Unit – II

Planning
Planning: Planning involves the development of forecasts,
objectives, policies,programmes, procedures, schedules
and budgets
- Louis Allen
Nature of Planning:
• Future orientation – It is future oriented, while planning
must consider situations and events of present and past
• Info base – It help managers to evaluate the present ,past
and future
• Decision Making – Identifying issue,collection of info.
These happens based on organ policies, programs,
strategies, objectives.
• Intellectual process – It is logical way .It
needs ability to see problems and analyse it
• Pragmatic – It needs practical and fixed
actions theories. Action should be practical
and implemented
• Formal and informal – Formal as investigation
and analysis, informal as trial and error
process
Importance of planning
• It improves motivation
• Encourages innovation and creativity
• Helps in avoiding business failures
• Facilitates delegation
• Improves adaptability
• Facilitates control
Purpose of planning
• Helps management to clarify,focus and research their business and
prospects
• Time frame work – short term,long term
• Benefits – org is able to guage and analyse all the options it has for
producing its ware
• Offers a benchmark against actual performance
Objectives of planning
• To facilitate proper decision making
• To provide effective organizational structure
• To reduce the severity of the uncertainty and complexity
• To provide clear cut policies for the guidance of all personnel
• To fix the desired end results of the organization
SIX P’S of planning
1.Purpose – Clear understand of the purpose of planning
2.Philosophy – Based on profitability through quality through customer satisfaction
3.Promise –By knowing the strength and weakness of the organization
4.Policies – Which give guidance and constraits which aid in management thinking and
action
5.Plans – It helps to reach the goals
6.Priorities – High priority goal will have preference for allocation of resources
Planning Process
1.Recognizing and Identifying the problems
2.Collecting and Analyzing information
3.Determination of objectives
4.Determining planning premises
a.Internal and external premises
b.Tangible and Intangible premises
c.Controllable and Non controllable premises
5.Alternative course of action
6. Evaluation and selecting best alternative
7. Determining secondary plans
8.Implementation of plans
9.Feedback and future evaluvation
 Planning process
1.Recognizing and Identifying the 5.Alternative course of action
problems

6. Evaluation and selecting best

2.Collecting and Analyzing information
alternative

3.Determination of objectives 7. Determining secondary plans

4.Determining planning premises 8.Implementation of plans

9.Feedback and future evaluvation

 Types of plan
Planning methods can be classified into two

i)Standing / Repeated plan

a.Objectives
b.Policies
c.Procedures
d.Methods
e.Rules
f.Strategies

ii) Single use plan

a.Programmes
b.Projects
c.Budgets
i)Standing plan / Repeated plan
- use repeatedly
- Readymade answers
- Managerial decisions and actions easy
a.Objectives
Objectives are goals which the management and the
administrative wish the organization to achieve
Characteristics of objectives
• Objectives are multiple in nature
• It has hierarchy
• It has long term and short term goals
• It was always priority
Advantages of objectives
• Co ordination of work
• Basis of de centralization
• Basis of control
• Basis of planning
Approaches of objectives
a.Traditional approach
• Objectives set by top management to lower management
• Cant able to full fill all the objectives within specific time
• Necessary alternative approach is required
b. New approach/ Modern approach
• Org objectives should consider personal objectives makes an employee
commitment
• Management by objectives(MBO) and management by results (MBR)
b. Policies
It is a statement of verbal, written overall guide setting up boundaries and directions in
which managerial activity will take place
Kinds of policies
i.Originated policy
- Formulated by managers
- give suggestions to follows
- Helps us ,how to act in situation
ii.Appealed policy
- Sub ordinate not clear about the situation
- with superior going to solve
iii .Imposed / External policy
- Solve with help of outside agencies like govt,trade union
iv.Functional policy – policy for all the functions of management such as
marketing,finance,production and Human Resource
V- Policy on basis of level – From top to lower level,department wise.
c.Procedure
It is a series of related tasks that make up chronological order and
established way of performing the work to be established

Importance of Procedure
-- Reduce the need of decision making at particular situation
-- Provide good standard for manager to appraise employees

Determinants of Procedure
-- Once procedure is established for doing activity every manager
follows ultimately
-- It helps in standard the org activity and follows smoothly
-- Set of procedure makes proper implementation decisions and
policies of org
d. Methods
A prescribed manner for performing a given task with adequate consideration to
objectives,total expenditures of time,money and effort
e.Rules
-- Rules prescribed the code of discipline.They specify what is to be done and
what is not to be done in a given situation
-- Rules are established principle for carrying out the activities in a systematic
manner
f.Strategy
Strategy is a process of defining the objectives of the organization

Types of strategy
1.Master strategy – refer entire pattern of companies objectives
2.Program strategy – these are more specific and support to the master
strategy
3.Sub strategy / Minor Strategy – Not important to the org,but gives guidance
to make decision
ii) Single use plan
These plans are to be used only in specific situation and
for tackling specific matters.
a.Programme
These are complexes of goals, policies, procedures,
rules,task assignment, steps to be taken ,resources to
be employed and other elements necessary to carry
out a given course of action
b.Projects – It is a set of inter related tasks to be
excuted over a fixed period and within certain cost
and other limited
c. Budget
It is a financial statement and quantitative ststement prepared prior to be defined
period of time,of the policy to be pursued during that period for the purpose of
attaining the organizations objectives
Classification and types of budget
Classification according to time
a. Long term budget
-- Period varies from 5 – 10 years
-- framed by top level managers
-- prepared for some sectors as research and development
b. Short term budget
-- Period varies from 1 – 2 years
-- used by small scale industries as cotton industry ,textile industry
c. Current budgets
-- generally for weekly and months
-- implemented for current conditions/ current situations
Classification based on basis of function
a.Functional budget / Subsidiary budget
- - budget related to different functions such as
Sales, purchase, cash and finance
b. Master budget – summary budget incorporating its functional budget,it was
prepared by budget office and it remains with the top level management
Classification on the basis of flexibility
a.Fixed budget
-- prepared for a given level of activity
-- prepared before financial year (april to march)
-- it is a designed to remain unchanged irrespective of the level of activity
actually attained
b. Flexible budget
-- which was recognized the difference between fixed, semi fixed and variable
cost is designed to change in relation to the level of activity
Decision making
DM is the act of choice wherein exclusive forms of conclusions about what must be done in given situation
A decision represents a course of behaviour choosen from number of possible alternatives
Types of decision making
1.Irreversible – permanent they cant be undone and no other option
2.Reversible
– Not final one will change
-- fresh decision will take based on new circumstances
3.Delayed
-- Put on hold,when time comes they will execute
4.Quick decision
-- decision taken by experience decision maker
-- sport span and not affect the future
5.Experimental
-- need to check whether it gives positive results are not if it provides good results then they will execute
6. Trial and error
-- they will check with some process if it is applicable then it will be implemented
7. Conditional
-- based on competitions startegy and following the benchmark
Theories of decision making
1. Marginal theory
-- stress on profit maximization
-- represent additional cost of producing an additional unit and marginal revenue in the
extra revenue from that product
2. Psychological theory
-- it is maximization of the customer satifaction
-- manager acts as administrative man rather than economic man
3.Mathematical theory
-- Based on use of models
-- more systematic theory
-- analyst describes the problem area

Limitations of Decision Making

• Individual manager may be lazy or careless in taking decisions

• some decisions are beyond the control of managers
• there is the inter mingling of the personal objectives of the decision maker
Steps in decision making
1.Diagnosing and defining the problem
2.Analyzing the problem and fact finding
3.Developing alternative solutions
4.Selecting the best solution
5.Implementing the decision
6.Following up the action
Importance of decision making
• Better utilisation of resources
• Facing problems and challenges
• Business growth
• Achieving objectives
• Facilitate innovation
• Motivates employees