Unit 3

Planning and Decision Making

Meaning/Concept
• It is primary function of management, it is deciding in
advance what to do, when to do, how to do, why to do and
by whom to do etc. to achieve common goal of
organization
• It is a bridge between present condition where we are and
future condition, where we want to be.
• Planning determine the success and failure of organization
Features of Planning
• Future oriented
• Pervasive function
• Goal oriented
• Decision oriented
• Process
• Efficiency oriented
Levels of planning
• Strategic/Corporate Plan: formulated by top level
management, overall planning, policy making,
objectives, goals mission of organization is
determined by this plan, plan life span is 1 – 5 years,
it is foundation of tactical and operational plan
• Tactical/Department Plan: formulated by middle
level of management, each departmental head make
tactical plan for their own department, plan life span
is 6 months to 1 year, based on corporate plan and
guides for operational plan
• Operational/Unit Plan: formulated by operational
level management , it is day to day plan so it changes
frequently, plan may different from one unit/section
to another unit
Steps in Planning
• Analyze opportunities: to see the scope of new plan
• Setting goal: if there is scope, then set the goals
• Determination of premises: identify supporting
environment
• Determination of alternatives: several alternatives
identification
• Evaluation of alternatives: finding pros and cons of each
alternative
• Selection best alternative: having maximum benefits and
less limitations alternative would be best
• Formulating derivative plans: small supporting plan
development for master plan implementation
• Implementation: bring the derivative plans into action
• Review: to check whether plan doing well or not.
Tools for Planning
• Many quantitative tools are used to enhance the efficiency
and effectiveness of planning
• Forecasting: it is the process of predicting future events
that may affect the business significantly
• Network techniques: it is a technique used to plan and
control time and cost of project. CPM (critical path method)
used to plan and control time and cost. PERT (project
evaluation and review technique) used to develop network
of activities and their interrelationships
• Flow chart: it is used to identify the task component and
work simplification
• Gantt chart: it focuses on activities and time required to
complete them
• Break even analysis: it is the level of activity in which cost
becomes equal to revenue.
• Linear programming: it is mathematical tool used for
optimum combination of scarce resources and activities
• Simulation: it represents model to solve real life problems
like computer programming
Decision Making
• It is the selection of best course of action among several
alternatives. It is one of the managerial function which
measure the performance of manager, only after taking
decision, manager will give order and direction to their
subordinates.
Features
• Selective process continuous
• Rational process Freedom to decision maker
• Dynamic Positive or negative impacts
• Goal oriented
Decision Making Process
• Identification of problem
• Analysis of problem
• Development of alternatives
• Evaluation of alternatives
• Selection of best alternative
• Implementation
• Review
Types of Decision Making
• Programmed and non programmed decision: programmed
decision is very simple and easy to make decision in which
manager will knows both the results and impacts of
decision. It is already fixed and schedule decision taken by
middle and lower levels of management, whereas non
programmed decision is taken in emergency and sudden
situation taken by top management level, which results and
impacts are not known. It is not routine and schedule
decision
• Routine and basic decision: day to day activities are
done under routine decision, it is operational
decision taken by each individual in their own level,
almost fixed and no hard effort and risk whereas
major decision taken once in company life is basic
decision, taken by top management level. It is basis
for other decisions.
• Organizational and personal decision: decision taken
in organizational level by top management level
affecting overall organization, whereas individual
personnel takes the personal decision by single
individual, only affect personal benefits and welfare.
• Policy and operative decision: policy making and
formulating decision taken by top management level,
it does not change frequently whereas day to day
operation is conducted by operative decision in lower
level of management, it changes frequently.
• Individual and group decision: based on number of people
involved in decision making, if single person make decision,
it is individual decision, it is almost autocratic in nature
whereas group of people involved in decision making is
group decision, it is participative and democratic in nature,
also more effective.
Decision Making Conditions
• Certainty: condition where both inputs and outputs of
decision making are known. Anyone can make decision
easily.
• Risk: condition where only inputs are known and outputs
are not. Decision making may have positive and negative
impacts, so there is risk.
• Uncertainty: condition where neither inputs nor outputs
are known, unfavorable condition for decision making, full
of risk and chances of failure in decision making