Unit 4

Planning & Decision Making

Organizational Goal Setting and Planning
Course outlook
• Meaning and levels of planning,
• Planning horizons,
• Planning process,
• Meaning and use of single use, Standing, contingency
and derivative planning,
• Pitfalls and their improvement in planning.
• Concept of decision making,
• Process of rational decision making,
• Type of problems and decision making,
• Decision making conditions and styles
KEC Publication @ M. Chalise & P. K.
6/7/22 2
Gautam
 Concept of Planning
• Planning is setting an organization’s goals and
deciding how best to achieve. - Ricky W. Griffin
• Planning is the process of coping with uncertainty
by formulating future course of action to achieve
specified results. – Richard Steers
• Planning is the process of predetermining the
objective and course of action to attain those
objectives. Planning is an intellectual process
regarding choice of what to do?, When to do?,
How to do? Who is responsible to do? etc.
KEC Publication @ M. Chalise & P. K.
6/7/22 3
Gautam
Characteristics/Features of Planning
• Primary function
• Pervasive function
• Future oriented
• Continuous activity
• Intellectual work
• Flexible
• Efficiency and Economy
• Actionable

KEC Publication @ M. Chalise & P. K.

6/7/22 4
Gautam
 Need/Importance of Planning
• Focus on goal
• Minimize risk
• Effective control
• Organizational effectiveness
• Economy in operation
• Facilitates coordination
• Innovation and Creativity
• Protects from failure
KEC Publication @ M. Chalise & P. K.
6/7/22 5
Gautam
 LEVELS OF PLANNING
i. Mission
ii. Goals
iii. Strategy
iv. Policy
v. Procedure
vi. Rules
vii. Programs
viii. Budget
KEC Publication @ M. Chalise & P. K.
6/7/22 6
Gautam
 PLANNING HORIZON
1. Long-term horizon
• Demand/product review
• Supply review
• Capacity review
2. Medium-term horizon
• Gross profit plan
• Demand plan
• Product plan
• Inventory plan
• Operations plan
• Supply chain plan
3. Short-term horizon
• Demand plan
• Inventory plan
• Operations plan
KEC Publication @ M. Chalise & P. K.
6/7/22 7
Gautam
 Planning Process
Step 1: Analyze opportunities
Step 2 : Setting goals
Step 3 : Setting premises
Step 4 : Determination of alternatives
Step 5 : Evaluation of alternatives
Step 6 : Selecting best course of action
Step 7: Formulation of derivative plan
Step 8 : Implementation of plan
Step 9 : Reviewing the planning process
KEC Publication @ M. Chalise & P. K.
6/7/22 8
Gautam
 Types of Planning
1. On the basis of Hierarchy
• Corporate plan 4. On the time horizon
• Tactical plan • Long term plan
• Operational Plan • Medium term plan
2. On the basis of Use • Short term plan
• Single use plan 5. Contingency plan
• Standing use plan
3. On the basis of Flexibility 6. Derivative plan
• Specific plan
• Flexible plan KEC Publication @ M. Chalise & P. K.
6/7/22 9
Gautam
 PITFALLS AND THEIR IMPROVEMENT IN
PLANNING
1. Overlooking the planning process
2.  Failing to distinguish between short- and long-
term planning
3.  Picking wrong team
4. Planning meetings poorly
5.  Neglecting the follow-up process
6.  Mixing up strategic and operational follow-up
7.  Overcomplicating the process
KEC Publication @ M. Chalise & P. K.
6/7/22 10
Gautam
 Concept of Strategic planning
• Strategic plan is a general plan outlining decision of
resource allocation, priorities and action steps
necessary to reach strategic goals.
– Ricky W. Griffin
• Strategic planning is a process that involves the review
of market conditions; customer’s needs; competitive
strength and weakness; socio-political, legal, and
economic conditions; technological developments; and
the availability of resources that lead to the specific
opportunities or threats facing the organization.
– Ivancevich, Donnelly, and Gibson
KEC Publication @ M. Chalise & P. K.
6/7/22 11
Gautam
 Formulation of Strategic Planning
• Step 1: Identifying organization’s current
mission, goals and strategies
• Step 2: Analyze the external environment
• Step 3: Identifying opportunities and threats
• Step 4: Analyzing internal environment
• Step 5: Identifying strengths and weaknesses
• Step 6: Formulating strategic plan

KEC Publication @ M. Chalise & P. K.

6/7/22 12
Gautam
PLANNING AND LEVELS OF MANAGEMENT

KEC Publication @ M. Chalise & P. K.

6/7/22 13
Gautam
 PLANNING APPROACHES
1. Top-Down method
2. Bottom-Up method
3. Composite method
4. Management by Objectives (MBO) method
5. Team method

KEC Publication @ M. Chalise & P. K.

6/7/22 14
Gautam
 Concept of Decision Making
• Decision making is the process of selecting best course
of action out of many available alternatives.
• Decision making is the process of identifying and
choosing alternative course of action in a manner
appropriate to the demands of the situations.
• Decision making is intended to solve organizational
problem through developing, evaluating and choosing
alternative course of action.
• It is continuous and pervasive managerial functions.
• Setting goals, formulating plans, formulating strategies,
formulating policies, assigning jobs, etc. are some
examples of decision making.
KEC Publication @ M. Chalise & P. K.
6/7/22 15
Gautam
Nature/Features of Decision Making
• Continuous and Pervasive Function
• Selective process
• Human and Rational Process
• Dynamic Process
• Goal Oriented Process
• Continuous Process
• Freedom to Decision Maker
• Positive or Negative Impact
KEC Publication @ M. Chalise & P. K.
6/7/22 16
Gautam
Process for Rational Decision Making
Step 1 : Identification of Problems
Step 2 : Analysis of Problems
Step 3 : Development of Alternatives

Step 4 : Evaluation of Alternatives

Step 5 : Selection of Best Alternative
Step 6 : Implementation of Alternative

Step 7 : Review of Implementation

KEC Publication @ M. Chalise & P. K.
6/7/22 17
Gautam
 Types of Decisions
Programmed decision
Non- Programmed decision

Routine decision
Basic decision

Organizational decision
Personal decision

Individual decision
Group decision

Policy decision
Operational decision
KEC Publication @ M. Chalise & P. K.
6/7/22 18
Gautam
 APPROACHES TO DECISION
MAKING
1. The Classical approach
2. The Administrative approach
3. The Rational approach

KEC Publication @ M. Chalise & P. K.

6/7/22 19
Gautam
 DECISION MAKING STYLES
1. Analytical style
2. Directive Style
3. Conceptual style
4. Behavioral style

KEC Publication @ M. Chalise & P. K.

6/7/22 20
Gautam
 Conditions of Decision Making
• Condition of Certainty
• Condition of Risk
• Condition of Uncertainty

Making Decision effective

• Clear understanding on problems
• Developing sufficient alternatives
• Managers must get more relevant information
• Use of situational and rational perspective
• Sufficient discussion for decisions
• Use of tools and techniques
KEC Publication @ M. Chalise & P. K.
6/7/22 21
Gautam
 PROBLEM SOLVING
• Problem can be defined as a difficulty or an obstacle
existing in a situation.
• Problem indicates a perceived gap between what is
and what should be.
• Problem solving consists of the process of identifying
the gap between the actual situation and desired
situation.
• problem solving is the process of identifying problem,
its intensity, causes and finding the most suitable
solution for it from available alternatives.
• It is an art of decision making.
KEC Publication @ M. Chalise & P. K.
6/7/22 22
Gautam
 TYPES OF PROBLEMS
1. On the basis of Frequency
i. Routine problems
ii. Exceptional problems
2. On the basis of Timeframe
i. Short term problems
ii. Medium term problems
iii. Long term problems
3. On the basis of Impact
i. Partially Impact problems
ii. Overall Impact problems
4. On the basis of Urgency
i. Urgent problems
ii. Non-Urgent problems
5. On the basis of Source of Problem
i. Technical problem
ii. Human problem
6/7/22
iii. Environmental problem
KEC Publication @ M. Chalise & P. K.
23
Gautam
 MANAGEMENT BY OBJECTIVES (MBO)
• Management by Objectives (MBO) is a new
approach for planning and making decision in
participation of managers and employees for
defining the objectives.
• It is a strategic management model that aims to
improve the performance of an organization by
clearly defining objectives that are agreed to by
both management and employees so that each
individual gets encouragement in participation
and commitment among employees.
KEC Publication @ M. Chalise & P. K.
6/7/22 24
Gautam
Steps in Management by Objective (MBO)

KEC Publication @ M. Chalise & P. K.

6/7/22 25
Gautam
Tools/Techniques to Aid Decision Making
• Linear Programming
• Simulation
• Payoff Matrix
• Decision Tree
• Queuing Model
• Game Theory
• Accounting Tools

KEC Publication @ M. Chalise & P. K.

6/7/22 26
Gautam