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COURSE NAME: PRINCIPLES OF MANAGEMENT

Dr.S.KUMARAN
Professor
School of Management
Hindustan Institute of Technology & Science,
Chennai - 600126
 MODULE – 2: PLANNING AND DECISION MAKING

• Nature and purpose of planning - Planning process – Objectives -

Management by objective (MBO)- Strategic Planning - Decision
Making - Decision Making Process.
 PLANNING
• Planning is deciding in advance what to do, how to do it,
when to do and who is to do. it bridges the gap from where we
are to where we want to go – Knootz O Donnel
• • Planning is deciding the best alternative among others to
perform different managerial operations in order to achieve the
predetermined goal--- Henry Fayol
• • Planning is the process of thinking through and making open
the strategy, actions, and relationship necessary to accomplish
an overall objective or purpose. --- Cleland and King
 NATURE OF PLANNING: (CHARACTERISTICS OR FACTORS
OF PLANNING)
• Planning is the primary function of management: planning is the starting point of management,
which gives meaning to all other managerial activities.
• It is goal oriented: planning helps to attain the goal is the most effecting and efficient manner.
• It is all pervasive: planning is done everywhere in all the levels all the managers and
departments.
• It is an intellectual activity: planning is a mental activity. It involves application of mind and
intelligence to attain.
• It is future oriented: planning is required to attain the future goals of an organization.
• It requires an integrated approach: planning links between the plans of different departments.
• It is a continuous process : planning is required as long as we live in the world
• Flexibility: The process of planning should be adaptable to changing environmental conditions.
 Purposes of Planning
1. To manage by objectives: All the activities of an organization are designed to achieve
certain specified objectives. However, planning makes the objectives more concrete by
focusing attention on them.
2. To offset uncertainty and change: Future is always full of uncertainties and changes.
Planning foresees the future and makes the necessary provisions for it.
3. To secure economy in operation: Planning involves, the selection of most profitable
course of action that would lead to the best result at the minimum costs.
4. To help in co-ordination: 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.
5. To make control effective: The controlling function of management relates to the
comparison of the planned performance with the actual performance. In the absence of
plans, a management will have no standards for controlling other's performance.
6. To increase organizational effectiveness: Planning enables the manager to measure
the organizational effectiveness in the context of the stated objectives and take further
actions in this direction.
 IMPORTANCE OF PLANNING (MERITS OR ADVANTAGES)
• It focuses on objective: once the objective of the business has been fixed the
next step is to prepare plan for its effective accomplishment
• • It helps to avoid no work or work pressure situations – planning helps to
distribute work evenly throughout the year.
• • It helps to avoid wastage of resources: by planning employees and executives
know beforehand what they have to do.
• • It ensures efficiency as well as effectiveness doing right things.
• • It reduces risk and uncertainty – planning is for future and future is uncertain .
But in planning the future uncertainties are anticipated and adequate provisions
are made to overcome.
• • It provides for co-ordination
• • It facilitates control planning without control is useless and control without
planning is meaningless
• • Planning provides scope for decentralization
Planning Process
 Planning Premises
• Planning Premises are assumptions of future market
conditions which become the basis for current planning
premises.
• To forecast future business conditions under which a plan has to
operate.

• Classification of Planning Premises:

• Internal and External Premises
• Tangible and Intangible Premises
• Controllable and Uncontrollable
 Classification of Planning Premises

• Internal : 5 M
• External: Govt. Polices, general economy of country,
technological trends, climate conditions
• Tangible: Machinery to purchase, capital required, quantity
standards, Production quality
• Intangible: company image, Brand loyalty, political
situation, employee morale
• Controllable: Managerial polices, rules and regulations
• Uncontrollable: Natural calamities, new inventions, wars,
strikes, trends change.
 CLASSIFICATION OF PLANS ACCORDING TO TIME
•I) long term planning: this plan is usually 5 to 15 years. It is also called as strategic
planning. It prepares the business to face the effects of long term changes
•a) Introduction of a new product
•b) entering a new market
•c) changing the technique of production
•d) increasing the scale of production
•II). Medium term planning: it is known as tactical planning, the period covered by the
medium term plan is usually 1 – 5 years.
•1. Making additions to an Existing plant.
•2. Expanding the factory
•3. appointment if additional staff to cope with the volume of work
•III). Short term planning: it is known as operational planning the period covered is less
than one year.
•purchase of raw materials
•Arranging for employee training etc
 TYPES OF PLANS

Single use plans are used only once and not over and over again
whereas, repeat use plans are used again and again. For example,
objectives, policies, strategies, rules, procedures etc., are standing plans
because once formulated, they will be used for a long period and
Repeated
repeatedly. use plans Single use plans
a) Objectives a) Programmes
b) Policies b) Budgets
c) Procedures c) Project
d) Rules d) schedules
e) Strategies
 Repeated use plans

OBJECTIVES: aims, goals, targets, missions, etc. objective is the destination point.

POLICIES A policy serves as a valuable guide to the managers when they take certain
important decisions, policies provide ready answers to question pertaining to certain
issues.
Types “(Formulated policy, Implied policy, Imposed policy and appealed policy)

PROCEDURES A procedure will lay down the manner in which certain work has to be
performed. It prescribes sequence of operations to be carried out to completer a given
task.

RULES Rules are the do`s and don’ts. They are always strictly enforced. There is always a
fine or penalty for the violation of rules. Eg. no smoking in the workplace, Wear uniform
while in the factory.

STRATEGIES Strategies means plan of action to counter the opponents attack. It is a

tactics adopted to counter competitor’s actions. Organization adopts strategy when they
are in crisis.
 SINGLE USE PLANS

• These plans are meant for a specific purpose as soon as that

purpose has been served the plan becomes useless and given
up.
• PROGRAMMES it specifies the date and time by which the
activities of the organization will be carried out.
• BUDGETS
• A budget is the financial plan of a business. It is expressed in
numerical terms. A budget is a statement of projected activities
of a business in the near future.
 MANAGEMENT BY OBJECTIVES (MBO)

• It is a technique by which the superior and the subordinate

jointly identify the objectives desired to be achieved by the
subordinate in tune with the overall results expected.
• The concept of ‘Management by Objectives’ (MBO) was first
given by Peter Drucker in 1954 (The Practice of
Management’).Management by objectives (MBO) is a
comprehensive management system based on measurable and
participative set objectives.
Criteria of a good objective

Specific: The objective must clearly state

the area of the organization that needs
improvements
Measurable: Organizational goals must be
set in a way that later they can be measured
by some kind of performance indicator.
Agreed-Upon: It’s important that the
objectives are communicated to all levels
and all levels must agree upon those
objectives. It means the objectives must be
accepted by two levels, those who created
the objectives and those who are going to
work and achieve objectives.
Realistic: Objectives must be realistic
meaning that objectives are set by keeping
the available resources in mind and what
can possibly be achieved.
Time-Bound: There must be an end period
when the performance can be measured or
Management by Objectives Process – Steps in the process of MBO

The 6 steps of the MBO process are:

Determining Organizational Goals

Determining Employees’ Objectives
Constant Monitoring Progress and
Performance
Performance Evaluation
Providing Feedback
The Performance Appraisal
 STRATEGIC PLANNING

• .

Strategic planning is a process in

which an organization's leaders
define their vision for the future and
identify their organization's goals
and objectives
 DECISION MAKING

• According to Trewatha & Newport, "Decision-making involves

the selection of a course of action from among two or more
possible alternatives in order to arrive at a solution for a given
problem".
 CHARACTERISTICS OF DECISION MAKING
• The process & selecting best alternatives
• Mental/intellectual activity
• Goal oriented process
• Based on reliable information/feedback:
• Time-consuming activity
• Pervasive process
• Performed at all level of Management
• Continues process
• Social Process
DECISION-MAKING PROCESS