Unit -2

Planning and Controlling

The planning is the most important and primary function of management. Due to
planning the objectives of the organization can be achieved very easily. The work is completed
in time without disturbance because of proper planning. In this modern business world the scale
of business has become very large and so the planning is becoming essential. Planning means
predetermination of future work regarding how and when to be done. Planning includes Time-
table, scheduling and budgeting of work to be done.
In short planning is a primary function of management. Which accelerates to other
functions of management.
Definitions: A few important definitions of planning are as below-
1) Theo Haiman: Planning is deciding in advance what is to be done. When a manager
plans, he projects a course of action for future, attempts to achieve a consistent, co-
ordinated structure of operations aimed at the desired results.”
2) Koontz & O’Donnell: “Planning is an intellectual process, the conscious determination
of course of action, the basing of decisions on purpose, facts and considered estimates.”
3) Afford & Betty: “Planning is the thinking process, the organized foresight, the vision
for any organization.”
4) George Terry: “Planning is the selection and relating of facts and making and using of
assumptions regarding the future in the visualisation and of proposed activities believed
necessary to achieve desired goals.”
From the above definitions it is clear that planning bridges the gap between where we are
and where we want to go. It is the thinking process and organized foresight based on past
experience and analysis of present situation.
Characteristics/Features of Planning-

1) Primary Function: Planning is a first and primary function of management. Due to

planning the control function is possible. The essence of planning is assessing the
future. Accurate forecasting leads to correct decisions about future course of action.
 2) Intellectual Process: Planning means forecasting of future and analysis of present
situation. Under the planning the work scheduling and budgeting is done. For all this
there is need of intellectual efficiency.
3) Related with Future: Planning deals with uncertainties in the future. Planning decides
in advance the future course of action. The exact future can seldom be predicted.
4) Objectives Based: Each plan is based on objectives. In the planning process,
organizational objectives or goals play an important part. Planning includes deciding of
fore path based on certain concrete objectives.
5) Continuous Process: Planning is a continuous process. It is an activity related to future.
In every present movement we have to plan for future. Planning is a never ending
process. It is unending process to keep the organization as a going concern.
6) Base for the Control Activity: Planning is a basic activity. It accelerates all other
activities of management. It helps to control process. Without planning control is
impossible. Under controlling actual results are compared with plans.
Planning co-ordinates the activities of various departments, sections and sub-sections. It
helps to control the future actions. The features of planning say that planning is a primary
function of management. In any business organization planning includes–Forecasting, setting
of objectives, scheduling, work-flow, budgeting and detail work plan. To complete the work in
time, work-plan with all supplementary details has become essential in this modern business
world. Without planning the modern complex business can not run smoothly. The sifting of
objectives and setting of the path of its implementation is a main part and parcel of planning.
Importance/Advantages of Planning
Planning is a basic and important function of management. Planning is very important
for any business organization. It helps to achieve goals of business and maximize the use of
business resources. Due to planning the cost of production can be minimized and control on
the activities can be possible. The following points indicate the importance of planning function
1) Attainment of objectives: A predetermined objectives can be achieved through plans.
Planning enables a purposeful set of activities instead of random action. In short
planning focuses attention on the objectives. Objectives are set first and then the work
plans are fixed.
2) Minimizes Uncertainty: Planning reduces the uncertainty of future. Due to planning the
manager can anticipate changes in technology, taste fashions etc. Proper provision is
made in the plans to attest these uncertainties. No doubt, the future is uncertain but
under planning expected and estimated expenses leads to control over expenses and
losses.
3) Better Utilization of Resources: There are many resources used in business
organization. Out of them material, machines, men, power, money are prime
manufacturing resources. Due to planning there is proper scheduling for maximum use
of resources. Planning set the actions and flow of actions with its cost and time effects.
4) Minimizes Cost : Planning reduces wastages. Proper planning increase speed and
efficiency of the workers which indirectly affects the cost. Planning is a base of control.
Functional budgets are prepared under planning which minimizes cost by controlling
wastages. It reduces variances between actual estimated cost.
 5) Better Use of Technology Resources: In this modern age the business has to cope up
with advance technology. This is possible only when proper planning for adoption of
technology will be done. Human resources and other infrastructure resources can be
utilized up to their maximum capacity only because of proper planning.
6) Facilitates Decision-Making: Decision – Making means selection of best alternative out
of many options. Planning includes the evaluation and analysis of best option from so
many options. Planning facilitates to decision – making.
7) Facilitates Control: Control is the last function of management. Control means
comparison of actual results with the estimated or budgeted aspects. The difference
between actual and planed targets is required to be redesigned again so indirectly
planning facilitates to control. From the above points it is clear that planning ensures
unity of direction. It helps to control the business activities. Planning leads to budgeting,
scheduling work-plan etc. Planning is the essence of all management activities. Once
the work is planned well other activities of the business automatically follow.
Steps in Planning Process
To plan is to chart out the future course of action to achieve the desired goal. For this
purpose, the following major steps are involved in planning process. Planning is a continuous
process which is unending process which indicates the following systematic procedure. The
steps in planning include the segmental procedure followed by the planning committee. The
following are the steps.
1) Forecasting of Professional Opportunities: Planning needs to search for professional
opportunities in the business. The objectives can be set after knowing the opportunities.
The professional opportunity may be in the form of units of production, sales units,
profit in rupees, profit in percentage.
2) Establishment of objectives: Planning is closely associated with the objectives of the
organization. If there are no objectives there is nothing to plan. Objectives must be laid
down in the clearest possible item.
3) Forecasting: Forecasting means assessing the future on the basis of present situation
and past experiences. Accurate forecasting leads to correct decisions about future
course of action. Accurate forecasting helps to make accurate planning.
4) Establishing the sequence of Activities: Planning includes the forecasting of so many
activities. The proper sequence for those activities is essential. In order to have a
successful execution of the basic plan as also of the derivative plans proper sequence is
decided.
5) Determing of Alternative Courses: There are several alternatives available for achieving
the organizational objectives. Therefore, the next step in the planning process is to
search for and examine alternative courses of action. However, the more common
problem is not selection of alternative but reducing the number of alternatives. So that
the most promising option may be analysed.
6) Selection of Alternative Course: After having searched and examined the alternative
courses, the next step is to evaluate the alternatives taking into consideration their
favourable and unfavourable problem as one alternative may have some favourable
points and other alternative may have some other favourable points.
7) Budgeting: A master budget for the whole enterprise and other departmental budgets
are prepared to give meaning to plans. Financial aspects are covered under budgeting.
 8) Follow-up : This is the last step in planning. After having adopted major and expected
plans and they are brought into execution.

It is necessary to make a provision to check that the actual work is being executed and
results are obtained at each stage according to plans and in case of variances or differences to
actual, corrective steps are taken immediately
Functional Types of Planning:
There are many types of planning on the basis of nature, period, objectives and area of
functions. Planning is a Primary, intellectual and important function of management. Due to
proper planning the objectives of organization can be achieved very easily. According to Henry
Fayol there are 14 principles of management. The first and most important principle is of
'Division of Labour.’ On the basis of this principle the entire process of the organization is
divided into some sections/departments and sub-sections. In any production organization
Finance, production, personnel and Marketing are some of the important departments.
Other than these there may be purchase, storage, advertising and accounting departments, so
depending upon the scope and size of the business. The planning of these four functional
departments need to be studied in detail.
 A. Financial Planning:
Capital is essential to start the business. Funds are also required to run and to expand the
business. In short, the capital or funds are required at every stage of business. For the constant
flow of funds in business proper financial planning is essential. Financial planning is related
with how to raise the funds and how to invest in any asset or resource so that maximum return
can be gained from the capital. Capital is raised in two ways. One is own capital and another
is borrowed capital. Own capital includes share capital, capitalization of reserves etc. Borrowed
capital includes issue of debentures, loans from banks and financial institute etc. When the
collected capital is invested in long-term fixed assets, it is called fixed capital and when the
funds are invested in short term needs this is called working capital. How to raise the funds
through proper financial structure and how to invest the funds in different assets, what will be
reserves, how will be the profit distribution, annual budgeting etc. are the main factors of
financial planning. Financial planning is the process of estimating capital requirement and
determining its utilization. It is an activity of framing financial policies in relation to
procurement, investment and administration of funds of an enterprise. This financial planning
includes-
I) Estimating the amount of capital to be raised.
II) Framing different sources of capital from both owned and borrowed capital.
III) Setting the policies of application of raised capital in different resources so that
maximum return can be achieved by each investment.
Definitions of Financial Planning:
1) Walker and Boughni: “Financial Planning pertains only to the function of finance and
includes the determination of the firm’s financial objectives formulating and
promulgating financial policies and developing financial procedures.”
2) Henry Hagland: “Financial planning of a corporation is its patterns of outstanding
stocks and bonds.” From the above definitions it is clear that financial planning is the
responsibility of finance department. It is very useful to achieve the goals of the
organization in time.
Importance of Financial Planning:
Financial planning plays an important role in the success of any business organization.
Due to financial planning funds flows constantly without any obstacle. The importance of
financial planning in any business organization can be understood from following points.
1) Forecasting of funds: Financial planning helps to forecast the need of funds for different
reasons in the business. This helps to prepare different types of budgets.
2) Capital Structure: Under the financial planning plans for how to raise own capital and
how much to collect borrowed capital is also decided. By issuing appropriate number
of shares the burden of fixed rate of interest on borrowed capital can be decreased.
3) Proper distribution of capital: The collected capital can be distributed in to fixed capital
and working capital. It is possible due to financial planning only.
4) Maximum use of Resources: Financial planning helps in deciding the investment of
funds in different resources. It also decides the return on investment in advance, which
helps to maintain optimum use of resources.
 5) Economy in capital structure: Financial planning helps in maintaining the lowest
expenses while raising capital funds. i.e. cost of capital factor is predetermined under
financial planning.
6) Constant flow of funds: Financial planning helps to maintain constant flow of funds in
the business. This reduces the risk of over liquidity and unsound insolvency position of
the business. It reduces the over-capitalisation and under-capitalisation.

B. Production planning:
Production is a main and an important process of any business organization. There is a
need of raw material, machinery, men-power and oil-fuel etc. as factors of production. There
is a need to plan for all these production factors. Under the production planning, schedule and
production budget is prepared. Production planning is the responsibility of production
manager. Quality of production, production cost control, production efficiency etc. are
important things to be considered while preparing production planning.
Production planning is an important to maintain the constant flow of production process
from raw material to finished goods and from finished goods to consumption by the customer.
Definitions of production planning:
1) British Standard Booklet: “The administrative process that takes place within a many
factory, business and which involves making sure that sufficient raw materials, staff
and other necessary items are procured and ready, to create finished according to the
schedule specified.”
2) J. Betty: “Production planning is related with setting the production target, forecasting
the factors of production and making the arrangement for production resources.”
Importance of Production Planning:
1) Maximum use of Production Factors: Due to production planning the factors of
production (i.e. money, material, men, machine etc.) can be used at its maximum level.
As the production planning includes the forecasting of schedule and standard quantity
to be used in future while production.
2) In time production: Because of production planning the production processes go on
without disturbance continuously, which helps to complete the production in time.
3) Reduction in cost of production: Production planning helps in reducing the cost of
production. Production planning includes production budget which also helps to
maintain control on cost.
4) Best Quality of Production: Production planning helps to maintain quality of production
quality control planning is a part of production planning.
5) Co-ordination Between Different Departments: Production planning trys to maintain
the co-ordination between purchase department, storage and marketing departments.
The planning of all these departments co-ordinate between departments depending
upon the production planning.
6) Guideline to workers: Production planning helps to workers while working in factory.
Production Schedule, Production Procedure, Production Cost, Production Budgets and
targets are helpful to know the direction of the work.
 7) Forecasting of Sales: Production planning helps to forecast the production and sales
quality, sales budget etc. The sales budgets are possible due to production planning.
8) Customers Satisfaction: Customers or consumers are satisfied when they get the things
as per their needs. This is possible only through the production planning-market survey,
consumers survey is conducted. From the above points it is clear that production
planning is the backbone of any business. It plays an important role in the success of
business organization

C. Personnel planning/Human Resource planning:

In any business organization there are so many sections/departments. The different
employees are required with different skills at different positions. Personnel Planning/Human
Resource Planning helps to provide sufficient and proper human resource supply to the
organization. Personnel planning includes selection of employees in proper numbers, training
to employees, motivation, welfare activities and resource development etc. The Human
Resource Manager needs to plan for every factor of the Human Resource Development. This
means Human Resource Planning is related with recruitment and thorough development of
human resource. So that it can be utilized at its maximum level. This ultimately effects on
productivity and quality of production.
Definitions of Personnel Planning:
1) According to Vettor: “The process by which management determines how an
organization should move from its current man-power position to its desired manpower
position.”
2) Wendell French: “Human resource planning is defined as the process of assessing an
organisation’s human resources need in the light of organizational goals and changing
conditions and making plan to ensure that a competent, stable workforce is employed.”
Importance of personnel planning:
1) Acceleration to other factors of production: Due to personnel planning the men-power
recruited is mostly of skilful and efficient. Such Manpower always accelerates to the
other factors of production. (i.e. Materials, Money, Machinery etc.)
2) Increase in production quality and quantity: Total success of institute is depending upon
the manpower employed. The employees are constantly and in time supplied for every
department especially production department helps to increase the quality and quantity
of the production.
3) Able to adopt the new technological changes: Under production planning advance
training is planned for employees. Due to this new advance technology can be adopted
easily. Advance training helps to employees to increase their efficiency.
4) Helpful to achieve goals: Production planning helps to achieve the main goal of the
business that is net profit. Production planning increases the work efficiency of the
workers. Proper training increases the efficiency as well as mental satisfaction of the
employees. There is low rate of labour turnover. It reduces cost of production and
increases the net profit.
5) High employment opportunity: Production planning helps to plan proper need of
employees with specific skills and education, with this proper plan employment
opportunity can be generated. From the above points the need of personnel planning is
 shown. This exposes that the very important factor of production that is men power can
be utilize at maximum level with the help of production planning.

D. Marketing Planning:
Marketing Planning helps to profit planning. Profit can be earned through proper marketing
of the products. Finished goods are handed over in time to the consumers through effective
marketing planning. Sustaining the present market as well as market extension and sales
promotion are the main objectives of marketing planning. Marketing planning includes-
planning for search of new market, branding, packing, advertising, market division, market
survey etc. Marketing planning has become more complicated due to the changing market
environment, competition, changing trends and demands of customer and changes in fashion
etc.
Definitions of Marketing Planning:
1) McDonald: “A logical sequence of activities leading to the setting of marketing
objectives and formulation of plans for achieving them.”
2) American Marketing Association: “Marketing is the performance of business activities
that direct the flow of goals and services from producer to consumer or user.”
Importance of Marketing Planning:
1) Fast/Quick stock turnover: Because of proper marketing planning there is fast turnover
of the stock of finished goods. The final product is sold very quickly and it does not lay
in stock for long period.
2) Forecasting of many factors: In the marketing planning the forecasting of many factors
like – customers, competitors, middlemen, publicity, packing etc. is done by marketing
manager. It may be done through market survey and research.
3) Guidelines to salesmen: Marketing planning is helpful to sales officers and salesmen
etc. It gives the guidelines to them. As it includes sales targets, sales budgets, sales
strategies etc.
4) Fulfilment of institutional objectives: Because of long-term as well as short term
marketing planning, the main objectives of expected sales and profit can be achieved
easily.
5) Easy to face new Environmental challenges: The marketing planning is essential to face
new environmental changes in the market. Changes in demand, taste, fashion,
competition etc. can be predetermined and proper remedies can be decided in marketing
planning.
6) Helpful to production department: Marketing planning is helpful to co-ordinate with
production function. The production target depends upon marketing efficiency.
Marketing forecasting, marketing surveys etc. which helps to set production budget.
7) Marketing planning is the base of annual budget: Annual budget includes proposed
incomes and expenditures with profit and loss estimation. Marketing planning
contributes to budget for all expenses as well as budgeted incomes through proposed
profit and loss A/c. Above all the few points which indicates the importance of
marketing planning in any business organization.
Decision – Making
Management includes a chain of functions like planning, Organization Direction, Co-
ordination and control. In case of every function the management needs to take decisions.
Decision- Making is a crucial and central Job. Decision is a choice whereby a person comes to
a conclusion about the solution of given problem. It is the selection of a course of action from
two or more alternative courses of action.
It is an intellectual and continuous process. In case of industry to achieve the objectives
of the business and to face the problems of organizations management needs to select the best
alternative out of many alternatives. According to dictionary meaning ‘Decision’ means to
prepare concrete view on any fact. The word ‘decision’ has been derived from the Latin word
‘Decidere’ which means a cutting away or a cutting off. Thus, a decision involves a cut off
alternatives between those that are desirable. “A decision is an action chosen from the various
possible course of action”. Decision- Making is rational process to arrive at a decision. The
process by which an individual or organization chooses one action.

Definitions – Following are few important definitions-

1) According to Allen – “Decision making is the work which a manager performs to arrive
at conclusion and judgement”.
2) According to George Terry – “Decision Making is the selection based on some criteria
from two or more alternatives”.
3) According to E. Dale – “Management decisions are those decisions which are always
made in the course of one of the true management activities: Planning, Organising,
Staffing, Directing. Controlling, Innovation and Representation”. From the above
definitions it is clear that decision- making is a function related with all other functions
of management. It is concerned with selection of best alternative out of many options.
In time decision- making helps the organization to achieve its goals.
Features / Characteristics of Decision- Making
1) Selection of Best Alternatives – Decision- Making means selection of the best
alternative out of various alternatives. Decision making implies that a manager selects
the most desirable alternative to salve a problem.
2) Intellectual Activity – Decision- making is a rational and intelligent process. A manager
has to think seriously and then choose the most appropriate way of doing a thing.
3) Goal- Oriented – Decision – making is goal-oriented activity. Every decision has to
solve a specific problem. Every problem has many solutions but the best solution is
based on a specific objective of the business.
4) Continuous Activity – Decision – making is a continuous activity. It is related with
many functions. In case of management functions from planning, organizing, co-
ordination and controlling there is decision- making involved.
5) Means to an end – A decision is a means to an end and not an end. it is a device to
achieve some results, Decision – making shows the results and effects in long run.
6) Related to Situation – Decisions are different in different situations selection of
alternative changes as pen changing priorities and priorities changes as pen situation.
Present situation is based on present economic conditions climate social- needs,
 changing habits and fashion etc. The above are few important features of Decision-
Making.
Process of Decision – Making – Process:
Decision- Making is defined as the selection of one course of action from two or more
alternative courses of action. Whatever manager does, he does it through decision- making, so
the management is basically a decision- making process. This process passes through some
sequencial steps. The process of decision making has the following steps to be followed in
progression, so that a decision is arrived at. The following figure shows the steps involved in
decision- making –

1) Setting Specific Objective: There must be some specific objective. Every business
activity has some goals. Setting of objectives is an essential step. There are many
objectives for a single problem. The objectives are set by top level management. The
management should be very careful while setting objectives of the organization.
2) Identification of Problem: Identification of the problem is the real beginning of
decision-making. A manager tries to solve a problem but identification of accurate
problem is very important. If the objective is set specifically, it provides a manager a
clue in identifying the problem. For identifying a problem, the analysis and diagnosis
of every aspect of the problem.
3) Searching for Alternatives: A detailed diagnosis and analysis help in knowing the
nature of the problem. Then the manager makes a search for possible solution. The
search for various alternatives helps in selecting the most appropriate alternative. A
manager may use several sources for finding alternatives for that he can use his past
experiences.
4) To Evaluate & select alternative: There are many alternatives for a single problem.
Sometimes some alternatives may not be significant. It is essential to evaluate from
different aspects like – cost economy, time factor, social effects etc. A manager mostly
makes a list of the alternatives. The priority list must be prepared and the best alternative
must be decided on the basis major objectives. The critical or strategic factors should
also be taken into account. These factors may be financial provision, technical know-
how, political situation, govt. policy, etc. On the basis of such factors the analysis and
selection of best alternative is done.
5) Action & Follow-up: Once the best alternative is selected it is put in to action. The
implementation of decision shows the problems or hurdles in practice. Sometimes these
obstacles are not possible to reduce then the revision of whole decision process is
required to be done. A decision is made effective through the action of the people in
the organisation. If the action of implementing a decision is helpful to achieve
 objectives of the organisation. When a decision is put into action, it brings certain
results. But if there is differences between results and objectives the reasons of
differences are being found out and review of the decision is done. A follow-up system
ensures the achievement of the objectives.
Techniques of Decision Making:
To take the accurate decisions in business the management needs of follow few steps.
One of these steps is to select the best option out of many options on the basis of few criteria.
While selecting the best option the management has to consider some techniques of decision-
making. There are two types of techniques to take managerial decisions. These techniques are
as follows.

1) Traditional Techniques: These Techniques are useful for small business concerns.
These techniques are used by high experienced managers of the businesses. In modern
days these techniques are becoming out dated as the business scale is increasing and
many environmental factors are affecting on business operations.
2) Modern / Scientific Techniques: In modern business world has become more dynamic
and of large scale. In this advance technology age taking the decisions on the basis of
traditional method has become riskier. So modern scientific techniques are developed
and used in modern businesses. The few major techniques are as below.
a. Analysis Technique: This technique makes an analytical study of available options
in present situation and tries to forecast for future. It is useful for small business
organizations where there are limited options available to select.
b. Financial Techniques: As any business decision affect directly or indirectly to
financial need of organisation. Due to any decision what will be the capital
investment, return on investment and burden of loan etc. are the factors which are
required to be considered. The Break Even-point, Cost-Volume- Profit analysis etc.
required to be found out and based on that profit planning and cost control should
be done.
c. Statistical Technique: Under this technique Probability Theory, Operation
Research, Co- relation & Regression, Ratios, Mean, Medians Trend analysis etc.
are used to make analysis of the data. In modern business world these statistical
techniques can be used with special software with computers.
d. Behavioural Technique : This technique is used in selection of human resource. To
select a right person at right place there is need of Judgment of behavioural factors
 like choice, trend psychological, emotional quantum, thoughts and nature of a
person, etc. The evaluation of behaviour aspects is done with some psychological
tests under this technique.
e. Special Technique: In modern business world some new special techniques of
operation research, PERT, CPM and SWOT analysis techniques are used while
analysing the data in decision making process. The above are few modern
techniques used in decision making process.