Planning & Decision making

Outcome2:

Summarize steps in the formal planning process; Describe the steps in the decision making process;

Contents:

 Definition of Planning
 Need for Planning
 Types of Plans
 Strategic planning vs. operational planning
 Steps in Planning
 Meaning and importance of decision-making
 Types of decisions
 Process of decision making

2
 Essential Reading
 Rao P. and Pande H (2009), Principles and Practice of Management, Global Media. Chapter Four; Link:https
://ebookcentral.proquest.com/lib/momp/detail.action?docID=3011383&query=Principles+of+management
 George R.Terry and Stephen G.Franklin, "Principles of Management,“ All India Traveller Bookseller, Delhi, 1987,
p. 116.)

Recommended Reading
• Management 6th Edition by Stephen P Robbins & Mary Coulter published by Prentice Hall International Editions
pp. 236-237
• Open Educational Resource
• www.Saylor.org/site/textbooks/Principles%20of20Management .pdf

•
 INTRODUCTION
 Planning is the primary function of management. It is the outline of
the activities to be done in the future predetermined goals. It means
looking ahead and chalking out the future course of action.

• Planning is concerned with deciding in

advance what, when, where, why and
how is to be done and who shall do it.
Thus, planning is the process of
setting goals and choosing the
means to achieve those goals.

• Without plans managers cannot know

how to organize people and resources
effectively for achieving Simply,
planning is the process by which
managers define goals and take
 Definition of Planning

 According to Koontz and O'Donnell, "Planning is deciding in

advance what to do, how to do it, when to do it and who is to
do it. Planning bridges gap from where we are to where we
want to go".

 In the words of Mary Cushing Niles, "Planning is the

conscious process selecting and developing the best course of
action to bridges gap from where we are to where we want to
go" accomplish an objective".

 ME. Hurley regards that, "Planning is deciding in advance

what is to be done. It involves the selection of objectives,
policies, procedures and programs from among alternatives".

 According to Harold Koontz and Heinz Weihrich, "Planning

involves selecting purposes and objectives of the actions to
achieve them; it require decision making, that is choosing from
among alternative future courses of action".
 Importance of Planning
(1) OVERLAPPING AND WASTEFUL •Through planning, the efforts of various individuals and departments are coordinated properly to eliminate overlapping & wasteful activities.
ACTIVITIES •It ensures clarity in thoughts and actions, work is carried on smoothly without any confusion and misunderstanding.
•Useless and wasteful activities are reduced or eliminated.
•It is easier to detect inefficiencies and take corrective measures to deal with them.

(2) PROVIDES DIRECTIONS

• By stating in advance how work is to be done, planning provides direction for action.
• Planning guarantees that goals and aim are distinctly defined so that they
• operate as a pattern for determining what direction should be taken.
• Planning makes the goals and objectives clear in the minds of all individuals working in different capacities.
• Lack of planning brings chaos and lack of coordination.
Example:
A car manufacturing company gives targets to employees who decide their direction of work.

(3) INNOVATIVE IDEAS •Planning is thinking in advance what to do and how to do it.
•New ideas can take the shape of concrete plans and innovation.
•Innovation is required to modify the plans for the growth and expansion of the business.
•Example:
•Through innovative products, the companies maintain a competitive edge in the market and it is planning through which it is decided how
to innovate.
•In a company of real estate, there are different departments like Marketing, HR, Sales, and Finance. Each department has assigned targets
and jobs. This reduces overlapping of work and wastage of efforts.
(4) REDUCES THE RISKS OF •Planning is done for the future and the future is full of uncertainties.
UNCERTAINTY •Planning enables a manager to look forward and take appropriate steps to deal with future uncertainties and changes.
•Mis-happenings and uncertain events cannot be eliminated completely but their effect on the organisation can be minimised if we plan how
to overcome such situations.
•Example:An organization might ensure its inventory yet an accident can take place and damage its assets. So, the future is uncertain yet
we can minimise the risks by proper planning.
(5) DECISION MAKING •Through planning, managers compare different alternatives with their benefits and limitations.
•Planning helps make rational decisions by choosing the best most profitable alternative which may bring lower cost, adaptable to the
organisation and situations.
•Example: A group of marketing experts (deciding for best marketing strategy for the product) chalk out different alternatives evaluates
these alternatives and finally selects the best alternative.
(6) SET STANDARDS FOR •Planning involves the setting of goals and these predetermined goals are accomplished with the help of managerial functions like planning,
CONTROLLING organising, staffing, directing and controlling.
•Planning provides standards against which actual performance is measured.
•Without standards, the actual performance of each individual, department, and division cannot be measured. 7
•With the help of standards, deviations in the performance are found and such deviations become the basis of effective planning for future
planning.
•Planning provides a basis to bring the desired output under controlling function and result of controlling function provides guidelines for
effective planning.
•Example: A torch manufacturing company decides to manufacture 8000 torches in the month of December. However with the passage of
Types of Plans (based on Breadth)
• Strategic Plans are formulated to provide direction for mission, objectives, and strategies for the
organization. It defines the course of action by which a company intends to attain strategic goals.
• Strategic plans are created by Top management such as the CEO, Board of Directors, Chairmen of the

Strategic Plan: company. These plans become the framework and set dimensions for the lower-level planning in the
organization.
• For Example – Strategic Plans consist of the Vision, Mission, Values, and overall-Objectives of the
Organisation. These are the key elements that clearly define the state of the business in terms of what to
achieve in the future.

• Tactical Plans are formulated to create the blueprint for the strategic plan. These plans clearly define how
the strategic plan will be implemented.
• Tactical plans are often short-term and are carried out by middle-level managers such as the Head of the

Tactical Plan: Department, Sales Manager, HR Manager, Production Manager.

• For Example – Managers of the company create plans to allocate required resources to support the
strategic plan. HR Manager make plans to manage Human Resources of the company. Production
managers make plans to smooth the production process of the business.

• Operational plan cover the day-to-day operations of the organization also. The specific results expected
from departments, workgroups, and individuals are the operational goals.

Operational • An operational plan is one that a manager uses to accomplish his or her job responsibilities. Operational
plans are also short-term in nature and created by Supervisors, team leaders, and facilitators to support
tactical plans.

Plan: • For Example – Team leaders have to manage daily shift timing schedules and allocate tasks to their
subordinates, Supervisors make strategies to reach daily targets that should be completed according
daily plan.
9 to the
Types of Plans (based on Time-frame)
• Long-term planning includes strategic goals and plans and may extend as far as 3 to 5
years into the future. Top management is involved in the formulation of Long term
Long-term Plan plans.
• For Example – Expansion of location, opening new branch offices, entering into a new
market, investment in stock, bonds, and assets.

• Intermediate-term planning includes tactical objectives and has a time horizon of from
Intermediate- 1 to 2 years. Middle-level managers are involved in the intermediate-term plan and
they report to top management before the implementation of these plans.

term Plan • For Example – Product Development, Plans to increase Market Share, Changes in
annual Contracts

• Short-term planning includes operational objectives for specific departments and

individuals. These plans are created by Supervisors and Team Leaders. And they have
Short-term to report their manager of the department. Short term plan has a time period of 3 to 6
months or within a year.

Plan • For Example – Plans for increase Monthly Revenue, Hiring new employees for the
company, Development programs for employees, Allocating monthly goals to10
employees.
Types of Plan (based on Frequency)
• Standing plans are ongoing plans because they focus on organizational
situations that occur repeatedly. Standing plans include policies, standard
Standing Plan/ procedures, rules, and regulations of the organization.
• For Example – Rules and policy of any organization are good examples

On-going plan of the standing plan because it provides a guideline for the course of
actions taken in the company to achieve organizational goals. All
members need to strictly follow these guidelines all the time.

• Single‐use plans apply to activities that do not recur or repeat at the same
time in the future. A one-time plan that is relevant for a specified time

Single-use and after the lapse of that time, these plans are formulated again
according to the situation for the next period.
• For Example – Single-use plans typically include organizational
Plan programs, projects, budgets. A budget is also a single‐use plan because it
predicts sources and amounts of income and how much they are used for
a specific project. 11
Types of Plan (based on Specificity)
• Directional plans are flexible plans that set out general guidelines. Such

Directional
plans are preferable in a dynamic environment where management must
be flexible in order to respond to unexpected changes.
• For Example – the Sales Manager provides a guideline to his

Plan subordinates to the expected target and now how subordinates will
achieve that it’s up to them. They are free to opt for any mode of practice.
Hence we can say that the Directional plans are outcome focus.

• Those plans which are clearly defined objectives and leave no room for

Specific
interpretation are called specific plans. Such plans require specific stated
objectives and do not contain ambiguity.
• For Example – the Production Manager briefing the plan to his

Plan subordinates as to what, when, where, how much, and by whom task will
be performed. Hence we can say that the Specific Plans are Process
Focused
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 Key Differences Between Strategic Planning and Operational
Planning
BASIS FOR
STRATEGIC PLANNING OPERATIONAL PLANNING
COMPARISON

Meaning The planning for achieving the vision of the Operational Planning is a process of deciding in advance
organization is Strategic Planning. of what is to be done to achieve the tactical objectives of
business?
Time Horizon Long term planning Short term planning

Approach Concerned the internal as well as the external Concerned with the internal environment of business
environment of business.
Modifications Generally, the plan lasts longer. The plan changes every year.

Performed by Top level management Middle level management

Scope Wide Narrow

Emphasis on Planning of vision, mission and objectives. Planning the routine activities of the company.
 Strategic & Operational Planning
Examples
 Take Meta, for example (formerly Facebook). The company recently announced that
an important part of its strategy will be building a new computing platform called a
metaverse—a shared virtual world environment. This is a long-term goal that leader
Mark Zuckerberg says is “critical to [the company’s] mission.” The creation of this new
metaverse would be considered part of the company’s strategic plan.
 To accomplish that goal, Meta needs to derive an operational plan outlining tasks that
need to be done. Numerous components are involved in creating such a platform—
everything from creating standards and protocols for the virtual world to developing the
necessary hardware and software to determining how to monetize the experience, and
much, much more. Meta has to detail which specific activities its people need to do in
each area and when they’ll need to do them. This operational plan will ensure they
meet certain milestones and that the company continues moving in the right direction
over the long term.
 A simpler strategic and operational planning example: Say you have a strategic plan
modeled after the Balanced Scorecard. It names the high-level goals your organization
is trying to accomplish in each of the four perspectives. It also includes aligned and 14
linked measures and projects designed to help you achieve your objectives. Based on
that strategic plan, each department in your company will then need to develop an
operational plan for the projects they are responsible for to determine how the work will
 Planning Process

Setting Objectives

Developing Planning Premises

Identifying Alternative Courses of Action

Evaluating Alternative Course of Action

Selecting One Best Alternative

Implementing the Plan

Follow Up Action
 Planning Process
(1) Setting Objectives

• This is the primary step in the process of planning which specifies the objective of an organisation, i.e. what an organisation
wants to achieve.
• The planning process begins with the setting of objectives.
• Objectives are end results which the management wants to achieve by its operations.
• Objectives are specific and are measurable in terms of units.
• Objectives are set for the organisation as a whole for all departments, and then departments set their own objectives within the
framework of organisational objectives.
• Example: A mobile phone company sets the objective to sell 2,00,000 units next year, which is double the current sales.

(2) Developing Planning Premises

• Planning is essentially focused on the future, and there are certain events which are expected to affect the policy formation.
• Such events are external in nature and affect the planning adversely if ignored.
• Their understanding and fair assessment are necessary for effective planning.
• Such events are the assumptions on the basis of which plans are drawn and are known as planning premises.
• Example: The mobile phone company has set the objective of 2,00,000 units sale on the basis of forecast done on the premises of
favourable Government policies towards digitisation of transactions.

(3) Identifying Alternative Courses of Action

• Once objectives are set, assumptions are made.

• Then the next step is to act upon them.
• There may be many ways to act and achieve objectives.
• All the alternative courses of action should be identified.
• Example: The mobile company has many alternatives like reducing price, increasing advertising and promotion, after sale
service etc.
(4) Evaluating Alternative Course of Action

• In this step, the positive and negative aspects of each alternative need to be evaluated in the light of objectives to be achieved.
• Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the planning premises and within the
availability of capital.
• Example: The mobile phone company will evaluate all the alternatives and check its pros and cons.

(5) Selecting One Best Alternative

• The best plan, which is the most profitable plan and with minimum negative effects, is adopted and implemented.
• In such cases, the manager’s experience and judgement play an important role in selecting the best alternative.
• Example: Mobile phone company selects more T.V advertisements and online marketing with great after sales service.

(6) Implementing the Plan

• This is the step where other managerial functions come into the picture.
• This step is concerned with “DOING WHAT IS REQUIRED”.
• In this step, managers communicate the plan to the employees clearly to help convert the plans into action.
• This step involves allocating the resources, organising for labour and purchase of machinery.
• Example: Mobile phone company hires salesmen on a large scale, creates T.V advertisement, starts online marketing activities
and sets up service workshops.

(7) Follow Up Action

• Monitoring the plan constantly and taking feedback at regular intervals is called follow-up.
• Monitoring of plans is very important to ensure that the plans are being implemented according to the schedule.
• Regular checks and comparisons of the results with set standards are done to ensure that objectives are achieved.
• Example: A proper feedback mechanism was developed by the mobile phone company throughout its branches so that the actual
customer response, revenue collection, employee response, etc. could be known.
18
  You're a decision-maker every single day.
 From the moment you wake up, you start making decisions. You decide what to
eat for breakfast, what to wear, and whether to spend 15 minutes on a workout,
meditation, or extra sleep. These decisions, large and small, continue all day
long.
 Some decisions aren't too complicated. We make them with barely a thought.
 Other decisions should be more intentional. If you are a manager or want to be
one, the decision-making process in management positions demands more
attention to detail.
 If you’re a manager who sometimes fears making decisions, it's understandable.
When you lead the decision-making process, there's a lot at stake. Your team
members count on you to be a good leader. Sometimes, you may not have a
Not significant
identifying the
amount of problem
time to bestcorrectly
decide. Having too much information

Why is it so hard to make a decision?

19

Being overconfidence
 Meaning of Decision-Making

 Decision-making is an integral part of management. Every manager takes

hundreds and hundreds of decisions subconsciously or consciously making it as
the key component in the role of a manager.

 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”

 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.

 The entire managerial process is based on decisions. Decisions are needed both
for tackling the problems as well as for taking maximum advantages of the
 Definitions of Decision-Making

• Decision-making is the selection based on some criteria

from two or more possible alternatives. “-—George R.Terry

• A decision can be defined as a course of action consciously

chosen from available alternatives for the purpose of
desired result —J.L. Massie

• A decision is an act of choice, wherein an executive forms

a conclusion about what must be done in a given situation.
A decision represents a course of behaviour chosen from a
number of possible alternatives. -—D.E. Mc. Farland
 Types of Decision Making in an Organization

Every organization needs to take

distinct types of decisions for
carrying out their activities
efficiently.
Programmed And Non-Programmed Decisions
Programmed decisions are one that relates to the matters of routine
type and problems that are of repetitive nature.
These decisions are taken following the specific standard procedure
for dealing with all such problems.
Programmed decisions are basically taken by management at the
lower level.
Such decision involves like purchasing raw materials and spare
parts, granting the leave to an employee, etc.

Non-programmed decisions are meant for dealing with problems of

difficult nature and which can’t be solved easily.
These decisions arise out of problems that are not routine or daily
occurring.
There is no standard procedure for solving such issues.
Non-programmed decisions are very crucial for an organization and
are taken by upper-level management.
Decisions at a higher level may include introducing new products in
the market, setting up Source:
a new branch of business, and many more.
www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 23
Routine And Strategic Decisions
Strategic decisions are key decisions influencing the goals,
objectives, and other crucial policy matters of the organization.
These decisions require proper analysis and evaluation of distinct
alternatives as they require an investment of funds.
Strategic decisions are taken by the top and middle-level
management teams.
These also influence the routine decisions taken on a daily basis and
hence require utmost care before taking them.

Routine decisions relate to the decisions which are taken on a

routine basis for the daily functioning of the business.
These decisions can be taken quickly without much evaluation,
analysis, and in-depth study.
Generally, higher management delegates power to their
subordinates for taking such decisions within the policy of business.
Source: www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 24
Tactical And Operational Decisions
Decisions that are concerned with distinct policy matters
and the planning of business are called policy decisions.
These decisions have a long-term influence on the
performance of an organization. these decisions are taken
by the top management team.
These decisions include decisions related to the volume of
production, the channel of production, location of business
plants, etc.

Operational decisions related to daily operations and

functioning of business enterprise.
These decisions make it possible to implement the plan and
policies taken by managers at the top level.
Middle and low-level managers usually take these
decisions.
Source: www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 25
Individual And Group Decisions

Decisions taken by a single individual in his official

capacity are called individual decisions.
This decision type is more used by organizations
that are smaller in size and have an autocratic
management style.
Group decisions, on the other hand, are taken
collectively by the management and employees of
the business together.
Group decisions mainly focus on involving a large
number of individuals in their process of decision-
making.
Decisions taken by the board of directors of the
company came in the category of group
Source: www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 26
Major And Minor Decisions

Major decisions relate to key aspects of

business organization and are taken by top-
level managers.
The decision to buying new factory
premises is a major decision.

Minor decisions are taken by peoples at

lower levels in business organizations and
are of less importance.
Purchase of office stationery for daily use is
a minor decision that can be taken by the
office superintendent.
Source: www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 27
Organizational And Personal Decisions
The organizational Decisions are taken by the manger
in their formal capacity for benefit of the organizations
A sales director might decide on the incentives for a
sales team.
An operations manager might decide to change the
roles of certain employees to help them perform better.
Such decisions taken by managers on behalf of the
company are known as organizational decisions.

The decisions which are taken by any person in his

personal capacity, and not as a member of the
organization are known as a personal decision, for
example, decisions for leave, dress, resigning the
organization and accepting or rejecting promotions,
etc..
Source: www.Saylor.org/site/textbooks/Principles%20of20Management .pdf 28
Process of decision-making

29
Step 1: Identify the decision
• When you're identifying the decision, ask yourself a few questions:
• Why the problem should be solved?
• Who are the affected parties of the problem?
• Does the problem have a deadline or a specific time-line?
• These questions are all common goal setting techniques that will ultimately help you come up with possible solutions. When the
problem is clearly defined, you then have more information to come up with the best judgement to solve the problem.

Step 2: Gather relevant information

• ​ athering information related to the decision being made is an important step to making an informed decision.
G
• Do you have any historical data related to this problem?
• Has anybody attempted to solve this problem before?
• It's also important to look for information inside and outside of your company.
• Effective decision making requires information from many different sources.
• Example : Find external resources, whether it’s doing market research, working with a consultant, or talking with colleagues
at a different company who have relevant experience. Gathering information will help you to identify different solutions to
your problem.

Step 3: Identify the alternatives

• This step requires you to look for many different solutions for the problem at hand.
• Finding more than one possible alternative is important when it comes to business decision-making, because different stakeholders
30
may have different needs depending on their role.
Step 4: Weigh the evidence
• Now that you have your possible solutions, it's time to weigh all the pros and cons.
• Think about your competitors and the outcomes they've had with such decisions. Review the possible wins and losses that you could
experience for each possible alternative.

Step 5: Choose among alternatives

• Once you have weighed all the evidence, you are ready to select the alternative that seems to be best one for you.
• You may even choose a combination of alternatives.

Step 6: Take action

• Now that you’ve identified and chosen your solution from all the possible options, it’s time to put it into action.
• You can be decisive in taking action precisely because you know you’ve put in the work in the previous steps to make the best decision
possible.

Step 7: Review your decision & its consequences

• Once you’ve made a decision, you can monitor the success . Here are a few questions to consider when reviewing your decision:
• Did it solve the problem your have identified in step 1?
• Did this decision impact your compny in a positive or negative way?
• Which stakeholders benefited from this decision? Which stakeholders were impacted negatively? 31
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