Unit 2

PLANNING
 PLANNING
• "It you have planned well, half of you work is
done" Management Functions are – planning,
organizing, staffing, directing and controlling
and all are required to achieve objectives but
without setting objectives there's nothing to
organize, direct or control. Therefore every
organization requires to specify what it wants
to achieve; Planning is related with this very
aspect.
 CONCEPT OF PLANNING
• Plan & Planning –
• Planning is process - have sub activities and steps. –
• Plan is commitment to particular course of action – For objective.
• Planning is deciding in advance the future course of action.
• What is to be done in future?
• When, what, why, where, who how are different aspects of planning
• Why - action's objections or rent result
• What - activates to be undertaken?
• How - generate policies, program, strategies
• They all speak about future of action.
• Planning is selecting missions and objectives as well as the actions to
achieve them which required decision making i.e. choosing a course
of action among alternatives.
 Definitions
• :Gorge R. Jerry – "Planning is the selection and
relating of fact and making & using of assumptions
regarding the future in the visualization and
formalization of proposed activities believed
necessary to achieve deserved result".
• Mc. Farland – "Planning may be broadly defined as
a concept of executive action that embodies the
skills of anticipating, influencing and controlling
the nature and direction of change" - Anticipating,
controlling everything for direction of change,
believe that environment of planning is very
dynamic & ever changing.
 Characteristics or Nature of Planning
• 1. Primary task of management
• 2. Intellectual process
• 3. Future oriented
• 4. Decision oriented
• 5. Goal oriented
• 6. Forecasting is the essence of planning
• 7. Pervasive function
• 8. Planning and action are twins of management
• 9. Planning is wider than decision making
• 10. Inter dependent activity
• 11. Continuous and dynamic activity
• 12. Planning is the basis of control
• 13. Planning follows a systematic and reutilized
procedure.
• 14. It is participative in nature
• 15. Planning always has a dimension of time.
• 16. Planning also implies “managerial innovation”
(Koontz and Weihrich)
Need Importance and advantages of Planning

• 1. Basis of success
• 2. Keystone management function
• 3. To manage by objectives
• 4. To offset growing complexity of business
• 5. Better utilization of resources
• 6. To gain economy in operation
• 7. Establishes coordinated effort
• 8. Facilitates control
• 9. Coping with change
• 10. Improves competitive strength
• 11. Creates forward looking attitude
• 12. Promotes order
• 13. Prevents hasty judgment and haphazard
action
• 14. Stay on track
• 15. Managing crises
• 16. Providing motivation
• 17. Promotes growth and improvement
• 18. Encourages creativity
• 19. Facilitates decentralization
• 20. It provides alternative courses of action
• 21. Efficient methods and procedures of action
can be developed.
 What is Planning Process?

• Planning is the fundamental function of an

organization to achieve the desired goals.
Defining goals and the course of action
required to obtain defined objectives is
introduced as the planning process.
• For systematic and good planning it is essential
to complete some procedures. Following are
the important steps in the process of planning
for an effective plan.
 Steps of Planning Process
• The important steps of the planning process:
• Analyze opportunities
• Set goals or objectives
• Determining premises
• Identify alternatives
• Evaluate alternatives
• Select a best course of action
• Formulate supportive plal
• Implement the plan
• Review the planning process
 #1 Analyze Opportunities
• This is the pre-step of the planning process. It is essential
to make a successful plan. The manager has to do a SWOT
analysis of the changing business environment.
• Strength and weakness are the outcome of the internal
environment of the organization like the availability of
materials, machines, manpower, organizational structure,
and adopted technology, etc
• Similarly, threats and opportunities are the outcome of the
external environment and are affected by many factors like
political, economic, socio-cultural, government policies,
and technology advancement, etc. Thus, it is essential to
make a detailed study while going to set goals.
 #2 Set Goals or Objectives
• This is the first step and an actual starting point of the
planning process. The objectives should be specific, clear,
and practical. They should be time-bound and expressed
in numerical terms. Objectives should not be idealistic or
over-ambitious. A minor mistake in setting objectives
might affect the implementation of a plan.
• Thus, a manager has to define the objective clearly by
considering organizational resources and opportunities.
After clarification of broad objectives, it should be broken
down into specific objectives of different departments,
branches, sections, and individuals.
• In short, the organizational objectives should be SMART,
that is specific, measurable, achievable, realistic, and time-
bound
 #3 Determine Premises
• Premises are the assumptions of the future, it is made
because of the uncertainty of the future environment. And,
on the basis of premises, the plan is formulated. The future
environment is estimated on the basis of forecasting.
• It can be tangible and intangible or internal and external.
Tangible premises involve capital investment, units of
production, units sold, cost per unit, time available, etc.
Similarly, intangible premises involve an employee’s
morale, goodwill, motivation, managerial attitude, etc.
• Internal premises involve money, materials, machines,
management whereas external premises involve
competitors’ strategies, government strategy, technological
change, social and cultural beliefs
 #4 Identify Alternatives
• A manager needs to identify various
alternative courses of action for the
achievement of organizational objectives. For
this, it is necessary to recognize all the likely
options.
• The manager must develop alternatives
through the support of experienced and
intellectual experts in management. The
determination of the alternative course of
action is the basis for plan formulation.
 #5 Evaluate Alternatives
• This is another most important step in the planning
process. This is a logical step to evaluate each and
every alternative from a cost and benefits point of
view. Each alternative is studied and evaluated in
terms of some common factors such as risk,
responsibility, planning premises, resources,
technology, etc.
• According to requirements, managers may apply
many techniques of analysis from different
disciplines such as mathematics, sociology,
psychology, and economics, etc. The evaluation
technique must be scientific and practical so that the
best course of action can be selected.
#6 Select A Best Course of Action (Best Alternative)

This is a decision-making process from available

alternatives. Here the manager selects the best
and most feasible course of action after evaluating
all the alternatives. For this purpose, the manager
has to consider past experience, present situation,
and future contingencies of such a decision.
• Thus it is essential to consider the various
premises and environments of an organization
and their impact on the future course of action.
Besides it, the alternative which has less cost and
sound profit is chosen
 #7 Formulate Supportive Plans
• After selecting the course of action, it is
essential to develop support plans for each
department of the organization. The
secondary plans help to implement the main
plan. These supportive plans involve the
formulation of policies, rules, schedules, and
budgets to achieve defined objectives.
• For example, may, getting proper training,
media advertising, sponsoring are supportive
plans for a good seminar
 #8 Implement The Plan
• After selecting the best course of action and
preparation of supportive plans, if not implemented,
the plan remains on paper only. This is the last step in
planning where the selected plan actually comes into
action to implement.
• For the implementation of the plan, the manager
needs to take some steps such as communicating
with subordinates who initiates the plan into action,
providing necessary instruction and guidance, making
arrangement of all resources like materials, money,
machine, equipment, etc. and making timely
supervision and control of subordinates.
 #9 Review The Whole Planning Process

• Planning is a continuous function and lasts till the

organization, is in existence. Implementation of
the plan is crucial but if performance is not
evaluated the result is unknown.
• For this, it is necessary to know about the actual
performance of the plan. The manager can take
corrective action only after evaluating the actual
performance. And, the right decision at the right
time is necessary to achieve objectives according
to the plan
 Purpose and Mission

Objective
Long Term Plan

• . Policies

Strategies

Rules

Procedures
Short term Plan

Programmes

Budgets
 TYPES OF PLANS
• On the basis of Managerial Hierachy
• 1. Strategtic Plans
• 2. Administrative plans
• 3. Operating Plans
On the basis Frequency of Use
1. Standing plans
2. 2. Single use plans
• On the basis of Time Frame
• 1. Short range plans
• 2. Medium or Intermediate plans
• 3. Long range plans
• On the basis of Organizational Scope
• 1. Business or divisional level plans
• 2. Unit or functional level plans
• On the basis of Specificity
• 1. Specific plans
• 2. Directional plans
• Other classifications Contingency plans :The are
helpful in emergency situations.
 Limitations of Planning
• 1. Ambiguous objectives and plans
• 2. Lack of reliable facts and information
• 3. Inaccurate premises
• 4. Rigid philosophy or lack of pragmatism
• 5. Resistance to change
• 6. Inflexibility of existing objectives and plans
• 7. Lack of planning skills
• 8. Failure to integrate with other functions
• 9. Attitudes and conficts among managers
• i. Conflict on the goals and priorities of planning.
• ii Conflict on the selection of the courses of action and resources.
• iii. Conflicts on their roles in the implementation of plans.
• iv. Conflict between line and staff managers due to their role in
planning.
• v. Conflict on the issue of usefulness of the planning itself.
• 10. Psychological barriers.
• i. Some managers feel that present is more important than the
future. They regard present is more desirable and has certainity.
Hence, they neglect the significance of planning.
• ii. Some managers feel that certain things are bound to happen in
future. Such things cannot be changed by planning.
• iii. Some feel that planning is not successful always. Therefore, it is a
waste of time, energy and money.

• iv. Plans serve as standards for evaluating performance. Therefore,

many managers fear that others will know their weaknesses at the
time of performance evaluation.
• 11. Expensive
• 12. Inadequate resources
• 13. Delay in actions
• 14. Difficulties in implementation
• 15. Rapid and random changes
 Essentials of effective planning
• 1. Well defined objectives
• 2. Simple and easy to understand
• 3. Comprehensive
• 4. Flexible
• 5. Balanced
• 6. Economical
• 7. Stable
• 8. Continuity
• 9. Unity
• 10. Consistency
• 11. Participation
• 12. Practicable
• 13. Written
• 14. It should be logical and rational
• 15. It must be time bound.
 Tools & Technique of Planning
• Different tools and techniques are used in formulating and implementing
plans. Some of the most important are as follow:
• 1. Forecasting
• 2. Budgeting
• 3. Break even analysis
• 4. Marginal analysis
• 5. Linear programming
• 6. Waiting line or Queueing theory
• 7. PERT/CPM
• 8. Theory of probability
• 9. Scheduling
• 10. Games Theory
• 11. Simulative Model
• 12. Sequencing
• 13. Bench marking
• 14. Environmental Seanaing
• 15. MBO
 Decision
• Decision  making  may  be  reviewed  as  the  process 
of  selecting  a  course  of  action  from  among  several 
alternatives in order to accomplish a desired result. Th
e purpose of decision making is to direct human 
behaviour and commitment towards a future goal. 
• If there are no alternatives, if no choice is to be made, 
if there is no other way‐
out, then there would be not need 
for decision making.  It involves committing 
the organisation and its resources to a particular choic
e of course of action thought to be sufficient and 
capable of achieving some predetermined objective. 
 Definition
• George Terry
Decision making is the selection based on some 
criteria from two or more alternatives. 
• Heinz Weihrick and Harold Koontz
Decision making is defined as the selection of a 
course of action among alternatives, it is the car
e of  planning. 
• Louis Allen
Decision making is the work a manager perform
s to arrive at conclusion and judgement. 
 Objectives of Decision Making
• Identifying Goals
• The Decision-making process focuses on identifying
the goals that an organization aims to achieve. Proper
analysis of the aims and objectives provides the basis
for effective decisions. Decisions are unproductive
and aimless unless goals are clearly recognized.
• Efficient Utilization Of Resources
• It aims at fuller utilization of resources by taking
proper decisions regarding their usage within
organization. All decisions are framed and
implemented after thorough analysis which ensures
maximum productivity with minimum wastage.
• Proper Communication
• Efficient decision making aims at developing the right communication network for
communicating all required information at different levels. Proper flow of information
regarding decisions within the organization avoids any confusion and conflict.
Employees are too motivated to participate in decision making and come up with new
ideas and facts. 
• Selecting Best Alternative
• It performs a proper analysis of different alternatives available to come up with the best
possible one. Decision-maker selects the best course of action for performing a task
which yields maximum results. He employs various analysis tools of finance, statistics
and accounting for finding out the appropriate action.
• Business Growth
• Proper decision making plays an important role in enhancing the overall growth of
business enterprise. It helps in efficient utilization of resources by properly allocating
them within the organization. Business are easily able to face the problems and
challenges of market through quick and rational decisions. This will boost up the
probability of business and eventually contribute towards its growth.
• Promotes Innovation
• Adopting the changes and innovation as per the market requirements is must for every
organization to ensure its survival. Decision-making process brings in large amount of
information within organization by performing different types of analysis. All this
information informs management of new ideas and market changes which facilitates
innovation by taking decisions accordingly.
 Tools & Technique of Planning
• Different tools and techniques are used in formulating and implementing plans. Some
of the most
• important are as follow:
• 1. Forecasting
• 2. Budgeting
• 3. Break even analysis
• 4. Marginal analysis
• 5. Linear programming
• 6. Waiting line or Queueing theory
• 7. PERT/CPM
• 8. Theory of probability
• 9. Scheduling
• 10. Games Theory
• 11. Simulative Model
• 12. Sequencing
• 13. Bench marking
• 14. Environmental Seanaing
• 15. MBO
 Definition
• Decision-making can be defined as the process of selecting a right
and effective course of action from two or more alternatives for
the purpose of achieving a desired result. Decision-making is the
essence of management.
• According to P. F. Drucker – “What­ever a manager does he does
through making decisions.” All matters relating to planning,
organising, direction, co-ordination and control are settled by the
managers through decisions which are executed into practice by
the operators of the enterprise.
• Objectives, goals, strate­gies, policies and organisational designs
are all to be decided upon in order to regulate the performance
of the business.
Nature Or Characteristics of Decision Making
• Decision making is globally thought to be selection from alternatives. It is deeply related
 with all the 
traditional functions of a manager, such as planning, organizing, staffing, directing and c
ontrolling. When 
he performs these functions, he makes decisions. However, the traditional management
 threorists did 
not pay much attention to decision making. Infact, the meaningful analysis of decision 
making process  was initiated by Chester Bernard (1938) who commented, 
• The process of decision are largely  techniques for narrowing choice. 
The nature of decision‐
making may be clearly understood by its following characteristics features: 
•
1. Decision making is an intellectual process, which involves imagination, reasoning, eval
uation and  judgement. 
• 2. It is a selection process in which best or most suitable course of action is finalized fro
m among several 
available alternatives. Such selected alternative provides utmost help in the achievemen
t of 
organizational goals. The problems for which there is only one selection are most decisi
on problems.
• 3.Decision making is a goal oriented process. Decisions are made to attain c
ertain goals. A decision is 
rated good to be extent it helps in the accomplishment of objectives. 
•
4. It is a focal point at which plans, policies, objectives, procedures, etc., ar
e translated into concrete  actions. 
• 5.Decision making is a continuous process persuading all organizational acti
vity, at all levels and in the 
whole universe. It is a systematic process and an interactive activity. 
•
6.Decision making involves commitment of resources, direction or reputati
on of the enterprise. 
• 7. Decision making is always related to place, situation and time. It may be 
decision not act in the given  circumstances. 
•
8.After decision making it is necessary and significant to communicate its r
esults (decisions) for their  successful execution. 
• 9.The effectiveness of decision‐
making process is enhanced by participation. 
 Elements of Decision Making
• There are following elements in decision making: 
• • The decision maker. 
• • The decision problem or goal. 
• • Attitudes, values and personal goals of the decision maker. 
• • Assumption with regard to future events and things. 
• • The environment in which decision is to be made. 
• Available known alternatives and their estimated or imagined outc
omes. 
• • Analytical results in the whole perspective. 
• • The constraints. 
• • The act of selection or choice. 
• • Timing of decision. 
• • Proper communication of decision for its effective execution
 Principles of Decision Making:

• Effective decision involves two important aspects

—the purpose for which it is intended, and the
environmental situation in which it is taken. Even
the best and correct decision may become
ineffective if these aspects are ignored; because in
decision-making there are so many inside and
outside chains of unavoidable reactions.
 Principles of Decision Making:
• 1. Subject-matter of Decision-making:
• Decisional matters or problems may be divided into groups consisting of programmed and
non-programmed problems. Programmed problems, being of routine nature, repetitive
and well-founded, are easily definable and, as such, require simple and easy solution.
Decision arrived in such programmed problems has, thus, a continuing effect. But in non-
programmed problems, there is no continuing effect because they are non-repetitive,
non-routine, and novel. Every event in such problems requires individual attention and
analysis and its decision is to be arrived at according to its special features and
circumstances.
• 2. Organisational Structure:
• The organisational structure, having an important bearing on decision-making, should be
readily understood. If the organisational structure is rigid and highly centralised, decision-
making authority will remain confined to the top management level. This may result in
delayed and confused decision and create suspicion among the employees.
• On the contrary, if the organisational structure provides scope for adequate delegation
and decentralisation of authority, decision-making will be flexible and the decision-making
authority will be close to the operating centres. In such a situation, decision-making will
be prompt and expected to be more effective and acceptable.
• 3. Analysis of the Objectives and Policies:
• Proper analysis of the objectives and policies is
needed for decision-making. The clear definition of
objectives and policies is the basis that guides the
direction of decision-making. Without this basis,
decision-making will be aimless and unproductive.
• 4. Analytical Study of the Alternatives:
• For decision-making, analytical study of all possible
alternatives of a problem with their merits and
demerits is essential. This is necessary to make out
a correct selection of decision from among the
alternatives.
• 5. Proper Communication System:
• Effective decision-making demands a machinery for proper communication of information to all responsibility
centres in the organisation. Unless this structure is built up, ignorance of decision or ill-informed decision will
result in misunderstanding and loose co-ordination.
• 6. Sufficient Time:
• Effective decision-making requires sufficient time. It is a matter of common experience that it is usually helpful to
think over various ideas and possibilities of a problem for the purpose of identifying and evaluating it properly.
But in no case a decision can be delayed for an indefinite period, rather it should be completed well in advance of
the scheduled dates.
• 7. Study of the Impact of a Decision:
• Decision is intended to be carried out for the realisation of the objectives of the organisation. A decision in any
particular area may react adversely in other areas of the organisation. As all business activities are inter-related
and require co-ordination, it is necessary that a study and analysis of the impact of any decision should precede
its application.
• 8. Participation of the Decision-maker:
• The decision-maker should not only be an observer while others will perform as per his decision. He should also
participate in completing the work for which decision was taken by him. This experience will help him in decision-
making in future. The principle of participation in work of the decision-maker will enable him to understand
whether the decision taken is practical and also guide him in forthcoming decisional matters.
• 9. Flexibility of Mind:
• This is essential in decision-making, because decisions cannot satisfy everybody. Rigid mental set-up of the
decision-maker may upset the decisions. The flexible mental disposition of the decision-maker enables him to
change the decision and win over the co-operation of all the diverse groups.
• 10. Consideration of the Chain of Actions:
• There is a chain relationship in all the activities of any organisation. Different activities are tied up in a chain
sequence. Any decision to change a particular work brings change in other related works also. Similarly, decision-
making also proceeds following the chain of action in different activities. Therefore, before taking a decision one
should consider the chain relationship among different activities.
 Importance of decision‐making
• 1. Implementation of managerial function: Without decision‐
making different 
managerial function such as planning, organizing, directing, controlling, 
staffing 
can’t be conducted. In other words, when an employee does, s/he does
 the work  through decision‐
making function. Therefore, we can say that decision is 
important element to implement the managerial function. 
• 2. Pervasiveness decision‐making: of
  the decision is made in all managerial 
activities and in all functions of the organization. It must be taken by all 
staff.  Without decision‐
making any kinds of function is not possible. So it is pervasive. 
• 3. Evaluation of managerial
performance: Decisions can evaluate managerial 
performance. When decision is correct it is understood that the manag
er is 
MANAGEMENT BY OBJECTIVES
 Definitions
• Mc. Farland – Defines objectives in quite broad term
"Objectives are goals, aims or purposes that
• organisations wish to achieve over varying period of time".
• Terry & Franklin -
• "A managerial objective is the intended goal that
prescribes definite scope & suggests direction to the
• planning efforts of a manager".
• - So we can define objective as the intended and result
that an organisation desires to achieve over
• varying period of time.
 Features of objectives are as follows:-

• 1. Each organisation or group has some objectives in fact they are created basically for
certain
• objectives.
• 2. Objectives may be broad or may be specifically mentioned. Wide or narrow, Long
term or short
• term. General objective are translated into operative objectives to provide definite action.
• 3. Objectives have hierarchy
• Top level - broad object
• Dept level - specific object
• Unit level - their own object
• 4. Organisational objectives have social sanction they are related with social norms.
• Organisation is a social unit, its objectives must confirm to the needs of society.
• Various restrictions on organisation objective are put through social norms, rules &
customs
• eg: objective- Increase stock but not by hoarding
• 5. One organisation can have multiple
objectives
• eg: HLL- Under chairmanship of T. Thomas
(1973-80) has following objectives

• (i) To expand & diversify in area of chemicals.

• (ii) To control cost & improve productivity very
rigorously
• (iii) To built up mgt skills for future growth.
 Role of objectives:-
• 1. Defining an Organisation:
• Every organisation works in environment consisting of several forces.
• Forces provide threats & opportunities both, in order to take best from
environment –
• It must define itself for all.
• eg: Modern food industries ltd's objective -"Manufacturing & Marketing of
nutritional foods to the
• public".
• 2. Directions for decision making:
• Objectives set limits, prescribe areas in which man can make decision.
• No ambiguity about end results, so manager is clear about all expectations.
• it promotes unified planning and acts as motivating force.
• 3. Performance Standards:
• It Sets Benchmarks, the Performance of all – organisation –units
• Sub-units is measured against objectives.
• 4. Basis for Decentralization
• Decentralization is necessary for large
organizations.
• Independent decision making may lead to
disintegration of organisation
• Until and unless clear objectives are set for all
contributions.
• 5. Integrating organisation, group & Individual -
• Clearly Specified objectives provide integration to
various individuals, groups in organisation.
• Organisation cannot exist apart of its related
people.
• eg: creditors, customers, etc.
 TYPES OF OBJECTIVES
• 1. General Objective
•  Survival
•  Growth
•  Economic Contribution
•  Social Obligation
•  Profit
• 2. Specific Objectives
• 3. Objectives Based on organizational levels
•  Mission Goals
•  Strategic objectives
•  Tactical Objectives
•  Operational Objectives
• 4.Time based objectives
•  Short term
•  Intermediate
•  Long-term
• 5. Other Types
•  Personal
•  Organisational objectives
•  Performana goals
•  Group Goals
 Management by Objective
• The term MBO was coined by Peter Drucker -1954, since then many organisation have
adopted it
• Definitions of MBO –
• Heinz & Harold Koontz "MBO is a comprehensive managerial system that integrates
many key
• managerial activities in a systematic manner continuously directed towards the effective
and efficient
• achievement of organisational objectives."
• S.K. Chakravarty "MBO is result-centered, non-specialist operational managerial
process for the
• effective utilization of material, physical & human resources the organisation by
integrating the
• individual with the organisation & organization with environment".
• MBO is now used not only as a technique of setting objectives but also used as a
planning,
• motivation, performance appraisal and control technique.
• MBO is a process whereby both superior and subordinate managers jointly identify their
• common goals, of their work unit (department) and define each employee’s major areas
of
• responsibility and goals with his active participation.
 Characteristics of MBO :

• 1. A philosophy of management
• 2. Goal oriented approach: It focuses on setting goals at every level of the organization. In MBO,
• goal setting begins at the top management level and filters down, one level at a time.
• 3. Common objectives and individual goals : MBO is the process of setting objectives of the
• organization as well as the each individual’s goals.
• 4. Participation and involvement : MBO approach proposes the participation and involvement of
• all people in goal setting.
• 5. An interactive approach: MBO is an interactive approach to goal setting. Managers and
• subordinates both are actively involved in setting goals.
• 6. A comprehensive approach : It is a comprehensive approach. It considers both the economic and
• human aspects of an organization.
• 7. A systems approach : It takes into account the internal as well as external environmental factors.
• 8. It applies to total management system : It can be used with an entire organization, a
• department or a sub unit having only one subordinate.
• 9. Aims at optimum results. MBO approach provides for interim review of the results and
• evaluation of performance at the expiry of the time fixed.
• 10. Simple universal approach : The MBO approach to managing is logical, appeals to common
• sense and enjoys wide spread popularity.
• 11. Multiple uses : MBO technique is used not only in planning but it is also used in performance
• appraisal, motivation, and control.
PROCESS OF MBO
 ADVANTAGES OF MBO

• 1. Encourages result oriented philosophy

• 2. Clearer goals
• 3. Effective planning
• 4. Clarification organizational roles
• 5. Coordination
 LIMITATIONS OF MBO

• 1. Failure to teach philosophy of MBO

• 2. Lack of guidelines
• 3. Inflexibility
• 4. Time consuming
• 5. Incomplete understanding
• 6. Difficulty of setting goals
• 7. Over use of quantitative goals
• 8. Dynamic & complex environment
• 9. Ignores relationship behavior