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I. PLANNING
Planning - Nature - Importance - Forms - Types - Steps in Planning - Objectives - Policies -
Procedures and Methods - Nature and Types of Policies - Decision Making - Process of
Decision making - Types of Decisions - Problems involved in Decision - making.

PLANNING
 Planning is deciding in advance what to do, how to do it, when to do and who is to do. it
bridges the gap from where we are to where we want to go – Knootz O Donnel
 Planning is deciding the best alternative among others to perform different managerial
operations in order to achieve the predetermined goal--- Henry Fayol
 Planning is the process of thinking through and making explicit the strategy, actions, and
relationship necessary to accomplish an overall objective or purpose. --- Cleland and King

NATURE OF PLANNING: (CHARACTERISTICS OR FACTORS OF PLANNING)

 Planning is the primary function of management: planning is the starting point of
management, which gives meaning to all other managerial activities. For Eg. : Organization
set 10,000 no to produce products.
 It is goal oriented: planning helps to attain the goal is the most effecting and efficient
manner.
 It is all pervasive: planning is done everywhere in all the levels all the managers and
departments.
 It is an intellectual activity: planning is a mental activity. It involves application of mind
and intelligence to attain.
 It is future oriented: planning is required to attain the future goals of an organization.
 It requires an integrated approach: planning links between the plans of different
departments.
 It is a continuous process : planning is required as long as we live in the world

IMPORTANCE OF PLANNING (MERITS OR ADVANTAGES)

 It focuses on objective: once the objective of the business has been fixed the next step is to
prepare plan for its effective accomplishment. E.g. the annual target of the production

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 department of a business cannot be achieved in a week. It should be divided into monthly,
quarterly and half weekly targets etc.
 It helps to avoid no work or work pressure situations – planning helps to distribute work
evenly throughout the year.
 It helps to avoid wastage of resources: by planning employees and executives know
beforehand what they have to do.
 It ensures efficiency as well as effectiveness doing right things.
 It reduces risk and uncertainty – planning is for future and future is uncertain . But in
planning the future uncertainties are anticipated and adequate provisions are made to
overcome.
 It provides for co-ordination
 It facilitates control planning without control is useless and control without planning is
meaningless
 Planning provides scope for decentralization

PROCESS OF PLANNING (STEPS INVOLVED IN PLANNING / STAGES INVOLVED

IN PLANNING)
1. Identifying business opportunities: it is necessary to make an analysis of both the
internal and external environment to know the trends in the near future. Business
activities are influenced by internal as well as external factors, regulations, technological
changes, competition etc. the businessmen therefore have to look for opportunities
always by observing the business environment.
2. Establishment of objectives: planning process is to establish the organization objectives
in tune with the opportunities identified, taking into account the resources available. The
overall objective of the organization must be stated along the specific objectives of
departments
3. Determination of Planning Premises: planning premises are the assumptions about the
future happenings. As planning is for future and future is uncertain, certain assumptions
about the future become necessary Eg. Employee attitude technology uses, managerial
decisions making process etc. are some of the factors influencing the internal

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 environment of business. The external environment is like demand, buyer behavior,
competitors action, government regulations, suppliers actions
4. Identifying the alternative course of action: there are always alternative ways of
carrying out any task just as here are different routes to reach a destination point. To
attain the objective of a business different course of action may be available.
Eg. To maximize profits any of the following method used.
1. large scale production
2. curtailing the cost of production and distribution
3. maximizing sales
4. Increasing the market share and so on.
5. Evaluating alternative courses of action: once the alternative courses of action are
identified, the next step is to evaluate the same. Evaluating means studying the merits and
demerits of each alternative should be examined carefully to decide on its suitability.
6. Selecting the best course of action: once the alternative course of action has been
evaluated the next step is to select the best. The one finally selected should help the
organization in making an optimum use of the available resources and help to attain the
objective.
7. Formulation of derivative plans: after the basic plan of the organization has been
determined the next step is to prepare the subsidiary plans to support the basic plan.
8. Periodic evaluation and review: once the implementation of the plan starts it becomes
necessary to evaluate performance of periodic intervals to ensure that the activities of the
originations precede in the right direction and as laid down in the plan.

TYPES OF PLANS
CLASSIFICATION OF PLANS ACCORDING TO TIME
I) long term planning: this plan is usually 5 to 15 years. It is also called as strategic planning. It
prepares the business to face the effects of long term changes.
a) Introduction of a new product
b) entering a new market
c) changing the technique of production
d) increasing the scale of production

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II). Medium term planning: it is known as tactical planning, the period covered by the medium
term plan is usually 1 – 5 years.
The plan is needed for
1. Making additions to an Existing plant.
2. Expanding the factory
3. appointment if additional staff to cope with the volume of work
III). Short term planning: it is known as operational planning
the period covered is less than one year.
- purchase of raw materials
- Arranging for employee training etc.
LIMITATIONS OF PLANNING
1. Uncertain Nature: future happenings cannot be accurately foreseen. Eg. natural
calamities, floods earthquake etc.
2. Expensive: preparation and implementation of plan is expensive.
3. Rigidity: strictness and lack of flexibility leads to monotony.
4. loss of initiative :
5. Ignorance of subordinates interests
STEPS TO MAKE PLANNING EFFECTIVE
1. The success of planning depends upon the effectiveness of the forecast. If the forecast is
accurate the plan will be success.
2. Flexibility must be introduced in the plan whenever necessary so that the employees will
work with interest.
3. All the members’ ideas and views taken into consideration for making the plans then the
employees will be interested.
4. The plan should not be prepared to focus on the financial goal alone. There should be for
development of employees.
5. The plan must be realistic. It should take into account the capabilities of employees.
6. The plan must be communicated to subordinates.

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METHODS OF PLANNING
Repeated use plans Single use plans
a) Objectives a) Programmes
b) Policies b) Budgets
c) Procedures
d) Rules
e) Strategies
1. OBJECTIVES: aims, goals, targets, missions, etc. objective is the destination point. The
important are,
 profit maximization
 a higher market share
 customer satisfaction
 Product diversification
Advantages of Objectives
 Objectives give focus to the activities of the organization.
 Planning depends on the objectives of an organization
 Integration of the activities of an organization is based on objectives
 Objectives provide the necessary yardstick for measurement of performance.
Disadvantages of objectives:
 Certain objectives cannot be measured quantitatively Eg. employee attitude
 In the name of objective there may be a tendering to exploit its workers this results
frustration among the workers.
MANAGEMENT BY OBJECTIVES (MBO)
It is a technique by which the superior and the subordinate jointly identify the objectives desired
to be achieved by the subordinate in tune with the overall results expected.
Stages involved in the process of MBO
1. Define organization goals
Setting objectives is not only critical to the success of any company, but it also serves a variety
of purposes. It needs to include several different types of managers in setting goals. The
objectives set by the supervisors are provisional, based on an interpretation and evaluation of

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what the company can and should achieve within a specified time.

2. Define employee objectives

Once the employees are briefed about the general objectives, plan, and the strategies to follow,
the managers can start working with their subordinates on establishing their personal objectives.
This will be a one-on-one discussion where the subordinates will let the managers know about
their targets and which goals they can accomplish within a specific time and with what resources.
They can then share some tentative thoughts about which goals the organization or department
can find feasible.
3. Continuous monitoring performance and progress
Though the management by objectives approach is necessary for increasing the effectiveness of
managers, it is equally essential for monitoring the performance and progress of each employee
in the organization.
4. Performance evaluation
Within the MBO framework, the performance review is achieved by the participation of the
managers concerned.
5. Providing feedback
In the management by objectives approach, the most essential step is the continuous feedback on
the results and objectives, as it enables the employees to track and make corrections to their
actions. The ongoing feedback is complemented by frequent formal evaluation meetings in

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which superiors and subordinates may discuss progress towards objectives, leading to more
feedback.
6. Performance appraisal
Performance reviews are a routine review of the success of employees within MBO
organizations.
Advantages of MBO
 It promotes better communication relationship between the superior and subordinates.
 It gives the subordinate an opportunity to fix his target, in consultation with his superior.
 Subordinate fix the target based on his own potentials.
 They feel they are motivated and take lot of effort to achieve the target.
 Periodical review helps him to go on his right direction.

Disadvantages of MBO
 The superior and subordinates have to meet several times to set the objectives.
 Periodical review of the performance consumes more time and paper work.
 MBO has not much to do with the lower levels of management.
POLICIES
A policy serves as a valuable guide to the managers when they take certain important decisions,
policies provide ready answers to question pertaining to certain issues. They prescribe the limits
within which the decisions have to be made.
Eg: employee promotion whether seniority or merit or both.
Essentials if a good policy
 It should be clear and definite; it should not give scope for misinterpretation.
 The policy should be logical.
 The policy based on ethical and moral values.
 Should be fair to all the employees.
 policy should be revised periodically
Factors determining the formulation of policies
 The beliefs and value of the owners of business
 Government regulations, Availability of funds

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  Technology to adopted, Market trends
 Reactions of trade unions, General business environment
Merits of policies
 Policy guide managers to take bold decisions
 They save time by providing a ready solution to certain problems
 They ensure consistency in decision making
 Policies prevent the managers from misusing their authority
Limitations of policies
 Policies cannot provide solutions to all organizational problems
 Policies provide guidelines not solutions.
 It is necessary to review the policy periodically otherwise it becomes outdated.
 We cannot blindly apply the policies.
 Policies do not allow the managers to think originally
TYPES OF POLICIES
1. Formulated Policy: A formulated policy is one which is specified by the organization for
providing guidelines to its members. Every organization formulates various policies on
different aspects. This policy flows from higher level to lower levels in an origination.
2. Implied Policy: sometimes policies may not be clearly stated and the actions of managers
particularly at the higher levels provide guidelines for actions at lower levels. These actions
might constitute the policy. Sometimes the organization has clearly expressed policies for its
image, but it is not able to enforce these. In such a case the action of a decision maker
depends on his own guidelines and prejudices.
3. Imposed Policy: This arises from the influence of some outsider agencies. Such agencies
may be government which provides policies for all public sector organizations. These
agencies may either provide complete guidelines on a subject matter or provide a broad
framework for devising specific policies. For Eg. in public sector commercial banks
recruitment and selection is done by banking service commission and individual banks do
not have and control.
4. Appealed Policy: An appealed policy arises from the appeal made by a subordinate a
manger to his superior for deciding an important case. The need for such an appeal may arise
because the particular case has not been covered by any policy. The appeal is then taken

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 upward and the decision is made on the case sets precedent which becomes policy providing
guidelines for deciding similar cased in future.
PROCEDURES
A procedure will lay down the manner in which certain work has to be performed. It prescribes
sequence of operations to be carried out to completer a given task.
Advantages
1. It prescribes the sequence of operations to be performed.
2. They facilitate systematic performance of the work.
3. They ensure that the work proceeds in the right direction.
4. Procedures ensure consistency and uniformity of action
5. It secures proper coordination.
Disadvantages
1. The procedural formalities make delay in the performance of the work.
2. A few procedures result in confusion.
RULES
Rules are the do`s and don’ts. They are always rigidly enforced. There is always a fine or penalty
for the violation of rules. Eg. no smoking in the workplace, Wear uniform while in the factory.
STRATEGIES
Strategies means plan of action to counter the opponents attack. It is a tactics adopted to counter
competitor’s actions. Organization adopts strategy when they are in crisis.
1. Fall in sales.
2. Competitive pressures
3. Trade union demands etc.
SINGLE USE PLANS
These plans are meant for a specific purpose as soon as that purpose has been served the plan
becomes useless and given up.

PROGRAMMES
it specifies the date and time by which the activities of the organization will be carried out.
Eg: To produce 5000 color television sets by 31st march 2010. To sell 10000 motorcycle before
31 Dec 2009

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Advantages
 It ensures commitment
 No wastage of time
 Employees work with motivation
 They coordinate the work
BUDGETS
A budget is the financial plan of a business. It is expressed in numerical terms. A budget is a
statement of projected activities of a business in the near future.
Advantages
 It helps to determine its future course of action.
 A budget is always prepared for a specific period of time.
 Before preparing the budget the past happenings the present needs and future trends are
taken into account.
DECISION MAKING
DEFINITION OF DECISION-MAKING
A decision may be defined as "a course of action which is consciously chosen from among a set of
alternatives to achieve a desired result." It represents a well-balanced judgment and a
commitment to action.
According to Trewatha & Newport, "Decision-making involves the selection of a course of
action from among two or more possible alternatives in order to arrive at a solution for a given
problem".
CHARACTERISTICS OF DECISION MAKING
 Decision making implies choice: Decision making is choosing from among two or
more alternative courses of action. Thus, it is the process of selection of one solution
out of many available. For any business problem, alternative solutions are available.
Managers have to consider these alternatives and select the best one for actual
execution. Continuous activity/process:Decision-making is a continuous and dynamic
process. It pervades all organizational activity. Managers have to take decisions on
various policy and administrative matters. It is a never ending activity in business
management.
 Mental/intellectual activity: Decision-making is a mental as well as intellectual

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 activity/process and requires knowledge, skills, experience and maturity on the part
of decision- maker. It is essentially a human activity.
 Based on reliable information/feedback: Good decisions are always based on
reliable information. The quality of decision-making at all levels of the Organisation
can be improved with the support of an effective and efficient management
information system (MIS).
 Goal oriented process: Decision-making aims at providing a solution to a given
problem/ difficulty before a business enterprise. It is a goal-oriented process and
provides solutions to problems faced by a business unit.
 Means and not the end: Decision-making is a means for solving a problem or for
achieving a target/objective and not the end in itself.
 Time-consuming activity: Decision-making is a time-consuming activity as
various aspects need careful consideration before taking final decision. For
decision makers, various steps are required to be completed. This makes decision-
making a time consuming activity.
 Pervasive process: Decision-making process is all pervasive. This means
managers working at all levels have to take decisions on matters within their
jurisdiction.
ADVANTAGES OF DECISION MAKING
 Decision making is the primary function of management: The functions of
management starts only when the top-level management takes strategic decisions.
Without decisions, actions will not be possible and the resources will not be put to use.
Thus decision-makingis the primary function of management.
 Decision-making facilitates the entire management process: Decision-making
creates properbackground for the first management activity called planning. Planning
gives concrete shapeto broad decisions about business objectives taken by the top-level
management. In addition, decision-making is necessary while conducting other
management functions such as organizing,staffing, coordinating and communicating.
 Decision-making is a continuous managerial function: Managers working at all levels will
have to take decisions as regards the functions assigned to them. Continuous decision making is a
must in the case of all managers/executives. Follow-up actions are not possible unless

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decisionsare taken.
 Decision-making is essential to face new problems and challenges: Decisions
are required to be taken regularly as new problems, difficulties and challenges develop
before abusiness enterprise. This may be due to changes in the external environment.
New products may come in the market, new competitors may enter the market and
government policies may change. All this leads to change in the environment around the
business unit. Such change leads to new problems and new decisions are needed.
 Decision-making is a delicate and responsible job: Managers have to take quick
and correctdecisions while discharging their duties. In fact, they are paid for their skill,
maturity and capacity of decision-making. Management activities are possible only when
suitable decisions are taken. Correct decisions provide opportunities of growth while
wrong decisions lead to loss and instability to a business unit.
STEPS INVOLVED IN DECISION MAKING PROCESS
Decision-making involves a number of steps which need to be taken in a logical manner. The
scientific method of decision-making involves the following six steps:
a. Defining / Identifying the managerial problem,
b. Analyzing the problem,
c. Developing alternative solutions,
d. Selecting the best solution out of the available alternatives,
e. Converting the decision into action, and
f. Ensuring feedback for follow-up.
The figure given below suggests the steps in the decision-making process:-

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 Identifying the Problem: Identification of the real problem before a business
enterprise is the first step in the process of decision-making. It is rightly said that a
problem well- defined is a problem half-solved. Information relevant to the problem
should be gathered so that critical analysis of the problem is possible. This is how
the problem can be diagnosed.
 Analyzing the Problem: After defining the problem, the next step in the decision-
making process is to analyze the problem in depth. This is necessary to classify the
problem in order to know who must take the decision and who must be informed about
thedecision taken. Here, the following four factors should be kept in mind: (i) Futurity
of the decision, (ii) the scope of its impact, (iii) number of qualitative
considerations involved, and (iv) uniqueness of the decision.
 Collecting Relevant Data: After defining the problem and analyzing its nature, the
next step is to obtain the relevant information/ data about it. There is information flood
in the business world due to new developments in the field of information
technology. All available information should be utilized fully for analysis of the problem.
This brings clarity to all aspects of the problem.
 Developing Alternative Solutions: After the problem has been defined,
diagnosed on the basis of relevant information, the manager has to determine
available alternativencourses of action that could be used to solve the problem at hand. Only
realistic alternatives should be considered. It is equally important to take into account time and
costconstraints and psychological barriers that will restrict that number of alternatives
 Selecting the Best Solution: After preparing alternative solutions, the next step

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 in the decision-making process is to select an alternative that seems to be most
rational for solving the problem. The alternative thus selected must be communicated
to those who are likely to be affected by it. Acceptance of the decision by group
members is always desirable and useful for its effective implementation.
 Converting Decision into Action: After the selection of the best decision, the next
step is to convert the selected decision into an effective action. Without such action,
the decision will remain merely a declaration of good intentions. Here, the manager
has to convert 'his decision into 'their decision' through his leadership.
 Ensuring Feedback: Feedback is the last step in the decision-making process. Here,
the manager has to make built-in arrangements to ensure feedback for continuously
testing actual developments against the expectations. It is like checking the
effectiveness of follow-up measures. Feedback is possible in the form of organized
information, reports and personal observations. Feedback is necessary to decide
whether the decision already takenshould be continued or be modified in the light of
changed conditions.
TYPES OF DECISIONS
 Programmed and Non-programmed Decisions
Programmed or structured are those decisions, which are well defined and some
specified procedure or some decision rule might be applied to reach a decision. Such
decisions are routine and repetitive and require little time for developing alternatives in
the design phase. Programmed or structured decisions have traditionally been made
through habit, by operating procedures or with other accepted tools. Whereas, Non-
programmed Decisions, which are not well defined and have not pre-specified
procedures decision rule are known as unstructured or non-programmed decisions.

 Routine ad Strategic Decisions

These decisions are also known as Operating Decisions. They occur repetitively and
are regular in nature. These decisions are made to govern the day-to- day operations of
the businesses. These decisions are generally taken at lower levels of the management
whereas strategic decisions are also known as Policy decisions. These are not repetitive
in nature nor follow a routine manner. These are related to the long-term functioning of
the company. The making of these decisions is guided by policy manuals but require

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 high expertise and strategic knowledge. Since their impact is organization-wide they are
taken athigher level of management.
 Organizational and Personal Decisions
Organizational decisions are made to further the interests of the organization. Such
decisions are made by managers in their official capacity. These decisions are based
on rationality, judgment and experience whereas Personal Decisions while making
personal decisions, personal interests are kept in mind. Such decisions are made by
managers on their own behalf. There is no scope for delegation of such decisions
in management.
 Individual or Group Decisions
Individual Decision Making: without a group's input or a decision made regardless of the
group's opinion is, naturally, an individual decision. This is the more traditional decision making
approach and can work effectively for a manager when the group's input is not required or in
certain cases, desired.
Group Decision Making: There are several models of group decision making that you can put
to use. Two examples are consensus and consultation. Consensus decision making involves
posing several options to the group and using the most popular option to make a decision.
Consultation takes the opinions of the group into consideration when making a decision. Both
methods require the group's participation and call for a manager who respects the opinions and
input of the group in the decision making process.
ADVANTAGES OF GROUP DECISION MAKING:
An individual can make a decision quicker than group can, of course, since only one person
needs to be consulted. Group decision making, though it can be an arduous process, can help
cement the group by allowing input from all members of the group.
DISADVANTAGES OF GROUP DECISION MAKING:
There are times when each decision making method is not appropriate. Avoid individual decision
making if the decision directly affects the group. For example, making a blanket decision that
everyone must work weekends will meet with opposition for reasons ranging from religious to
other personal obligations.
PROBLEMS INVOLED IN DECISION MAKING:
 Information overload. Having a lot of information is often viewed as beneficial, but if that
information is not collated properly or only available via a multitude of methods, processing it all
can become overwhelming. You should be accustomed to accessing the kind of user-friendly

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 data that iskey to your decision-making options, or you might feel misguided and confused.
 Not having enough information. Of course, extremes are never good: not having
enoughinformation to support your decision is not good either; and you should definitely
be up to speed withall the relevant information in order to come up with the best solution
for any issue.
 Misidentifying the problem. In many cases, the issues surrounding your decision will be
obvious.However, there will be times when the decision is complex and you aren’t sure
where the main issue lies, as the actual cause may be elusive. Being able to conduct
thorough research, receive useful dataand speak with internal experts could be ways to
mitigate this situation.
 Overconfidence in the outcome. We are not by any way devaluing the importance of
positive thinking, but rather that you should identify realistic, viable, achievable options
rather than ones that are overly optimistic and unrealistic.
 Impulsiveness. Stress, time constraints or any other circumstance such as the pressure
to decide upon a course of action can compromise the desired results if decisions are taken
too quickly. You might inadvertently skip important data or forget about the impact of
some action or other on the team.
 Opinions and objectivity. It is natural to involve other people in the decision-making
process, but you need to avoid falling for something similar to the halo effect
(preconceived ideas and prejudices based solely upon appearances). Try and be coolly
objective in your decision-making—compliance, safety and the business should be the
priority—that’s something you can only achieve with objective data.

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