Module-1-Management and Planning

Management: Definition, Importance – Nature and Characteristics of Management, Management

Functions, Roles of Manager, Levels of Management, Managerial Skills, Management &
Administration, Management as a Science, Art & Profession
Planning: Nature, Importance and Purpose Of Planning, Types of Plans, Steps in Planning,
Limitations of Planning, Decision Making – Meaning, Types of Decisions-Steps in Decision
Making.

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ORGANIZATION: Group of people working together in a systematic manner to achieve a set

of goals.

MANAGEMENT: A set of activities (including planning and decision making, organizing,

leading, and controlling) directed at an organization’s resources (human, financial, physical, and
informational) with the aim of achieving organizational goals in an efficient and effective manner.
1] Human: managerial talent and labor
2] Financial: capital used to finance both ongoing and long term operations.
3] Physical: raw materials, office, production facilities equipment
4] Information: Usable data needed to make effective decisions.

Definitions:
“Management is a process of utilizing the organization resources effectively and efficiently
to achieve the organizational goals”
Organization Resources: men, materials, money, machine are the organization resources
Efficient – Using resources wisely and in a cost-effective way. (Max Output / Min Input)
Effective – Making the right decisions and successfully implementing them
Organization goals: the end result that organization seek to achieve

George R. Terry- He defines management as a process "consisting of planning, organizing,

actuating and controlling, performed to determine and accomplish the objectives by the use
of people and other resources".

Nature of Management:

 Management is universal: Basic principles of management can be applied in all

managerial situations regardless of size, nature and location of the organization.
Universality of managerial tasks and principles also implies that managerial skills can be
transferrable and managers can be trained and developed
 Multidisciplinary: Because it includes knowledge, information from various disciplines
like economics, statistics, psychology, sociology, operations research etc is required.
Management integrates ideas and concepts taken from these disciplines and presents newer
concepts which can be put in to practice for managing organizations.
 Management is dynamic: Management has framed certain principles which are flexible
in nature and change with the changes in the environment in which the organization exists.
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 Is a system of authority: A manager is supposed to get things done by using authority,

than doing things himself? Authority means right to give orders and power to obtain
objective achieved from subordinates.
 Management is an activity: Management is a process of organized activity which is
concerned with the efficient use of resources of production. Resources include materials,
money & people in the organization.
 It is a purposeful activity: It is concerned with the achievement of an objectivity these
functions such as planning, organizing, staffing, directing & controlling
 It is concerned with the efforts of a group: management is concerned with management
of people & not the direction of violent people. It inspires & motivates works to put forts
their efforts to the maximum extent.
 It applies economic principles: Management is the art of applying the economic
principles that underlie the control of men & materials in the enterprise under
consideration.
 Involves decision-making: Management in the decision making process & the decisions
are involved in all the functions of management.
 It Co-ordinates all activities & resource: It is concerned with the Co-ordination of all
activities & resources it’s various functions to attain the stated objectives.

FUNCTIONS OF MANAGEMENT
According to Henry Fayol, “To manage is to forecast and plan, to organize, to command,
& to control”.
Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for
Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for
reporting & B for Budgeting.

But the most widely accepted are functions of management given by KOONTZ and
O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.
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Fig: 1 Functions of Management

1. Planning

It is the basic function of management. It deals with chalking out a future course of action &
deciding in advance the most appropriate course of actions for achievement of pre-determined
goals. According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how
to do. It bridges the gap from where we are & where we want to be”. A plan is a future course of
actions. It is an exercise in problem solving & decision making. Planning is determination of
courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways &
means for accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it
also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing

It is the process of bringing together physical, financial and human resources and developing
productive relationship amongst them for achievement of organizational goals. According to
Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e.
raw material, tools, capital and personnel’s”. To organize a business involves determining &
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providing human and non-human resources to the organizational structure. Organizing as a process
involves:

 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.

3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase
in size of business, complexity of human behavior etc. The main purpose of staffing is to
put right man on right job i.e. square pegs in square holes and round pegs in round holes.
According to Kootz & O’Donell, “Managerial function of staffing involves manning the
organization structure through proper and effective selection, appraisal & development of
personnel to fill the roles designed and the structure”. Staffing involves:

 Manpower Planning (estimating man power in terms of searching, choose the

person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.

4. Directing

It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel
aspect of management which deals directly with influencing, guiding, supervising,
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motivating sub-ordinate for the achievement of organizational goals. Direction has

following elements:

 Supervision
 Motivation
 Leadership
 Communication

Supervision- Implies overseeing the work of subordinates by their superiors. It is the act
of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to

work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.

Leadership- may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one
person to another. It is a bridge of understanding.

5. Controlling

It implies measurement of accomplishment against the standards and correction of

deviation if any to ensure achievement of organizational goals. The purpose of controlling
is to ensure that everything occurs in conformities with the standards. An efficient system
of control helps to predict deviations before they actually occur. According to Theo
Haimann, “Controlling is the process of checking whether or not proper progress is being
made towards the objectives and goals and acting if necessary, to correct any deviation”.
According to Koontz & O’Donell “Controlling is the measurement & correction of
performance activities of subordinates in order to make sure that the enterprise objectives
and plans desired to obtain them as being accomplished”. Therefore controlling has
following steps:

1. Establishment of standard performance.

2. Measurement of actual performance.
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3. Comparison of actual performance with the standards and finding out deviation if
any.
4. Corrective action.

LEVELS OF MANAGEMENT:

TOP LEVEL MANAGEMENT

Top Managers – Make up the relatively small group of executives who manage the overall
organization. Titles found in this group include president, vice president and chief executive officer
(CEO). Top managers create the organization’s goals, overall strategy and operating policies.
Functions of Top Management

 Determine objective of the organization. They relate to profit, business growth, survival,
prestige, competitive pricing, marketing method.
 Frame the policy: To frame policies & check out plans to carry out the objectives &
policies, policies may relate to different aspects of the organization.
 Organizational frame work: Top management determines the organization structure for
the purpose of executing the plans
 Assemble the resource: Execute the plans; the resources of men, machines, materials &
money have to assemble.
 Control the operations the organization: Top management also.

MIDDLE LEVEL MANAGEMENT

Are largest group of managers in most organizations. Common middle-management titles include
plant manager, operations manager and division head. Middle managers are responsible primarily
for implementing the policies and plans developed by top managers and for supervising and
coordinating the activities of lower-level managers.

Functions of Middle Management

 To execute the various functions of organization so that the top management gets enough
time to look after their responsibilities.
 To cooperate among themselves, with the top management & the supervisors so that the
organization functions smoothly
 To communicate the rules, regulation to the lower level.

LOWER LEVEL MANAGEMENT:

First-Line Managers – Supervise and coordinate the activities of operating employees. Common
titles for first-line managers are supervisor, coordinator and office manager.

Functions of supervisors
1. To issue order & instructions to the workers & to supervise & control their work.
2. To plan activities of the section.
3. To assign jobs to the workers
4. To direct & guide the workers about work procedure.
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5. To arrange for the necessary tools, equipment, material etc.

6. To solve the problems of workers
7. To maintain discipline among the workers & to develop them the right approach to work.
8. To inform the management about the problems of workers which are not solved at this
level?
9. To maintain good human relations.
10. To build high group morale among workers.

Top management Middle management Supervisor management Formatted Table

Board of directors Departmental heads Senior Supervisor
Chairman Decisional heads Immediate Supervisor
Chief Executive Divisional heads Front Line Supervisor

Roles of Manager:

Fig 2 Roles of Manager

INTERPERSONAL ROLE:
 Figurehead – Every manager has to perform some duties of a ceremonial nature, such as
attending the wedding of an employee, taking an important customer to lunch and so on.
 Leader – As a leader, every manager must motivate and encourage his employees.
 Liaison – Every manager must cultivate contacts outside his vertical chain of command to
collect information useful for his organization.

INFORMATIONAL ROLES:
 Monitor – The manager has to perpetually scan his environment for information,
interrogate his liaison contacts and his subordinates, and receive unsolicited information,
much of it as a result of the network of personal contacts he has developed.
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 Disseminator – The manager passes some of his privileged information directly to his key
subordinates who would otherwise have no access to it.
 Spokesman - A manager is also required to spend a part of his time in representing his
organization before various outside groups which have some stake in the organization.
These stake holders can be government officials, labor unions, financial institutions, suppliers,
customers etc.

DECISIONAL ROLES
 Entrepreneur – The manager proactively looks out for innovation to improve his
organization. Innovation means creating new ideas, which may either result in the
development of new products or services, or finding new uses for the old ones.
 Disturbance Handler – The manager has to work reactively like a fire fighter. He must
seek solutions of various unanticipated problems-a strike may loom large, a major customer
may go bankrupt and so on.
 Resource Allocator – The manager must divide work and delegate authority among his
subordinates.
 Negotiator – The president of a company may negotiate with the union leaders on a new
strike issue, the foreman may negotiate with the workers a grievance problem and so on.

MANAGERIAL SKILLS:

Fig 3 Managerial Skills

1. Technical Skills Job specific knowledge and techniques needed to proficiently specific tasks.
These skills tend to be more important for lower level managers because they typically are
managing employees who are using tools and techniques to produce the organizations products or
service the organization’s customers.
2. Human Skills These involve the ability to work well with other people, both individually and
in group. Because managers directly deal with people, these skills are essential and equally
important to all levels of management. Managers with good human skills know how to get best
out of their people. They know how to communicate, motivate, lead and inspire enthusiasm and
trust.
3. Conceptual skills: Managers use to think and to conceptualize about abstract and complex
situations. Using these skills, managers must see the organization as a whole, understand the
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relationships among various subunits and visualize how the organization fits into its broader
environment.

MANAGEMENT AND ADMINISTRATION:

Administration is different from management: Admin is higher level activity while management
is a lower level activity. It is concerned with the determination of overall objectives & policies of
the enterprise while management with planning, coordinating & controlling of business activities
for attaining the enterprise objectives.
Administration is part of management: management is the generic term for the total process of an
executive control involving responsibility for effective planning & guidance of the operations of
an enterprise. Administration is the part of management which is concerned with the installation
& carrying out of the procedures by which the program me is laid done & communicated &
progress of activities is regulates & checked against plans.

Basic difference Administration Management Formatted Table

Nature of work It is primary concerned with It is dues the implementation Formatted Table
determination of objectives & plans & policies,
polices Doing function.
It is thinking function
Scope It takes major decision It takes the decision within
frame work of administration.
Level of authority IT is a top level function Lower level function
Status It consist of owners of an It consists of managerial
enterprise personal with specialize
knowledge who may be
employees.
Influence Its decisions are influenced The influence by internal
by external factors such as factors such as values,
social, political labor beliefs, opinions.
Abilities Handles business Handles employees

MANAGEMENT AS A SCIENCE:

Development of management as a science is of recent origin, even though its practice is ages old.
Fredrick W. Taylor was the first manager-theorist who made significant contributions to the
development of management as a science. He used the scientific methods of analysis, observation
and experimentation in the management of production function.
Science is concerned with knowing “why” and art is with the “how” of application

MANAGEMENT AS SCIENCE
Management as a systematized body of knowledge which can be learnt taught and researched. It
has also provided powerful tools of analysis, prediction and control to practicing managers.
Another characteristic of science in management is that it uses the scientific methods of
observation, experimentation and laboratory research.
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A discipline is called scientific if it’s:

 Systematic body of knowledge: Management is an organized body of knowledge built up
by management practitioners, philosophers and thinkers by conducting extensive research
and verification of the same over the years. Principles of management make use of
scientific methods. Taylor applied scientific techniques like time and motion study, work
study etc.
 Cause and effect relationship: In management also cause and effect relationship is
studied. Poor planning causes low productivity, lack of employee benefits; low salary
causes high attrition; poor marketing causes low sales etc.
 Continuous observation: Principles of management have been developed on the basis of
continued observations by many theorists and practitioners over a period of years.
 Validity and predictability: Scientific principles represent basic truth and can be applied
at all times to all situations. In management also there are certain fundamental principles
which can be universally applied and repeatedly tested to verify its validity and
predictability.

MANAGEMENT AS ART
Art is a systematic application of a skill or knowledge for the accomplishment of results. It
represents methods or ways of doing specific things to effect change and accomplish results
through deliberate efforts.
 Personal Skill: Manager has to use his skill, knowledge to solve many complimented
problems on day to day basis
 Practical Knowledge: Management does not merely mean systematic presentation of
principles can be applied in practical to get better results
 Result Oriented: Management is concerned with accomplishment of objectives, it is result
oriented and for that it leads, directs others towards attaining desired goals.
 Regular Practice: Effectively and effectiveness can be attained through regular practice.
Like an artist manager also practices regularly so that he can work better and can get output
in an effective and efficient manner.
 Creativity: Any art work can be considered as a creative work. Like an art, management
is one of the most creative arts as it deals with getting things done through others by
motivating their efforts in an innovative manner.

Management is both science as well as art. Like science it has systematic and well- organized body
of knowledge and like art it requires personal skill, creativity and practice to apply such knowledge
in the best possible way. Science and art are not in contrast to each other; both exist together in
every function of management.

MANAGEMENT AS PURE SCIENCE SUFFERS FROM FOLLOWING LIMITATIONS

 Principles of management don’t always have a universal application. Unity of Command,
which means reporting to one superior. It does not mean that he should not report to more
than one boss, if superiors have better understanding, know how to balance between the
advantages and disadvantages of multiple commands, an employee can have more than one
superior.
 Human beings behavior cannot be predicted
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 Management lack certainty about the result.

MANAGEMENT AS PROFESSION:
 Profession means an occupation backed by specialized knowledge, expertise and training.
 Over the past few years management has grown in to a distinct discipline backed by
systematic body of knowledge. Number of process, principles, techniques and tools have
been developed and they are important through formalized education and training .
 Management also focuses on ethical behavior and developed certain code of conduct to
regulate performance of management professional.
 Like a Doctor, Managers [consultants] do charge fees on services rendered.
We generally mean a manager who undertakes management as a career and is not interested in
acquiring ownership share in the enterprise which he manages

 According to McFarland a profession possess the following characteristics: (i) a body of

principles, techniques, skills, and specialized knowledge; (ii) formalized methods of acquiring
training and experience; (iii) the establishment of a representative organization with
professionalization as its goal; (iv) the formation of ethical codes for the guidance of conduct;
and (v) the charging of fees based on the nature of services.

 Management is also a profession in the sense that formalized methods of training is available
to those who desire to be managers. We have a number of institutes of management and
university departments of management which provide formal education in this field. Training
facilities are provided in most companies by their training divisions.

PLANNING:
 Basic and important managerial function
 Thinking in advance
 A process of chalking out a future course of action for accomplishing a purpose of the
enterprise.
 Bridge the gap between present and the desired future
 An exercise which determines in advance
 The ends [what is to be done or achieved]
 The means [how it is to be done?]
 The timing [when to do what?]
 The responsibility and accountability [who should do what?]
 The reason [why it should be done?]

NATURE OF PLANNING:

o Focus in objectives: Plan starts with setting up of objectives long term & short term objectives
should be prepared. The main aim is to utilize the financial resources in the best possible
manner. & take the best advantage of prevailing economic situation. It is realized by
developing policies with procurement, administration & distribution of business funds in a best
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possible way, It is important in developing procedures to ensure consistency of actions. The

procedures follow the formulation of policies & strategies etc.

o It is an intellectual process: The intellectual process requires mental exercise, fore suing
future developments, making forecasts & the determination of the best course of action.

o Planning is a selective process: It involves careful study of analysis of various alternative

courses of action. For alternatives to decide & make decision it requires to know what is to be
done. How it is done, when it is to be done & by whom it is done.

o Planning in pervasive: which is an activity to cover all the levels of enterprise. In the levels
of management the top level is concerned with strategically planning, middle & the cover are
concerned with administrative & operational planning.

o Planning is integrated process: It involves not only determination of objectives to formulate

sound policies, programmer, procedures & strategies for the meeting these objectives. The
managerial functions & facilities other managerial functions like organizing, staffing, directing
& control try.

o Planning is directed towards efficiency: Planning is basically to increase the efficiency.

Good plan is will give maximum output & profit at minimal cost. Planning is foundation.
o First function in the process of management: Planning is important filled of the process
management. Manager takes the responsibility to organize staff direct & control them without
planning. Other functions become meaningless activity, producing nothing but chaos. It is a
decision making process: Decision making is an integral part of planning; it is defined as the
process of choosing among alternatives.

IMPORTANCE OF PLANNING:
 Minimizes risk and uncertainty – By providing a more rational, fact-based procedure for
making decisions, planning allows managers and organizations to minimize risk and
uncertainty. In a dynamic society such as ours, in which social and economic conditions
alter rapidly, planning helps the manager to cope with and prepare for the changing
environment.
 Leads to success –Planning leads to success by doing beyond mere adaptation to market
fluctuations. With the help of a sound plan, management can act proactively, and not
simply react.
 Focuses attention on the Organization’s Goals – This makes it easier to apply and
coordinate the resources of the organization more economically. The whole organization
is forced to embrace identical goals and collaborate in achieving them.
 Facilitates control – In planning, the manager sets goals and develops plans to
accomplish these goals. These goals and plans then become standards or benchmarks
against which performance can be measured. The function of control is to ensure that the
activities conform to the plans.
 Trains executives – They become involved in the activities of the organization, and the
plans arouse their interest in the multifarious aspects of planning.
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TYPES OF PLANS:

1. Strategic Plans – A strategic plan is an outline of steps designed with the goals of the
entire organization as a whole in mind, rather than with the goals of specific divisions or
departments. Strategic planning begins with an organization„s mission. Strategic plans
look ahead over the next two, three, five, or even more years to move the organization from
where it currently is to where it wants to be. These plans are set by the board of directors
and top management, generally have an extended time horizon and address questions of
scope, resource deployment, competitive advantage and synergy. For eg. Tata’s plan of
entering into Insurance Sector in India forming a Joint Venture with AIG is a
strategic plan.

2. Tactical Plans – A tactical plan is concerned with what the lower level units within each
division must do, how they must do it, and who is in charge at each level. Tactics are the
means needed to activate a strategy and make it work. Tactical plans are concerned with
shorter time frames and narrower scopes than are strategic plans. For e.g. Any new
insurance product to launch or making changes in the existing insurance products of
AIG is a tactical plan.

3. Operational Plans – Focuses on carrying out tactical plans to achieve operational goals.
Developed by middle and lower-level managers, operational plans have a short-term focus
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and are relatively narrow in scope. For e.g. Policies a budget of Insurance especially for
Indian Market is an example of operation plan.

4. Long-Range Plans – Covers many years, perhaps even decades. The time span for long
range planning varies from one organization to another. Any plan that extends beyond five
years as long range.

5. Intermediate Plans – Somewhat less tentative and subject to change than is a long range
plan. Intermediate plans usually cover periods from one to five years and are especially
important for middle and first-line managers.
6. Short-Range Plans – Has a time frame of one year or less. Short range plans greatly affect
the managers day to day activities.

7. Standing plan: A standing plan is used for activities that recur regularly over a period of
time.
a. Policy – A policy specifies the organization‟s general response to a designated problem or
situation. A policy provides a broad guideline for managers to follow when dealing with important
areas of decision making. Policies are general statements that explain how a manager should
attempt to handle routine management responsibilities. Typical human resources policies, for
example, address such matters as employee hiring, terminations, performance appraisals, pay
increases, and discipline. For eg. McDonald‟s has a policy that it will not grant a franchise to an
individual who already owns another fast-food restaurant. Similarly, Starbucks has a policy that it
will not franchise at all, instead retaining ownership of all Starbucks coffee shops.
b. Standard Operating Procedures – An SOP is more specific than a policy, in that it outlines
the steps to be followed in particular circumstances. A procedure is a set of step-by-step directions
that explains how activities or tasks are to be carried out. The admissions clerk at the university,
for example might be told that, when an application is received, he
or she should 1) set up an electronic file for the applicant, 2) merge test score records, transcripts,
and letters of reference to the electronic file as they are received and 3) forward the electronic file
to the appropriate admissions director when it is complete.
c. Methods – A method is a prescribed way in which one step of a procedure is to be performed.
The specified technique to be used in screening the applications or conducting a written test is a
method.
d. Rules and Regulations – A rule is an explicit statement that tells an employee what he or she
can and cannot do. Rules are ―do‖ and ―don„t‖ statements put into place to promote the safety
of employees and the uniform treatment and behavior of employees. Rules and Regulations
describe exactly how specific activities are to be carried out. Each McDonald‟s restaurant has a
rule prohibiting customers from using its telephones. The university admissions office might have
a rule stipulating that, if an applicant‟s file is not complete two months before the beginning of a
semester, the student cannot be admitted until the next semester.
8. Single-use plan is developed to carry out a course of action that is not likely to be repeated in
the future.
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a. Programs – A program is a single-use plan for a large set of activities. It might consist of
identifying procedures for introducing a new product line, opening a new facility or changing the
organization‟s mission.
b. Projects – A project is similar to a program but is generally of less scope and complexity.
c. Budgets – A budget is a financial and quantitative statement prepared prior to a definite period
of time, of the policy to be pursued during that period, for the purpose of obtaining a given
objective.

STEPS IN PLANNING PROCESS:

 Being aware of opportunities:

It includes a preliminary look at possible opportunities and the ability to see them clearly
and completely, knowledge of where the organization stands in the light of its strengths
and weaknesses, an understanding of why the organization wants to solve uncertainties,
and a vision of what it expects to gain. This provides an opportunity to set the objectives
in real sense because the organization tries to relate itself with the environment.

 Setting objective or goals:

At this stage, major organisational and unit objectives are set. Objectives specify the results
expected and indicate the end points of what is to be done, where the primary emphasis is
to be placed, and what is to be accomplished by the various types of plans.

 Considering planning premises:

After determination of organisational goals, the next step is establishing planning premises,
that is, the conditions under which planning activities will be undertaken. Planning
premises are planning assumptions-the expected environmental and internal conditions.

 Establishing Planning Premises – The second step in planning is to establish planning

premises, i.e. certain assumptions about the future on the basis of which the plan will be
ultimately formulated. Planning premises are vital to the success of planning as they supply
pertinent facts and information relating to the future such as population trends, the general
economic conditions, production costs and prices, probable competitive behavior, capital
and material availability, government control and so on.
 Planning premises can be Internal and External Premises: Premises may exist within
and outside the company. Important internal premises include sales forecasts, policies and
programmes of the organization, skill of the labor force, other resources and abilities of the
organization in the form of machines, money and methods. External premises may be :
 General business and economic environment
 Technological changes
 Government policies and regulations
 Population Growth
 Political stability
 Sociological factors
 Demand for industry’s product.
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 Deciding the Planning Period – In some instances plans are made for a year only while
in others they span decades. In each case, however there is always some logic in selecting
a particular time range for planning based on lead time in development and
commercialization of a new product, time required to recover capital investment and length
of commitments already made.

 Finding Alternatives in light of Goals sought – The fourth step in planning is to search
for alternative courses of action. For example, products may be sold directly to the
consumer by the company’s salesmen or through exclusive agencies.
 Evaluating and selecting a Course of Action - Having sought alternative courses, the
next step is to evaluate them in the light of the premises and goals and to select the best
course or courses of action.

 Developing Derivative Plans – Once the plan has been formulated, its broad goals must
be translated into day-to-day operations of the organization. Middle and lower level
managers must draw up the appropriate plans, programmes and budgets for their sub-units.
These are described as derivative plans.

 Measuring and controlling the progress – Process of controlling is a critical part of any
plan. Managers need to check the progress of their plans so that they can a) take whatever
remedial action is necessary to make the plan work, or b) change the original plan if it is
unrealistic.

Limitations of planning:

 Lack of accurate information

 Time consuming process
 Expensive
 Environmental constraints
 Capital invested in Fixed Assets limits planning
 Planning may create rigidity.
 Plans cannot be developed for dynamic environments.
 Formal plans cannot replace intuition and creativity.
 Formal planning reinforces today’s success, which may lead to tomorrow’s failure.

Decision Making:

Making a choice from two or more alternatives.

Definition by George Terry:

“Decision making is the election based on some criteria from two or more possible
alternatives”
Koontz & O'Donnel “Decision is the selection from among alternatives of a course of
actions”
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Decision Making Process:

 Identifying a Problem:
Every decision starts with a problem, a discrepancy between an existing and a desired
condition. Here sales manager representative need new laptops because their old ones are
outdated and inadequate for doing their job.
 Identifying decision criteria:
Once a manager has identified a problem, he or she must identify the decision criteria that
are important or relevant to resolving the problem. Every decision maker has criteria that
guide his or her decisions, even if they’re not explicitly stated. In our example manager
decides after careful consideration that memory and storage capabilities, display quality,
battery life, warranty, and carrying weight are the relevant criteria for decision.

 Allocation weights to the criteria:

If the relevant criteria aren’t equally important, the decision maker must weight the items
in order to give them the correct priority in the decision. A simple way is to give the most
important criterion a weight of 10 and then assign weights to the rest using that standard
that could resolve the problem. This is the step where a decision maker needs to be creative.
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 Developing alternatives:
The fourth step in the decision-making process requires the decision maker to list viable
alternatives

 Analysing alternatives:
Once alternatives have been identified, a decision maker must evaluate each one. There are
times when decision maker might not have to do this step. If one alternative scored highest
on every criterion, you wouldn’t need to consider the weights because that alternative
would already be the top choice.

 Selecting an alternative:
The sixth step in the decision-making process is choosing the best alternative or the one
that generated the highest total in step 5.

 Implementing the alternative:

In step 7 in the decision-making process, you put the decision into action by conveying it
to those affected and getting their commitment to it.

 Evaluating decision effectiveness:

The last step in the decision-making process involves evaluating the outcome or result of
the decision to see if the problem was resolved. If the evaluation shows that the problem
still exists, then the manager needs to assess what went wrong. The answers might lead
you to redo an earlier step or might even require starting the whole process again.

Types of Decision:

 Programmed and Non-Programmed Decisions – Programmed decisions are those that are
made in accordance with some policy, rule or procedure so that they do not have to be handled
de novo each time they occur. These decisions are generally repetitive, routine and are
obviously the easiest for managers to make. E.g. pricing ordinary customer’s orders,
determining salary payments to employees who have been ill.

 Non-Programmed Decisions are novel and non-repetitive. If a problem has not arisen before
or if there is no cut and dry method for handling it or if it deserves a custom-tailored treatment,
it must be handled by a non-programmed decision. E.g. How to allocate organization’s
resources, what to do about a failing product line etc.

 Major and Minor Decisions – Some decisions are considerably more important than others
based on the impact of the decision on other functional areas.
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 Routine and strategic Decisions – Routine, tactical or housekeeping decisions are those
which are supportive of, rather than central to, the company‟s operations. Provision for air
conditioning, better lighting, parking facilities, cafeteria service etc. are all routine decisions.
On the other hand, lowering the price of the product, changing the product line, installation of
an automatic plant, etc. are strategic decisions.

 Individual and Group Decisions – Decisions may be taken either by an individual or by a

group. Individual decisions are taken where the problem is of a routine nature, where the
analysis of variable is simple and where definite procedures to deal with the problem already
exist. Important and strategic decisions which may result into some change in the organization
are generally taken by a group.

 Simple and Complex Decisions – When variables to be considered for solving a problem are
few, the decision is simple; when they are many, the decision is complex.