Unit 2

Planning and
decision making PLANNING
MEANING OF PLANNING
Planning is a fundamental management function that involves deciding in advance
what needs to be done, how it should be done, who will do it, and when it will be done.
It provides a roadmap for achieving organizational goals by setting objectives,
identifying resources, and outlining strategies to reach those objectives. Planning helps
ensure that efforts are coordinated, resources are used efficiently, and uncertainties are
managed effectively.
Henry Fayol:
"Planning is looking ahead and deciding in advance the actions to be taken, the
methods to be followed, and the resources required to achieve desired goals.
Billy E. Goetz:
"Planning is fundamentally choosing and a planning problem arises when an
alternative course of action is discovered."
NEED OF PLANNING
1.Direction and Focus: Planning provides a clear sense of direction
and aligns individual efforts with organizational objectives. It helps
ensure that everyone is working towards the same goals.
2.Resource Optimization: Planning ensures that the resources such as
time, money, and personnel are utilized efficiently by allocating them
in the most effective way to achieve organizational objectives.
3.Risk Management: Through planning, managers can anticipate
potential risks and uncertainties. By preparing contingency plans,
they can mitigate or manage the impact of unforeseen events.
4.Coordination: It helps in synchronizing the activities of different
departments or teams within an organization, ensuring a smooth
workflow and avoiding duplication of efforts.
5. Decision-Making: Planning aids in making informed decisions by
analyzing different alternatives and evaluating their potential
outcomes. It simplifies complex decision-making processes.
6. Setting Benchmarks: Effective planning allows organizations to set
clear targets and performance standards, which help in evaluating
progress and success over time.
7. Adaptability: Planning prepares an organization to adapt to changes
in the environment, such as market conditions, technological
advancements, or regulatory changes, by laying out a flexible strategy.
8. Motivation and Commitment: A well-structured plan can motivate
employees by giving them clear objectives and showing them how
their efforts contribute to the overall success of the organization.
Components of Planning:
The components of planning in management provide a structure for creating, implementing,
and evaluating plans to achieve organizational goals. These components ensure that the
planning process is thorough and effective. Here are the key components of planning
according to management principles:
1. Objectives
Objectives are the end goals or targets that the organization aims to achieve. They form the
foundation of the entire planning process as they guide all other planning decisions.
Objectives should be specific, measurable, attainable, relevant, and time-bound (SMART).
•Example: A company's objective might be to increase market share by 10% within the next
year.
2. Goals
Goals are broader long-term aspirations that support the organization's mission and vision.
They serve as the framework within which objectives are set and help in creating a focus for
planning efforts.
•Example: Achieving industry leadership in customer satisfaction.
• 3. Strategies

• Strategies outline how the objectives will be achieved. They involve deciding on the course of action
that best aligns with the organization’s resources and capabilities. Strategies are crucial for directing
long-term efforts and addressing challenges.

• Example: A strategy could be entering a new market through strategic partnerships.

• 4. Policies

• Policies are the guidelines that govern decision-making within an organization. They provide a
consistent approach to handling various situations and ensure that all actions align with the
organization's objectives.

• Example: A policy might dictate that all customer complaints must be responded to within 24 hours.

• 5. Procedures

• Procedures are detailed step-by-step instructions for performing specific tasks or activities. They help
ensure that tasks are carried out consistently and efficiently by different individuals or teams.

• Example: A procedure for processing orders in a manufacturing unit.

• 6. Rules
• Rules are specific directives that leave little room for interpretation. They are rigid and must be
followed strictly without deviation. Rules often define what actions are permitted or prohibited in
specific situations.
• Example: "No employee is allowed to access sensitive customer data without authorization."
• 7. Programs
• Programs are comprehensive plans that include a series of related activities aimed at achieving
specific objectives. Programs typically outline the scope, time frame, resources, and actions
required for achieving goals.
• Example: A new product launch program that details all activities from product design to
marketing.
• 8. Budgets
• Budgets are financial plans that allocate resources to specific activities or projects. Budgets help
control expenditures and ensure that resources are used effectively in line with the organization’s
objectives.
• Example: A marketing budget for a product launch campaign.
• 9. Forecasting
• Forecasting involves predicting future conditions and trends based on data and analysis. It
helps organizations anticipate changes in the environment and make informed decisions.
Forecasting is crucial for both short-term and long-term planning.
• Example: A company forecasting sales growth based on market trends and consumer behavior.
• 10. Plans
• Plans are the detailed and specific documents outlining the actions to be taken, the people
responsible for those actions, the timelines, and the resources needed to achieve the
objectives. They ensure that everyone understands their roles in the process.
• Example: A detailed action plan for reducing operational costs by 5% within a year.
• 11. Standards
• Standards are the benchmarks or criteria used to measure performance. By establishing
standards, management can compare actual performance with planned performance and take
corrective action if needed.
• Example: A company might set a standard to achieve a 95% customer satisfaction rate.
 Types of Planning:
1. Strategic Planning:
This long-term planning focuses on the overall goals and direction of the organization. It typically spans 3 to 5
years or longer and addresses the "big picture" of the organization's future.

1. Example: A company developing a five-year plan to expand its operations into international markets.

2. Tactical Planning:
Tactical planning supports strategic plans by breaking them down into specific, shorter-term actions. It is usually
more focused on departments or functions within the organization.

1. Example: A marketing team planning a six-month campaign to promote a new product.

3. Operational Planning:
This is short-term planning that deals with day-to-day activities. It focuses on specific procedures, tasks, and
standards required to meet immediate objectives.

1. Example: A restaurant setting its daily staffing schedule and food inventory requirements.

4. Contingency Planning:
Contingency planning involves preparing for unexpected events or emergencies. It outlines alternative courses
of action to be taken if original plans fail due to unforeseen circumstances.

1. Example: A company creating a disaster recovery plan in case of a cyberattack.

•5. Financial Planning:
•his involves forecasting future financial needs and allocating financial
resources. It helps ensure that an organization remains solvent and achieves its
financial goals.
•Example: A business preparing a budget for a new project or expansion.
•6. Human Resource Planning:
Focuses on managing the workforce. It involves planning for recruitment,
training, and development to meet future labor needs.
•Example: A company planning for leadership succession.
•7. Project Planning:
Planning for specific projects, it involves defining the scope, timelines,
resources, and objectives for successful project completion.
•Example: Planning the launch of a new software product.
Planning Process:
• Planning Process:
1.Setting Objectives:
The first step in the planning process is to establish clear, measurable objectives that the
organization wants to achieve.
2.Analyzing the Environment:
This step involves analyzing internal and external environments to understand strengths,
weaknesses, opportunities, and threats (SWOT analysis).
3.Identifying Alternatives:
After understanding the environment, multiple courses of action are identified. The
organization should explore different ways to achieve its objectives.
4.Evaluating Alternatives:
Each alternative is evaluated based on factors like feasibility, costs, risks, and alignment with
organizational objectives.
5.Selecting the Best Alternative:
After evaluation, the most suitable alternative is chosen that best aligns with the organization’s
goals and resources.
6. Formulating Action Plans:
Detailed plans are created for implementing the chosen alternative. This
includes defining tasks, allocating resources, and setting timelines.
7. Implementing the Plan:
The selected plan is put into action. Effective communication, delegation of
responsibilities, and resource allocation are critical at this stage.
8. Monitoring and Controlling:
Continuous monitoring is done to ensure that the plan is on track. Any
deviations are identified, and corrective actions are taken if necessary.
9. Review and Feedback:
After the plan is executed, it is evaluated to assess its success and any
lessons learned. Feedback is used for future planning efforts.
Decision Making
Meaning of Decision making

Decision-making is
the process of
identifying and
choosing between
alternative courses
of action based on
the values,
preferences, and
beliefs of the
decision-maker.
Definitions
• George R. Terry: "Decision-making is the selection of a particular course
of action based on available alternatives.“

• Chester I. Barnard: "Decision-making is the process of concluding which

action to take after a deliberate thought.“

• Koontz and O'Donnell: "Decision-making is defined as the selection of a

course of action among alternatives."
• In management, decision-making is a crucial function, and it varies
depending on the level, scope, and context within the organization. Here
are the main types of decision-making in management:
Strategic Decision-Making
• Definition: Long-term, high-impact decisions that shape the overall
direction of an organization.
• Management Level: Top-level (executives, CEOs, board of directors).
• Characteristics:
• Concerned with broad, organizational goals and growth.
• Typically involves significant resources and risk.
• Requires analyzing external and internal environments.
• Example: Deciding to expand into a new market or adopt a new
technology.
• Tactical (Managerial) Decision-Making
• Definition: Medium-term decisions that translate the strategic objectives
into specific actions.
• Management Level: Middle management (department heads, division
managers).
• Characteristics:
• Focuses on implementing strategies.
• Aims to allocate resources effectively and ensure departments
achieve their goals.
• More structured and routine than strategic decisions.
• Example: Deciding how to allocate a marketing budget across different
channels to support a new product.
• Operational Decision-Making
• Definition: Short-term, day-to-day decisions that ensure smooth business
operations.
• Management Level: Lower management (supervisors, team leaders).
• Characteristics:
• Concerned with routine processes and tasks.
• Low-level, repetitive, and procedural.
• Focused on immediate, internal operational efficiency.
• Example: Scheduling staff shifts or replenishing inventory.
• Non-Programmed Decision-Making
• Definition: Decisions made for novel, unique, and unstructured problems
requiring creative solutions.
• Management Level: Top and middle management.
• Characteristics:
• Unstructured, with no established procedures.
• Requires critical thinking, creativity, and problem-solving.
• Often involves higher risk and uncertainty.
• Example: Handling a crisis like a PR issue or making decisions in
response to a major technological disruption.
• Programmed Decision-Making
• Definition: Decisions made for routine and repetitive problems, following
established rules or guidelines.
• Management Level: All levels, particularly lower and middle
management.
• Characteristics:
• Structured and pre-determined solutions.
• Low complexity, often automated or delegated.
• Efficient for repetitive problems.
• Example: Approving standard operating expenses or reordering stock
based on thresholds.
• Individual Decision-Making
• Definition: Decisions made by a single manager or leader based on
personal judgment and expertise.
• Management Level: Can occur at any level but most common at top
management.
• Characteristics:
• Quick decision-making without group consultation.
• Relies heavily on the individual’s knowledge and experience.
• Example: A CEO deciding to restructure the company or enter into a
strategic partnership.
• Group Decision-Making
• Definition: Decisions made collectively by managers or team members to
leverage multiple perspectives.
• Management Level: Common in middle and top management.
• Characteristics:
• Collaborative and consultative process.
• Encourages diverse inputs but can be time-consuming.
• Leads to well-rounded decisions but may face challenges like
groupthink.
• Example: A management committee deciding on the company’s annual
budget.
• Authoritative Decision-Making
• Definition: A decision made by a single leader or manager with little or
no input from others.
• Management Level: Typically top-level management.
• Characteristics:
• Efficient and quick in urgent situations.
• Relies on authority and expertise.
• Can lead to disengagement if overused.
• Example: A CEO making a decision during a financial crisis or a safety
emergency.
Relationship between planning and decision
making
• 1. Planning as a Prerequisite to Decision-Making
• Planning involves setting objectives, developing strategies,
and outlining tasks and schedules to achieve desired goals. It
creates a framework for decision-making by identifying what
needs to be done, how it can be done, and the resources
required.
• Without a clear plan, decisions can become haphazard,
reactive, or inconsistent. A well-structured plan narrows the
scope of choices, ensuring decisions are aligned with the
overall strategy.
2. Decision-Making Within the Planning Process
•Decision-making is integral to planning. At every step of planning,
decision-making occurs: choosing the goals, selecting the
strategies, allocating resources, and determining timeframes. It
involves evaluating alternatives and selecting the best course of
action.
•For example, in business planning, decisions like budget
allocation, project prioritization, and setting timelines are
necessary to make the plan actionable.
• 3. Feedback Loop
• Effective planning leads to better decision-making, and in turn,
decisions shape the outcomes of plans. Once a decision is
made, it feeds back into the planning process, possibly
requiring revisions or adjustments in the plan to accommodate
new insights or changes.
• 4. Risk Management
• Both planning and decision-making involve managing risks.
Planning helps in identifying potential risks and creating
contingency plans. Decision-making involves choosing the
most appropriate risk mitigation strategies based on the
options outlined in the plan.
• 5. Goal Achievement
• Planning sets long-term goals and short-term objectives, and decision-
making is the process of selecting the steps necessary to meet those
goals. Good decisions ensure that the plan stays on track and adapts to
unforeseen changes.
• In summary, planning sets the stage for decision-making, and decisions
bring plans to life. They work in tandem to guide individuals or
organizations toward their objectives, ensuring that actions are well
thought out and aligned with long-term goals.
 Decision making process
The decision-making process is a systematic approach used to make choices
from available options to solve a problem or achieve a goal. This process can
vary depending on the complexity of the decision, but it generally involves the
following steps:
• 1. Identify the Problem or Decision to be Made
• The first step is recognizing that a decision is needed. This could be triggered
by an issue, opportunity, or a goal that needs to be achieved. Clearly define the
problem or objective to focus the decision-making process.
• 2. Gather Information
• Collect relevant information and data to understand the situation better. This
may involve conducting research, analyzing past experiences, consulting
experts, or gathering feedback from stakeholders. The goal is to have enough
information to make an informed decision.
• 3. Identify Alternatives
• Based on the information gathered, brainstorm and list
possible solutions or courses of action. Having multiple
alternatives helps ensure flexibility in decision-making and
allows for comparison of different options.
• 4. Evaluate the Alternatives
• Assess each option by weighing its pros and cons. Consider
factors like feasibility, risks, costs, benefits, and alignment with
your goals. Decision-making tools like SWOT analysis
(Strengths, Weaknesses, Opportunities, Threats) or cost-benefit
analysis can be used in this stage to assist with evaluation.
• 5. Choose the Best Alternative
• Based on the evaluation, select the most suitable option that will
effectively solve the problem or achieve the goal. The chosen alternative
should be the one that offers the highest likelihood of success with
acceptable risks and costs.
• 6. Implement the Decision
• Put the chosen alternative into action. Develop a plan for execution,
including assigning tasks, setting deadlines, and allocating resources.
Ensure that everyone involved understands their role in the
implementation process.
• 7. Monitor and Review the Decision
• After implementation, monitor the progress and outcomes of the
decision. This helps identify whether the decision is delivering the
expected results. If necessary, make adjustments to improve the outcome
or address any unforeseen challenges.
• 8. Learn from the Process
• Finally, reflect on the decision-making process and the results.
Whether successful or not, review the steps and outcomes to
identify lessons for future decisions. Continuous learning can
improve decision-making over time.
• Key Considerations in Decision-Making:
• Time constraints: Deadlines may affect the depth of analysis.
• Stakeholder involvement: Understanding who is impacted by
the decision.
• Ethical and legal implications: Ensuring the decision complies
with legal standards and ethical principles.
Decision making
approaches
• There are various decision-making approaches that individuals and organizations use depending
on the situation, complexity, and the nature of the decision. Here are some common decision-
making approaches:
• 1. Rational Decision-Making
• Description: A logical, step-by-step approach to decision-making that follows a structured
process. It involves defining the problem, gathering information, generating alternatives,
evaluating each alternative, and selecting the best option.
• Best for: Complex decisions where time and resources are available for a thorough analysis.
• Example: A company deciding on a major investment by conducting a detailed cost-benefit
analysis of all potential options.
• 2. Intuitive Decision-Making
• Description: Based on instincts, gut feelings, or past experiences. This approach relies on the
decision-maker’s ability to make quick judgments without extensive analysis.
• Best for: Situations requiring fast decisions or where the decision-maker has significant
experience and expertise.
• Example: A seasoned doctor making a quick diagnosis based on subtle symptoms that others
might overlook.
• 3. Bounded Rationality
• Description: Suggests that individuals make decisions within the limits of
their available information, cognitive limitations, and time constraints.
Instead of striving for the optimal solution, decision-makers settle for a
satisfactory one (called "satisficing").
• Best for: Real-world scenarios where perfect information is unavailable,
and time or resources are limited.
• Example: A manager choosing a candidate for a position based on
limited interviews and references due to time pressure.
• 4. Participative Decision-Making
• Description: Involves engaging multiple people in the decision-making process,
typically in a group setting. This approach values collaboration and collective
input to arrive at a decision.
• Best for: Decisions that affect many people or require buy-in from stakeholders.
• Example: A board of directors making strategic decisions for a company, involving
opinions and votes from each member.
• 5. Creative Decision-Making
• Description: Involves thinking outside the box to generate innovative solutions.
Creative decision-making is often used when conventional approaches do not
yield effective results.
• Best for: Problems requiring novel or unconventional solutions, such as in artistic
fields, research, or entrepreneurship.
• Example: A startup developing a unique product by combining unexpected
technologies and market needs.
• Decision-making plays a crucial role in both individual and organizational
contexts. It involves choosing the best course of action among alternatives to
achieve desired goals or solve problems. The significance of decision-making
can be understood through its various roles:
• 1. Goal Achievement
• Decision-making is key to setting and achieving personal or organizational
goals. Every step toward reaching a goal involves making decisions, whether
it's defining objectives, selecting strategies, or allocating resources.
• 2. Problem Solving
• When challenges or issues arise, decision-making is essential in identifying and
implementing solutions. Effective decision-making helps address problems
promptly and prevent them from escalating.
• 3. Resource Allocation
• Decisions determine how resources such as time, money, personnel, and
technology are allocated. Efficient decision-making ensures optimal use of
resources, minimizing waste and maximizing output.
• 4. Risk Management
• Decision-making plays a vital role in assessing and managing risks. It
involves evaluating potential risks in different courses of action and
choosing the one with the best balance between risks and rewards.
• 5. Strategic Planning
• In an organizational setting, decision-making shapes long-term strategies. It
influences the direction in which an organization moves, ensuring alignment
with its mission, vision, and objectives. Strategic decisions impact growth,
competitiveness, and sustainability.
• 6. Adaptation and Innovation
• In dynamic environments, decision-making helps individuals and
organizations adapt to changing circumstances. It enables innovation by
fostering the ability to make decisions that embrace new technologies,
ideas, or market conditions.