Unit-2: Planning

Concept, Definition, importance

Type of Planning, Components
Steps in Planning
Limitations of Planning
MBO
Objectives setting process
Benefits and weaknesses of MBO
Decision Making, Decision Making Process
Problems in Decision Making
Unit-2 (Planning)
Concept & Definition:
Killen: Planning is the process of deciding in
advance what is to be done, who is to do it,
how it is to be done and when it is to be
done”.(Want to start a Business Unit- what,
how, when, where to do)
Koontz O’Donnel & Weihrich: Planning is an
intellectually demanding process; it requires
the conscious determination of courses of
action and the basing of decision on purpose,
knowledge and considered estimates.
Unit-2
 Importance of Planning:
◦ Focuses attention on Objectives. (Review clearly, understand significant
points (Merits & Demerits of objectives)
◦ Ensure Economical Operation (Better Utilization of resources &
minimizing costs)
◦ Reduces Uncertainty (anticipate future events like shortage of raw
material etc. political & weather uncertainity)
◦ Facilitates Control (P provide base to control by setting up standards and
directives to future course of action)
◦ Encourages Innovation and Creativity (Planning provide sufficient time
to Managers to have innovative and creative ideas in operation)
◦ Improves Motivation (P ensure direct communication channel of mgrs
with employees which improve motivation.)
◦ Improves Competitive Strength (P involves expansion of capacity,
change in work methods, machinery, quality etc. for competition)
◦ Facilitates Coordination. (Direct all towards orgnal objectives)
Features of Planning
Planning is a process (Involving No. of inter-
connected activities) than behaviour at a given
point of time. This determines future course of
action.
It primarily concerned looking into future. It
requires forecasting of future (correct
forecasting=correct decision)
Planning involves selection of suitable course of
action (choosing best out of alternatives available
for achieving organizational objectives).
Planning is undertaken at all levels of orgn
(Orgnal Planning, Departmental Planning,
individual planning)
Planning is flexible as its commitment is on
future conditions (Adjustments is needed
between various factors and planning) i.e.
Mgr planned for purchase of raw material of
large quantity but due to price hike, some
adjustments needed to be done)
Planning is a pervasive (Omnipresent) and
continuous managerial function as it involves
processes of perception/estimation, analysis,
decision and action
Type of Planning
Financial or Non-Financial Plan
Formal and informal Plans
Specific and Routine Plans
Strategic and functional Plan
Long Range and Short Range Plan
Administrative and Operational Plan
Steps in Planning
Establishing Objectives
Defining Problems
Establishing Planning Premises (assumptions
about factors which affect implementation of
planning ie. Releasing final product in bulk 4
mktg. assuming great market potential of product)
Determining alternative courses of action
Evaluation of Alternative course of action
Selecting the course of action
Formulating plans
Timings and sequence of operations
Participation and follow up
Decision Making
Decision Making means selecting a course of action
out of alternative courses to solve a problem.
(Reebok or Action shoe buying)
McFarland: A decision is an act of choice, wherein
an executive forms a conclusion about what must
be done in a given situation.
Managerial Decision-Making involves process of
establishing goals, defining tasks, searching for
alternatives and deploying plans in order to find
the best answer to decision problem.
(Go for Fully automation or Offset Printing Press
with less capital investment - Review of
Expenditure and Output /final production)
Type of Decisions
 Programmed Decision: Decisions related to structured
situation where the problem is more or less of routine
nature. Based on Past Experience, such as
(1)Organizational Decision, (2)Operational Decision,
(3)Research Decision,(4) Opportunity decisions.
 Non Programmed Decision: These are taken in
unstructured situation. Such situations not occurred
before hence Mgrs require extensive brainstroming,
i.e. increase in advtg. expenditure, upgrade
technology, reasonable price, profit declining, needs
immediate decision making. Such decisions are (1)
Personal Decisions, (2) Strategic decisions, (3)crisis
intiative decisions and (4) Problem solving decisions.
Decision Making Process
 Defining the Problem (Problem is any deviation from a set of
expectation, In case anything is against expectation or
standards, then to identify the problem)
 Analyzing the problem (find Cause, what remedial measures)
 Collection of data (to find out solution or alternative)
 Developing Alternatives (Generate two or more solution of
problems, choose best, creative & applicable alternative)
 Review the key factors (Cost, resources, acceptability,
reversibility of decision)
 Selecting the best alternative (choose Most appropriate to
achieve organizational goals.
 Implementing the decision (Selected alternative be
Communicated to all concerned, Change in orgnal structure,
if required, Resources be allocated, Budgets procedure &
Controls be established to ensure effective implementation)
Problems in Decision Making
Multiple conflicting goals )(Not well defined
Goals)
Limited Time and Cost Factors
Limited knowledge to assess all alternatives.
Personal Biases (They think alternative
suggested by them are relevant. )
Continuous researches, innovation &
Technical Developments (Mgrs are not
updated)
Changing Economic & Social factors.
Management by Objectives (MBO)
MBO – A Process through which
subordinates and their superiors jointly
determine their specific performance
objectives, periodically review progress
towards objectives and allocate rewards
on the basis of that progress. MBO uses
them to motivate.
Qualities of Effective MBO

Top Management Support

Educating Managers
Clarity in formulation of objectives
Feed Back
Maximum Participation
Inter-Department Coordination
MBO Process
Overall Organizational Objectives
(SWOT analysis, Strategic Goals)
Divisional Objectives (Departmental goal,
Sectional Goal, individual goals etc.)
Devise Action Plan (What is to be done,
when, where by whom is to be done)
Review Progress (Period review of
performance of Individual, Deptt.)
Corrective action.
Features of MBO
Participation at all level (Goal setting in
consultation with Mgr.Sup &
Subordinate)
Integration (Mgr+Sup+Subordinate –
Unified direction= great efficiency
Link Objectives to Performance
Continuity (Periodic evaluation –
Performance Improvement)
Unit-3: Organizing
Organizing is a process of establishing
relationship among the members of the enterprise.
Louis A Allen: Organization involves
identification and grouping the activities to be
performed and dividing them among the
individuals, creating authority and responsibility
relationship among them for accomplishment of
Organizational objectives.
It also creates relationship between one job and
another job and also lays down the scope or limits
of authority and responsibility of each job.
Steps in Organizing
Determination of Objectives

Identification and Grouping of Activities

Assignment of Duties

Developing Authority, Responsibility,

Relationships
Type of Organization
 Formal Organization: Refers to structure of well defined
jobs, each bearing a definite measure of authority,
responsibility and accountability. It is designed to enable the
people of organization to work together in accomplishing the
common objectives. The basic characteristics of formal
organization are:
◦ Organization structure is predetermined
◦ Based on division of Labour and specialization
◦ Based on jobs to be performed and not according to the
individuals
◦ The organization does not take into consideration emotional
aspect.
◦ The Authority and responsibility relationship created by
Organization are to be honored by everyone.

Informal Organization
Informal Organization: Refers to relationship
between people in Organization based on personal
attitudes, emotions, likes, dislikes. Generally large
formal groups give rise to small informal groups.
These groups may be based on common taste,
language, culture or some other factors. These
groups are not pre-planned. The salient features
of informal organization are:-
 Informal Relations are unplanned.
 Formation of informal organizations is a natural process.
 It reflects human relationships
 Informal Organizations are based on common taste, problem, language,
religion, culture etc.
 Membership of informal organization is voluntary.
Departmentation
Organization Structure has two dimensions:-
◦ Horizontal – refers to grouping of activities
(departmentation)
◦ Vertical – Denotes the hierarchy of superiors and
subordinates (Pyramid or scalar chain)
Departmentation : A work group brought together
for performance of certain functions of similar
nature. Departments are various parts or division
of an enterprise.
Departmentation involves grouping of all operating
tasks, combing jobs into effective work groups
and combining all groups into division termed as
Department.
Aim of Departmentation
To promote the attainment of overall
objectives
To simplify the co-ordination
To effect economies of scale
(Efficiency+Goals+Profit) and
exploitation of special opportunities
To assist in Executive Development.