Unit 2

Planning and
decision PLANNING
making
MEANING OF PLANNING
Planning is a fundamental management function that involves deciding in
advance what needs to be done, how it should be done, who will do it, and
when it will be done. It provides a roadmap for achieving organizational goals
by setting objectives, identifying resources, and outlining strategies to reach
those objectives. Planning helps ensure that efforts are coordinated,
resources are used efficiently, and uncertainties are managed effectively.
Henry Fayol:
"Planning is looking ahead and deciding in advance the actions to be taken,
the methods to be followed, and the resources required to achieve desired
goals.
Billy E. Goetz:
"Planning is fundamentally choosing and a planning problem arises when an
alternative course of action is discovered."
NEED OF PLANNING
1.Direction and Focus: Planning provides a clear sense of direction
and aligns individual efforts with organizational objectives. It helps
ensure that everyone is working towards the same goals.
2.Resource Optimization: Planning ensures that the resources such
as time, money, and personnel are utilized efficiently by allocating
them in the most effective way to achieve organizational objectives.
3.Risk Management: Through planning, managers can anticipate
potential risks and uncertainties. By preparing contingency plans,
they can mitigate or manage the impact of unforeseen events.
4.Coordination: It helps in synchronizing the activities of different
departments or teams within an organization, ensuring a smooth
workflow and avoiding duplication of efforts.
5.Decision-Making: Planning aids in making informed decisions by
analyzing different alternatives and evaluating their potential
outcomes. It simplifies complex decision-making processes.
6. Setting Benchmarks: Effective planning allows organizations to
set clear targets and performance standards, which help in
evaluating progress and success over time.
7. Adaptability: Planning prepares an organization to adapt to
changes in the environment, such as market conditions, technological
advancements, or regulatory changes, by laying out a flexible
strategy.
8. Motivation and Commitment: A well-structured plan can
motivate employees by giving them clear objectives and showing
them how their efforts contribute to the overall success of the
organization.
Components of Planning:
The components of planning in management provide a structure for creating,
implementing, and evaluating plans to achieve organizational goals. These
components ensure that the planning process is thorough and effective. Here are
the key components of planning according to management principles:
1. Objectives
Objectives are the end goals or targets that the organization aims to achieve.
They form the foundation of the entire planning process as they guide all other
planning decisions. Objectives should be specific, measurable, attainable, relevant,
and time-bound (SMART).
•Example: A company's objective might be to increase market share by 10% within
the next year.
2. Goals
Goals are broader long-term aspirations that support the organization's mission
and vision. They serve as the framework within which objectives are set and help in
creating a focus for planning efforts.
•Example: Achieving industry leadership in customer satisfaction.
• 3. Strategies

• Strategies outline how the objectives will be achieved. They involve deciding on the
course of action that best aligns with the organization’s resources and capabilities.
Strategies are crucial for directing long-term efforts and addressing challenges.

• Example: A strategy could be entering a new market through strategic partnerships.

• 4. Policies

• Policies are the guidelines that govern decision-making within an organization. They
provide a consistent approach to handling various situations and ensure that all actions
align with the organization's objectives.

• Example: A policy might dictate that all customer complaints must be responded to
within 24 hours.

• 5. Procedures

• Procedures are detailed step-by-step instructions for performing specific tasks or

activities. They help ensure that tasks are carried out consistently and efficiently by
different individuals or teams.

• Example: A procedure for processing orders in a manufacturing unit.

• 6. Rules

• Rules are specific directives that leave little room for interpretation. They are rigid and
must be followed strictly without deviation. Rules often define what actions are permitted
or prohibited in specific situations.

• Example: "No employee is allowed to access sensitive customer data without

authorization."

• 7. Programs

• Programs are comprehensive plans that include a series of related activities aimed at
achieving specific objectives. Programs typically outline the scope, time frame, resources,
and actions required for achieving goals.

• Example: A new product launch program that details all activities from product design to
marketing.

• 8. Budgets

• Budgets are financial plans that allocate resources to specific activities or projects.
Budgets help control expenditures and ensure that resources are used effectively in line
with the organization’s objectives.

• Example: A marketing budget for a product launch campaign.

• 9. Forecasting

• Forecasting involves predicting future conditions and trends based on data and
analysis. It helps organizations anticipate changes in the environment and make
informed decisions. Forecasting is crucial for both short-term and long-term planning.

• Example: A company forecasting sales growth based on market trends and consumer
behavior.

• 10. Plans

• Plans are the detailed and specific documents outlining the actions to be taken, the
people responsible for those actions, the timelines, and the resources needed to achieve
the objectives. They ensure that everyone understands their roles in the process.

• Example: A detailed action plan for reducing operational costs by 5% within a year.

• 11. Standards

• Standards are the benchmarks or criteria used to measure performance. By

establishing standards, management can compare actual performance with planned
performance and take corrective action if needed.

• Example: A company might set a standard to achieve a 95% customer satisfaction rate.
 Types of Planning:
1. Strategic Planning:
This long-term planning focuses on the overall goals and direction of the organization. It typically spans 3 to 5 years or longer and
addresses the "big picture" of the organization's future.
1. Example: A company developing a five-year plan to expand its operations into international markets.
2. Tactical Planning:
Tactical planning supports strategic plans by breaking them down into specific, shorter-term actions. It is usually more focused on
departments or functions within the organization.
1. Example: A marketing team planning a six-month campaign to promote a new product.
3. Operational Planning:
This is short-term planning that deals with day-to-day activities. It focuses on specific procedures, tasks, and standards required to
meet immediate objectives.
1. Example: A restaurant setting its daily staffing schedule and food inventory requirements.
4. Contingency Planning:
Contingency planning involves preparing for unexpected events or emergencies. It outlines alternative courses of action to be taken if
original plans fail due to unforeseen circumstances.
1. Example: A company creating a disaster recovery plan in case of a cyberattack.
•5. Financial Planning:
•his involves forecasting future financial needs and allocating financial
resources. It helps ensure that an organization remains solvent and achieves its
financial goals.
•Example: A business preparing a budget for a new project or expansion.
•6. Human Resource Planning:
Focuses on managing the workforce. It involves planning for recruitment,
training, and development to meet future labor needs.
•Example: A company planning for leadership succession.
•7. Project Planning:
Planning for specific projects, it involves defining the scope, timelines,
resources, and objectives for successful project completion.
•Example: Planning the launch of a new software product.
Planning Process:
6. Formulating Action Plans:
Detailed plans are created for implementing the chosen alternative. This
includes defining tasks, allocating resources, and setting timelines.
7. Implementing the Plan:
The selected plan is put into action. Effective communication, delegation of
responsibilities, and resource allocation are critical at this stage.
8. Monitoring and Controlling:
Continuous monitoring is done to ensure that the plan is on track. Any
deviations are identified, and corrective actions are taken if necessary.
9. Review and Feedback:
After the plan is executed, it is evaluated to assess its success and any
lessons learned. Feedback is used for future planning efforts.
Decision Making
Meaning of Decision making

Decision-making
is the process of
identifying and
choosing between
alternative courses
of action based on
the values,
preferences, and
beliefs of the
decision-maker.
Definitions
Relationship between planning and
decision making
• 1. Planning as a Prerequisite to Decision-Making
• Planning involves setting objectives, developing
strategies, and outlining tasks and schedules to
achieve desired goals. It creates a framework for
decision-making by identifying what needs to be done,
how it can be done, and the resources required.
• Without a clear plan, decisions can become
haphazard, reactive, or inconsistent. A well-structured
plan narrows the scope of choices, ensuring decisions
are aligned with the overall strategy.
2. Decision-Making Within the Planning Process
•Decision-making is integral to planning. At every step of
planning, decision-making occurs: choosing the goals,
selecting the strategies, allocating resources, and
determining timeframes. It involves evaluating alternatives
and selecting the best course of action.
•For example, in business planning, decisions like budget
allocation, project prioritization, and setting timelines are
necessary to make the plan actionable.
Decision making process
Decision making
approaches
• 4. Risk Management
• Decision-making plays a vital role in assessing and managing risks. It
involves evaluating potential risks in different courses of action and
choosing the one with the best balance between risks and rewards.
• 5. Strategic Planning
• In an organizational setting, decision-making shapes long-term
strategies. It influences the direction in which an organization moves,
ensuring alignment with its mission, vision, and objectives. Strategic
decisions impact growth, competitiveness, and sustainability.
• 6. Adaptation and Innovation
• In dynamic environments, decision-making helps individuals and
organizations adapt to changing circumstances. It enables innovation
by fostering the ability to make decisions that embrace new
technologies, ideas, or market conditions.