Introduction to Management

UNIT TWO: THE PLANNING FUNCTION

2.1 CONCEPTS AND NEED FOR PLANNING

Every human activity is undertaken with following plan to achieve something. Since man is
gifted with the power of reasoning, he/she rarely does anything without weighing the
consequences of his action. In the field of business, the need for planning is all the greater.
This is because of ever-growing competition, frequent fluctuations in demand, discovery of
new products. Planning is an activity, which is performed before any action is taken. The
action we take is based on the plan.

Planning allows integrated, consistent and purposeful action. Thus, it is anticipatory decision
making a process and improves performance. Planning allows integrated, consistent and
purposeful action. Planning is the primary function of management. The chief function of
management is to attain the objectives of the enterprise. For this, it is to plan not only in the
beginning but throughout the operations. Planning involves deciding a best course of action
from among a number of alternatives which would help the enterprise to achieve its objectives
most expeditiously and economically.

What is planning?
Planning is anticipating the future events and determining how to meet the demands of such
event. Planning answers six basic questions in regard to any intended activity- what, when,
where, who, how, and how much.
What- refers to goal or objectives
When- refers to question of timing
Where- refers to place where planning ends?
Who- refers to specific people will perform the plan
How- refers to method for reaching
How much- refers to the expenditure of resources
Planning encompasses defining the organization’s objectives or goals, establishing an
overall strategy, development of schedules and developing a comprehensive hierarchy of
activities to integrate and coordinate. Planning identifies the goal and alternatives, it maps
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out courses of action that will commit individual, departments and the entire organization and
also it maps out courses of action that will commit individual, these ends after setting in
motion the following processes.
 Determination of what resources will be needed
 Identification of the number type of personnel the organization will need
 Development of the foundation for the organizational environment in which work is to
be accomplished.
 Determination of standard.
Planning involves selecting missions and objectives and the actions to achieve them; it
requires decision making, i.e., choosing future course of action from among alternatives.
Planning is determining in advance what is to be accomplished and how it is to be
accomplished. Because planning paves the way for all downstream management functions, by
serving as a bridge between the present & the future, it is regarded as the primary function of
management.

2.2 CHARACTERISTICS OF PLANNING

The Primacy of planning

The primacy of planning means that the function of planning precedes all other managerial
functions. Since the other management functions are performed to facilitate the achievement
of goals that are set in facilitate the achievement of goals that are set in planning process,
planning logically precedes all other managerial functions.
Although in practice all the managerial functions inter-match as a single system of action,
planning is unique in that it establishes the objective necessary for all group effort. And, of
course, all the other managerial functions must be planned if they are to be effective. That is,
the managerial functions are inseparable; especially, planning and controlling are often
referred as the Siamese twins. This is because, controlling, by definition, is the comparison of
actual performance with the planned. It is the planned performance, which is controlled.

Pervasiveness of planning

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Planning is pervasive or universal in the sense that; it is the function of all managers
regardless of the level they belong, the time spent on planning the significance, the
characteristic, etc. Planning exists in all organizations regardless of their type and size.
Contribution to purpose and objective
This implies that the purpose of any plan and all its supportive & derivative plans is to
facilitate the accomplishment and the achievement of the purposes and the objectives of the
organization. Managerial planning seeks to achieve a consistent, coordinated structure of
operations focused on desired ends. Without planning, actions much become merely random
activity, producing nothing but chaos.
Planning is directed towards efficiency
The efficiency of a plan is measured by its contribution to purpose and objectives, offset by
the costs and other unsought factors required to formulate and operate it. Plans are efficient if
they achieve their purpose at a reasonable cost, when cost is measured not only in terms of
time, money, or production but also in the degree of individual and group satisfaction.
It concerns future activity
Since planning is deciding currently about the future, it involves forecasting and decision
making. The essence of planning is looking ahead and is concerned with deciding in the
present what is to be done in the future.
It has dynamic aspects (it is flexible and continuous)
A manager plans on the basis of some assumptions, which may not come true in the future.
Therefore, he had to go on revising, modifying and adjusting plans in the light of the
prevailing realities/circumstances. Thus, planning is not only the primary function of
management, but it is also a continuous function of management. Planning is flexible as it is
based on future conditions which are always dynamic. In sum, every business plan must have
the following characteristics: objectivity, futurity, flexibility, stability, comprehensiveness,
clarity and simplicity.

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2.3 IMPORTANCE/PURPOSE OF PLANNING

To offset uncertainty:- Future is always full of uncertainties and charges which make
planning a necessity because planning foresees the future and makes provisions for it thereby
giving an added strength to the organization for continuous growth and steady prosperity.
To focus attention on objectives:- Because, all planning efforts are directed towards
achieving enterprise objectives, the very act of planning focuses attention on these objectives.
Well considered overall plans unify interdepartmental activities.
To gain economical operation: Planning minimizes costs because of its emphasis on
efficient operation and consistency. It substitutes joint directed effort for uncoordinated
piecemeal activity, even flow of work for uneven flow, and deliberate decisions for snap
judgments.
To facilitate control:- Planning and controlling are inseparable, and commonly referred to as
the Siamese twins. This is because unplanned action cannot be controlled, for control involves
keeping activities on course by correcting deviations from plans. Any attempt to control
without a plan would be meaningless, since there is no way for people whether they are going
where they want to go (the task of control), unless they first know where they want to go (the
task of planning), plans thus furnish the standards of control. Generally, a coordinated sense
of action, managerial perspective, improved decision making, increased efficiency, improve
control and performance are also benefits of planning.

2.4 TYPES OF PLANS

1) Duration /Time Dimension/

Some plans are in effect for short periods, where as others stretch decades into the future. An
important component of any plan is the planning horizon: i.e., the length of time the plan
specifies for activities to be implemented / the time that elapses between the formulation and
the execution of a planned activity. Hence, there are three planning horizons that can be
identified for classifying plans.
a) Short range plans:- a plan for a year or less one year.

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Example: Annual plan of sales, revenue, operating expenses budget.

b) Intermediate range plans:- plan between a year and five years.
Example: Development of new products, modernization of facilities.
c) Long range plans:- Plan for five or more years.
Example: Long term leases on production or ware house facilities

2) Scope Dimension
Planning can be classified in to three based on the scope or breadth of activities they
represent:
a) Strategic Plans: These plans are comprehensive in scope and reflect long-term needs and
direction of the organization. Strategic plans/top management plans include the
development of overall company objectives. They are primarily concerned with solving
long-term problems associated with external, environmental influences. They establish the
mission of the organization. Strategic planning is a process that involves the assessment of
market conditions, customer needs, competitive strengths and weakness; sociopolitical,
legal and economic conditions; technological developments and the availability of
resources that lead to the specific opportunities or threats facing the organization.
Strategic plans include:-Mission/purpose, Objectives, and Strategies.
b) Tactical plans: These are plans used to implement strategic plans. These plans are more
limited in scope and address those activities and resources required to implement strategic
plans. These tactical plans deal more with the allocation of resources and scheduling of
actual work activities than with the selection of strategies.
c) Operational Plans: is the most specific and detailed plans which are concerned with the
day-to-day, week-to-week activities of the organization. For instance; production
schedules and sales plan

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3) Use Dimension
Based on their use these plans can be classified as follow:

a) Standing Plans: are used to guide activities that occur over a period of time. These are
plans that are designed to be used again and again. Standing plans exist in the form of:
Policies: these are standing plans in that they are general statements or understandings which
guide or channel thinking in decision making. Policies define an area with in which a decision
is to be made and ensure that the decision will be consistent with, and contribute to, an
objective.
Procedures: are standing plans that establish a required method of handling future activities.
They are guides to action rather than thinking. It describes a series of action to be taken in a
given situation.
Rules and Regulations:- are plans that describe exactly how one particular situation is to be
handled. They are statements of actions that must be taken or not taken. They serve as a
restricting device.
Purposes or mission: - identifies the basic function of task of an organization.
Objectives or goals: - is the end towards which activity is aimed.
Strategies:- are ways, system and means to achieve the established objectives. It is important
to notice that every objective must have at least one strategy;
Methods:- is more detail procedures. It tells exactly hove this particular step is to be
Performed.

b) Single Use Plans: - single use plans are plans that are used once, and then discarded. This
type of plans is designed to meet the needs of a unique or single situation; such as for special
project or task. These plans are formulated to achieve a specific goal & usually within a
shorter period of time. Non- repetitive unique situations call for the formulation of single use
plans. They are also called one-time plans. Under these plans, we have:-
Program (project): are a complex of goals, policies, procedures, rules, task assignments, steps
to be taken, resources to be employed and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets. It is a comprehensive plan that

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includes future use of different resources in an integrated pattern and establishes a sequence
of required actions, time schedules for each in order to achieve stated objectives.
Budget: are statements of expected results or resources set aside for specific activities
expressed in numerical or quantitative terms. They are primary devices to control organization
activities and are thus important components of programs and projects.

2.6 THE PLANNING PROCESS

The following are the steps that serve as a general model, which can be applied, with some
modification, to the planning processes of any organization (Whether it is large or small,
profit making or not-for-profit).

1. Identifying and defining the real problem

An awareness of opportunities in the external environment as well as within the organization
is the real starting point for planning. We should take a preliminary look at possible future
opportunities and see them clearly and completely, know where we stand in the light of our
strengths and weakness, understand what problems we wish to solve and why, and know what
we expect to gain. Our setting of realistic objectives depends on this awareness planning
requires realistic diagnosis of the opportunity situation.
2. Establish clear-cut objectives
The next step in the planning process is to set objectives to the entire organization and to each
work unit, not only for long-term but also for the short range.
Objectives specify the expected results and indicate the end point of what is to be done, where
the primary emphasis is to be placed, and what is to be accomplished by the net work of
strategies, policies, procedures, rules, budgets, and programs.
3. Establishing the planning Premise
Premises are assumptions providing a background against which estimated events affecting
the plan will take place. They are assumptions about the environment in which the plan is to
be carried out knowledge of the organizations goods and existing condition provides a
framework for defining which aspects of the environment will have the greatest influence on
the organizations ability to achieve its objectives.

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The purpose of environmental analysis is to identify ways to respond to changes in economic,

technological, social /cultural and political/ and legal environments having indirect influence
to the organizations plans, and for changes direct influences which have extended on the
organizations market, industry, suppliers, competitors, or key resources and skills. Here, great
consideration should be made to the assumptions regarding the future. Therefore, the
assumption and the constraints under which plans are to operate should be clearly brought
about/established.
4. Identify Alternative Courses of Action
The fourth step in planning process is to find alternative course of action. We may have a
number of alternatives and finding alternatives is not common problem, but reducing the
number of alternatives so that selecting the most promising may be analyzed which requires
the assessment of their probable consequences. Thus, the planner must usually make
preliminary examination to discover the most fruitful possibilities.
5. Evaluating Alternative Courses
After identifying the alternatives, the next logical step is to evaluate each and every
alternative by weighing them against in the light of the premises and goals. One course may
appear to be profitable but require a large each out lay with a slow pay back; another may
look less profitable but involves less risk; still another may better suit the company's long
range objectives but it is difficult to adapt it, etc. Therefore, make an adjustment for the
forecast plan if any; see if the cost, speed, and quality requirements are satisfied and if
mechanization expedites the work for the achievement of desired objectives in terms of each
possible course of action.
6. Selecting a course of action /best Alternative
After evaluating each alternative based in the goals and premises, the next step is to decide or
select the best course of action that will help efficiently achieve the organization objectives.
When we decide, we have to make sure that the plan possesses flexibility to adjust to varying
conditions, acceptance of the plan by operating personnel as well as the existing capacity of
the firm and need for new equipment, space personnel, training and supervision.

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7. Formulating Derivative Plans

An arrangement of detailed sequence and timing should be made for the proposed plan. At the
point when a decision is made, planning is seldom complete and certain arrangements should
be made that support the basic plan of action chosen, that is, identification of the derivative
plans that support the major plan of action.
8. Numberizing Plans by Budgeting
After decisions are made and plans are set, the final step is to give them meaning that is to
numberize plans by converting them to budgets, this helps to establish verifiable targets of
achievement, to facilitate control.

2.7 ORGANIZATIONAL OBJECTIVES

The setting of organizational objectives begins with the definition of mission. A mission is the
organization's reason for existence. It describes the organization's values, aspirations and
reason for being. A well-defined mission is the basis for development of all subsequent
objectives and plans. A mission statement - mission in writing - is used to guide managers,
work units, and individual employees throughout the organization. Once the organization's
mission is articulated managers can begin developing specific mission related objectives at
every managerial level to reflect the responsibilities applicable to each.

What is an Objective?
An objective is an end result upon which the existence of an organization depends. It is the
desired outcome organizations hope to attain eventually. An objective provides a standard for
the measurement of success. An objective helps determine technologies required and set the
basis for specialization of effort, authority pattern, communication and decision net- works
and other structural relationships. Managers are directly concerned with organizational
objectives. Top managers generally establish broad organizational objectives that help, relate
the organization to its environment. Managers, then, translate these broad objectives into
operational objectives and provide means of control to measure the extent of accomplishment.
They must continually deal with goal conflicts and find a means of satisfying the interests of
many internal and external individuals and groups.

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Classification of Objectives
Objectives may be classified as strategic, tactical and operational or long-term, intermediate
and short-term. These classifications are made based on the levels of decision making
authority and time the objectives cover.
1) Based on Hierarchy
Strategic Objectives: Strategic objectives are broad statements describing where the
organization wants to be in the future. They pertain to the organization as a whole rather than
a specific department or division. They focus on such issues as profitability, market
positioning and managerial performance and attitude and public responsibility. Example:-to
achieve a 10% net profit. The top-level management has the responsibility and authority to
make strategic objectives.
Tactical Objectives: Tactical objectives are set by the middle management level. These
objectives define the outcomes that major departments and divisions must achieve in order for
the organization to reach overall objectives. This tactical objective is one part of achieving the
strategic objective and of communicating effectively with clients and employees.
Operational Objectives: Operational objectives are specified and measurable results expected
from departments, first-level managers, work groups and individuals within an organization.
Examples:- Setting daily, weekly and monthly sales targets for each product category.

2) Based on Time Frame

Time frame objectives imply that an organization's activities are guided by different
objectives depending on the duration of the action being planned.
Long-term Objectives:- These objectives extend up to 5 years. They must be accomplished to
ensure the long-term survival of the organization.
Intermediate Objectives: These objectives cover a time period between the short-term
objectives and long-term objectives- probably 1-3 years.
Short-term Objectives: These objectives can be accomplished in less than a year.

2.7.1 Characteristics of Sound Objectives

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Specific and Measurable

Not all objectives can be expressed in numeric terms, but they should be quantified when
possible. Specific outcomes are easier to focus on than general ones, and performance can be
more easily measurable when the task is defined. Example: increasing profit by 5%.
Achievable
Objectives should be challenging but not unreasonably difficult, i, e, objectives should be
challenging but attainable, given the resources and skills available. The best objectives require
people to search their abilities. On the other hand, when objectives are unrealistic, they set
employees up for failure and lead to decreasing employee morale causing de-motivation.
However, if objectives are too easy, employees may not feel motivated.
Relevant
Cover Key Result Areas
Objectives cannot be set for every aspect of employee behavior or organizational
performance; if they were, their sheer number would render them meaningless. Instead,
managers should identify a few key result areas. Key result areas are those activities that
contribute most to company performance. Example: focus on key results-sales, profits,
production, or quality-that affect overall performance.
Defined Time Period
Objectives should specify the time period over which they will be achieved. A time period is a
deadline specifying the date on which objective attainment will be measured. The period
should be realistic and productive. Short-term objectives should complement long-term
objectives. For example strategic sales objectives could be established on a three-year time
horizon with a 100, 000 targets in year one, 150,000 in year two and 200,000 in year three.

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UNIT THREE: DECISION MAKING

3.1 MEANING OF DECISION MAKING

Decision Making is defined as the process of selecting or choosing based on some criteria,
the best course of action from a number alternative. Because managers are continually
confronted with opportunities and problems, they must constantly analyze the effect of
different decisions on their organizations and select the alternative that will move the firm
toward its stated objectives. Decision making is a skill required in planning which is
mainly making a choice among the alternative course of action to be implemented in
future.

There are three decision making situations:

1. Decisions under certainty:- decisions made in which the external conditions are
identified and very predictable /whenever there is complete data & information/
2. Decisions under risk:- those decisions in which probabilities can be assigned to the
expected outcomes of each alternative.
3. Decisions under uncertainty:- it is a case where neither there is complete data not
probabilities can be assigned to the surrounding conditions. Some conditions that are
uncontrollable by management include competition, government regulations,
technological advances, the overall economy, and the social and cultural tendencies of
society.

1.2. RATIONAL DECISION MAKING PROCESS

The steps in decision making process include the following:

1. Ascertain the need for a decision/Identify the problem
The decision making process begins by determining a problem exists; that is, there is an
unsatisfactory condition.
2. Establish decision criteria
Once the need for a decision has been determined, there comes a need to establish decision
criteria which requires identifying those characteristics that are important in making the
decision.
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3. Allocate weights to criteria

The identified criteria should be weighted based on their importance and arranged in
priority. This is because some are obviously more important than others and we need to
weight each criterion to reflect its importance in the decision.
4. Develop Alternatives
This involves developing a list of the alternative that may be viable in dealing with the
stated problem.
5. Evaluate Alternatives
Once the alternatives are enumerated the decision maker must critically evaluate each one
and identify the strong and weak points when compared against the criteria and the weights
established. In evaluating each alternative, we not only consider things that can be
measured in numerical terms such as time and various types of fixed & operating costs, but
also consider intangible or qualitative factors such as the quality of labor relations, the risk
of technological change or the international political climate.
6. Select the Best Alternative
After we evaluate the alternatives, the next logical step is to select the best alternative that
suits to solve our decision problem. In selecting the best alternative, factors such as risk,
economy of efforts, timing and limiting factors should be considered adequately.
7. Putting Decision In to Action
After selecting the best alternative, we implement or put it into action. This requires
communication of decisions to subordinates, getting acceptance of the decisions, and
getting support and cooperation for converting the decision in to effective action. The
decision should be effective at proper time and in proper way to make the action effective
to achieve desired objectives.
8. Following up Decisions
Having implemented the decision, the manager should compare the results of that course of
action with the desired outcome, if necessary, take corrective action. Since decisions are
made based on forecasts about the future, the best decision that we select may not suit
absolutely to achieve our objectives. Therefore, managers should adjust, modify or take
any other correctives if necessary.

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3.3. TYPES OF DECISIONS

Several authors believe that there are two types of decisions: programmed and non-
programmed decisions.
Programmed decisions: are the kinds that managers face time and again. These decisions
are programmable because of a specific procedure can be worked out to resolve them
based on experience in similar situations. Once a standard procedure has been established,
it can be used to treat all like situations. They usually involve an organization's every day
operational and administrative activities. They are primarily found at the middle and lower
levels of management. Data used in making a programmed decision usually are complete
and well defined. Participants know the details and agree on how to resolve the problem.
Non-programmed Decisions: are used to solve nonrecurring problems. No well-
established procedure exists for handling them, primarily because managers do not have
experience to draw upon. In contrast to programmed decisions, available data are usually
incomplete. Non programmable decisions are commonly found at the middle and top levels
of management and often are related to an organization's policy-making activities such as
whether to add a product to the existing product line, to reorganize the company, or to
acquire another firm, are examples.

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