Module IV

DR. SHWETA DANI

Module IV
• Planning and Decision Making: (a) Meaning and Characteristics of
Planning
• (b) Importance of Planning, (c) Limitations of Planning
• (d) Types of Plans; Planning of start-ups
• e) Steps in Planning Process,
• Decision Making: (a) Meaning (b) Types of Decisions
• c) Decision Making Process
Module IV

• At the end of this module, students will understand that sustainability of

businesses and consistent growth of businesses depend on setting the right goals
based on right problem definition and execution depends on effective decisions
at every stage of the plan
Definition of Planning
“Planning is the thinking process, the organized foresight, the vision based
on fact and experience that is required for intelligent action.”

Alford and Beatt,

“Planning is deciding in advance what is to be done. When a manager
plans, he projects a course of action for further attempting to achieve a
consistent co-ordinate structure of operations aimed at the desired results.
Theo Haimann,
Planning : It is the process of outlining the activities that are
necessary to achieve the goals of the organizations.
Close Relationship between Planning and
Controlling
Characteristics of a Good Plan
1. Linked to Long-term Objectives
2. Direction for Action: A plan must specify the actions and the outcomes of
these actions.
3. Consistent - consistent with external environmental factors
3. Feasible: A plan must be based on reality of the situations.
5. Simplicity: A plan must be simple to understand because of the fact that one
group of personnel formulates the plan but it is implemented by another group.
6. Flexible: A plan should be flexible enough to accommodate unforeseen
future changes in the environment
There are two principles of flexibility in planning:
a. Principle of flexibility: The planning should be in such a way that a change
in it (because of changes in environment) can be made without undue costs
or friction.
b. Principle of Navigational Change:
• A manager should constantly check his plans (as navigator check constantly
where his ship is going in vast ocean)
• since the distant future is generally more uncertain than the immediate
future, long-range planning requires such constant checking.
Benefits of Planning
• Better Coordination
• Focus on Forward Thinking
• Participatory Work Environment
• More Effective Control System
 Importance of Planning
• Creation of Goals
• Planning Provides Direction
• Planning Tackles Uncertainty
• Reduce Overlapping & wasteful activities
• Promotes innovative ideas
• Facilitates Decision Making
• Establishes standards for Controlling
Limitations of Planning
• Lack of accuracy
• Costs
• Advance effect on decisions
• Delay in actions
• Psychological barrier
• Limited flexibility
• Limited practical value
Types of Plans
1. Standing and single-use Plans:
Standing Plans provide guidelines for further course of action and are used over a period of time. These plans are in
operation for a long period unless there is a change in these plans.
a) The policy: is a standing plan that furnishes broad guidelines for action, consistent with reaching organizational
objectives.
b) Procedures: are standing plans that outline a series of related actions that must be taken to accomplish a particular
task.
c)  Rules: are standing plans that are designate specific required action. A rule indicates what an organization
member should or should not do and allows no room for interpretation.

Single-use plans : These plans are relevant for a specified time and after the lapse of that time, these plans are
formulated again for the next period. Example : Walmart want to expand the number of its stores in China, top-level
executives formulated a single-use plan as a guide.
Program: is a single use plan designed to carry out a specific project within an organization.
Budget: is a single use financial plan that covers a specified length of time. 
2. Strategic and Operational Plans:
Strategic Plans are major plans which define the long-term course of action for an
organisation in the light of its environment.
eg. Determination of long-term organisational objectives, major policies and strategies.
Operational Plans are plans that encompass a particular operational area of the organization.
Focuses on day-to-day activities that are necessary to achieve the long-term goals of the
organization.
3. Long-term and Short Term Plans :
Long Term plans : Plans with a time frame beyond three years
Short Term Plans : Plans covering one year or less
4. Specific and Directional Plans
Specific Plans : Plans that are clearly defined and leave no rooms for interpretation.
Example : manager seeks to increase his unit’s output by 8% over 12 months.

Directional Plans: Plans that are flexible and set out general Guidelines
PROCESS OF PLANNING
Steps in Planning:

1. Being Aware of Opportunity:

In light of:

• The market
• Competition
• What customers want
• Our strengths
• Our Weaknesses
2. Setting Objectives or Goals:

*Where we want to be
*What we want to accomplish
*and When

3. Considering Planning Premises (future environment):

In what environment-internal or external-will our plan operate?

4. Identifying Alternatives:

What are the most promising alternatives to accomplishing our

objectives?

5. Comparing Alternatives in light of Goals Sought:

Which alternative will give us the best chance of meeting our goals at
the lowest cost and highest profit.
6. Choosing an Alternative:

Selecting the course of action we will pursue (Plan).

7. Formulating Supporting Plans:

Such as plans to:

 Buy equipment
 Buy materials
 Hire and train workers
 Develop a new product
8. Numbering Plans by Making Budgets:

Develop such budgets as:

*Volume and price of sales

*Operating expenses necessary for plans
*Expenditures for capital equipments
 Scenario:
• Tommy and Larkin recently started a restaurant and specialty food
store in Norther California. The store also sells wine and locally
make craft. Although the business does well during the summer
tourist months, things get pretty lean from October to April when
visitor numbers dwindle. The Larkin felt that the potenetial
opportunities in this location were good.

Ques : what type of plans do the Larkins need to survive the off-
season?
DECISION
MAKING
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
It is the process of

• locating and defining the problem,

• developing alternate solutions to the problem,
• weighing the various alternate solutions in terms of their possible
consequences,
• choosing the optimum solution from among them,
• and implementing the decision effectively.
Types of Decisions:

A. Programmed and Non-programmed Decisions:

1. Programmed Decisions:
 Programmed decisions are routine and repetitive decisions.
 These are made within the framework of well defined policies and rules of
organisation.
 These decisions are comparatively easy to make as these relate to the
problems which are solved by considering internal organisational factors.
2. Non-programmed Decisions:

• These decisions are made to solve unique/unusual and non-recurring problems.

• For these decisions, situation is not well structured and outcomes of various
alternatives can not be arranged in advance.

• For taking these decisions, managers have to consider various factors, many of
which may be in the external and uncontrollable environment.

• As these decision influence organisation in long-run, managers at higher levels are

involved in taking decisions.
B. Strategic and Tactical Decisions:
1. Strategic Decision (non-programmed): Strategic decision is a major choice of actions
concerning allocation of resources and contribution to the achievement of
organisational objectives.
Characteristics of Strategic Decision
 This decision is major decision which affects the whole or major part of organisation.
 It contributes directly to the achievement of organisational objectives and other
decisions derive from this decision.
 A strategic decision may bring out major changes in earlier organisational
practices like expansion of business, change in personnel policies etc.
 The strategic decision has three elements:

a) Action element: a course of action which specifies the work to be done to achieve the result.

b) Result element: a desired result or objective to be achieved through the implementation of

the decision.

c) Commitment element: a commitment which directs some part of the organisation to

undertake the course of action, makes the personnel involved responsible for attaining the
objective, and allocates resources to them.

d) Strategic decisions are to be taken in the context of environmental factors which are
dynamic and uncertain. Alternatives and outcomes for these decisions are unknown, so they
are normally non-programmed decisions.
2.Tactical Decision(programmed):

• Relate to day-to-day operations and are repetitive in nature.

• These are programmed decisions as these are taken through the prescription of policies, rules,
procedures etc.

• The outcome of tactical decision as short-term and affects a small part of the organisation.

• So, the authority to take these decisions can be delegated to lower-level managers and higher
level managers get more time to devote on strategic decisions which are more important.
DECISION MAKING
PROCESS
DECISION MAKING PROCESS:

 Decision making process is more applicable to non-programmed decisions.

 For frequently occurring, structured problems, it is not necessary to consider the entire
process because to solve these problems policies are already established.

Steps in Decision Making Process:

1. Specific Objectives: (eg. Increasing profit)

 To achieve certain objective, decision making is required.

 Objective is the outcome of earlier decision, so it provides framework for further

decisions.
2. Problem Identification: (Less profit-More profit)
Problem is the gap between present and desired state of affairs on the subject
matter of decision. A problem can be identified clearly, if managers go
through diagnosis and analysis of the problem
a) Diagnosis: It means….
 knowing the gap between what is and what should be,
 identifying the reasons for gap, (may be less sales, high cost of
production, less profit margin)
 and understanding the problem in relation to higher objectives of the
organisation.
b) Analysis: It is done to find out ….

 who would make decision (according to the criticality of the decision),

 what information would be needed,

 and from where the information is available.

3. Search for Alternatives: (for increasing profit)

• A problem can be solved in several ways. Therefore, a decision maker must try
to find out the various alternatives available to get the most satisfactory result
of a decision.

• Various alternatives can be identified through many sources like past

experiences of decision maker, practices followed by others etc.
4. Evaluation of Alternatives:

After developing a list of alternatives, the decision maker will evaluate that how each
alternative may contribute towards the achievement of objective of decision.

In evaluating an alternative, both tangible (quantitative, e.g. cost) and intangible

(qualitative, e.g. psychological effect) factors have to be taken in consideration.
5. Choice of Alternative:
Deciding the most acceptable alternative which fits with the organisational objectives is
very important step in the process of decision making.
In choosing an alternative, the decision maker can go through three approaches:
………….
a) Experience: Managers can choose any alternative which has given desired results in the
past. This approach has certain limitations because environmental factors are flexible and
any decision may not give similar results which were given in the past.

b) Experimentation: In this approach, a particular alternative put in practice at small scale,

result is observed and the alternative giving the best result is selected. This method can be
used on a limited scale because of cost and time factor.
c) Research and Analysis: It is the most certain method of selecting an alternative, specially in
case of major decisions.
In this method, relationships between various factors are studied scientifically and effect of
various components of any alternative on objective achievement has to be seen
systematically.
6. Action: After choosing an alternative, it has to be put into action.
Implementation of decision requires:
• -Communication to subordinates
• -getting acceptance of subordinates over the matters
• -getting their support for putting the decision into action.
The decision should be effected at appropriate time and in proper way to make the action
more effective.
7. Results: After implementing the decision, certain results will be achieved.
A manager has to compare the achieved results with desired results.
If there is any deviation, than the factors responsible for this deviation should be identified
properly and corrective action should be taken accordingly