UNIT - II

PLANNING

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 UNIT - II
PLANNING
DEFINITION
According to Koontz & O'Donnel – “Planning is deciding in
advance What to do, how to do it, when to do it and who is to do
it. It is the selection among alternatives of future course of action
for the enterprise as a whole and each department within it. Plans
involve selecting objectives and determining ways of achieving
them”.
Planning is the process of selecting objectives and determining
the course of action required to achieve these objectives.

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NATURE AND PURPOSE OF PLANNING:
Nature of Planning
1. Planning - a Primary function:
 Planning is the first of the managerial functions.
 It precedes all other management functions.
2. Planning – a dynamic process:
 Planning is a continuous managerial function involving complex
processes such as perception, analysis, communication, decision and
action.
3. Planning – based on objectives and policies:
 Planning process involves setting of objectives to be achieved
and determining the techniques for achieving those objectives.
4. Planning – a selective process :
 For achieving a particular objective, there are number of alternatives
available.
 The planning manager has to select only one alternative which is best
suited to the firm.

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5. Pervasiveness of Planning:
 Planning is found at all levels of management.
 Top management looks after strategic planning.
 Middle management is in charge of administrative planning.
 Lower management has to concentrate on operational planning.
6. Planning - an intellectual process :
 Planning is a mental activity. It is the process where a number of activities are
to be taken to decide the future course of action.
 The quality of planning will vary according to the quality of the mind of the
manager.
7. Planning is directed towards efficiency:
 In general, all management functions including planning are directed to
increase the efficiency of the firm.
8. Planning – Focus with future activities:
 Planning is primarily concerned with looking into future.
 It forecasts the future situation in which the organisation has to function.
9. Flexibility of Planning:
 The process of planning should be adaptable to changing environmental
conditions.
10. Planning is based on facts:
 Planning is not a guess work or trial and error method. 4
Importance/Purpose/Objectives of Planning:
Planning has a great importance in all types of organisation.
1. Primary of Planning:
 Planning is a primary function of an organisation which precedes all
other functions.
 All other functions such as organising, staffing, directing and controlling
are performed to achieve the objectives already set by planning
process.
2. To achieve objectives:
 Planning is directed towards the attainment of organisation objectives.
 Planning makes the objectives more concrete by focusing attention on
them.
3. To cope with uncertainty and change:
 There is a continuous change in the environment. This change is
reflected in both Tangible and Intangible changes.
 Tangible changes are in the form of changes in technology, market
forces, government regulations etc.,
 Intangible changes are in the form of changes in attitudes, values,
cultures etc., 5
4. To facilitate control:
 Control involves the measurement of accomplishment of events against
plans and correction of deviations to assure achievement of objectives
as set by plans.
 Planning provides the standards with which actual performance can be
measured and corrective actions can be taken wherever necessary.
5. To help in coordination:
 Co-ordination is, indeed, the essence of management, the planning is
the base of it.
 Without planning it is not possible to co-ordinate the different activities
of an organization.
6. To increase organizational effectiveness:
 The term effectiveness means that the organisation is able to achieve its
objectives within the given resources.
 Planning enables the manager to measure the organizational
effectiveness in the context of the stated objectives.
7. To guide decision making:
 Planning provides a basis for future oriented decisions.
 Without planning, business decisions may become random.
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PLANNING PROCESS

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 PLANNING PROCESS
The various steps involved in planning are
given below:
a)Identification of Opportunities
b)Establishment of objectives
c)Developing planning premises
d)Identification of alternatives
e)Evaluation of alternatives
f) Selecting an alternative
g)Formulating derivative plans
h)Establishing sequence of alternatives
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a) Identification of Opportunities:
 Identification of an opportunity is the real starting point
for planning.
 It includes a preliminary look at possible future
opportunities and the ability to see them clearly and
completely.
 Knowledge of where we stand in the light of our
strengths and weaknesses, an understanding of what
problem we wish to solve, and a vision of what we
expect to gain.
 Setting realistic objectives depends on this awareness.

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b) Establishment of Objectives:
 The next step in planning is to establish objectives for
the entire organisation and then for each subordinate
unit.
 Objectives specify and indicate the results expected.
 what is to be done?
 where the primary emphasis is to be placed?
 what is to be accomplished by various types of plans?
 Organisational objectives should be specified in all key
result areas.
 Key result areas may be profitability, sales, R&D,
manufacturing and so on.
 Overall objectives give directions to the nature of all
other plans of the major departments.
 Departmental objectives must confirm the overall
objectives.
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c) Developing Planning Premises:
Planning premises are the assumptions that should be made
about the various elements of the environment.
It provides the basic framework in which plans operate.
This premises may be Internal or external
 Internal premises include organisational policies,
resources of various types, sales forecasts and the ability
of the organisation to withstand the environmental
pressure.
 External premises include the total factors in task
environment like political, social, technological,
competitors plans and actions and government policies
etc.
 The plans are formulated on the basis of both internal and
external premises.

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d) Identification of alternatives:
 The next step in planning is to search for alternatives for
reaching the objectives.
 Based on organisational objectives and planning premises,
various alternatives of plans can be identified.
 A particular objective can be achieved through a number of
ways.
 All the alternatives cannot be analysed. Some alternatives can
be rejected at its preliminary stage itself by considering
preliminary criteria such as minimum investment required,
matching with the present business, market conditions,
government control, skilled workers, techniques available etc.,
 Only the alternatives which meet the preliminary criteria may
be chosen for further detailed analysis.

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e) Evaluation of alternatives
 The alternatives considered for the analysis according to preliminary
criteria may be taken for further evaluation.
 Each alternative course of action is evaluated on the basis of
profitability, capital investment, risk involved, gestation period etc.,
 In evaluating the alternatives, sometimes intangible factors such as
public relations, goodwill of the company, employee morale, personal
relations etc., are also to be considered.

f) Selecting alternatives:
 After evaluation of various alternatives, the most appropriate course of
actions is selected.

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g) Formulation of derivative plans:
 The derivative plans are formulated on the basis of the major plan.
 There are several minor plans required to support and execute the
major plan. These plans are known as derivative plans.
 The various derivative plans are planning for buying equipment,
buying raw materials, recruiting and training personal, developing
new product etc.,
h) Establishing sequence of activities:
 After formulating basic and derivative plans, the sequence of
activities is determined so that plans are put into action .
 While formulating derivative plans, a built-in mechanism should be
created for periodic review and updating of various plans whenever
necessary.

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TYPES OF PLANS

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 TYPES OF PLANS
Four major types of plans can help managers achieve
their organization's goals:
a) Operational plan
b) Tactical plans
c) Strategic plan
d) Contingency plan

a) OPERATIONAL PLANS:
 An operational plan is one that a manager uses to accomplish his
or her job responsibilities.
 Supervisors, team leaders, and facilitators develop operational
plans to support tactical plans.
 An Operational Plan is a detailed plan used to provide a clear
picture of how a team, section or department will contribute to
the achievement of the organization's strategic goals. 16
 Operational plans can be a single-use plan or a standing plan.
 i) Single-use plans apply to activities that do not recur or
repeat.
 ii) Standing plans are usually made once and retain their value
over a period of years while undergoing periodic revisions and
updates.
b) 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.
 These plans usually span one year or less because they are
considered short-term goals.
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c) 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 organisation's mission.
 Strategic plans look ahead over the next two, three, five or
even more years to move the organisation from where it
currently is to where it wants to be.
d) CONTINGENCY PLANS:
 A Contingency plan is a plan devised for a specific situation
when things could go wrong.
 Contingency plans are often devised by governments or
businesses who want to be prepared for anything that could
happen.
 During time of crisis, contingency plans are often developed
to explore and prepare for any eventuality. 18
OBJECTIVES

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 OBJECTIVES
 Objectives are the aims, purposes or goals that an
organisation wants to achieve over varying
periods of time.

 According to Koontz and O'Donnell, "an objective

is a term commonly used to indicate the end
point of a management programme.“

 Objectives constitute the purpose of the

enterprise and without them no intelligent
planning can take place.
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Features of Objectives:
 The objectives must be predetermined.
 A clearly defined objective provides the clear
direction for managerial effort.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives may be short-range, medium-range and
long-range.
 Objectives have a hierarchy.
 Objectives must be clearly specified in writing.
 The list of objectives should not be too long.
 Objectives may be tangible or intangible.
 Objectives must be set by considering the various
factors affecting their achievement.
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 Objective should clearly indicate the organisational
mission.
 Objectives should be verifiable.
 Objectives should be challenging and reasonable.
 Objectives should yield specific results when
achieved.
 Objectives should provide timely feedback so that
necessary corrective action can be taken.
 Short term objectives should coincide with long-term
objectives.
 Objective should start with the word “To” and be
followed by an action.
 Objectives should be periodically reviewed.
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Advantages of Objectives:
 Clear definition of objectives encourages unified planning.
 Objectives serve to identify the organization and to link it
to the groups upon which its existence depends.
 Objectives provide direction to think and bring into action.
 Objectives work as a motivating force by providing
directions to organization members.
 Objectives provide standards which aid in the control of
human efforts in an organization.
 Objectives act as a sound basis for developing
administrative controls, by decentralisation.
 Clearly defined objectives and mutually agreed objectives
help in achieving the voluntary coordination.

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 GUIDELINES FOR SETTING OBJECTIVES:
In the setting of objectives, the following points should be
borne in mind:
 Objectives are required to be set by management in every area
which directly and vitally affects the survival and prosperity of
the business.
 The objectives to be set in various areas have to be identified.
 While setting the objectives, the past performance must be
reviewed, since past performance indicates what the
organization will be able to accomplish in future.
 The objectives should be set in realistic terms i.e., the objectives
to be set should be reasonable and capable of attainment.
 Objectives must be consistent with one and other.
 Objectives must be set in clear-cut terms.
 For the successful accomplishment of the objectives, there
should be effective communication.
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 SMART OBJECTIVES
 SPECIFIC
 MEASURABLE
 ACHIEVABLE
 RELEVANT
 TIME BOUND

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MANAGING BY OBJECTIVES (MBO)

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 MANAGING BY OBJECTIVES (MBO)
Management by objectives (MBO) is a management model that
aims to improve performance of an organization by clearly
defining objectives that are agreed to by both management and
employees.

Definition:
“MBO is a process whereby the superior and the mangers of an
organization jointly identify its common goals, define each
individual’s major area of responsibility in terms of results
expected of him, and use these measures as guides for operating
the unit and assessing the contribution of each of its members.”

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Features of MBO
 MBO focuses attention on appropriate goals and
plans.
 MBO integrates the goals of an organization and
individuals.
 The essence of MBO is a process of joint goal
setting between a supervisor and a subordinate.
 Managers work with their subordinates to
establish the performance goals that are
consistent with their higher organizational
objectives.
 MBO facilitates control through the periodic
development and subsequent evaluation of
individual goals and plans.
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 The Process of MBO
The Management by Objectives has been recognized as a
system for achieving the organisational objectives. The
MBO process consists of the following steps:
Setting Preliminary Objectives
Fixing Key result areas
Setting subordinate’s objectives
Recycling objectives
Matching resources with objectives
Periodic performance reviews
Appraisal
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1) Setting Preliminary Objectives:
 For Management by Objectives (MBO) to be effective, individual
managers must understand the specific objectives of their job
and how those objectives fit in with the overall company
objectives set by the board of directors.
 The managers of the various units or sub-units, or sections of an
organization should know not only the objectives of their unit
but should also actively participate in setting these objectives
and make responsibility for them.
 Managers need to identify and set objectives both for
themselves, their units, and their organizations.
 These objectives are formed by keeping in view the external
and internal environment of the organisation.
 During setting objectives for subordinates, we should consider
the organisational goals, subordinates ability and resources
available to him.
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2) Fixing key result areas:
 Key result areas (KRAs) are identified on the basis of
organisational objectives and planning premises.
 These are the areas reference to which organisational
health can be measured.
 Key result areas are arranged on the priority basis.
 Some examples of KRAs are i) Profitability ii) Market
standing iii) Innovation, iv) Productivity, v) Market
Performance, VI) Public responsibility.
 These areas may vary for different organisations.
3) Setting subordinate’s objectives:
 The organisational objectives are achieved through
individuals.
 Therefore, each individual must know what he is
expected to achieve. 31
 During setting of objectives for subordinates, we
should consider the organisational goals,
subordinate’s ability and resources available to him.
 There should be an open discussion between superior
and his subordinates.
 The allocation of resources should also be made in
consultation with subordinates.
4) Recycling objectives:
 Under MBO goal-setting is not the direction from the
top level management only.
 It is a two-way processes in which superior suggests a
goal that is acceptable to the subordinates.
 Thus setting objectives can recycled/altered based on
interaction.
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5) Matching resources with objectives:
 Objectives should be carefully matched with the available
resources.
 If certain resources are not available, the objectives of an
organisation are changed accordingly.
 The allocation and movement of resources should be
done in consultation with the subordinates.
6) Periodic Performance reviews:
 At specific intervals, the superior and subordinates
should hold meetings in which they discuss the progress
in the accomplishment of objectives.
 Such reviews are made to identify shortcomings and to
take timely steps to improve results.
 Feedback from these reviews is provided to each
individual to facilitate self regulation and control. 33
7) Appraisal:
 Appraisal aspect of MBO tries to measure whether the
subordinates is achieving his objective or not.
 If subordinates do not achieve their objectives, then the
superior should identify what are the problems and how
these problems can be overcome.
 The main purpose of the appraisal is to find out the
shortcomings in achieving objectives and also to remove
them promptly.
 It ensures that everything is going on according to the plan.

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Benefits of MBO:
 Improvement of managing.
 Clarification of the organisation
 Personnel satisfaction
 Team work
 Development of effective control
 Fast decision making
Weakness of MBO:
 Failure to teach the philosophy of MBO
 Failure to give guidelines to goal setters
 Difficulty of setting goals
 Emphasis on short term goals
 Danger of inflexibility
 Time consuming
 Increased paperwork 35
STRATEGIES

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 According to Alfred D. Chandler, “Strategy is the determination of
basic long term objectives and the adoption of the course of
action and allocation of resources to achieve these goals”.
Nature of Strategy:
 Strategy provides a guideline for future course of action.
 Strategy is forward looking
 Strategy is flexible and dynamic.
 It is formulated at the top management level.
 It involves assumption of certain calculated risks.

Need and Importance of Strategies:

 Strategy of an organisation is more helpful for facing
environmental challenges.
 Strategy provides a long-term guide towards the achievement of
objectives.
 Strategy ensures more efficient and effective utilization of
organisational resources.
 Strategy facilitates better coordination and control.
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Strategic Planning Process

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 Strategic Planning Process
1. Mission and Objectives:
 Strategic planning process starts with the determination of
organisational mission and objectives.
 The basic purpose for which the organisation has been started
should be clearly indicated. This process is known as mission.
2. Environment Analysis:
 Any organisation must know the kind of environment in which it
has to work.
 The basic objective of strategies is to integrate the organisation
with its environment.
3. Corporate Analysis:
 The strength and weakness of the organisation are analysed in
corporate analysis, such as resource analysis.
 It will enable the organisation to improve on its strength and to
minimise its weakness.
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4. Identification of Alternatives:
 Strategic alternatives are developed on the basis of an
analysis of both external and internal environment.
 The alternatives are evaluated based on organisational
mission and objectives.

5. Strategic Decision-Making:
 This stage has to decide the acceptable alternative
among several alternatives which fits with the
organisational objectives.
 The choice of strategy also depends upon several factors,
such as management, external environment,
management attitude towards risk etc.,

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6. Implementation, Review and Control:
 Once, the strategy has been chosen, it is put into action
by translating it into tactical and operational plans.
 The following factors are necessary for
implementation of strategy:
 Designing a suitable organisation structure
 Developing and motivating people to take up work
 Designing effective control and information system
 Allocation of Resources
 Controls should be developed to evaluate the
performance.
 Whenever, actual results are below expectation, the
strategy should be reviewed.

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 Major Kinds of Strategies

The major strategies that give an overall direction to operations are

likely to be in the following areas:

1. Growth
2. Finance
3. Organisation
4. Personnel (union relation, selection, training etc.,)
5. Products or Service
6. Market

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 Effective Implementation of Strategies

For success implementation of strategy, the following eight

recommendations should be considered:

1. Communication of Strategies
2. Developing and Communicating Planning Premises
3. Developing Appropriate Operational Plans
4. Periodic Review of Strategy
5. Developing Contingency Strategies
6. Developing Appropriate Organisation Structure
7. Setting Proper Organisational Climate ( cooperation, dedication
etc.,)

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POLICIES

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 POLICIES
Policy is the statement or general understanding which provides the
guidance in decision making to members of an organisation in respect to
any course of action.
- L.M.PRASAD.

Nature of Policy
 Relationship to organisational objectives
 Clarity of policy
 A policy is a guide to thinking in decision-making
 Policies should be written
 Communication of policies
 Consistency of policies
 Balance of policy (balance between stability and flexibility) 45
PURPOSE OF POLICIES
To operationalize objectives
To save time and effort
To facilitate delegation of authority
To speedup decision-making
To control administration

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POLICY FORMULATION PROCESS

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 POLICY FORMULATION PROCESS:
A policy formulation process involves the following steps:
1. Definition of Policy Areas:
 The initial steps in policy formulation is to specify the
area in which the policies are formulated.
 During this process, the objectives, needs and
environment of the organization should be kept in mind.

2. Creation of Policy Alternatives:

 By analyzing the external and internal environment of
the organization carefully, the opportunities and
constraints, strength and weakness are identified.
 On the basis of such analysis, we can identify the policy
alternatives for each objective. 48
3. Evaluation of Policy Alternatives:
 Each of the policy alternatives are evaluated in terms of
contribution to objectives.
 The various factors such as costs, benefits and resources
required should be considered in evaluating alternatives.

4. Choice of Policy:
 After evaluation of each policy alternative, the most
appropriate alternatives is selected for implementation.

5. Communication of Policy:
 The chosen policy is communicated to those responsible
for implementation.
 The policy may be communicated through the policy
manuals, company handbooks and written memorandum.
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6. Implementation of Policy:
 The chosen policy is then put into action by
converting it into operational plan.

7. Review of Policy:
 Policy should be reviewed periodically to
facilitate the rapid changes in the environment.
 Without such reviews, policies become obsolete
over the period of time.

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 TYPES OF POLICIES
1. Formulated Policies:
 Formulated policy is originated from top level managers.
2. Appealed Policies:
 It is the policy formulated on the request or appeal of lower
level managers.
3. Imposed Policy:
 It is the policy which is imposed by some external forces such
as government, trade union etc.,
4. Written Policies:
 Written policies are formal and clearly reveal the intention of
the management.
5. Implied Policies:
 Sometimes, policies may not be clearly stated and the action
of managers at the higher levels provide guidelines for action
at lower levels. 51
PLANNING PREMISES

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 PLANNING PREMISES
Koontz and Weihrich have defined Planning Premises as:
“ Planning Premises are the anticipated environment in
which plans are expected to operate”.

 Planning premises are the basic assumptions about the

environment.
 Planning premises are the assumptions about future from
forecasting.
 Effective planning is therefore largely dependent upon the
correct knowledge and choice of planning premises.
 One of the major purposes of planning premises is to
facilitate the planning process by guiding, directing,
simplifying and reducing the degree of uncertainty in it.

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Classification of Planning Premises:

1. Internal and External

2. Tangible and Intangible
3. Controllable and Uncontrollable.

1.Internal and External Planning Premises:

 Internal Premises exists within a business enterprise.
 These include resources and capabilities of enterprise in
the form of men, material, machine, money and methods.
 Competency of management personal and skill of the
labour force may be regarded as the most important
internal premises.

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  External Premises are those which lies outside the firm.
 There are many kind of external premises.
(a) General business environment including economic,
technological, political and social conditions.
(b) The product market consisting of the demand and
supply
(c) The market for land, labour, capital etc.,

2. Tangible and Intangible Planning Premises:

 Tangible Premises are those which can be expressed in
quantitative terms such as monetary units, unit of product,
labour hour, machine hour and so on.
 Intangible Premises are those which cannot be measured
quantitatively. Example of such premises is reputation of the
concern, public relations, employee morale, motivation etc.,
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3. Controllable and Uncontrollable Planning Premises:
This classification is on the basis of controllability.
 Controllable Premises:
 Those which are entirely within the control of
management.
 These include organizational policies, structures,
systems, procedures etc., Such premises are
mostly internal.

 Uncontrollable Premises:
 Those which cannot be controllable by an
organizations action.
 These include the rate of economic growth,
population growth, taxation policy of the
government, natural climate, war etc.,
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DECISION MAKING

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 DECISION MAKING
In the words of George R. Terry, "Decision-making is the selection
based on some criteria from two or more possible alternatives".
In the words of Knootz and Weihrich “ Decision making is defined as
the selection of a course of action from among alternatives”.

Features of Decision Making

 Decision-making is a selection process.
 Decision-making is goal-oriented process.
 Decision-making is the end process.
 Decision-making is a human and rational process involving the
application of intellectual abilities.
 Decision-making is a dynamic process.
 Decision-making is situational.
 Decision making implies freedom to the decision maker regarding
the final choice.
 Decision may be positive or negative.
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 DECISION-MAKING PROCESS
1. Identification of Problem:
 Decision-making process begins with the identification of the problem.
 Problems generally arise due to gap between what is and what should be.
 A well defined problem is half solved.
 The manager have to use imagination, experience and judgement in order
to identify the real nature of the problem.

2. Diagnosis and Analysis of the Problem:

 The most important part of the diagnosing problem is to find out the real
cause or source of the problem.
 In order to diagnose the problem correctly, a manager must obtain all
important facts.
 After diagnosing the problem, the next phase is to analyse the problem.
 The analysis of the problem requires to find out who would make decision,
what information would be needed, from where the information is available
and whether some specialists should be consulted.

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3.Search for Alternatives:
 A problem can be solved in many ways.
 A wide range of alternatives increases the managers freedom of choice.
 The PRINCIPLE OF LIMITING FACTOR is followed, to identify the alternatives.
 A limiting factor is one which stands in the way of accomplishing a desired
objective.
 There are various ways of identifying alternatives, such as decision makers past
experience, practices followed by others and using creative techniques.

4. Evaluation of Alternatives:
 Evaluation is the process of measuring the positive and negative consequences
of each alternative.
 Peter F.Drucker has suggested the following criteria to weigh the alternative
course of action;
 Degree of Risk Involved.
 Economy of efforts – Cost, time and efforts involved in each alternative.
 Timing or situation-whether the problem is urgent.
 Limitations of resources – Physical, financial and human resources
available in the organisation.
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5. Selecting an alternative:
 In this stage, the decision maker can select the best alternative.
 Optimum alternative is one which maximizes the results under given
conditions.
 The various approaches such as experience, experimentation and research and
analysis are helpful while selecting an alternative.

6 Implementation and follow-up:

 Once an alternative is selected, it is put into action in a systematic way.
 Decision should be communicated to those responsible for its implementation.
 Acceptance should be obtained from them.
 Procedure and time sequence should be established for implementation.

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TYPES OF DECISIONS

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a) Programmed and Non-Programmed Decisions:

i) Programmed decisions are other wise called routine decisions or structured

decisions.
 The reason is that these types of decisions are taken frequently and they are
repetitive in nature.
 Such decisions are generally taken by the middle or lower level managers.
 For example, making a purchase order or sanctioning of different types of
leave etc.,
 Managers know in advance what decisions he has to take in a particular set
of conditions. They need not ask anything from their superiors.
ii) Non-Programmed Decisions are otherwise called strategic decisions or
policy decisions .
 This decision is taken by the top management.
 These decisions deal with unique or unusual or non-routine problems.
 Such problems cannot be tackled in a predetermined manner.
 A careful analysis is made by the management before taking a decision.
 For example, issues related to industrial relations problem, declining market
share, starting new business etc.,
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b) Organizational and Personal Decisions:
 Organizational decisions are decisions taken by an
individual in his official capacity.
 These decisions are based on rationality, judgement
and experience.
 Examples for organisational decisions are such as
introducing a new incentive system, transferring an
employee etc.,
 Personal decisions are based on individuals will and
pleasure.

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DECISION MAKING UNDER DIFFERENT
CONDITIONS

65
 The future conditions will vary from perfect certainty
to complete uncertainty.
 Therefore, decision-making involves conditions of
perfect certainty, conditions of risk and conditions of
complete uncertainty.
 It can be divided into three types.
Namely a) Certainty, b) risk and c) Uncertainty

a) Certainty:
 The manager of the organisation knows the nature of
the work.
 The circumstance of certainty exists due to its nature.
 This makes the manager to take decision-making
perfectly time to time.
66
b) Risk
 Generally, most of the organisations makes the decision
based on the conditions of risk.

 In a situation with risks, factual information may exist,

but it may be incomplete.

 In order to improve decision making one may estimate

the objective probability of an outcome.

 All intelligent decision makers dealing with uncertainty

like to know the degree and nature of the risk they are
taking in choosing a course of action.

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c) Uncertainty
If managers of organisation do not have
information about the outcome of the decisions,
then he will be in a condition to run organisation
under uncertainty conditions.

In a situation of uncertainty, people have only a

mere database, they do not know whether or
not the data are reliable, and they are very
unsure about whether or not the situation may
change.

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PLANNING TOOLS AND TECHNIQUES

69
 In all organisations, managers plan their future course
of action based on some predictions about the future.
 It is carried out in two steps such as TECHNIQUES FOR
ASSESSING THE ENVIRONMENT and TECHNIQUES FOR
ALLOCATING BUDGETS.
 a) ENVIRONMENTAL SCANNING:
 Environmental scanning is the process of screening
large data in terms of information to expect and realise
changes in the environment.
 Competitor Intelligence: It is an environmental scanning
activity by which organisations collect information about
competitors in the form of work and actions.
 Global Scanning: It is one of the important scanning
techniques about environment which are mainly used by
managers to see the changes and trends in the global
environment through the collected global information. 70
 FORECASTING:
 Forecasting is a technique of anticipating future problems
and events.
 It involves making a detailed analysis of the past and
present to get an idea about probable events in the future.
TECHNOLOGICAL FORECASTING:
 Engineers usually are involved in planning environments
where technology is changing and it is essential that
planning is based on the best estimate of the technology
that will be available in future.
 Technological forecasting may be defined as forecasting
the future technology that may affect the operations of the
enterprise.
 It is a prediction based on confidence that certain
technological developments can occur within a specified
time period with a given level of resource allocation. 71
 b) TECHNIQUES FOR ALLOCATING RESOURCES:

 RESOURCES refer FINANCIAL, PHYSICAL, HUMAN,

INTANGIBLE and STRUCTURAL/CULTURAL assets of the
organisation.
 FINANCIAL: Debt, Equity and Retained Earnings.
 PHYSICAL: Buildings, Equipment, and Raw materials.
 HUMAN: Experience, Skills, Knowledge and Competencies.
 INTANGIBLE: Brand names, Patents, Reputation, Trademarks,
Copyrights and Data Bases.
 STRUCTURAL/CULTURAL: History, Culture, Work Systems,
Working Relationships, Trust and Policies.

 BUDGETING
 SCHEDULING
 PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT)
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