CHAPTER: 1

MANAGEMENT: SCIENCE, THEORY, AND PRACTICE

One of the most important human activities is managing. Ever since people began forming
groups to accomplish aims they could not achieve as individuals, managing has been essential
to ensure the coordination of individual efforts. The task of managers has been rising in
importance.

DEFINITION OF MANAGEMENT: ITS NATURE AND PURPOSE

Management is the process of designing and maintaining an environment in which

individuals, working together in groups, efficiently accomplish selected aims.

1. As managers, people carry out the managerial functions of planning, organizing,

staffing, leading, and controlling.
2. Management applies to any kind of organization.
3. It applies to managers at all organizational levels.
4. The aim of all managers is the same: to create a surplus.
5. Managing is concerned with productivity; this implies effectiveness and efficiency.

The functions of management

Many scholars and managers have found that the analysis of management is facilitated by a
useful and clear organization of knowledge. In studying management , therefore, it is helpful
to break it down into five managerial functions- planning, organizing, staffing, leading, and
controlling – around which can be organized the knowledge that underlies those functions.
Thus, the concepts, principles, theory, and techniques of management are grouped into these
five functions.

Management as an essential for any organization

Managers are charged with the responsibility of taking actions that will makes possible for
individuals to make their best contributions to group objectives. Management thus applies to
small and large organizations, to profit and not for-profit enterprises to manufacturing as well
as service industries. Effective managing is the concern of the corporation president, the
hospital administration etc

Managerial functions at different organizational levels

The scope of authority held may vary and the types of problems dealt with may be
considerably different. Furthermore, the person in a managerial role may be directing people
in the sales, engineering, or finance department. But the fact remains that, as managers all
obtain results by establishing an environment for effective group endeavor.

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All managers carry out managerial functions. However, the time spent for each function may
differ. Top-level managers spend more time on planning and organizing than do lower-level
managers. Leading, on the other hand, takes a great deal of time for first-line supervisors.

Managerial skills and the organizational hierarchy Robert L. Katz identified three kinds
for administrators. To these may be added a fourth – the ability to design solutions.

1. Technical skill is knowledge of and proficiency in activities involving methods,

processes, and procedures. Thus, it involves working with tools and specific
techniques. For example, mechanics work with tools, and their supervisors should
have the ability to teach them how to use these tools.

2. Human skill is the ability to work with people; it is cooperative effort; it is

teamwork; it is the creation of an environment in which people feel secure and free to
express their opinions.

3. Conceptual skill is the ability to see the “big picture,” to recognize significant
elements in a situation, and to understand the relationships among the elements.

4. Design skill is the ability to solve problems in ways that will benefit the enterprise.
To be effective, particularly at upper organizational levels, managers must be able to
do more than see a problem. They must have, in addition, the skill of a good design
engineer in working out a practical solution to a problem, if managers merely see the
problem and become ”problem watchers,” they will fail.

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The relative importance of these skills may differ at various levels in the organization
hierarchy, technical skills are of greatest importance at the supervisory level. Human skills
are also helpful in the frequent interactions with subordinates. Conceptual skills, on the other
hands, are usually not critical for lower-level supervisors. At the middle-management level,
the need for technical skills decreases; human skills are still essential the conceptual skills
gain in importance. At the top management level, conceptual and design abilities and human
skills are especially valuable, but there is relatively little need for technical abilities.

Women in the organizational hierarchy In the last decade or so, women have made
significant progress in obtaining responsible positions in organizations. Among the reason for
this development are laws governing fair employment practices, changing societal attitudes
toward women in the workplace, and the desire of companies to project a favorable image by
placing qualified women in managerial positions.

In 1965,readers of Harvard business review were surveyed to determine their attitudes

toward women in business organizations. About half of the men and women responding felt
that women seldom are expected to achieve

Twenty years later in 1985, the results showed that attitudes toward women in business had
changed significantly. Only 9 percent of the men and 4 percent of the women in the survey
thought that women do not aspire to top positions. Moreover, it was found that men
increasingly saw women as competent, equal colleagues.

Some evidence suggests that women do have difficulties making it to the top for example,
there are no women on the way to the chief executive officers job in the fortune 500
corporations reason being discrimination

The Goal of all Managers

Non business executives sometimes say that the aim of business managers is simple—to
make a profit. but profit is really only a measure of a surplus of sales dollars over expense
dollars. In a very real sense, in all kinds of organizations, whether business or non business,
the logical and publicly desirable aim of all managers should be a surplus. Thus, managers
with the least amount of time, money , material and personal dissatisfaction or in which they
can achieve as much as possible of a desired goal with available resources.

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Productivity, effectiveness, and efficiency

Another way to view the aim of all managers is to say that they must be productive after
world war II the united states was the world leader in productivity. But in the late 1960s the
deceleration of productivity growth began. Today the urgent need for productivity
improvement is recognized by government, private industry, and universities.

Definition of productivity

Successful companies create a surplus through productive operations. Although there is not
complete agreement on the true meaning of productivity, let us define it as the output-input
ratio within a time period with due consideration for quality. It can be expressed as follows:

Productivity=outputs/inputs (within a time period, quality considered)

The formula indicates that productivity can be improved (1)by increasing outputs
with the same inputs, (2) by decreasing inputs but maintaining the same outputs, or (3) by
increasing outputs and decreasing inputs to change the ratio favorably. Companies use
several kinds of inputs, such as labor, materials, and capital. Total factor productivity
combines various inputs to arrive at a composite input.

Definitions of effectiveness and efficiency : Productivity implies effectiveness and

efficiency in individual and organizational performance. Effectiveness is the achievement of
objectives. Efficiency is the achievement of the ends with the least amount of resources.
Managers cannot know whether they are productive unless they first know their goals and
those of the organization

MANAGING: SCIENCE OR ART?

Managing -is an art . it doing things in the light of the realities of a situation. Yet managers
can work better by using the organized knowledge about management. It is this knowledge
that constitutes a science. Thus, managing as practice is an art; the organized knowledge
underlying the practice may be referred to as a science.
As science improves, so should art, the science underlying managing is fairly crude
and inexact. This is true because the many variables with which managers deal are extremely
complex. Nevertheless, such management knowledge can certainly improve managerial
practice. Executives who attempt to manage without management science must trust t lack,
intuition, or what they did in the past.

THE ELEMENTS OF SCIENCE

Science is organized knowledge. The essential feature of any science is the application of the
scientific method to the development of knowledge. Thus, a science comprises clear
concepts, theory, and other accumulated knowledge developed from hypotheses
experimentation, and analysis.

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The Scientific Approach

The scientific approach first require clear concepts and mental images of anything formed by
generalization from particulars. Form this base, the scientific method involves the
determination of facts through observation. After classifying and analyzing these facts,
scientists look for causal relationships. When these generalizations or hypotheses are tested
for accuracy and appear to be true, that is , to reflect or explain reality, they are called
principles. They have value in predicting what will happen in similar circumstances. Theory
is a systematic grouping of interdependent concepts and principles which give a framework
to ,or tie together, a significant are of knowledge.

The role of management theory

In the field of management the role of theory is to provide a means of classifying significant
and pertinent management knowledge. In the are of designing an effective organization
structure, for example, there are a number of principles that are interrelated and that have a
predictive value for managers. Some principles give guidelines for delegating authority etc.

Principles in management are fundamental truths explaining relationships between tow or

more sets of variables, usually an independent variable and dependent variable and a
dependent variable. Principles may be descriptive or predictive, and not prescriptive.

Management techniques

Techniques are essentially ways of doing things, methods of accomplishing a given result and
they are important. Among them are budgeting , cost accounting, network planning and
control technique like the program evaluation and review technique(PERT) .

PATTERNS OF MANAGEMENT ANALYSIS: A MANAGEMENT THEORY

JUNGLE?

The variety of approaches to management analysis, the welter of research, and the number of
differing views have resulted in much confusion as to what management is, and how
managerial events should be analyzed. This situation the management theory jungle.

Different Approaches to the Analysis of Management

The various approaches to management analysis – are the following

1) the empirical, or case approach, 2) the interpersonal behavior approach, 3) the group
behavior approach, 4) the cooperative social systems approach, 5) the sociotechnical
systems approach, 6) the decision theory approach, 7) the systems approach, 8) the
mathematical, or “management science,” approach, 9) the contingency, or situational,
approach, 10) mintzberg’s managerial roles approach, shown earlier in the
perspective, 11) McKinsey’s 7-S approach, and 12) the operational approach.
Understanding the various approaches makes it possible to identify the point of view
from which any book or article on management has probably been written.

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6
The operational, or management process, approach

The operational approach draws on all the other approaches and integrates them in a
systematic manner., this approach to management theory and science attempts to bring
together the pertinent knowledge of management by relating it to the managerial job—what
managers do. Like other operational sciences, it tries to integrate the concepts, principles, and
techniques that underlie the task of managing.
The operational approach recognizes that there is a central core of knowledge about
managing pertinent only to the field of management. Such matters as line and staff,
departmentation, managerial appraisal and various managerial control techniques involve
concepts and theory found only in situations involving managers. This approach draws on
and absorbs knowledge from other fields, including systems theory, decision theory, theories
of motivation and leadership.

The nature of the operational approach can be seen in figure 1-4. Because the function of
manager are emphasized in the operational approach, it is often called the “management
process” school. This approach has been found useful to, and understandable by, practicing
managers. It also furnishes a means of distinguishing between managerial knowledge and the
special knowledge and expertise of such non managerial fields as marketing and production.

THE SYSTEMS APPROACH TO OPERATIONAL MANAGEMENT

An organized enterprise department on its external environment.It is a part of larger systems

such as the industry to which it belongs, the economic system, and society. Thus, the
enterprise receives inputs, transforms them, and exports the outputs to the environment, as
shown by the very basic model in figure. Any business or other organization must be

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described by an open-system model that includes interactions between the enterprise and its
external environment.

Inputs and
claimants

The inputs from the external environment may include people, capital, and managerial skills,
as well as technical knowledge and skills. In addition, various groups of people will make
demands on the enterprise. Other claimants to the enterprise ma include financial institutions
and labor unions; even competitors have a legitimate claim for fair play. It is the managers
job to integrate the legitimate objectives of the claimants.

The managerial transformation process

It is the task of managers to transform the inputs, in an effective and efficient manner, into
outputs. One can focus on such diverse enterprise functions as finance, production,
personnel , and marketing. Writers of management look on the transformation process in
terms of their particular approaches to management.

The communication system

Communication is essential to all phases of the managerial process for two reasons. First, it
integrates the managerial functions. For example, the objectives set in planning are
communicated so that the appropriate organization structure can be devised. Communication
is essential in the election, appraisal, and training of managers to fill the roles in this
structure. Similarly, effective leadership and the creation of an environment conducive to
motivation depend on communication. It is through communication that one determines
whether events and performance conform to plans. Thus, it is communication which makes
managing possible.

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 FIGURE 1-6

External variables

Effective mangers will regularly scan the external environment. While it is true that managers
may have little or no power to change the external environment, they have no alternative but
to respond to it.

Outputs

It is the task of managers to secure and utilize inputs to the enterprise, to transform them
through the managerial functions – to outputs
The kinds of outputs will vary with the enterprise, they usually include many of the
following : products, services, profits, satisfaction, and integration of the goals of various
claimants to the enterprise.
The organization must indeed provide many “satisfactions” if it hopes to retain and
elicit contributions from its members. It must contribute to the satisfaction not only of basic

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material needs but also of need for affiliation, acceptance, esteem, and perhaps even self-
actualization so that one can use his or her potential at the workplace. Another output is goal
integration. It is the task of managers to resolve conflicts and integrate these aims.

Reenergizing the system

Finally, it is important to notice that is the system model of operational management some of
the outputs become inputs again. Thus , the satisfaction of employees becomes an important
human input. Similarly profit the surplus of income over costs, are reinvested in cash and
capital goods such as machinery, equipment, building and inventory.

THE FUNCTIONS OF MANAGERS

The functions of managers provide a useful framework for organizing management

knowledge. It is classified as follows: organizing, staffing, leading and controlling.

Planning

Planning involves selecting mission and objectives and the actions to achieve them; it
requires decision making, that is, choosing future courses of action from among alternatives.
There are various types of plans, ranging from overall purposes and objectives to the most
detailed actions to be taken, no real plan exists until a decision – a commitment of human or
material resources or reputation – has been made. Before a decision is made, all that exists is
a planning study, an analysis, or a proposal; there is no real plan.

Organizing

People working together in groups to achieve some must have roles to play whether these
roles are ones they develop themselves, are accidental or haphazard, or are defined and
structured by someone who wants to make sure that people contribute in a specific way to
group effort. The concept of a “role” implies that what people do has a definite purpose or
objective; they know how their job objectives fits into group effort, and they have the
necessary authority tools, and information to accomplish the task.

Organizing, then, is that part of managing that involves establishing an intentional structure
of roles for people to fill in an organization. It is intentional in the sense of making sure that
all the task necessary to accomplish goals are assigned and, it is hoped , assignments to
people who can do them best.

The purpose of an organization structure is to help in creating an environment for

human performance. It is, then, a management tool and not an end in and of itself. Although
the structure must define the task to be done, the roles so established must also be designed in
the light of the abilities and motivations of the people available

Staffing

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Staffing involves filling, and keeping filled, the positions in the organization structure. This
is done by identifying work-force requirements; inventorying the people available; and
recruiting, selecting, placing, promoting, appraising, planning the careers etc.

Leading

Leading is the influencing of people so that they will contribute to organization and group
goals; it has to predominantly with the interpersonal aspect of managing. Most important
problems arise from – their behavior as individuals and in groups – and that effective
managers also need to be effective leaders. Since leadership implies followership and people
tend to follow those who offer a means of satisfying their own needs, wishes, and desires, it is
understandable that leading involves motivation, leadership styles and approaches, and
communication.

Controlling

Controlling is the measuring and correcting of activities of subordinates to ensure that events
conform to plans. It measure performance against goals and plans, shows where negative
deviations exist, and by putting in motion action to correct deviations etc. plans guide
managers in the use of resources to accomplish specific goals.

Control activities generally relate to the measurement of achievement. Each measure

and each shows whether plans are working out. If deviations persist, correction is indicated.

Coordination, the essence of managership

Some authorities consider coordination to be a separate function of the manager. However it

can be regarded as the essence of managership, for achieving harmony among individual
efforts toward the accomplishment of group goals. Each of the managerial functions is an
exercise contributing to coordination.

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CHAPTER: 2

MANAGEMENT AND SOCIETY: SOCIAL RESPONSIBILITY

AND ETHICS

All managers, whether they operate in a business, a government agency, a church.

Must, consider the elements and forces of their external environment. They must identify,
evaluate, and react to the forces outside the enterprise that may affect its operations.

OPERATING IN A PLURALISTIC SOCIETY

Managers in the united states operate in a pluralistic society, in which many organized groups
represent various interests. Each group has an impact on other group, but no one group exerts
inordinate power. Many groups exert some power over business.

Working within a pluralistic society has several implications for business. First,
business power is kept in balance by various groups, such as environmental groups. Second,
business interests can be expressed by joining group such as the chamber of commerce.
Third, business participates in project with other responsible groups for the purpose of
bettering society and example is working toward the renewal of inner cities. Fourth, in a
pluralistic society there can be conflict or agreement among groups. Finally, in such a society
and group is quite aware of what other groups are doing.

THE SOCIAL RESPONSIBILITY OF MANAGERS

In the early 1900s the mission of business firms was exclusively economic. Today, party due
to the interdependencies of the many groups in our society the social involvement of business
has increased. There is indeed a question as to what the social responsibility of business
really is.

Social Responsibility and Social Responsiveness

The concept of social responsibility is not new. Although the idea was already considered in
the early part of the twentieth century, the modern discussion of social responsibility got a
major impetus with the book social responsibilities of the businessman Howard R. Bowen.
Suggested that businesses should consider the social implication of their decision. “Corporate
social responsibility is seriously considering the impact of the company’s action on society”

A newer concept, is social responsiveness, which in simple term means “the ability of
a corporation to relate its operations and policies to the social environment in ways that are
mutually beneficial to the company and to society. Both definitions focus on corporations 1)

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to include enterprises other than business and 2) to encompass relationships within the
enterprise.

Arguments for and against business involvement in Social Actions

Although there are arguments for business involvement in social activities, there are also
arguments against it.
Today many businesses are involved in social actions. A decision as to whether
companies should extend their social involvement requires a careful examination of the
arguments for and against such actions. Certainly society’s expectations are changing and the
trend seems to be toward greater social responsiveness.

Reaction or Proaction?

To live within an environment and be responsive to it does not mean that managers should
merely react in the face of stress. Since no enterprise can be expected to react very quickly to
unforeseen developments, an enterprise must practice ways of anticipating developments
through forecasts. No enterprise should wait for problems to develop before preparing to face
them, proaction is an essential part of the planning process.

The Role of the Government

There are many instances in which social changes can be implemented only by the enactment
of legislation. However, many managers in business and else where have found it to their
advantage to do something about pressing social problems. For example, many businesses
have profited by filtering smoke-stack pollutants and selling or using these recovered wastes.
Contributing to the solution of social problems does not always involve net expense.

The influence of values and performance criteria on behavior

Even if individual managers have full freedom to act in accordance with the currently
conceived social responsibilities, they may not do so because of standards applied in
evaluation their performance managers seek approval. Therefore, if their success is measured
by profit, living within a budget tax collection as a percentage of income, managers will tend
to strive for excellence in these regards managers will respond to socially approved values
and will give priority to those held in highest esteem. To make sure that organizations
respond to social forces, we must clarify social values and then reward managers for their
success in responding to them, recognizing, of course, that different organizations have a
variety of missions.

The Social Audit

The discussion of social responsibility raises the question of how social performance should
be evaluated. This led to the concept of the “social audit”, first proposed in the 1950s by
Howard R. Bowen. But it is only more recently that. Corporations have seriously concerned
themselves with this idea.” The social audit has been defined as “a commitment to systematic
assessment of and reporting on some meaningful, definable domain of the company’s
activities that have social impact.”

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 Two types of audits. One is required by the government and involves, for example,
pollution control, product performance requirement, and equal employment standards. The
other kind of social audit concerns a great variety of voluntary social programs.

ETHICS IN MANAGING

All persons, whether in business, government, a university, or any other enterprise, are
concerned with ethics, in Webster’s Ninth new Collegiate dictionary ethics is defined as “the
discipline dealing with what is good and bad and with moral duty and obligation.” Thus,
personal ethics has been referred to as “the rules by which an individual lives his or her
personal life,” and accounting ethics pertains to the code that guides the professional conduct
of accountants.” Business ethics is concerned with truth and justice and has a variety of
aspects such as expectations of society, fair competition, advertising. Public relation, social
responsibilities, consumer autonomy and corporate behavior in the home country as well as
abroad.

Ethical Theories and a Model for Political Behavior Decisions

In organizations, managers complete for information, influence, and resources.

There are three basic types of moral theories in normative ethics. First the utilitarian
theory suggests that plans and actions should be evaluated by their consequences. The
underlying idea is that plans or actions should produce the greatest good for the greatest
number of people .second ,the theory based on rights holds that all people have basic rights.
Examples are the rights to freedom of conscience, free speech, and due process. A number of
those rights can be found in the constitutional bill of rights of the united states. Third, the
theory of justice demands that decision makers be guided by fairness and equity, as well as
impartiality.

Managers are facing many situations that require ethical judgments, and often there are no
easy answers

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Institutionalizing Ethics

Managers, and especially top managers, do have a responsibility to create an organizational

environment that fosters ethical decision making by institution analyzing ethics. This means
applying and integrating ethical concepts into daily action. Three ways; 1) by establishing
appropriate company policy or a code of ethics, 2) by using a formally appointed ethics
committee, and 3) by teaching ethics in management development programs. The most
common way to institutionalize ethics is to establish code of ethics; much less common is
the use of ethic board committees

Code of Ethics and its implementation through Formal Committees

A code is a statement of polices, principles or rules that guide behavior. Certainly codes of
ethics do not apply only to business enterprises; they should guide the behavior of persons in
all organizations and in everyday life.

Appointment of an ethics committee, consisting of internal and external directors, is

essential for institutionalizing ethical behavior. The functions of such a committee may
include 1) holding regular meetings to discuss ethical issues. 2) dealing with gray areas 3)
communicating the code to all members of the organization 4) checking for possible
violations of the code, 5) enforcing the code, 6) rewarding compliance and punishing
violations, 7) reviewing and updating the code , and 8) reporting activities of the committee
to the board of directors.

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Benefits of Ethics

Ethics is a branch of philosophy which addresses questions about morality like differentiation
between good and bad, right and wrong, noble and ignoble, virtue and justice. Ethics can be
studied under five major branches of meta-ethics, normative ethics, applied ethics, moral
psychology and descriptive ethics.

Quality business ethics practiced can contribute a lot to a success of any company. Business
ethics mainly focuses on examining conduct and policies at both individual and
organizational levels. Business ethics relates to the application of principles and theories of
ethics to achieve both individual and organizational goals. There is a great change in the field
of business ethics as more and more firms are identifying the benefits of business ethics.

Many firms have today realized that there is a direct link that exists between business ethics
and financial performance of the organization or firm. Building ethical reputation for a
company among its employees, customers and also the public is very important to achieve
organizational goals. There are many practical benefits of being ethical.

Being ethical and socially responsible in business can practically have many benefits like

 Increase in efficiency of daily operations

 increase in commitment among the employees

 increasing investors willingness to invest more in the business

 increased financial performance and

 improving trust of customers in company’s products and services.

Contribution of ethics toward employee commitment. The commitment of employees

increases when they realize that their future is tied with the growth of the organization.
Their willingness to give personal sacrifices can help the organization grow which in turn
can result in their own growth. An organization should always be dedicated toward the
employee and should look after their welfare. This results in the employees taking care of
the organization.

Contribution of ethics to make profits

Ethical culture can be developed by any organization when it has attained adequate
financial performance and has made enough profits. Businesses with good financial
resources as can be socially responsible while serving their customers and can take proper
care of their employees which also builds public trust. According to studies, there exists a
very positive relation between corporate social responsibility and business performance.

So, it is quite evident from many organization that being ethical pays off well and can
lead to improved financial performance. Today, many corporations are showing great
concern for ethical conduct in business and are including the same in their strategic
planning to increase their profits.

16
CHAPTER:3

THE NATURE AND PURPOSE OF PLANNING

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Types of Plans:

1. The mission or Purpose identifies the basic functions or tasks of an enterprise or

agency or of any part of it.

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2. Objectives or aims are the ends towards which activity is aimed. They are the results
to be achieved. They represent not only the end point of Planning but the end towards
organizing, staffing, leading and controlling are also aimed.
3. Strategies to more ground plan are the determination of the base long term objective
of an enterprise.
4. Policies also are plans in that they are general statements or understandings which
guide or channel thinking in decision making. Policies define an area within which a
decision is to be made and ensure that the decision will be considered with and
contribute to an objective.
5. Procedures are plans that establish a required method of handling functional activities.
They are guides to action rather than to thinking and they detail the exact manner in
which certain activities must be accomplished. They are Chronological sequences of
required actions.
6. Rules spell out specific required actions or non actions, allowing no discretions. They
are usually the simplest type of plans.
7. Programs constitutes goals, policies, procedures, rules, tasks, assignments, steps to be
taken, resources to be employed and other elements necessary to carry out a given
course of action.

STEPS IN PLANNING:

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Since minor plans are usually simpler, some of the steps would be more easily accomplished,
but the practical steps listed below, and diagrammed in figure are of general application.
Managers must study the feasibility of possible courses of action at each stage. Similarly feed
back is also essential.

1 Being Aware of Opportunities

Although it precedes actual planning and is therefore not strictly a part of the planning
process, an awareness of opportunities in the external environment as well as within the
organization is the real starting points for planning. It is important to take preliminary look at
possible future opportunities and see them clearly and completely. All managers should know
where they stand in the light of their strength and weaknesses, understand what problems

20
they wish to solve and why, and know what they expect to gain. Setting realistic objectives
depends on this awareness. Planning requires realistic diagnosis of the opportunity situation.

2 Establishing Objectives

The second step is to establish objectives for the entire enterprise and them for each
subordinate work unit. This is to be done for the long term as well as for the short range.
Objectives specify the expected results 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 network
of strategies, policies, procedure, rules, budgets, and programs.

3 Developing Premises

A third logical step in planning is to establish, circulate, and obtain agreement to utilize
critical planning premises such as forecasts, applicable basic policies, and existing company
plans. They are assumptions about the environment in which the plan is to be carried out. It is
important for all the managers involved in planning to agree on the premises. In fact, the
major principle of planning premises is this: The more thoroughly individuals charged with
planning understand and agree to utilize consistent planning premises, the more coordinated
enterprise planning will be.

Forecasting is important in premising; what kinds of markets will there be? What volume of
sales? What prices? What products? What technical developments? What costs? What wage
rates? Etc

Managers have a number of sources to draw from when preparing a forecast for their
enterprise. The government publishes a wealth of information that can be useful.

Future is so complex, it would not be profitable or realistic to make assumptions about every
detail of the future environment of a plan. Therefore, premises are, as a practical matter,
limited to assumptions, which most influence its operation.

4 Determining Alternative Courses

The fourth step in planning is to search for and examine alternative courses of action,
especially those not immediately apparent. There is seldom a plan for which reasonable
alternatives do not exist, and quite often an alternative that is not obvious proves to be the
best.

The more common problem is not finding alternatives but reducing the number of
alternatives so that the most promising may be analyzed.

5 Evaluating Alternative Courses

The next step is evaluating the alternatives by weighing them in the light of premises and
goals. One course may appear to be the most profitable, but it may require a larger cash
outlay and have a slow payback; another may look less profitable but may involve less risk;
still another may better suit the company’s long-range objectives.

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 There are so many alternative course in most situation and so many variables and
limitations to be considered that evaluation can be exceedingly difficult.

6 Selecting a Course

Occasionally, an analysis and evaluation of alternative courses will disclose that two or more
are advisable, and the manager may decide to follow several courses rather than the one best
course.

7 Formulating Derivative Plans

When a decision is made, planning is seldom complete, and a seventh step is indicated.
Derivative plans are almost invariably required to support the basic plan.

8. Numberizing Plans by Budgeting

After decisions are made and plans are set, the final step in giving them meaning, as was
indicated in the discussion of types of plans, it to numberize them by converting them to
budget. The overall budgets of an enterprise represent the sum total of income and expenses,
with resultant profit or surplus, and budgets.

If done well, budgets become a means of adding together the various plans and also set
important standards against which planning progress can be measured.

THE PLANNING PROCESS: A RATIONAL APPROACH TO

GOAL ACHIEVEMENT

As indicated by the planning steps above, planning is a rational approach to accomplishing

objectives. The process can be illustrated as shown in figure. In this diagram, progress
( toward more sales, more profits, lower cost, and so forth) is on the vertical axis, and time is
on the horizontal axis. Here x indicates where we are and y where we want to be at a future
time(at tn). In short, we are at x and to go to y, often we do not have all the data, but we start
planning anyway. We may even have to start our planning study at x1 (at t-n). the line xy is
the decision path.
If the future were completely certain, the line xy would be relatively easy to draw. However
many factor may push us away from or toward the desired goal. These are the planning
premises. Again, because we cannot forecast or consider everything, we try to develop our
path from x to y in the light of the most critical premises.

Decision making may be the easiest part of planning, although it involves techniques of
evaluation and considerable skill in applying them. The real difficulties arise. Giving
meaning to objectives and critical premises, seeing the nature and relationships of the
strength and weaknesses of alternatives, and communication goals and premises to those
throughout the enterprise who must plan.

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The Planning Period

Certain questions suggest multiple horizons of planning – in some cases, planning a week in
advance may be ample, while in other, the desirable period may be a number of years. Even
within the same firm at the same time, various planning periods may exist for various
matters.

The Commitment Principle

Some criteria must be used in selecting the time range for company planning. The key to
choosing the right planning period seems to lie in the commitment principle logical planning
encompasses a future period of time necessary to fulfill, through a series of actions, the
commitment s involved in decisions made today

What the commitment principle implies the commitment principle implies that long-range
planning is not really planning for future decisions but, rather, planning for the future impact
of today’s decisions. In other works, a decision is a commitment, normally of funds, direction
of action, or reputation. And decisions lie at the core of planning. A plan does not really exist
as such until a decision has been made. A good manager will recognize the validity of
gearing longer-term considerations to present decisions. To do otherwise is to overlook the
basic nature of both planning and decision making.

Application of the commitment principle there is no uniform or arbitrary length of time for
which a company should plan or for which a given program or any of its parts should be
planned. But the same company might wish to see much further into the future before
assuming a lease for specialized manufacturing facilities, undertaking a program of
management training, r developing and a promoting a new product.

Coordination of Short- and Long-Range Plans

Often short-range plans are made without reference to long-range plans. This is plainly a
serious error. The importance of integrating the two types can hardly be overemphasized, and
no short6-run plan should be made unless it contributes to the achievement of the relevant
long-range plan. Much waste arises form decisions about immediate situations that fail to
consider their effect on more remote objectives.

Sometimes short-range decisions not only fail to contribute to a long-range plan but
actually impede, or require change in , the long-range plan.

Responsible managers should continually review and revise immediate decisions to

determine whether they contribute to long-range program, and subordinate managers should
be regularly briefed on long-range plans so that they will make decisions consistent with the
company’s long-range goals.It is far easier to do this than to correct inconsistencies,
especially since short-term commitments tend to lead to further commitment along the same
line.

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CHAPTER:4

OBJECTIVES

Objectives were defined as the important ends toward which organizational and individual
activities are directed.

The Nature of Objectives:

Objectives state end results, and overall objectives need to be supported by subobjectives.
Thus, objectives form a hierarchy as well as a network. A manager may have to choose
between short-term and long-term performance, and personal interests may have to be
subordinated to organizational objectives.

A Hierarchy of Objectives:

The zenith of the hierarchy is the purpose, which has two dimensions.
 First there is the purpose of society such as requiring the organization to contribute to
the welfare of the people by providing goods and services at a reasonable cost.
 Second, there is the purpose of the business, which might be to furnish convenient,
low-cost transportation for the average person.
The next level of the hierarchy contains more specific objectives, such as
those in the key result areas.

The objectives have to be further translated into division, department, and unit
objectives down to the lowest level of the organization.

The Process of Setting Objectives and the Organizational Hierarchy:

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A Figure 4-1 indicates, managers at different levels in the organizational hierarchy are
concerned with different kinds of objectives. The board of directors and top managers are
very much involved in determining the purpose, the mission, and the overall objectives of the
firm, as well as the more specific overall objectives in the key result areas. Middle-level
managers , such as the vice-president or manager of marketing or the production manager ,are
involved in setting key –result-area objectives, and department objectives . The primary
concern of low-level managers is setting objectives of departments and units as well as their
sub-ordinates.

A Network of Objectives:

Both objectives and planning programs normally form a network of desired results and
events. if goals are not interconnected and if they do not support one another, people very
often pursue paths that may seem good for their own department but may be detrimental to
the company as a whole.

FIGURE:4-2

Multiplicity of Objectives:

Aims are, of course, numerous. Even the mission and broad major enterprise objectives
are normally multiple. To say that a university’s mission is education and research is not

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enough. It would be much more accurate to list the overall objectives, as shown in the
perspective.
Evolving Concepts in Management by Objectives:

Management by objectives is a comprehensive managerial system that integrates many

key managerial activities in a systematic manner and that is consciously directed toward the
effective and efficient achievement of organizational and individual objectives. The view of
MBO as a system of managing is not shared by all.
Emphasis on performance appraisal
Emphasis on short term objectives and motivation
Inclusion of long-range planning in the MBO process
The system approach to MBO
Setting preliminary objectives at the top
Clarifying organizational roles
Setting sub-ordinates objectives
Recycling objectives

How to set Objectives:

Quantitative and qualitative objectives

Setting objectives in government
Guidelines for setting objectives

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27
Benefits and Weaknesses of Management by Objectives and some Recommendations:

Benefits of management by objectives

Improvement of managing
Clarification of organization
Encouragement of personal commitment
Development of effective controls
Weaknesses of management by objectives
Failure to teach the philosophy of MBO
Failure to give guidelines to goal setters
Difficulty of setting goals
Emphasis on short-run goals
Danger of inflexibility
Other dangers

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CHAPTER:5

STRATEGIES, POLICIES, AND PLANNING PREMISES

Planning is done in an environment of uncertainty. No one can be sure what the

external as well as the internal environment will be even next week, much less several years
from now.

The Nature and Purpose of Strategies and Policies:

Strategies and policies are closely related. Both give directions, both are the
framework for plans, both are the basis of operational plans, and both affect all areas of
managing.

The strategy and policy

The guide: furnishing the framework of plans
The need for operational planning: Tactics

The Strategic Planning Process:

Specific steps in the formulation of a strategy may vary, the process can be built,
atleast conceptually, around the key elements shown.

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THE STRATEGIC PLANNING PROCESS:

Inputs to the Organization:

There are various organizational inputs which includes people, capital,

Managerial skills and technical skills. These are considered as Inputs to the Organization.

Industry Analysis:

The focus should be on the kind of competition within an industry, the

possibility of new firms entering the market, the availability of substitute products or
services, the bargaining of the suppliers and buyers/customers.

Enterprise Profile:

The enterprise profile is usually the starting point for determining where the
company is and where it should go. Thus, top managers determine the basic purpose of the
enterprise and clarify the firm’s geographic orientation.

Orientation of Executives, Values, and Vision:

The enterprise profile is shaped by people, especially executives, and their

orientation and values are important for formulating the strategy. They set the organizational
climate, and they determine the direction of the firm through their Vision.

Mission (Purpose), Major Objectives, and Strategic Intent:

The purpose and the major objectives are the end points towards which the
activities of the enterprise are directed. Strategic intent is the commitment to win in the
competitive environment.

Present and Future External Environment:

The present and future external environment must be accessed in terms of

threats and opportunities. The evaluation focuses on the competitive situation as well as on
economic, social, political, legal, demographic, and geographic factors.

Internal Environments:

Similarly, the firm’s internal environment should be audited and evaluated in

respect to its resources and its weaknesses and strengths in research and development,
production, operations, procurement, marketing, and products and services.

Development of Alternative Strategies:

Strategic alternatives are developed on the basis of an analysis of the external

and internal environment. An organization may pursue many different kinds of strategies. It

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may specialize or concentrate and may also diversify by extending the operation into new and
profitable markets.

Evaluation and Choice of Strategies:

The various strategies have to be carefully evaluated before the choice is

made. Strategic choices must be considered in light of the risks involved in a particular
decision. Some profitable opportunities may not be pursued because a failure in a risky
venture could result in bankruptcy of the firm.

Medium and Short-Range Planning, and Implementation through a Re-

engineering of the Organization Structure, Leadership, and Control:

Medium and short range planning as well as the implementation of the plans
must be considered during all phases of the process. Implementation of the strategy often
requires re-engineering the organization, staffing the organization structure, and providing
leadership.

Consistency Testing and Contingency Planning:

The last key aspect of the strategic planning process is testing for consistency
and preparing for contingency plans. During all phases of the strategic planning process,
consistency testing is essential. A contingency plan may also be made in which the scenario
includes a major recession.

The Tows Matrix :A Modern Tool for Analysis of the situation:

Four Alternative Strategies:

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THE TOWS MATRIX- A MODERN TOOL FOR ANALYSIS
OF THE SITUATION
 The TOWS Matrix has a wider scope, and it has different emphasis from those of the
Business Portfolio Matrix.
 The TOWS Matrix is a conceptual framework for a systematic analysis that facilitates
matching the external threats and opportunities with the internal weaknesses and
strengths of the organization.
 The TOWS Matrix has been proposed: “T” stands for threats, “O” stands for
Opportunities, “W” stands for weaknesses, and “S” stands for strengths.
Four Alternative Strategies:
The diagram presents the four alternatives of the TOWS Matrix. The strategies are based on
the analysis of the external environment and the internal environment.
1. The WT Strategy aims to minimize both weaknesses and threats. It may
require that the company, for example, form a joint venture, retrench, or even
liquidate.
2. The WO Strategy attempts to minimize the weaknesses and maximize the
opportunities. Thus, a firm with certain weaknesses in some areas may either
develop those areas within the enterprise or acquire the needed competencies
from the outside, making it possible to take advantage of opportunities in the
external environment.
3. The ST Strategy is based on the organization’s strengths to deal with threats in
the environment. The aim is to maximize the former while minimizing the
latter. Thus, a company may use its technological, financial, managerial, or
marketing strengths to cope with the threats of a new product introduced by its
competitor.

The most desirable situation occurs when a company can use its strengths to take advantage
of opportunities. Indeed, it is the aim of enterprises to move from other positions in the
matrix to this one. If they have weaknesses, they will cope with them so that they can focus
on opportunities.

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The Portfolio Matrix: A Tool for Allocating Resources:

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING

RESOURCES

 The Business Portfolio Matrix was developed by the Boston Consulting Group(BCG).
 It is a simplified Version and it shows linkages between the growth rate of the
business and the relative competitive position of the firm that are identified by the
Market Share.
 Businesses in the “question marks” quadrant, with a weak market share and a high
growth rate, usually require cash investment so that they can become “stars”, the
businesses in the high growth, strongly competitive position.
 These kinds of businesses have opportunities for growth and profits.
 The “Cash Rows” with a strong competitive position and a low growth rate, are
usually well established in the market, and such enterprises are in the position of
making the products at low cost.
 Therefore the products of these enterprises provide the cash needed for their
operation.

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  The “dogs” are businesses with a low growth rate and a weak market-share position.
These businesses are usually not profitable and generally should be disposed of.
 This was developed for large corporations with several divisions that are often
organized around units.

Major Kinds of Strategies and Policies:

The major strategies and policies that give an overall direction to operations are likely to
be in the areas of growth, finance, organization, personnel, public relations, products or
services, and marketing.
 Products are services
A business exists to furnish products or services. In a very real sense, profits are
merely a measure-although an important one- of how well a company serves its
customers. New products are services, more than any other single factor, determine
what an enterprise is or will be.
 Marketing
Marketing strategies are designed to guide managers in getting products are
services to customers and in encouraging customers to buy. Marketing strategies are
closely related to product strategies; they must be interrelated and mutually
supportive.
The two basic business functions as,
Innovation
Marketing

Hierarchy of Company Strategies:

There are three strategies. They are,
 Corporate -level strategy
 Business strategies
 Functional strategies
In large and diversified companies, the overall strategy may form of hierarchy.

 At the top of the pyramid is the corporate -level strategy. At this level, executives
craft the overall strategy for a diversified company. Decisions are made as to the
industries in which the company wants to compete.

 At the second level in the hierarchy, business strategies are developed, usually by the
general manager of a business unit. These strategies are reviewed and approved or
rejected by the CEO. The purpose of the business strategy is to gain a competitive
advantage in a particular area of product line.

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  On the third hierarchy level, functional strategies are developed. Thus, strategies are
devised for departments or other organizational units such as
 Finance
 Marketing
 Production
 Service
 Personnel and so on.
The aim is to support the business and corporate strategies.

Industry Analysis and Generic Competitive Strategies by Porter:

Industry analysis
Overall cost leadership strategy
Differentiation strategy
Focused strategy
Premising and Forecasting:
Environmental forecasting
Values and areas of forecasting
Forecasting with the Delphi technique

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