the best
alternative, implementing the decision, and evaluating the outcome.

9. What is a strategic decision in an organization?

A strategic decision is a long-term decision that defines the overall direction and goals of an
organization, such as entering new markets or launching new products.

10. Why is planning essential for organizations?

Planning is essential because it helps organizations set clear objectives, allocate resources efficiently
and prepare for future uncertainties.

11. What is the primary characteristic of a functional organization structure?

 A functional organization structure organizes employees based on specialized roles or functions,
such as marketing, finance or human resources.

12. What is the main difference between formal and informal organization structures?
The main difference is that a formal organization structure is a deliberately designed framework with
defined roles and responsibilities, while an informal structure emerges naturally based on personal
and social relationships.

SECTION B (14 MARKS)

1. Explain the planning process in detail, highlighting the key steps involved.

The planning process is a step-by-step approach that organizations use to achieve their goals. It involves
several key steps:

1. Setting Objectives: The first step is to clearly define what the organization wants to achieve.
Objectives give direction to all planning activities. For example, a company might aim to increase its
market share by 10% within a year.
2. Developing Planning Premises: Planning premises are the assumptions about future conditions that
will affect the plan. These include forecasts and market conditions. Managers consider these to
ensure the plan is realistic. For example, they might consider upcoming government regulations.
3. Identifying Alternative Courses of Action: Next, different ways to achieve the objectives are
identified. This involves brainstorming various strategies. For instance, to increase sales, alternatives
might include expanding into new markets or launching new products.
4. Evaluating Alternatives: After identifying options, each one is evaluated based on its feasibility,
risks, and benefits. This helps in deciding which option is the most viable. Factors like cost, time,
and resources are considered.
5. Selecting the Best Alternative: The most suitable option is then chosen. The selected plan should be
practical, efficient, and aligned with the organization’s goals.
6. Implementing the Plan: The chosen plan is put into action. This step involves assigning tasks,
allocating resources, and ensuring that everyone is working towards the same goal. Effective
communication is crucial here.
7. Follow-Up and Control: Finally, the plan's progress is monitored. Managers compare actual
performance with the planned objectives and make adjustments if necessary. This ensures the
organization stays on track to meet its goals.

Conclusion: The planning process involves setting objectives, developing assumptions, identifying and
evaluating alternatives, selecting the best option, implementing the plan, and monitoring progress to achieve
organizational goals.

2. Discuss the various types of plans used in organizations.

 Planning is a fundamental function of management that lays the foundation for all other managerial
activities. The importance of planning can be understood through the following points.

Organizations use different types of plans to achieve their objectives. These plans can be categorized based
on their scope, time frame, and purpose:

1. Strategic Plans:

Strategic plans are long-term plans that define the overall direction and goals of the organization.
They are usually developed by top management and focus on the big picture, such as market
positioning, growth strategies, and resource allocation. Strategic plans typically cover a time frame
of three to five years or more. Example: A company might develop a strategic plan to enter new
international markets within the next five years.

2. Tactical Plans:

Tactical plans are medium-term plans that translate strategic plans into specific actions. They are
developed by middle management and focus on how to achieve the objectives set out in the strategic
plan. Tactical plans typically cover a time frame of one to three years and are more detailed than
strategic plans. Example: A tactical plan might involve launching a new marketing campaign to
increase brand awareness over the next year.

3. Operational Plans:

Operational plans are short-term plans that detail the day-to-day activities required to achieve tactical
goals. These plans are developed by lower-level management and focus on specific tasks, processes,
and procedures. Operational plans typically cover a time frame of less than one yeExample: An
operational plan might involve scheduling employee shifts or managing inventory levels for the next
quarter.

4. Contingency Plans:

Contingency plans are developed to address potential risks or unexpected events that could disrupt
normal operations. These plans outline alternative courses of action that can be implemented if the
original plan fails or if unforeseen circumstances arise. Example: A contingency plan might include
procedures for responding to a natural disaster or a sudden drop in market demand.

5. Single-Use Plans:

Single-use plans are designed for specific, one-time projects or events. Once the objective is
achieved, the plan is no longer needed. These plans are typically detailed and cover a short time
frame. Example: A plan for organizing a company-wide annual meeting or launching a new product.

6. Standing Plans:

Standing plans are ongoing plans that provide guidelines for repetitive activities. These plans are
used over and over again and include policies, procedures, and rules that govern routine operations.
Example: A company's employee handbook or safety procedures manual.
In conclusion, planning is an essential function of management that provides direction, reduces uncertainty,
and optimizes resource utilization. Organizations use various types of plans, including strategic, tactical, and
operational plans, to achieve their objectives and maintain a competitive edge in the market.

3. Discuss the importance of planning in management.

 Planning offsets future uncertainty and change: Proper planning brings with it a higher degree of
certainty and order in the organisation; it helps the organisation in foreseeing the risks and uncertainties
in the future and in advance in the best possible way and in preparing the plan on the basis of decisions
in the past and present. In short, planning helps to reduce uncertainties and changes in future.

 Facilitates unity of direction and coordination: Planning facilitates coordination through its well-
defined objectives, well publicized policies, programmes and procedures. Planning facilitates the
coordination of all the inter-connected activities and avoids duplication of activities and delays in the
execution of activities.
 Facilitates Control: Planning helps maintain control by setting clear expectations for tasks,
responsibilities, timelines, and costs. This allows for easy comparison between actual and planned
performance. If there are differences, corrective actions can be taken to get back on track.
 Management by objectives: it makes the management formulate the objectives of the organisation in
clear-cut terms and take the right course of action to realize specific objectives.
 Focuses attention on Organisational goals: Planning sharpens the focus on organizational goals by
making them clear and concrete. It ensures that all activities are aligned with these goals and helps
everyone in the organization understand what needs to be achieved
 Improves Adaptability: Planning helps adaptability ie. planning helps the organisation in coping with
the changing business environment. The anticipation of future events and changing conditions, implied
in planning, prepares the organisation to meet them effectively.
 Improves Competitive Strength: Planning enhances a firm's competitive edge by anticipating
changes in technology and consumer preferences. It helps identify new opportunities for growth
and allows for improvements in work methods and product quality. Companies that plan effectively
are better positioned to stay ahead of their competitors.
 Improves Motivation: Planning ensures the participation of all managers in the determination of the goals,
policies, programmes etc, of the organisation; this improves the motivation and morale of the managers.

 Encourages Innovation and Creativity: Planning promotes or encourages innovation and creativity on the part
of managers, in the sense that many new ideas come the minds of managers during planning, which is basically a
deciding function of management.

4. Discuss the different types of organizational structures and analyze their advantages and
disadvantages in the context of modern business management. Include examples of how these
structures can impact organizational effectiveness.

Organizational structures define how tasks are allocated, how reporting relationships are structured, and
how coordination is achieved within a company. The main types of organizational structures include:

 Functional structures
 Divisional structures
 Matrix structures
  Team-Based structures
 Network structures and
 Hybrid structures.
Each has its advantages and disadvantages, impacting how effectively an organization can achieve its
goals.

1. Functional Structure: This structure organizes employees based on specialized functions such as
marketing, finance, and human resources.

 Advantages: It allows for high specialization and efficiency as employees focus on specific tasks
within their expertise. Clear career paths are defined within each function.
 Disadvantages: It can create silos within an organization, leading to poor communication and
coordination across departments. For example, the marketing department may not fully
understand the needs of the production department, leading to misaligned goals.
 Impact: This structure is effective in stable environments where tasks are routine and
specialized, but less effective in dynamic environments requiring quick, cross-functional
decision-making.

2. Divisional Structure: In this structure, the organization is divided based on products, markets or
geographic regions.

 Advantages: It allows for greater focus on specific products or markets, making the organization
more responsive to market changes. Each division operates as a semi-autonomous unit.
 Disadvantages: This structure can lead to duplication of resources and internal competition
between divisions. For example, two divisions might develop similar products, wasting
resources.
 Impact: Divisional structures are beneficial for large organizations with diverse product lines or
markets, allowing for tailored strategies that suit specific customer needs.

3. Matrix Structure: The matrix structure combines functional and divisional structures, with employees
reporting to both functional managers and project managers.

 Advantages: It promotes flexibility and collaboration across functions, improving innovation

and the ability to respond to complex and changing environments.
 Disadvantages: It can lead to confusion and conflict due to dual reporting relationships. For
instance, an employee might receive conflicting instructions from a functional manager and a
project manager.
 Impact: Matrix structures are effective in organizations that require high levels of collaboration
and need to respond quickly to changes, such as in the technology sector.

4. Team-Based Structure: This structure emphasizes teamwork, collaboration, and shared responsibility
among employees.

 Advantages: It fosters innovation, flexibility, and higher employee engagement by encouraging

cross-functional teams to work together.
 Disadvantages: It requires strong leadership to ensure that teams are aligned and focused on
common goals. Without effective leadership, teams may lack direction or become uncoordinated.
 Impact: Team-based structures are particularly effective in industries that thrive on innovation
and adaptability, such as creative agencies and tech startups.
5. Network Structure: The network structure is decentralized and involves external partners and alliances
to carry out business functions.

 Advantages: It is highly flexible and promotes collaboration and innovation by leveraging

external expertise and resources. Organizations can quickly adapt to changes in the market.
 Disadvantages: Managing a network structure can be complex due to its reliance on external
entities, which may have different goals and priorities. Strong communication is required to
ensure effective coordination.
 Impact: Network structures are well-suited for companies operating in fast-paced industries
where agility and innovation are critical, such as in fashion or technology.

6. Hybrid Structure: The hybrid structure combines elements from various organizational frameworks to
create a model tailored to the organization's specific needs.

 Advantages: It offers flexibility and the ability to adapt to different circumstances, allowing
organizations to utilize the strengths of multiple structures.
 Disadvantages: The complexity of managing a hybrid structure can be high, as it requires careful
oversight to ensure all components work harmoniously together.
 Impact: Hybrid structures are effective in large, diverse organizations that need to balance
centralized control with the flexibility to respond to different market demands.

SECTION D (8 MARKS)
1. What are the steps involved in the decision making process.
Step 1: Identify the Purpose of the Decision
Analyze the Problem: Start by understanding the problem. Ask yourself:
 What exactly is the problem?
 Why does this problem need to be solved?
 Who will be affected by this problem?
 Is there a deadline to solve the problem?
Step 2: Gather Information
Collect Relevant Data: Identify all the stakeholders involved and gather as much information as possible
about the factors affecting the problem. Tools like 'Check Sheets' can be useful to organize this information.
Step 3: Set Criteria for Judging Alternatives
Define Baseline Principles: Establish criteria to judge the alternatives. Consider the organization’s goals and
culture. For example, most companies avoid decisions that reduce profits unless absolutely necessary. Set
clear guidelines for evaluating options.
Step 4: Brainstorm and Analyze Alternatives
Generate Ideas: Use brainstorming to list all possible solutions. Before this, understand the causes of the
problem and prioritize them. Tools like Cause-and-Effect Diagrams and Pareto Charts can help identify and
prioritize the causes.
Develop Alternatives: Based on your analysis, generate all possible solutions to the problem.
Step 5: Evaluate the Alternatives
 Weigh Pros and Cons: Use your established criteria to evaluate each alternative. Consider the positives and
negatives of each option, using your experience and judgment.
Step 6: Choose the Best Alternative
Make an Informed Decision: After evaluating the options, choose the best alternative. This should be an
informed choice since you've followed a structured process.
Step 7: Implement the Decision
Action Plan: Turn your decision into a clear plan or a sequence of actions. Execute this plan either by
yourself or with the help of your team.
Step 8: Evaluate the Outcome
Review Results: After implementing the decision, evaluate the results. Learn from the outcome and make
corrections if necessary. This step will help you improve your decision-making skills over time.
2. What are the purpose of planning process? Explain in detail.

Planning is vital and crucial to the maintenance and sustenance of the business. The incorporator of the
business needs to plan before venturing into the business. Different categories of plans are required at all
stages and phases of the business. Plans are classified under short, medium- and long-term plans. Every
business draws out its daily, weekly, quarterly and yearly plans.

It serves the following critical functions:

(ix) Helps management to clarify, focus and research their business's or projects development and prospects.
(x) Provides a considered and logical framework within which a business can develop and pursue business
strategies over the next three to five years.
(xi) Offers a benchmark against which actual performance can be measured and reviewed.
(xii) Function: Before chalking out a plan, the organisation usually takes stock of the scenario in which it is
currently operating in. This is done so by studying the external and internal environments of the
business.
(xiii) Significance: Planning helps integrate and connect all the departments in the organisation. The
departments are the production, marketing, IT, systems, HR, finance and accounting departments.

(xiv) Types: Different plans are used for different situations. A start-up plan helps assess the feasibility and
funding of a new business. After starting, each department makes its own plan to guide operations. A
strategic plan selects the best options to boost profits and reduce risks. A growth plan is needed when a
company wants to expand its products and markets.

(xv) Time Frame: Plans are classified by duration: short-term (less than a year) for daily operations,
medium-term (1-3 years) for growth and diversification, and long-term (3-5 years) for corporate
strategies

(xvi) Benefits: Several benefits accrue with planning. The organisation is able to gauge and analyze all the
options it has for producing its ware, marketing them and financing its operations and choose the one
 that is best suited to it. Also once all strategic functions have been planned for, implementing them
becomes relatively for the business.

3. Differentiate between formal and informal organisation.

A formal organization structure is a deliberately designed framework that defines the roles,
responsibilities and hierarchy within an organization.
An informal organization structure emerges naturally based on personal and social relationships among
employees. It operates alongside the formal structure, creating networks of communication and influence
that are not officially defined but significantly impact the workplace.

Points of Formal Organisation Informal Organisation

Differentiation
1. Meaning Formal organisation is a prescribed Informal organisation is a natural and
structure of roles and relationships spontaneous structure arising out of the
which are consciously coordinated social tendency of the people so as to
towards a common objective. associate and interact.

2. Formed by A formal organisation is formed by the An informal organisation is formed

Whom? top-level management. by social forces within the formal
organisation.

3. Rules and The members of a formal organisation have The members of an informal
Regulations to follow certain rules and regulations. organisation do not have to follow
These rules are available in writing any rules and regulations.
(documented). If the members follow these
rules properly, then they will be rewarded.
However, if they do not follow these rules,
they will be punished.
4. Duties and In a formal organisation, the duties, In an informal organisation. there
Responsibilities responsibilities, authority and are no fixed duties. responsibilities,
accountability of each member is well authority. accountability, etc. for the
defined. members.

5. Objectives or In a formal organisation, the objectives or In an informal organisation. the

Goals goals are specific and well-defined. The objectives are not specific and
main objectives of a formal organisation well- defined. The main objectives
areproductivity, growth and expansion. of an informal organisation are
friendship.security, common
interest, individual
6. Stability A formal organisation is stable. and group satisfaction,
An informal etc.is not stable.
organisation
7. Channels of A formal organisation uses formal An informal organisation uses
Communication channels of communication. informal channels of communication
(i.e.,grapevine)
8. Organisation A formal organisation is shown on the An informal organisation is not
Chart organisation chart. shown on the organisation chart.

9.Superior- In a formal organisation, there exists a In an informal organisation, there is

Subordinate superior subordinate relationship. no such superior subordinate
Relationship relationship.
 10. Benefits for The members of the formal The members of informal
Members organisation get financial benefits and organisation get social and personal
perks like wages or salaries, bonus, benefits like friend circle,
travelling allowances, health insurance, community, groups.
etc.

______________________________________________________________________________________________