UNIT II – PLANNING AND ORGANISING

Planning - Steps in Planning Process - Scope and Limitations - Forecasting and types of
Planning - Characteristics of a sound Plan - Management by Objectives (MBO) - Policies and
Strategies – Scope and Formulation - Decision Making - Types, Techniques and Processes.
Organization Structure and Design - Authority and Responsibility Relationships - Delegation
of Authority and Decentralization - Interdepartmental Coordination - - Impact of Technology
on Organizational design - Mechanistic vs. Adoptive Structures - Formal and Informal
Organization. Control: meaning, function, Process and types of Control.
PLANNING
Planning is an important managerial function in that there is no choice between
planning and no planning. The choice is only regarding the method and techniques
used to plan. It is anybody’s knowledge that we plan many things in our day-to-day
lives. We plan to go on a holiday trip, plan our careers, plan our investments and so
on. Organizations are no exception. Lot of planning is done by managers at all
levels. Planning is the basic process by which we use to select our goals and
determine the means to achieve them. Lot of information must be gathered and
processed before a plan is formulated. In other words, a plan is like a jigsaw
puzzle. All the pieces must be put together properly, so that they make sense.
Planning is necessarily forward looking. It is looking into the future. It bridges the
gap between where we are and where we want to go. It involves visualizing a
future course of action and putting it in a logical way. Let us look at the following
observations about planning.
✓ “Failure to plan is planning to fail”.
✓ “Planning is outlining a future course of action in order to achieve
objectives”.
✓ “Planning is looking ahead”.
✓ “Planning is getting ready to do something tomorrow”.
✓ “Plan is a trap laid down to capture the future”.

STEPS INVOLVED IN PLANNING PROCESS

1. Perception of Opportunities: Perception of opportunities is not strictly a

part of the planning process. But this awareness of opportunities in the
external environment as well as within the organization is the real starting
point for planning. It is important to take a preliminary look at possible
future opportunities and see them clearly and completely. All managers
should know where they stand in the light of their strengths and
weaknesses, understand the problems they wish to solve and know what
they gain. Setting objectives depends on the awareness. Planning requires
realistic diagnosis of the opportunity situation.
2. Establishing Objectives: This is the second step in the planning
process. The major organizational and unit objectives are set in this stage.
This is to be done for the long term as well as for the short range.
Objective 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 various types of plans. Organizational
objectives give direction to the major plans, which by reflecting these
objectives define the objective of every major department. Major
objectives, in turn, control the objectives of subordinate departments and
so on down the line. In other words, objectives from a hierarchy. The
objectives of lesser departments will be more accurate if subdivision
managers understand the overall enterprise objectives and the derivative
goals. Managers should also can contribute their ideal to setting their own
goals and those of the organization.
3. Planning Premises: After determination of organizational objectives,
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
Thus planning premises are external and internal. External premises
include total factors in task environment like political, social,
technological, competitors, plans and actions, government policies.
Internal factors include organization ‘s policies, resources of various
types, and the ability of the organization to withstand the environmental
pressure. The plans are formulated in the light of both external and
internal factors. The nature of planning premises differs at different
levels of planning. At the top level, it is mostly externally focused. As
one moves down the organizational hierarchy the composition of planning
premises changes from external to internal. The major plans both old
and new will materially affect the future against which the managers at
lower units must plan.
4. Identification of Alternatives: The fourth step in planning is to identify
the alternatives. Various alternatives can be identified based on the
organizational objectives and planning premises. The concept of various
alternatives suggests that a particular objective can be achieved through
various actions. For example, if an organization has set its objectives to
grow further, it can be achieved in several ways like expanding in the
same Field of business or product line diversifying in other areas, joining
hands with other organizations, or taking over another organization and so
on. Within each category, there may be several alternatives the most
common problem is not finding alternatives but reducing the number of
alternatives
5. Evaluation of Alternatives: The various alternative course of action
should be analysed in the light of premises and goals. There are various
techniques available to evaluate alternatives. The evaluation is to be done
in the light of various factors. Example, cash inflow and outflow, risks,
 limited resources, expected pay back etc.; the alternatives should give us
the best chance of meeting our goals at the lowest cost and highest profit.
6. Choice of Alternative Plans: This is the real point of decision-making.
An analysis and evaluation of alternative courses will disclose that two or
more advisable and beneficial. The fit one is selected.
7. Formulation of Supporting Plan: After formulating the basic plan,
various plans are derived to support the main plan. In an organization
there can be various derivative plans like planning for buying equipment,
buying raw materials, recruiting and training personal, developing new
product etc. These derivative plans are formulated out of the basic or main
plan and almost invariably required to support the basic plan.
8. Establishing Sequence of Activities: After formulating basic and
derivative plans, the sequence of activities is determined so those plans are
put into action. After decisions are made and plans are set, budgets for
various periods and divisions can be prepared to give plans more concrete
meaning for implementation. The overall budgets of an enterprise
represent the sum of income and expenses, with resultant profit or surplus,
and budgets of major balance sheet items such as cash and capital
expenditures.

CHARACTERISTICS OF A SOUND PLAN

A sound plan should have the following characteristics:

Primacy: Planning is an important managerial function that usually precedes other
functions. Obviously, without setting the goals to be reached and the lines of
actions to be followed, there is nothing to organize, to direct, or to control in the
enterprise. But this should not lead us to think that planning is isolated from other
managerial functions.
Continuity: Planning is a continuous and never-ending activity of a manager to
keep the enterprise as a going concern. One plan begets another plan to be followed
by a series of other plans in quick succession. Actually, a hierarchy of plans
operates in the enterprise at any time. Planning gets used up where tomorrow
becomes today and calls for further planning day in and day out. Again, the
incessant changes make re-planning a continuous necessity.
Flexibility: Planning leads to the adoption of a specific course of action and the
rejection of other possibilities. This confinement to one course takes away
flexibility. But if the future and assumptions upon which planning is based prove
wrong, the course of action is to be modified for avoiding any deadlock.
Accordingly, when the future cannot be molded to conform to the course of
action, the flexibility is to be ingrained in planning by way of adapting the
course of action to the demands of current situations.
Consistency: Planning is made by different managers at different times.
Maintenance of consistency or the unity of planning is one of its essential
requirements. Objectives provide the common focus for unifying managerial action
in planning. Moreover, policies and procedures introduce a consistency of
executive behaviour and action in matters of planning.
Precision: Planning must be precise with respect to its meaning, scope and nature.
As guides to action, planning is to be framed in intelligible and meaningful terms
by way of pinpointing the expected results. Planning must be realistic in scope
rather than being dreams indicating pious desires. As planning errors are far more
serious and cannot be offset by effective organizing or controlling, the accuracy
and precision is of outmost importance.
Pervasiveness: Planning is a pervasive activity covering the entire enterprise and
every level of management. Planning is not the exclusive responsibility of top
management only. But it extends to middle and lower managements as well.
Although top managers are mostly preoccupied with planning because of the wider
scope of operational and decision-making authority, planning is of equal
importance to every manager.

MANAGEMENT BY OBJECTIVES

Peter Drucker is credited with being the first to introduce Management by

Objectives (MBO) as an approach for increasing organizational effectiveness. He
observes that every manager, from the highest to the lowest levels in the
organization, should have clear objectives to pursue. According to him, such a
process would enable each manager to have a clear understanding of what the
organization expects of him or her and how their individual objectives are
integrated with the overall organizational objectives. George Odiorne has done
substantial research work on MBO and further popularized the concept.
To quote George Odiorne, “MBO is a process whereby the superior and
subordinate managers of an organization jointly identify the common goals,
define each individual’s major areas of responsibility in terms of the results
expected of him, and use these resources as guides for operating the unit and
assessing the contribution of each of its members”. Different goals are sought to be
achieved by the introduction of MBO in organizations. MBO, as a management
tool, thus, is so versatile that it is used.
✓ to integrate the organizational goals with the individual goals.
✓ as a motivational technique wherein, individuals are driven
towards the achievement of goals.
✓ to appraise the performance of managers; to control the activities as they are
performed.
POLICIES
Decision-making is the primary task of a manager. While making decisions, it is
common that managers consult the existing organizational policies relevant to the
decisions. Policies provide the basic framework within which managers operate.
Policies exist at all levels in the organization. Some may be major company
policies affecting the whole organization while others may be minor in nature
affecting the departments or sections within the departments. Thus, policies are
intended to provide guidance to managers in decision- making. It may be
remembered that a policy is also a decision. But it is a one-standing decision in the
light of which, so many routine decisions are made.

Policy Formulation
As mentioned earlier, the basic intention of policies is to help executive thinking in
decision- making. Policies are formulated for all the key functional areas of
business-like production, marketing, finance, personnel and so on. Effectiveness
and consistency of decisions in all these areas depend on how well the policies
are formulated and understood. Policy is a plan. Therefore, the steps involved in
policy formulation are like the steps in planning. Though policies vary in respect of
scope, the process of policy formulation usually involves the following steps
Corporate Mission -Corporate mission specifies the purpose for which the
organisation exists. It relates the organisation to the environment in which it
operates. It is natural, therefore that all the activities of the organisation are
geared towards the achievement of the mission. The mission statement provides the
direction to the organisation. As such, thorough understanding of the corporate
mission is the starting point for policy formulation.
Appraisal of the Environment -Environment appraisal in a systematic way is the
key for successful formulation of the policies. Correct appraisal of the environment
enables the organisation to integrate its activities with the needs of the society. As
such, the nature of the environment, the various dynamics of it must be analysed. It
includes collection of relevant information from the environment and interpreting
its impact on the future of organisation.
Corporate Analysis - While the focus in environmental appraisal is on the internal
factors of the business, corporate analysis considers the internal factors. Corporate
analysis discloses strengths and weaknesses of the organisation and points out the
areas that have potential. This is an inward-looking exercise.
Identification of Alternatives - The above two steps – environmental appraisal and
corporate analysis popularly known as SWOT (Strengths, Weaknesses,
Opportunities and Threats) analysis will help identifying the alternative policies.
For example, the objective of the organisation is expansion. This may be achieved
by several ways, diversification of the activities, acquisition of existing businesses,
and establishment of subsidiaries abroad and so on. Again, if diversification is
chosen, it must be decided whether it is into related or unrelated business. The
alternative policies thus identified must be evaluated in the light of the
organizational mission and objectives.
Choice of the Right Policy -This stage involves choosing the right policy from among
the several policy options that suits the organizational objectives. The Corporate
history, personal values and attitude of the management and the compulsions in
the environment, if any, influence the choice of the policy.
Policy Implementation -Effective implementation of the policy requires designing
suitable organisational structure, developing and motivating people to contribute
their best, designing effective control and information systems, allocation of
resources, etc. At times, polices may have to be revised in line with the changes in
the environment. Further, polices need to be monitored constantly during the
implementation stage so that inadequacies if any, may be corrected at the
appropriate time.
DECISION MAKING
Decision-making in simple may be defined as “the selection of a future course of
action from among various alternatives. It presupposes the existence of various
alternatives. It is in a way a choice between alternatives. In other words, if there are
no alternatives, there is no choice. Therefore, the question of decision-making and
the associated dilemma do not arise. Thus, the following characteristics emerge
from the definition of decision making.
Type of Decisions taken by managers may be classified under various categories
depending upon the scope, importance and the impact that they create in the
organization. The following are the different types of decisions:
Programmed and Non-programmed
Decisions Programmed decisions are normally repetitive in nature. They are the
easiest to make. Usually, these decisions are taken in consultation with the existing
policy, rules or procedure which are already laid down in the organization. For
example: making purchase orders, sanctioning different types of leave, increments
in salary, settlement of normal disputes, etc. On the other hand, non-programmed
decisions are different in that they are non-routine in nature. They are related to
some exceptional situations for which there are no established methods of handling
such things. For example: Issues related to handling a serious industrial relations
problem, declining market share, increasing competition, problems with the
collaborator, and growing public hostility towards the organization fall in this
category. Problems like these must be handled in a different way. While different
managers reach the same solution in the case of programmed decisions because
they are guided by the same policy or procedure, the solutions may widely differ
in the case of non-programmed decisions.
Operational and Strategic Decisions
Operational or tactical decisions relate to the present. The primary purpose is to
achieve a high degree of efficiency in the company’s ongoing operations. Better
working conditions, effective supervision, prudent use of existing resources, better
maintenance of the equipment, etc., fall in this category. One the other hand,
expanding the scale of operations, entering new markets, changing the product mix,
shifting the manufacturing facility from one place to the other, striking alliances
with other companies, etc.
Organizational and Personal Decisions
Decisions taken by managers in the ordinary course of business in their capacity as
managers relating to organizational issues are organizational decisions. For
example: decisions regarding introducing a new incentive system, transferring an
employee, reallocation or redeployment of employees etc. are taken by managers to
achieve certain objectives. As against such decisions, managers do take some
decisions which are purely personal in nature. However, their impact may not
exactly be confined to themselves, and they may affect the organization also. For
example: the manager’s decision to quit the organization, though personal in
nature, may impact the organization.

Individual and Group Decisions

It is quite common that some decisions are taken by a manager individually while
some decisions are taken collectively by a group of managers. Individual decisions
are taken where the problem is of a routine nature, whereas important and strategic
decisions which have a bearing on many aspects of the organization are generally
taken by a group. Group decision making is preferred these days because it
contributes to better coordination among the people concerned with the
implementation of the decision. Decisions may also be further classified under
major and minor decisions and simple and complex decisions. However, a detailed
description of these types is not necessary because they are almost all like the
already discussed programmed and non-programmed decisions in respect of
importance and impact.
TECHNIQUES OF DECISION-MAKING
Nowadays, different techniques are used by managers in making decisions. These
techniques, if used properly, would contribute to the effectiveness of the decisions.
Some of the important techniques are discussed below.
Brainstorming: Brainstorming is the oldest and widely followed technique for
encouraging creative thinking. It was originally developed by A.F. Osborn. It
involves the use of a group. The success of the technique lies in creating a free and
open environment where members of the group participate without any inhibitions.
It starts on the premise that when people interact in a free environment, the
possibility for creative ideas to emerge to higher continuous interaction through
free discussions may result in spontaneous and creative thinking. The larger the
number of solutions, the fairer the chances of locating an acceptable solution.
Established research proves that one hour brainstorming session is likely to
generate 50- 150 ideas. Of course, most of them may be impracticable; at least,
some of them merit serious consideration. This group process is not without
limitations. It consumes lot of time and therefore is an expensive exercise.
Secondly, it emphasizes only quantity of