PLANNING

Planning is the first managerial function to be

performed. It is concerned with deciding in
advance what is to be done in future, when,
where and by whom it is to be done. It is a
process of thinking before doing.

Without the activities determined by

planning, there would be nothing to
organize, no one to activate and no need to
control.
George R. Terry
 FEATURES OF PLANNING
1. Focus on realizing the objectives set
2. Intellectual process involving mental exercise
3. Selective as it selects the best course of action
4. Pervasive as all the levels of management plan
5. Lays foundation of the successful actions of
management
6. It is flexible
7. It is Continuous
8. Efficiency is measured by what it contributes to
the objectives.
 OBJECTIVES OF PLANNING
1. Helps in effective forecasting
2. Provides certainty in the activities
3. Establish coordination in the enterprise
4. Provides economy in the management
5. Helpful in the accomplishment of budgets
6. Gives direction to all the activities of an
organization
6 Ps in Planning
Purpose
Philosophy
Premise
Policies
Plans
Priorities
MERITS AND DEMERITS OF
PLANNING
Advantages: Disadvantages :
1.Reduces 1.Limitations of
uncertainty forecasts
2.Ensures 2.Rigidity in
economical administration
operations 3.Time consuming
3.Facilitates control process
4.Improves 4.Costly affair
motivation 5.Influence of
5.Gives competitive external factors
edge 6.Psychological
6.Avoids duplication factors
STEPS IN PLANNING
1. Awareness of opportunities and problems
a) What business opportunities will arise in future
b) What benefits will the organization get
c) How to exploit these opportunities
2. Collecting and analyzing information
3. Determination of objectives
4. Assessment of environment
5. Premising and forecasting
6. Review of key factors
 STEPS IN PLANNING
7. Development of alternative plans
8. Evaluation of alternative plans
9. Selection of a suitable plan
KINDS OF PLANNING

KINDS OF PLANNING

Organizational level Focus

Time period
Corporate Strategic Long
range
Divisional Operational Medium
range
Functional Tactic Short range
 ORGANIZATIONAL PLANNING
Corporate planning or top level planning: It lays
down the objectives, policies and strategies of an
organization. Usually made for a longer time
period.
Divisional planning or middle level planning: It is
related to a particular department or division. It
lays down the objectives, policies and strategies
of a department.
Sectional planning or lower level planning:
focused on laying down detail plans for the day to
day guidance.
 FOCUSED PLANNING
1. Strategic planning: deciding the objectives and
to decide the resource marshalling in order to
realize the objectives. Done by the top
management.
2. Operational planning: ensuring efficient use of
resources and to develop a control mechanism
so as maximum efficiency is ensured.
3. Tactical planning: made for short term moves.
Required to meet the sudden changes in the
environment forces.
 TIME PERIOD PLANNING
1. Long range planning: for a period of five years at
least. Involves capital budgeting, product
planning, project planning etc. deals with a
great uncertainty.
2. Medium range: for one to five years. Relate to
development of new products and markets,
product publicity etc. supportive to long range
plans.
3. Short range: upto one year. Made to achieve
short term goals. Focused on the internal
environment of the business.
Basic terms
1. Objectives: these are the end towards
which the activities of an organization are
directed. Objectives can be set both by
traditional (authoritarian) approach or
MBO approach.
2. Policies: Policies provide the framework
within which the decision makers are
expected to operate while making
decisions related to an organization
Basic terms
3. Procedures: These are the administrative
specifications prescribing the time sequence for
work to be done. They tell us how a particular
activity is to be done.
4. Methods: It is a means by which each operation
is performed. It also specifies how a particular
step in the procedure is to be performed.
5. Rules: it specifies what is to be done and what
is not be done. More rigid than a policy.
6. Strategy: It refers to the firms overall plan for
dealing with and existing in the environment.
 POLICIES
Policies provide the framework within which the
decision makers are expected to operate while
making decisions related to an organization.
They are guide to the thinking and action of
subordinates for the purpose of achieving the
objectives of the business successfully.
 Nature of policy
1. Policy is an expression of intentions of top
management.
2. It serves as a guide to decision making in an
organization.
3. It should be planned after taking into
consideration the long range plans and
needs of an organization.
4. As policies live longer than the people
therefore the policies should be framed after
serious thinking and participation of the top
executives.
5. Policies take a concrete step when they are
TYPES OF POLICIES
1. Basic or top management policy: laid by
the top management like product
selection, size of business, budgeting etc.
2. Middle management policies: general
policies affecting a large part of
organization. E.g. purchase policy
3. Departmental Policies: applies to routine
activities e.g. workers related matters
4. Written and verbal policies
TYPES OF POLICIES
5. Implied policies: which actually exist in a
company. Such policies can be known only
by watching the actual working of an
organization.
6. Functional policies: e.g. marketing policies,
finance policies, research policies, and
recruitment policies.
7. Policy manual: where all policies are
compiled in the form of a book is called a
policy manual.
ADVANTAGES OF POLICIES
1. Better performance
2. Helps in control
3. Better industrial relations
4. Helps in enhancing co-operation
5. Consistency
 STRATEGY
It refers to the firms overall plan for dealing with
and existing in the environment.
Features
1. It is a general program of action
2. More concerned with external problems rather
than internal
3. It includes tactics used by the opponents
4. They need to be changed as per the
requirements
5. Formulated only at the top level
Types of strategies
Strike while the iron is hot
Camels head in the tent
Strength in unity
Divide and rule
Times is a great healer
One step ahead
 SWOT ANALYSIS
Winners recognize their limitations but focus
on
their strengths; losers recognize their strengths
but focus on their limitations
A weakness can be converted into strength by
recognizing it and by making an effort in that
Direction.
Opportunities and threats also need to be
recognized.
 SWOT ANALYSIS
SWOT ANALYSIS

Internal environment External environment

Strengths Weaknesses Opportunities

Threats
 Importance of SWOT analysis
It analyses whether the business is healthy or
sick.
An organization comes to know about the internal
and external factors that affect its success or
failure.
It helps in the formation of a strategy so as to
make preparations for the possible threats from
the competitors.
It helps to evaluate a business environment in a
detailed manner so as to take strategic decisions
for the future course of action.
 Internal factors
STRENGTH: It is a positive, good or such other
thing that gives an edge to a company.
Strengths of a company could be
a) Technical expertise
b) Efficient human resources
c) Possession of latest physical assets
d) Strong research and development
department
e) Joint venture with a Multi National Company
 WEAKNESS
It is something that a company lacks.
a) Less competent staff
b) Lack of goodwill in the market
c) Obsolete plant and machinery
d) Weak R & D Department
e) Underutilized plant capacity
f) Ineffective marketing strategies
g) Narrow product line
 OPPORTUNITIES
These are the chances or the possibilities that
come in the firms way.
a) To enter in a new product line
b) To expand the companys existing product lines
c) To enter into the foreign markets
d) To acquire the rival firms
e) To create new alliances so as to increase
competitive strength.
f) To use latest technologies in the business.
 THREATS
These are the forces that have a negative bearing
on any undertaking.
A) New competitors may enter the field
B) Customers purchasing substitute products
C) New technology making products obsolete
D) Slow down in the market leading to slump.
E) Change in government policies
F) Shift in buyers needs and tastes
 STRATEGIC MARKETING PLANNING
PROCESS
Strategic analysis of business units: to look into the
past, present and
future of the business. Can be Boston consulting
group (BCG) or GE
multifactor planning process.

Stars Question
Marks

Cash Cows Dogs

 PLANNING PREMISING
Premising: Planning made today is dependent
upon certain assumptions.
It constitutes a framework in which planning is to
be done.
Planning premises are made taking into
consideration both the past as well as the
expected events.
 TYPES OF PLANNING
PREMISES
1. Internal premises: include those that originate
from the sales forecast, existing policies and
procedures of an organization and capital
investment policies.
2. External premises: relating to Political, Social,
Technological and economical forces. These are
beyond the powers of any organization.
TYPES OF PLANNING
PREMISES
Controllable premises: factors like
materials, money and machine are
controllable factors.
Semi controllable: these are under partial
control of a business like labour relations
and marketing strategy.
Non controllable: which are beyond the
control of any organization like govt. policy,
wars and natural calamities.
Business forecasting
Forecasts are predictions or estimate of
the change, if any in characteristic
economic phenomena which may affect
ones business plans
It is a systematic effort to peep into the
future.
It is a technique of anticipating the
future by scientific analysis of known
facts.
It helps in the anticipating the areas
where there is a great need to be
attentive to control the costs.
FEATURES
1. It is the calculation of probable future
trends.
2. The analysis is based on the analysis of
past and present circumstances.
3. Statistical techniques are used for
analyzing past trend and then estimating
the future.
4. Business forecasting does not take into
consideration the note of the present
circumstances in relation to the past.
 IMPORTANCE
1. Importance in planning: {formulation of
plans can only be done through forecasting}
2. Managerial decision making: helps managers
to reach accurate the accurate decisions.
3. Control facilitated: tells the areas where
control is necessary for the functioning of an
enterprise.
4. Help in preparing budgets: like cash budget,
material budget, manpower budget.
IMPORTANCE
Sales forecasts:
a) Help to forecast the probable future
demand
b) Helps a firm to take advantages of
favorable prices for raw materials
c) Basis for business growth, diversification
and expansion.
d) Decisions relating to financial and
expansion policies.
FACTORS AFFECTING FORECASTING
Internal factors:
1. Past statistics data relating to the
business
2. Data in respect of cost of materials, wage
rates, cost of capital etc.
3. Financial resources
4. Future expansion plans
5. Plans for product development
 FACTORS AFFECTING FORECASTING
EXTERNAL FACTORS:
1. Political factors: If everything remains stable,
then the generalizations come true.
2. Government restrictions: if governments
controls and restrictions become available
for long run, forecasting becomes easy.
3. Fiscal and monetary policy:
4. Population
5. Trends in price level
TECHNIQUES OF
FORECASTING
Direct or bottom up method: every
department
makes its own forecasts which is later
clubbed
together as an aggregated data.
Indirect or top down method: the
requirements
of the total industry are ascertained first and
then it is shared amongst the departments.
TECHNIQUES OF
FORECASTING
Past performance technique: forecasts
are
based on the basis of past data. Results can
be
good only if past data has been consistent.
Market research techniques: polls and
surveys
can be conducted to find out the sale of a
product. Questionnaire method through
mailing
or enumeration
TECHNIQUES OF
FORECASTING
Quantitative techniques:
Business barometers method: Business
index
numbers are used to measure the state of
economy. Index numbers for two periods are
used to find out the direction of business.
Trend analysis method: it is used when
data are
available for a long period of time.
 TECHNIQUES OF
FORECASTING
Extrapolation method: the values for future
periods can be predicted. It assumes that the
effect of various components of time series is
of a constant pattern.
Regression method: two or more inter-related
series are used to disclose the relationship
between two variables.
Econometric Model: equations are made with
the help of time series.
 DECISION MAKING
Making decisions is selecting one alternative from
different alternatives
Decision is a choice whereby a person comes to
a conclusion about given circumstances/situation.
It involves choice making
It is core of managerial activities in organization
TYPES OF DECISIONS
A programmed decision is one that is fairly
structured or recurs with some frequency.
Non-programmed decisions, on the other
hand, are relatively unstructured and may
occur much less often. No business makes
multi-billion-dollar decisions on a regular
basis. Managers faced with such options
must treat each one as unique, investing
enormous blocks of time, energy, and
resources into exploring the situation from
all perspectives.
 TYPES OF DECISIONS
Intuition and experience also play large roles in
the making of non programmed decisions. Most
of the decisions made by top managers involving
strategy (including mergers, acquisitions, and
takeovers) and organization design are non-
programmed. So are decisions about new
facilities, new products,
labor contracts, and legal issues.
 DECISION-MAKING
CONDITIONS
Managers sometimes have an almost perfect
understanding of conditions surrounding a
decision, but at other times they have few clues
about those conditions.
In general, the circumstances that exist for the
decision maker are conditions of certainty, risk,
or uncertainty.
These conditions are represented in the form of a
figure
Decision-making Conditions

The
The decision
decision maker
maker
faces
faces conditions of
conditions of

Certainty
Certainty Risk
Risk Uncertainty
Uncertainty

Lower Moderate Higher

Level of ambiguity and chances of marking bad decision

 Decision Making Under
Certainty
When managers know with reasonable
certainty what
their alternatives are and what conditions are
associated
with each alternative, a state of certainty
exists.
In organizational settings, few decisions are
made
under conditions of true certainty. The
complexity and
turbulence of the contemporary business world
make such
situations rare.
 Decision making under
uncertainty
The decision maker does not know all the
alternatives, the risks associated with each,
or the consequences each alternative is likely
to have. This uncertainty stems from the
complexity and dynamism of contemporary
organizations and their environments. The
key to effective decision making in these
circumstances is to acquire as much relevant
information as possible and to approach the
situation from a logical and rational
perspective. Intuition, judgment, and
experience always play major roles in the
decision-making process under conditions of
uncertainty. Even so, this condition is the
most ambiguous for managers and the one
 STEPS IN DECISION MAKING
1. Recognizing and Some stimulus indicates that a decision A plant manager sees that employee
defining the situation must be made. The stimulus may be turnover has increased by 5 percent.
positive or negative.

2. Identifying alternatives Both obvious and creative alternatives are The plant manager can increase wages,
desired. In general, the more significant increase benefits, or change hiring
the decision, the more alternatives should standards.
be generated.

3. Evaluating Each alternative is evaluated to determine Increasing benefits may not be feasible.
alternatives its feasibility, its satisfactoriness, and its Increasing wages and changing hiring
consequences. standards may satisfy all conditions.

4. Selecting the best Consider all situational factors, and choose Changing hiring standards will take an
alternative the alternative that best fits the manager's extended period of time to cut turnover,
situation. so increase wages.

5. Implementing the chosen The chosen alternative is implemented into The plant manager may need permission
alternative the organizational system. of corporate headquarters. The human
resource department establishes a new
wage structure.

6. Follow-up and At some time in the future, the manager The plant manager notes that, six months
evaluation should ascertain the extent to which the later, turnover has dropped to its previous
alternative chosen in step 4 and level.
implemented in step 5 has worked.
Decision trees
1. Terms:
a. Alternativea course of action or
strategy that may be chosen by the
decision maker
b. State of naturean occurrence or a
situation over which the decision maker
has little or no control
Decision trees
2. Symbols used in a decision tree:
a. decision node from which one of
several alternatives may be selected
b. a state-of-nature node out of which
one state of nature will occur
Decision tree example

A decision node A state of nature node

Favorable market

ruct Unfavorable market

o nst plant
C ge
lar Favorable market
Construct
small plant
Do Unfavorable market
n ot h
ing
 Group decision making
An interacting group is the most common
form of group decision making. The format is
simple - either an existing or a newly
designated group is asked to make a decision
about something. Existing groups might be
functional departments, regular work groups,
or standing committees. Newly designated
groups can be ad hoc committees, task forces,
or teams.
 Group decision making
A Delphi group is sometimes used for
developing a consensus of expert opinion.
Developed by the Rand Corporation, the Delphi
procedure solicits input from a panel of experts
who contribute individually. Their opinions are
combined and, in effect, averaged.
The members of the nominal group represent
a group in name only - they do not talk to one
another freely like the members of interacting
groups. Nominal groups are used most often to
generate creative and innovative alternatives or
ideas.
Merits and demerits of group decision
making
1. More information and knowledge are 1. The process takes longer,
available.

2. More alternatives are likely to be 2. Compromise decisions resulting from

generated. indecisiveness may emerge.

3. More acceptance of the final decision 3. One person may dominate the group.
is likely.

4. Enhanced communication of the 4. it is costlier also

decision may result.

5. More accurate decisions generally

emerge.
BRAINSTORMING
Brainstorming is a group activity technique
designed to generate a large number of
ideas for the solution of a pro
In 1953 the method was popularized by
Alex Faickney Osborn in a book called
Applied Imagination. Osborn proposed that
groups could double their creative output
with brainstorming.
 BASIC RULES IN
BRAINSTORMING
Focus on quantity: This rule aims to facilitate
problem solving through the maxim i.e.
quantity breeds quality. The assumption is
that the greater the number of ideas
generated, the greater the chance of
producing a radical and effective solution.
Withhold criticism: Instead, participants
should focus on extending or adding to ideas,
reserving criticism for a later 'critical stage' of
the process. By suspending judgment,
participants will feel free to generate unusual
ideas.
 BASIC RULES IN
BRAINSTORMING
Welcome unusual ideas: To get a good and
long list of ideas, unusual ideas are welcomed.
They can be generated by looking from new
perspectives and suspending assumptions.
These new ways of thinking may provide better
solutions.
Combine and improve ideas: Good ideas may
be combined to form a single better good idea,
as suggested by the slogan "1+1=11".
 METHOD OF BRAINSTORMING
Set the problem Before a brainstorming
session, it is critical to define the problem.
The problem must be clear, not too big. If the
problem is too big, the facilitator should
break it into smaller components, each with
its own question.
Create a background memo The
background memo is the invitation and
informational letter for the participants,
containing the session name, problem, time,
date, and place. The memo is sent to the
participants well in advance, so that they can
think about the problem beforehand.
 METHOD OF BRAINSTORMING
Select participants The facilitator composes
the brainstorming panel, consisting of the
participants and an idea collector. A group of 10
or fewer members is generally more productive.
Several core members of the project who have
proved themselves.
Several guests from outside the project, with
affinity to the problem.
 METHOD OF BRAINSTORMING
Session conduct The facilitator presents the problem
and gives a further explanation if needed. The facilitator
asks the brainstorming group for their ideas. If no ideas
are forthcoming, the facilitator suggests a lead to
encourage creativity. All participants present their ideas,
and the idea collector records them. When time is up, the
facilitator organizes the ideas based on the topic goal and
encourages discussion. Ideas are categorized. The whole
list is reviewed to ensure that everyone understands the
ideas. Duplicate ideas and obviously infeasible solutions
are removed.
METHOD OF BRAINSTORMING
Evaluation
Usually the group itself will, in its final
stage, evaluate the ideas and select one as
the solution to the problem proposed to the
group.
 Organization
The word organization is used to connote a group of
people, structure of relationships and a function of
management.
Group of persons: it is a group which works for
the achievement of common objectives. People
who
form a group also demarcate their authority and
responsibility.
 Organization
A group has following features:
People in a group communicate and co-operate with
each
other. They work together for the achievement of goals
and
objectives. It is imperative that the objective must be
common for all the members of the group. Group
members
also lay down the rules and regulations and a formal
structure of relationship among themselves for a proper
coordination of efforts.
 Steps in organization
1. Determination of objectives: without any
objective, organizing is meaningless.
2. Division of activities: it enables the
members what is required of them. Also
avoids duplication of efforts.
3. Fitting right persons into right jobs: it
reduces the chances of errors.
4. Developing relationships: i.e. authority
responsibility relationships. Whos
accountable to whom.
5. coordination: i.e. the work of one employee
supplements to that of the other.
 IMPORTANCE OF
ORGANIZATION
1. Clearly defined authority relationships:
members become clear who is accountable
to whom and what is expected of him.
2. Coordination: helps to establish clear cut
relationship among departments.
3. Growth and diversification: facilitates growth
by increasing the capacity to handle
increased level of activity.
 IMPORTANCE OF
ORGANIZATION
4. Technological innovations: sound organization
structure help modify the existing authority
responsibility relationships in the wake of
technological improvements.
5. Optimum use of Human resources: placing the
right person at right job
6. Efficient management: other functions of
management like Planning, Staffing, Directing
and Controlling are dependent on it.
 DEPARTMENTATION
Meaning: It is a process of division of an enterprise
into different parts. The chief executive divides
activities into different divisions (Departments)
such as production, sales, marketing, finance etc.
Further, in the marketing department there can
be advertising, marketing research, customer
service etc departments. These divisions are
administered by the senior executives. There can
primary, intermediate or ultimate
departmentation.
 BASES OF DEPARTMENTATION
Functional: Organization divided into a particular type
of functional activity. Blue Bell ice creameries has
sales, production, R &D, Distribution and finance
departments.
Product: Microsoft has divided into three divisions i.e.
platform products and services (windows and MSN),
Business (office and business solution products) and
entertainment (windows mobile and Microsoft TV)
Process: production department of a textile mill
Customer: e.g. wholesale, retail and export
Territory: e.g. Colgate Palmolive is organized into
regional divisions in North America, South America,
the Far East and South Pacific.
 BASES OF DEPARTMENTATION
CHIEF EXECUTIVE

Finance Marketing Production R &D Human Relations

Director Director Director Director Director

Textiles
Steel division
Division

Spinning
Ginning weaving Dyeing Bleaching

Marketing fine
Marketing Marketing and super
Woolen Coarse dine

Marketing south Marketing North

 MATRIX APPROACH
The subordinates will report to two superiors
i.e. the
country boss and the product boss.
Chief Executive
Officer

Latin
Germany Argentina Spain
America
Worldwide
Plastic
products
Worldwide
Glass
products
Worldwide
Insulation
products
 DIFFERENCE AUTHORITY AND
POWER Power is the ability to
Authority is the power to
get the things done by
enforce law, to take others. The principle of
command and to expect power is to punish or
obedience from those reward.
without any authority. E.g. an armed robber has
E.g. a professor has an
a power but no authority.
authority over his pupils In short, it is the ability
but no power.
to force someone to do
It is the skill of getting
your will even if they
people to willingly do your would choose not to.
will because of your Power and responsibility
personal influence.
do not go hand in hand
Those who have authority
It can go in any
also have responsibility to
direction.
 LINE AND STAFF CONCEPT
Line organization: The quantum of authority is
maximum at the top and lowest at the
bottom. People at the top have a formal
authority to direct and control their
immediate subordinates.
Line and staff Organization: Narrower in
approach. I includes the right to advise,
recommend and counsel the staff specialists.
Functional Organization: Keeping the
specialists in top position. The specialists
have a limited command over the people
from different department. The subordinates
get order not only from their superiors but
 Line do the mainline functions/Staff assist

Human Engineering
Staff Resources
Managers Department
Department

Trucks Forks & Small Earthmovers Tools

Line Division Division Division
Managers

Materials
Purchasing Fabrication Painting Assembly Sales Distribution
Handling
 MANAGING DIRECTOR

Production Manager Marketing Manager Finance Manager

Plant Supervisor Market Supervisor Chief Assisstant

Foreman Salesman
 Line and staff conflict
The line managers view themselves as supreme
as they directly accomplish the objectives of
an enterprise. Therefore, staff members may
feel ignored resulting into a conflict situation.
Major reasons of conflict (Line Managers View)
1. Interference in their work
2. Lack of practicality and too theoretical
3. lack of accountability
4. Credit shared by the staff specialists
 Line and staff conflict
Major reasons of conflict (Staffs Viewpoint)
1. No proper use of the staff members
2. Resistance to adopt new ideas
3. Staff do not have the proper authority to get
even the best ideas executed by the
subordinates.
Suggestions:
4. Clear line of demarcation i.e. line has the
implementation responsibility and staff has the
advisory function.
5. Line managers must justify why a particular
advise cant be implemented.
 Line and staff conflict
3. Staff members need to be more tolerant as
the changes are always disliked first.
4. Staff personnel should give concrete
suggestions to the line managers about why a
certain proposal be implemented.
5. Line managers also need to understand that
a certain opportunity may be missed out if
timely action (as proposed by the staff) is not
taken.
 DELEGATION OF AUTHORITY
Delegation is process in which a superior assigns
some of the tasks within his jurisdiction to his
subordinate. It enables a manager to concentrate
more on some important matters.
Elements in delegation:
1. Assignment of responsibility to the subordinate.
2. Granting of authority to the subordinate
3. Subordinate becomes responsible to his superior
although the overall responsibility vests in hand
of superior.
WHAT IS AUTHORITY
Authority is a legitimate right to make
decisions to carry out decisions and to direct
others. Managers expect to have the authority
to assign work, hire or fire employees and the
allotment of money. Organizations have a
formal authority system that depicts the
authority relationship between the people and
their work. E.g. in case of line organization,
superior has an authority over his
subordinates. In case of line and staff, the
staff has authority over the subordinates but
they work with the line managers. Functional
authority allows managers to direct specific
 WHAT IS RESPONSIBILITY
Responsibility is the obligation to accomplish
the goals related to the position and the
organization. In order to enable the
subordinate do his duty well, it is the duty of a
superior to tell him what is expected of him.
Manager at whatever level of the organization
have the same basic responsibilities when it
comes to managing the workforce i.e. direct
employees toward objectives, oversee the
work effort of employees, deal with the
immediate problems and report the progress
of work to superiors.
 WHAT IS ACCOUNTABILITY
It is the obligation to carry out responsibility
and exercise authority in terms of
performance standards. When a subordinate is
given an assignment and is granted necessary
authority to complete it, the final phase is
holding the subordinate responsible for
results. However, the extent of accountability
depends upon the authority and responsibility
delegated. A person cannot be held
answerable to the acts not assigned to him by
his superior. For effective accountability,
performance standards be communicated in
advance to the subordinate and he must
 IMPORTANCE OF DELEGATION
1. To help the superiors concentrate on more
important matters.
2. Subordinates given authority to take
decisions to dispose off the matters quickly.
Thus, it helps in quick decision making.
3. Employees feel motivated and try to prove
themselves for the trust reposed by the
superiors in them.
4. Serves as a tool for the future training of
executives.
5. It improves work performance of
subordinates as delegation is given
 PROBLEMS IN DELEGATION
Difficulties on the part of superior:
1. Resistance: That I can do the job in a better way.
2. Lack of ability of a manager to correctly issue
instructions to the subordinates.
3. Lack of willingness to let go: superior wants to
have dominance over the work of subordinates
4. Lack of trust in subordinates: because of their
inability
5. Ineffective controls: where the manager does
not set up adequate controls or he has no
means of knowing the proper use of authority,
he may feel hesitant to delegate the authority
PROBLEMS IN DELEGATION
Difficulties on the part of subordinate:
1. Lack of self confidence
2. Desire to play safe by depending upon the boss
for all decisions.
3. Fear of committing mistakes and then criticized
4. Overburden with duties
5. Inadequacy of information for performing the
duties.
Difficulties on the part of organization:
6. Non clarity of authority responsibility structure
7. Lack of effective control 3. Inadequate planning
GUIDELINES FOR EFFECTIVE DELEGATION
1. Clear cut objectives i.e. the subordinate
must know the objective of work delegated
to him
2. Unity of command i.e. the subordinate
must receive orders from a single executive.
3. Clear explanation of the work assigned
and authority delegated
4. Reasonable control over delegatee i.e.
executive may evaluate the performance
and issue necessary instructions from time
to time.
5. No intervention in day to day work of
the delegatee
 Decentralization
Decentralization is a systematic delegation of
authority at all levels of management and in all of
the organization. In a decentralization concern,
authority is retained by the top management for
taking major decisions and framing policies
concerning the whole concern only. Rest of the
authority may be delegated to the middle level
and lower level of management. In other words, it
is the diffusion of authority in a planned way.
 REASONS FOR
DECENTRALIZATION
1. Better access to local information: Local
managers know better about the local
conditions like strength and nature of local
competition, local labour work force etc.
2. More timely response: In centralized form
information sent to head office and results
awaited. In decentralized local managers
can quickly respond to customers demands.
3. Focus on central management: Central
management gets free to concentrate on
more important issues.
 REASONS FOR
DECENTRALIZATION
4. Training and evaluation of segment managers: it
gives a chance to senior managers to evaluate
the capabilities of subordinate managers.
5. Motivation of segment managers: self esteem
and self actualization needs of the segment
managers get satisfied. Greater responsibility
supplies them more satisfaction and motivate
them to exert greater effort.
 TYPES OF
DECENTRALIZATION
Political Decentralization: It aims to
give citizens or their elected
representatives more power in public
decision-making. It is often associated with
pluralistic politics and representative
government, but it can also support
democratization by giving citizens, or their
representatives. Advocates of political
decentralization assume that decisions
made with greater participation will be
better informed
TYPES OF DECENTRALIZATION
Administrative decentralization: It is
the transfer of responsibility for the
planning, financing and management of
certain public functions from the central
government and its agencies to field units
of government agencies, subordinate units
or levels of government, semi-autonomous
public authorities or corporations, or area-
wide, regional or functional authorities.
There are three major forms of
administrative decentralization --
deconcentration, delegation, and
 TYPES OF DECENTRALIZATION
Deconcentration: It is often considered to be
the weakest form of decentralization and is
used most frequently in unitary states. It
redistributes decision making authority and
financial and management responsibilities
among different levels of the central
authority.
Delegation. Through delegation central
authority transfer responsibility for decision-
making and administration of public
functions to semi-autonomous organizations
not wholly controlled by the central
 TYPES OF DECENTRALIZATION
Devolution. When governments devolve
functions, they transfer authority for decision-
making, finance, and management to quasi-
autonomous units of local government with
corporate status. Devolution usually transfers
responsibilities for services to municipalities
that elect their own mayors and councils,
raise their own revenues, and have
independent authority to make investment
decisions.
 TYPES OF DECENTRALIZATION
Economic or Market Decentralization:
Privatization and deregulation shift
responsibility for functions from the public to
the private sector.
Privatization include:
allowing private enterprises to perform
functions that had previously been
monopolized by government;
contracting out the provision or management
of public services or facilities to commercial
enterprises
transferring responsibility for providing
 TYPES OF DECENTRALIZATION
Deregulation reduces the legal constraints on
private participation in service provision or allows
competition among private suppliers for services
that in the past had been provided by the
government or by regulated monopolies.
Silent Decentralization: It is a decentralization
in the absence of reforms
SPAN OF MANAGEMENT
It refers to the number of subordinates
that can be handled effectively by a
superior in an organization.
It can be of two types: Narrow span and
Wide span.
Narrow Span of management means a
single manager or supervisor oversees few
subordinates.
A wide span of management means a
single manager or supervisor oversees a
large number of subordinates.
 SPAN OF MANAGEMENT
There is an inverse relation between the
span of management and the number of
hierarchical levels in an organization, i.e.,
narrow the span of management, greater
the number of levels in an organization.
Narrow span of management is more costly
compared to wide span of management as
there are larger number of superiors.
 WIDE SPAN OF CONTROL
Wide span of control
1 manager
All subordinates
Factors affecting span of control
i) Function: Function refers to the nature of the
work to be supervised. Where the nature of
work is of a routine, repetitive, measurable and
identical character, the span of control is more
than when the work is of different character.
ii) Time: In old and established organizations,
things get stabilized. Such organizations run
themselves well through rapid supervision. But
newer organizations demand reference to the
superiors.
 Factors affecting span of
control
iii) Space: Space refers to the place of work. If the
subordinates are under the same roof along
with the supervisor, supervision becomes easier
and quicker. If they work at different places,
supervision becomes difficult as they escape his
personal attention.
iv) Personality of supervisor and of the
subordinates; If a supervisor is competent,
energetic and intelligent, he can supervise the
work of a large number of subordinates.
 Factors affecting span of
control
v) Delegation of authority: Some supervisors keep
only a few functions for themselves and
delegate the rest to their subordinates. By doing
so they can supervise a large number of
subordinates.
vi) Techniques of supervision: Where a direct
supervision of the supervisor is required, the
span of control will be less and vice versa.
 HISTORY OF SPAN OF
CONTROL
An argument for a narrow span of control was
presented by V.A. Graicunas, who developed a
formula showing that an arithmetic increase in
the number of a manager's subordinates
resulted in a geometric increase in the number
of subordinate relationships that a manager
had to manage. According to Graicunas,
managers must manage not only one-to-one
direct reporting relationships, but also
relationships with various groups of
subordinates and the relationships that exist
between and among individual subordinates.
 HISTORY OF SPAN OF
CONTROL
A group of six factory workers reporting to a
supervisor presents a less complex problem
than six division presidents reporting to the
CEO of a large company. And six presidents of
completely independent divisions presents a
simpler problem than six vice presidents of
closely integrated divisions. Regardless of
these considerations, the number of
relationships a superior must attend to rises
exponentially after the fourth subordinate.
 HISTORY OF SPAN OF
CONTROL
Thus Graicunas cautioned any executive
seeking to add a fifth directly reporting
subordinate to consider the fact that this
would add 20 new relationships for himself
and nine for each of his current colleagues.
The total number of relationships would
increase by 56, going from 44 to 100. As
Graicunas noted, this was "an increase in
complexity of 127 per cent in return for a 20
per cent increase in working capacity."
 SCALAR CHAIN
It refers to the number of different levels in the
structure of organization.
SCALAR CHAIN

Tall structure
indicates more
levels of authority

Flat structure indicates few levels of authority

Coordination
Coordination is the synchronization and
integration of activities, responsibilities and
command and control structures to ensure that
the resources are used most efficiently in
pursuit of the specified objectives.
In simple words, Coordination is the way
through which people can be made to work
together and to cooperate with each other to
attain the final aims of the organization.
 IMPORTANCE OF
COORDINATION
1. Better accomplishment: it avoids the
duplication of efforts.
2. Economy and efficiency: by avoiding wastage
of resources and duplication of efforts.
3. High morale: in organizing and staffing it leads
to job satisfaction of employees.
4. Better human relations: because the authority
responsibility relationships are clear
5. Integration of goals: it brings unity of action.
COORDINATION -THE ESSENCE OF MANAGING
1. Planning and coordination: various types of
plans like objectives, policies, strategies and
programmes serve as means of coordinating the
activities of an enterprise.
2. Organizing and coordination: when authority is
delegated coordination is the last thing which a
manager looks for from different managers.
3. Staffing and coordination: coordination between
the job requirement and the personnel
appointed.
COORDINATION -THE ESSENCE OF
MANAGING
4. Directing and coordination: To ensure smooth
directing of subordinates, supervision,
motivation, leadership and communication
require proper coordination.
5. Controlling and coordination: a manager keeps
on monitoring the performance is it is as per the
desired standards or not. If the performance
does not match the required standards, the
manager will take remedial steps. By this way he
will achieve coordination.
 DIFFICULTIES IN
COORDINATION
Uncertain features such as natural phenomena
like rains, floods, droughts or abnormal changes
in the behaviour of subordinates poses a great
challenge to effective coordination.
The confused and conflicting ideas of the
managers act as a constraint.
Lack of administrative skills and adequate
knowledge of necessary techniques by the
managers.
DIFFICULTIES IN
COORDINATION
Lack of orderly method of developing and
adopting new ideas and programmes act as
a constraint for effective coordination.
A vast number of variables due to the
incompleteness of human knowledge limit
the degree of coordination
Effective coordination techniques
1. Well defined objectives: unity of purpose is
must for achieving proper coordination.
2. Effective chain of command: clear cut authority
responsibility relationships help in reducing the
conflicts.
3. Precise programmes and policies: it brings
uniformity in action.
4. Effective communication: quick communication
helps in synchronizing the other activities to be
performed.
Effective coordination techniques
5. Effective leadership: it helps coordination both
at the planning and implementation stage.
6. Cooperation: the individuals in an organization
must be willing to help each other voluntarily.
7. Committees: it includes the advisors who try to
integrate the views of different groups in an
organization.
 CONTROLLING
Control refers to a systematic
process of regulating organizational
activities to make them consistent
with the expectations established in
plans, targets and standards of
performance. Effectively controlling
an organization requires an
information about performance
standards and actual performance,
as well as actions taken to correct
 FEATURES OF CONTROL
1. Managerial function: its a follow up
action to other functions of
management.
2. Forward looking: its a corrective
function related to future events only
as past cant be controlled. It aims at
minimizing losses, wastages and
deviations from standards.
3. Review of past events: the deviations
in the past are revealed by the control
process. Its called feedback
 FEATURES OF CONTROL
4. Action oriented: It is only action which
adjusts performance to predetermined
standards whenever deviations occur.
5. Continuous process: it involves
constant analysis of standards,
policies, procedures etc. a manager
needs to perform this function with
other functions.
6. Dynamic process: control results in
corrective actions which may lead to a
change in the performance of other
functions of management.
Relationship between Control and Planning
When a plan becomes operational control is
required to measure performance, finding out the
deviations and then taking corrective actions.

PLANNIN PERFORMAN
CE
CONTROL
G

Planning also depends upon controlling as a

manager uses standards for measuring and
appraising performance which are laid down by
the plans. If the standards are not pre set
manager wont be knowing what is to be
controlled.
 PROCESS OF CONTROL
1. Establish standards of control: it is the criteria
for performance. It may include reducing the
rejection rate from 15 to 3 percent, increasing
the corporations return on investment to 7
percent or reducing the number of accidents to
one per week. Standards should be accurate,
precise, acceptable and workable.
2. Measure actual performance: many
organizations prepare formal reports of
quantitative performance measurements that
managers review, daily, weekly or monthly.
Regular review of reports helps managers stay
aware of whether the organization is doing
what it should. Not only the quantitative
 PROCESS OF CONTROL
3. Compare performance to standards: The actual
performance is compared with the set
standards. When performance deviates from the
standards, managers dig beneath and try to find
out the cause of the problem. E.g. a salesman
was expected to give 10 percent increased sales
but he could give only 6 percent increased sales.
The possible causes could be several business
on his routes were closed owing to a holiday,
additional sales people were applied by the
competitors or he needs more training to make
a sales call. Managers must take an inquiring
approach to deviations in order to gain a broad
understanding of factors that influence
 PROCESS OF CONTROL
4. Take corrective action: in traditional top down
approach to control, managers used to encourage
employees to work harder, redesign the
production process or fire employees. However, in
participative approach manager collaborates with
employees to determine the corrective action
necessary. Sometimes even standards need to be
altered to make them realistic in case none of the
employees could realize them. Managers may
wish to provide positive reinforcement in case all
the targets set are met.
Note: these are also the steps in feedback control
 Feed Forward Control
Feed forward control focuses on the regulation of
inputs (human, material, and financial resources
that flow into the organization) to ensure that
they meet the standards necessary for the
transformation process.
Feed forward controls are desirable because they
allow management to prevent problems rather
than having to cure them later. Unfortunately,
these control require timely and accurate
information that is often difficult to develop. Feed
forward control also is sometimes called
preliminary control, pre control, preventive
control, or steering control.
 FEED BACK CONTROL
This type of control focuses on the outputs of the
organization after transformation is complete.
Therefore, also called post action or output
control. For one thing, it often is used when feed
forward and concurrent controls are not feasible or
are to costly.
Moreover, feedback has two advantages over feed
forward and concurrent control. First, feedback
provides managers with meaningful information on
how effective its planning effort was. If feedback
indicates little variance between standard and actual
performance, this is evidence that planning was
generally on target.
If the deviation is great, a manager can use this
information when formulating new plans to make
 CONCURRENT CONTROL
Concurrent control takes place while an activity
is in progress. It involves the regulation of
ongoing activities that are part of transformation
process to ensure that they conform to
organizational standards. Concurrent control is
designed to ensure that employee work
activities produce the correct results.
Since concurrent control involves regulating
ongoing tasks, it requires a through
understanding of the specific tasks involved and
their relationship to the desired and product.
Concurrent control sometimes is called
screening or yes-no control, because it often
involves checkpoints at which determinations
 Tools and techniques of controlling
Budget and budgetary control system: a budget
is a plan or programme of future action which is
prepared on the basis of estimates or forecasts
made for coming operating period. It anticipates
income for a given period and the costs to be
incurred in order to get this income.
A budget which is prepared for the organization
as a whole is known as master budget. Budget
prepared for certain functional areas such as
sales, distribution, production and finance is
known as functional or operating budget.
 Budgetary control
It is a system of controlling costs which includes
the preparation of budgets, coordinating the
departments and establishing the
responsibilities, comparing actual performance
with the budgeted and acting upon results to
achieve maximum profitability. It is an intelligent
consideration of future events. It clarifies
objectives, helps in the best utilization of
resources and is helpful in the control of
performance and costs.
Zero base budgeting: it was introduced for the
first time in preparing the divisional budgets in
1971 in USA. Under this each manager has to
justify the entire budget in detail from zero base.
 Zero base budgeting
In this rapidly changing environment goals
continuously keep on changing. The goals need
to be redefined in a logical manner. The past
year financial allocations may not serve any
purpose. It calls for a new allocation of
resources. All the proposals are drawn from the
scratch.
Basic steps in ZBB:
1. Identification of decision units:
2. Analysis of decision units:
3. Evaluation and ranking of all decision units
4. Allocation of resources to each unit.
 Types of budgets
Performance budgeting: which indicates whether
an organization is getting adequate results for
the money spent.
Fixed budget: it is a budget that remains
unchanged irrespective of the level of activity
actually attained. But if the level of production
does not conform to the standards established
this budget serves no purpose.
Flexible budget: it gives the budgeted costs for
different levels of activity. It is of great help at
times when it is not possible to exactly forecast
the sales.
Control by exception: the significant deviations if
any from the standards set be only brought to the
 Marginal costing
Case I
100 units are produced Case II
If 101 units are produced
MC of producing one unit MC will rise to Rs. 5050
is Rs. 50. (101 x 50 = Rs. 5050)
Fixed cost is Rs. 1000
(100 x 50 = Rs. 5000) Total Cost is
Fixed cost is Rs. 1000 Marginal cost 5050
+ Fixed cost 1000
Total Cost is = Total Cost 6050

Marginal cost 5000 Till the time production

+ Fixed cost 1000 does not
= Total Cost 6000 reach full capacity, all the
decisions
are taken by MC.
 Break even analysis
The point where TR = TC.

TR
TC
Revenue
and cost
FC

sales (in units)

 Management auditing
It may be defined as a comprehensive and
constructive review of the performance of
management team of any organization. It
undertakes a systematic search of the
effectiveness and efficiency of the
management.
It locates the deficiencies in the performance
of various functions and suggest possible
improvements.
It scope is very wide. It identifies if the
functions like planning, organizing, staffing,
directing and controlling are being performed
efficiently or not.
 NEW TECHNIQUES OF CONTROL
Yugo was the lowest priced car in the US market
in 1985, but within 4 years the concern got
bankrupt largely because of the quality problems
both in products and service. In contrast, Toyota
steadily gained the market share and is expected
to soon overtake General Motors which is the
worlds top selling auto maker.
The total quality management became attractive
to the US managers as it had been successfully
implemented by the Japanese companies such as
Toyota, Canon and Honda. The TQM philosophy
focuses on teamwork, increasing customer
satisfaction and lowering the costs. Major TQM
techniques involve the use of techniques like
NEW TECHNIQUES OF CONTROL
Quality circles: it is a group of 6-12 volunteer
employees who meet regularly to discuss and
solve the problems affecting work. Circle
members are free to collect data and take
surveys. The reason for promoting quality
circles is that these people know the day to
day tasks and problems and can easily
recommendations.
Benchmarking: it is the continuous process of
measuring products, services and practices
against the toughest competitors or
recognizing the industry leaders to identify
the areas of improvement. Of course, only
 NEW TECHNIQUES OF CONTROL
Six sigma: these were first introduced by Motorola
in 1980s. It is based on Greek letter sigma which
means how far something deviates from
perfection. It is a highly ambitious quality
standard that specifies not more than 3.4 defects
per million parts i.e. 99.9997 percent accuracy.
Now it has become a generic term which indicates
higher quality and lower costs. 100s of
companies like General Electric, Allied Signal, Cox
99 PERCENT AMOUNTS TO SIX SIGMA AMOUNTS TO
communications and DuPont and Co. have used
23087 defective computers shipped 8 defective computers shipped
sixmonth
each sigma program in recent each years.
month

7.2 hours per month without 9 seconds per month without

electricity electricity

800,000 mishandled personal 3 mishandled personal checks each

NEW TECHNIQUES OF CONTROL
Reduced cycle time: it refers to the steps taken
to complete a company process. Even if an
organization decides not to use quality circles or
other techniques, substantial improvement is
possible by focusing on improved responsiveness
and acceleration of activities into a shorter time.
Continuous improvement: Japanese companies
have realized extraordinary success from making
a series of mostly small improvements. This
approach is called continuous improvement or
Kaizen. It is the continuous implementation of a
large number of small incremental improvements
in all areas of an organization on an ongoing
basis. The innovations can start simple and the
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