Unit - four

Planning and Decision Making

Kiran Kumari Sah

 Meaning of Planning
• Initial and basic function of management

• Logical thinking process which determines when, where, how, why

and who will do the specific job to achieve desired goal

• Process of outlining and deciding future courses of actions in

advanced for attaining organizational goals

• Involves goal determining, formulating policies, developing

procedures and programs, budgeting etc.

• Bridges the gap between the present state and desired future state
According to Richard Steers - planning is the process by which
managers define goals and take necessary step to ensure that these
goals are achieved.
According to Peter Ducker – Planning is the continuous process of
making present entrepreneurial decisions systematically and with the
best possible knowledge their futurity, organising systematically the
efforts needed to carry out these decisions and measuring the results of
these decisions against the expectation through organized systematic
feedback.
 Characteristics of planning
Following at the characteristics of planning
i. primary function and focus on goal
ii. future oriented
iii. intellectual activities
iv. pervasive in nature
v. continuous and flexible activities
vi. bounded in time frame
vii. based on environmental analysis
viii.set of priority of product and market
 Levels of Planning
• Strategic Plan; corporate or grand plans stating how a business
organization will achieve the mission and predetermined objectives; specifies
organization’s mission, vision and objectives; prepared by top level
management by considering long-term objectives; way of approaching business
opportunities and threats.
Characteristics of Strategic Planning
i. Long term focus and Goal oriented
ii. Based on environmental analysis (SWOT)
iii. Involvement of top management
• Tactical plan/Business plan ; second level plan prepared by middle
level management considering the targets of the department or
branch; consistent with strategic plan and short-term in nature;
involves allocation of divisional work, resources and utilization of
them properly to support strategic plan; production plan, finance plan
etc.
Characteristics of business plan
i. it is concerned with the gaining competitive advantage in the market
ii. It is derived from strategic plan
iii. it has relatively shorter time horizon than strategic plan
• Operational plan; plans prepared by lower level
management to achieve operational goals; considers the
tactical plans of the respective department and specifies the
procedures, schedules and processes for day to day activities
of the operational unit; emphasizes on the best utilization of
resources; maintenance plan is an example of operational
plan
Characteristics of operational plan
i. It emphasis is on planning the routine activities of the business.
ii. its scope is narrow and specific for 12 months only.
iii. it is prepared to achieve the tactical objective of the business.
iv. it is shortest one among three types of planning.
• Unit Plan - Unit plan can be defined as a plan created by the
selection of learning activities in a particular way as a means of
presenting a complete picture. Unit planning is a methodical
arrangement of subject matter and involves a series of learning
experiences.
 Steps in planning/Planning process
• Environmental Analysis: pre-step in planning essential to analyses the
strengths, weakness, opportunity and threats(SWOT) from the dynamic and
complex environment for successful implementation of planning.

• Setting Goals: objectives or goals are targets that provide pathways and
mechanism to organizational activities; objectives should be SMART; overall
objectives and specific objectives should be developed by considering
strengths and opportunities.
• Developing Planning Premises: premises are certain assumptions about
environment; market conditions, availability of resources, government
policy, competition should be predicted.
• Identifying Alternatives: there may be various methods, persons,
resources as alternatives to operate activities to attain goal; all the
possible alternatives should be identified

• Evaluating Alternatives: each alternative should be examined

logically on the basis of cost, time, risk, return etc. evaluation
facilitates comparison

• Selecting the best Alternative: after evaluating the alternatives,

planner has to select the best alternative by considering past
experience, present situation and future contingencies
• Formulating Action Plan/Derivative Plans: action plan for all
departments and units should be formulated after selecting the best
alternative; derivative plans are secondary plans or supportive plans and
they support in implementation of main plan

• Implementation of the Plan: brings all the procedures, programs,

budget and policies of plan into action otherwise, plan remains in
paper only; involves providing instructions, supervision, control

• Review and Follow up: review of the process provides feedback to the
planner to measure effectiveness and weakness of the process and
facilitates corrective action
 Tools for Planning
• Forecasting: an important quantitative tool for planning; techniques such
as time series analysis, regression analysis, extrapolation method etc.
are used to estimate sales, income, expenses etc.
• Network Method: technique mostly associated with planning,
implementation and controlling of project; planner should list out all the
activities, events and critical time interval affecting entire project; PERT
(Program Evaluation Review Technique) and CPM (Critical path method)
are common network methods.
• Linear Programming: mathematical tool for getting optimal solution
by making optimum combination of scarce resources and activities;
generally used for maximizing profit and minimizing cost.
• Simulation: means to imitate the operation of real world based on
assumptions; mostly applicable in very complex situation where
diverse constraints and opportunities are found; computer
programming is used for combining variables.

• Break-Even Analysis: technique identifying the sales unit at which

revenue is just sufficient to cover total cost; helpful to analyze cost,
quantity and profits.

• Flow Chart: is used to eliminate wasted steps and activities to simplify

work ; involves defining, standardizing and communicating the process;
works as the guide for a program.
 Pitfalls/Limitations of Planning
• Inflexibility: no scope for modification or improvement by middle or
lower level even when they feel it to be ineffective

• Lack of control: external environmental factors are not under the

control of managers that may not as per planning premises; those
forces greatly influence proper implementation of planning

• Avoid intuition and creativity: provides roadmap of organizational

functioning and employees are more focused on it which may inhibit
employee intuition and creativity
• Time consuming: takes more time in thinking, analysis, estimation,
evaluation and implementation; due to long time planning may be
ineffective

• Expensive: needs more money to analyze environment, develop and

evaluate alternatives and so on, it may also need experts, and
consultants for proper suggestions

• Insufficient information: chances of not getting reliable, sufficient

and up to date information; managers have to formulate plan on the
incomplete and current data only
 Improving Planning
• Setting clear goals: overall goals, departmental goals and individual goals
should be clear, specific and synchronized

• Proper understanding: participative management should support for

proper understanding

• Management Information System: provides reliable, relevant and

sufficient data for formulating effective plan

• Flexibility: plan should be modified and adjusted as per situational change;

should have provision for making change in its components according to
requirement
• Economical: process should not be expensive; managers should
analyze the planning process from cost benefit perspective

• Managerial efficiency: planner must be dynamic person having good

managerial ability; s/he must have knowledge of environmental
analysis, forecasting, evaluation etc.

• Planning must start at the top: at the first, strategic plan should be
developed by the top level ,then departmental and operational plans
should be formulated to support strategic and tactical plans