POM Unit 2 Full

Planning
 Planning involves selecting mission and objectives and

the actions to achieve them,
 it requires decision making, that is, choosing among

alternative future courses of action.
 That is, choosing a goal and developing a strategy to

achieve that goal.
 Planning bridges the gap from where we are to where

we want to go.
Planning…
 Planning and control are inseparable, that is, the
Siamese twins of management.
 Any attempt to control with out plans is meaningless.
 Controlling means comparing plans with results,

based on that corrective actions or
 new plans will be formed or
 go with the current plan if no deviations.

Planning…
 Planning is that it encourages the development of task
strategies.
 That is, planning not only encourages people to work

hard for extended periods and to engage in behaviors
directly related to goal accomplishment,
 it also encourages them to think of better ways to do

their jobs.
 Planning has been proven to work for both

companies and individuals.
The Purpose of Planning
 Planning is essential in modern business.
 Planning affects performance.
 Planning puts focus on objectives.
 Planning is necessary to facilitate control.
 Planning helps in decision making.

Benefits of Planning
 Focuses attention on Objectives
 Ensures Economical Operation
 Reduce uncertainty
 Facilitates control
 Encourages innovation and creativity
 Improves motivation
 Improves competitive strength
 Achieves better coordination.
Limitations of Planning
 Lack of reliable data
 Lack of initiative
 Costly process
 Rigidity in organizational working
 Non acceptability of change
 External limitations
 Psychological barriers.
Measures to overcome limitations
of Planning
1. Setting clear cut objectives
2. Management information system
3. Careful premising
4. Business forecasting
5. Dynamic management
6. Flexibility
7. Availability of resources
8. Cost benefit analysis.
Types of Plans
Plans can be classified as:
 Purpose or mission
 Objectives or goals
 Strategies
 Policies
 Procedures
 Rules
 Programs, and
 Budgets.
Types of Plans…
Purpose and Missions:
 It identifies the basic function or task of an enterprise

or agency or any part of it.
 For example, the purpose of a business generally is

the production and distribution goods and services.
 The purpose of a University is teaching, research, and

providing services to the community.
Types of Plans…
Objectives or Goals:
 Are the ends toward which activity is aimed.
 They represent not only the end point of planning but
also the end toward which organizing, staffing, leading,
and controlling are aimed.

Types of Plans…
Strategies:
 It is defined as the determination of the basic long
term objectives of an enterprise and
 the adoption of courses of action and allocation of
resources necessary to achieve these goals.

Types of Plans…
 It refers to the determination of the purpose (or
mission) and the basic long term objectives of an
enterprise, and
 the adoption of courses of action and allocation of

resources necessary to achieve these aims.
 That is the direction in which human and material

resources will be applied in order to increase the
chance of achieving selected objectives.
Types of Plans…
Policies:
 Policies define an area within which a decision is to

be made and
 ensure that the decision will be consistent with, and

contribute to, an objective.
 Policies help decide issues before they become

problems, thus permitting managers to delegate
authority and maintain control over what their
subordinates do.
Types of Plans…
 Policies are general statements or understandings
that guide managers thinking in decision making.
 They ensure that decisions fall within certain

boundaries.
 They usually do not require action but are intended

to guide managers in their commitment to the
decision they ultimately take.
Types of Plans…
Procedures:
 Are plans that establish a required method of

handling future activities.
 They are guides to action, rather than to thinking, and
 they detail the exact manner in which certain

activities must be accomplished.
 Eg: a company policy may grant employees vacations,

Types of Plans…
 Procedures established to implement this policy will
provide for scheduling vacations to avoid disruption
of work,
 setting methods and rates of vacation pay,
 maintaining records to assure each employee of a

vacation, and
 spelling out the means for applying for a vacation.

Types of Plans…
Rules:
 It spell out specific required actions or nonactions,

allowing no discrimination.
 The essence of a rule is that it reflects a managerial

decision that some certain action must or must not
be taken.
 Rules allow no discrimination in their application.

Types of Plans…
Programs:
 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, and they need to be supported by budgets.
Types of Plans…
Budgets:
 The budget is the fundamental planning instrument in

many companies.
 That is, it may deal with operations, as the operational

expense budget does, or
 it may reflect capital outlays, as the capital

expenditure budget does, or
 it may show cash flow, as the cash budget does.

Steps in Planning
Being aware of Opportunity
In light of –
The market
Competition
What customers want
1 Our Strength
Our Weakness
Setting objectives or Goals

Where we want to be and
2 what we want to accomplish and
when
Considering planning Premises

In what environment
3 – Internal or external –
will our plans operate?
Steps in Planning…
Identifying Alternatives
4 What are the most promising alternatives to accomplish our
objectives?
Comparing alternatives in Light of Goals Sought

5 Which alternative will give us the best chance of meeting our
goals at the lowest cost and highest profit?
Choosing an Alternative
6 Selecting the best course of action that we will pursue
Steps in Planning…
Formulating Supporting Plans

Such as plans to:
7 Buy equipment
Buy materials
Hire and train workers
Develop a new product
Numberizing Plans by Making Budgets

Develop such budgets as:
8 Volume and price of sales
Operating expenses necessary for plans
Expenditures for capital equipment
Planning From Top to Bottom
 Planning works better when the goals and action
plans at the bottom and middle of the organization
support the goals and action plans at the top of the
organization.
 That is, panning works best when everybody pulls in

the same direction.
Planning From Top to Bottom
Planning From Top to Bottom…
 Top management is responsible for developing
long term strategic plans,
 that make clear how the company will serve

customers and position itself against competitors in
the next two to five years.
 Strategic planning begins with the creation of an

organizational purpose.
 Purpose statement, which is often referred to as an
organizational mission or vision, is a statement of a
company’s purpose or reason for existing.
 Purpose statements should be brief, not more than

two sentences.
 They should also be long lasting, inspirational, clear,

and consistent with widely shared company beliefs
and values.
 A clear mission can also help employees prioritize
better and work more efficiently.
 The strategic objective, which flows from the

purpose, is a more specific goal that unifies company
wide efforts,
 stretches and challenges the organization, and

possesses a finish line and a time frame.
 Once the strategic objective has been accomplished, a
new one should be chosen.
 However, the new strategic objective must grow out

of the organization’s purpose, which does not change
significantly over time.
 Middle management is responsible for developing

and carrying out tactical plans to accomplish the
organization’s strategic objective.
 Tactical plans specify how a company will use
resources, budgets, and people to accomplish specific
goals related to its strategic objective for the next
two years.
 Whereas strategic plans and objectives are used to

focus company efforts over the next two to five
years,
 tactical plans and objectives are used to direct

behavior, efforts, and attention over the next six
months to two years.
 Management by objectives (MBO) was first proposed
by Peter Drucker can be defined as a management
model that attempts to devise a common objective
that is acceptable for both the management and
employees, which will improve the overall
performance of the organization.
 That is, it is often used to develop and carry out

tactical plans.
 It is a four step process in which managers and their

employees:
 (1) discuss possible goals;
 (2) collectively select goals that are challenging,

attainable, and consistent with the company’s overall
goals;
 (3) jointly develop tactical plans that lead to the

accomplishment of tactical goals and objectives; and
 (4) meet regularly to review progress toward

accomplishment of those goals.
The benefits of MBO are:
 Motivation: Due to the participative goal setting

employees are better empowered. This raises the job
satisfaction and commitment.
 Clarity of objectives: Due to the participative goal

setting, the goals are better understood across the
organization.
 Better communication: Reviews and constant
interactions with managers and employees aids in a
better relationship between them and helps
coordination.
 Drive to achieve: As goals are set by them for them,

they will have more urge to achieve the objectives.
 Objectives can be set at all levels and for all functions.

Limitations of MBO are:
 The product quality can be adversely affected as

employees will try to achieve the production targets
ignoring the product quality.
 In addition, the process may be time consuming, that

is,
 need a lot of meetings and too many reports to be

prepared, which add to the responsibilities and
burden the managers.
 Lower level managers are responsible for
developing and carrying out operational plans,
 which are the day to day plans for producing or

delivering the organization’s products and services.
 Operational plans direct the behavior, efforts, and

priorities of operative employees for periods ranging
from thirty days to six months.
 There are three kinds of operational plans: single use

plans, standing plans, and budgets.
 Unlike single use plans that are created, carried out
once, and then never used again,
 standing plans save managers time because after the

plans are created, they can be used repeatedly to
handle frequently recurring events.
 There are three kinds of standing plans: policies,

procedures, and rules and regulations.
 Policies indicate the general course of action that
company managers should take in response to a
particular event or situation.
 Procedures are more specific than policies because
they indicate the series of steps that should be taken
in response to a particular event.

 Rules and regulations are even more specific than
procedures because they specify what must happen
or not happen.
 Budgeting is quantitative planning because it forces
managers to decide how to allocate available money
to best accomplish company goals.

Management by Exception (MBE)
 It is a practice where only significant deviations from
a budget or plan are brought to the attention of
management.
 The idea behind it is that management's attention will

be focused only on those areas in need of action.
 When they are notified of variance, managers can
concentrate on that specific issue and let staff handle
everything else.
 If nothing is brought up, then management can
assume everything is going according to plan.
Management by Exception (MBE)…
The process requires few objectives, that is
 setting the objectives or norms,
 assessing the performance of the chosen objectives,
 analyzing the possible deviations, and
 solving the exceptions/deviations.

 The main advantage of management by exception is
that problematic issues are identified rapidly and
 managers is able to use their time and energy more

wisely for important issues rather than for less
important ones that could provoke delays in their
daily operations.
 As managers take fewer decisions, employees have

more responsibility, which increases their motivation.
 This concept is based on the existence of a budget
against which actual results are compared.
 If the budget was not well formulated, there may be a

large number of variances, many of which are
irrelevant, and
 which will waste the time of anyone investigating

them.
 The concept requires the use of financial analysts
who prepare variance summaries and present this
information to management.
 Thus, an extra layer of corporate overhead is

required to make the concept function properly.
 Also, an incompetent analyst might not recognize a

potentially serious issue, and will not bring it to the
attention of management.
 The concept assumes that only managers can correct
variances.
 If a business were instead structured so that front

line employees could deal with most variances as
soon as they arise,
 there would be little need for management by

exception.
Forecasting
 Forecasting is the process of predicting changing
conditions and future events that may significantly
affect the business of an organization.
 It is important to both planning and decision making.
 It is used in a variety of areas such as, production

planning, budgeting, strategic planning, sales analysis,
inventory control, marketing planning, logistics
planning and purchasing.
Decision Making
 It is the process of choosing a solution from available
alternatives.
 The problem can be large or small but it is the

manager who has to decide what action to take.
 So, the quality of managers decisions is the bench

mark of their effectiveness and value to the
organization.
 That is, decision making is a typical form of planning.

Decision Making…
Every decision making process consists of four
interrelated phases,
 explorative (searching for decision occasions),
 Speculative/predict (identifying the factors affecting

the decision problem),
 evaluative (analysis and weighing alternative courses

of action and
 selective (choice of the best course of action).

Characteristics of Decision Making
 Decision making is based on rational thinking.
 That is, the manager tries to foresee various possible

effects of a decision before deciding a particular one.
 It is a process of selecting the best from among

alternatives available.
 The selection of best alternative will be made only

when pros and cons of all of them are discussed and
evaluated.
Characteristics of Decision Making…
 Decision making is the final product because it is
preceded by discussions and deliberations.
 Decision making is aimed to achieve organizational

goals.
 It also involves certain commitment from the

managers.
 That is the manager is committed to every decision

he/she takes.
Nature of Decision Making
 Decision making is an intellectual process, which
involves imagination, reasoning, evaluation and
judgement.
 It is a selection process in which best or most

suitable course of action is finalized from among
several available alternatives.
 Decisions are made to attain certain goals.

Nature of Decision Making…
 It is a focal point at which plans, policies, objectives,
procedures, are translated into concrete actions.
 It is a continuous process persuading all

organizational activity at all levels.
 It involves commitment of resources, direction or

reputation of the enterprise.
 The effectiveness of decision making process is

enhanced by participation.
Elements of Decision Making
 The decision maker.
 The decision problem or goal.
 Attitudes, values and personal goals of the decision

maker.
 Assumption with regard to future events and things.
 The environment in which decision is to be made.

Elements of Decision Making…
 Available known alternatives and their estimated or
imagined outcomes.
 Analytical results in the whole perspective.
 The constraints.
 Timing of decision.
 Proper communication of decision for its effective

execution.
Types of Decision Making
Individual and Group Decisions:
 A decision taken by one person is known as individual

decision.
 In small organizations normally the owner takes most

of the decisions.
 But in big organizations the routine or simple

decisions may be left to a particular manager.
 He/she will take decisions based on the information

they receive continuously.
Types of Decision Making…
 When decisions are taken by two or more persons,
these are known as group decisions.
 Strategic or other important decisions are taken by

groups instead of individuals because of risk involved,
and
 will have long term implications for the organization.
 Eg: Board of Directors in a company.

Programmed and Non Programmed Decisions:
 Programmed decision is one that is routine and

repetitive.
 Rules and policies are established well in advance to

solve recurring problems quickly.
 They are generally made by lower level personnel

following established rules and procedures.
 Eg: a procedure for admitting new patients in

hospitals.
 Non programmed decisions deal with unusual
problems.
 That is, problems crop up suddenly and there is no

established procedure or formula to resolve them.
 Since the decisions often involve long term

consequences for the organization, they are made by
higher level managers.
 Eg: to locate a new company warehouse.

Strategic and Administrative Decisions:
 Strategic decision making is a top management

responsibility.
 These are key important and most vital decisions

affecting the entire organization.
 They are future oriented with long term implications.

 Administrative decisions deal with operational issues.
 That is making sure that several aspects of strategic
decisions implemented smoothly at various levels in
an organization.
 They are mostly handled by middle level managers.

Rational Decision Making Process
 Rational decision making is a systematic process in
which managers,
 define problems,
 evaluate alternatives, and
 choose optimal solutions that provide maximum

benefits to their organizations.
Rational Decision Making Process…
Define the Problem:
 The first step in decision making is identifying and

defining the problem.
 A problem exists when there is a gap between a

desired state (what is wanted) and
 an existing state (the situation you are actually facing).

 The presence of a gap between an existing state and a
desired state is no guarantee that managers will make
decisions to solve problems.
 Three things must occur for this to happen.
 First, managers have to be aware of the gap.
 They have to know there is a problem before they

can begin solving it.
 Second, being aware of a problem isn’t enough to
begin the decision making process.
 Managers have to be motivated to reduce the gap

between a desired and an existing state.
 Finally, it’s not enough to be aware of a problem and

be motivated to solve it.
 Managers must also have the knowledge, skills,

abilities, and resources to fix the problem.
Identify Decision Criteria:
 Decision criteria are the standards used to guide
judgments and decisions.
 Typically, the more criteria a potential solution meets,
the better that solution will be.

Weigh the Criteria:
 After identifying decision criteria, the next step is

deciding which criteria are more or less important.
 Although there are numerous mathematical models

for weighing decision criteria,
 all require the decision maker to provide an initial

ranking of the criteria.
 Absolute comparisons method, in which each
criterion is compared with a standard or is ranked on
its own merits.
 Another method uses relative comparisons, in which
each criterion is compared directly with every other
criterion.
Generate Alternative Courses of Action:
 After identifying and weighting the criteria that will

guide the decision making process,
 the next step is to identify possible courses of action

that could solve the problem.
 In general, at this step, the idea is to generate as many

alternatives as possible.
Evaluate Each Alternative:
 The next step is to systematically evaluate each

alternative against each criterion.
 Because of the amount of information that must be

collected, this step can take much longer and
 be much more expensive than other steps in the

decision making process.
 No matter how you gather the information, once you

have it,
 the key is to use that information systematically to
evaluate each alternative against each criterion.
Compute the Optimal Decision:
 The final step in the decision making process is to

compute the optimal/best decision by determining
the optimal value of each alternative.
 This is done by multiplying the rating for each

criterion and then summing those scores for each
alternative course of action that you generated.
Limits to Rational Decision Making:
 To make completely rational decisions, managers would
have to operate in a perfect world with no real world
constraints.
 Of course, it never actually works like that in the real
world.
 Managers face time and money constraints.
 They often don’t have time to make extensive lists of
decision criteria.
 And they often don’t have the resources to test all
possible solutions against all possible criteria.
Behavioural Aspects of
Decision Making
 It is important for every manager to understand the
behavioral aspects of decision making.That is,
Rationality:
 Decision making is always a mental process.
 The Human brain has the ability to learn, grasp, think,

analyze, create, evaluate and relate complex facts and
variables which leads to rationality in decision making.
Behavioural Aspects of
Decision Making…
Commitment:
 Decisions are such that their outcome will be visible
only at the end and
 hence the decision maker must stay on the decision
and he or she needs to have the full commitment till
the end.
Ethics:
 While taking decisions, managers need to make sure
that attention must be paid to ethical considerations
carefully and deliberately.
References
 Koontz, H., & Weihrich, H. Essentials of Management, McGraw Hill Publishers.
 Williams. Management, (International edition) South-western Cengage Learning.
 Stoner, Freeman, Gilbert Jr. (2014). Management (6th edition), New Delhi: Prentice
Hall India.
 Daft, R. L. (2009). Principles of Management (1st edition), Cengage Learning.
 Gupta, R.S., Sharma, B.D., & Bhalla. N.S. (2011). Principles & Practices of Management
(11th edition). New Delhi: Kalyani Publishers.
 John R. Schermerhorn. Management,Wiley-India
 L M Prasad, (2007). Principles and Practices of Management, Himalaya Publishing

House
 Rao, P.S. (2009). Principles of Management, Himalaya Publishing House.
 Moshal, B.S. Principles of Management,Ane Books.

Thank You…
Dr. Ajai Krishnan G

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Planning

 Planning involves selecting mission and objectives and

 it requires decision making, that is, choosing among

 That is, choosing a goal and developing a strategy to

 Planning bridges the gap from where we are to where

 Any attempt to control with out plans is meaningless.

 Controlling means comparing plans with results,

 new plans will be formed or

 go with the current plan if no deviations.

 That is, planning not only encourages people to work

 it also encourages them to think of better ways to do

 Planning has been proven to work for both

 Planning affects performance.

 Planning puts focus on objectives.

 Planning is necessary to facilitate control.

 Planning helps in decision making.

 Rigidity in organizational working

 Non acceptability of change

 It identifies the basic function or task of an enterprise

 For example, the purpose of a business generally is

 The purpose of a University is teaching, research, and

 Are the ends toward which activity is aimed.

 They represent not only the end point of planning but

also the end toward which organizing, staffing, leading,

and controlling are aimed.

 It is defined as the determination of the basic long

term objectives of an enterprise and

 the adoption of courses of action and allocation of

resources necessary to achieve these goals.

 the adoption of courses of action and allocation of

 That is the direction in which human and material

 Policies define an area within which a decision is to

 ensure that the decision will be consistent with, and

 Policies help decide issues before they become

 They ensure that decisions fall within certain

 They usually do not require action but are intended

 Are plans that establish a required method of

 They are guides to action, rather than to thinking, and

 they detail the exact manner in which certain

 Eg: a company policy may grant employees vacations,

 setting methods and rates of vacation pay,

 maintaining records to assure each employee of a

 spelling out the means for applying for a vacation.

 It spell out specific required actions or nonactions,

 The essence of a rule is that it reflects a managerial

 Rules allow no discrimination in their application.

 Are a complex of goals, policies, procedures, rules,

 other elements necessary to carry out a given course

 The budget is the fundamental planning instrument in

 That is, it may deal with operations, as the operational

 it may reflect capital outlays, as the capital

 it may show cash flow, as the cash budget does.

Setting objectives or Goals

Considering planning Premises

Comparing alternatives in Light of Goals Sought

Formulating Supporting Plans

Numberizing Plans by Making Budgets

 That is, panning works best when everybody pulls in

 that make clear how the company will serve