PLANNING AND DECISION MAKING

Meaning of Planning
Literally, planning means thinking before doing. In fact, it is the taking decision in advance about
what to do, when to do it, where to do, how to do it and who is to do it. Planning is a must in
selecting one best future course of action. Planning is a basic function of management. It plays an
important in laying most favorable future course of action. It performances as guide to bridge the
present state of activities with expected future.

It refers to a process of finding the best alternative from among various alternatives to attain
organizational goals. It is the intellectual quality of a manager who decides whether or not to act
or take up to a particular event. It is the foundation from which all other management functions
could be performed efficiently. It includes both assessment of future opportunities and threats to
the organization and development of strategies.

Planning is a rational process with which manager looks within, around and ahead prior to making
decision take action.
“Planning is the process by which managers define goals and take necessary steps to ensure that
these goals are achieved." -Richard steers
“Planning involves selecting purposes and objective of the action to achieve them; it requires
decision-making that is choosing one best from among alternative future courses of action.”
- Koontz and Weihrich
"Planning involves defining the organization's goal, establishing an overall strategy for those goal
and developing a comprehensive set of plans to integrate and coordinate organizational work"
- Stephen P Robins and Mary Coulter
From Above definitions, we concluded the planning involves determination of objectives and
selecting a best if course of action to achieve defined objectives effectively and efficiently. It is
essential for every organization to grab opportunities created by the changing environment to
sustain business. It is also a must to face probable threats that may arise in the future. Planning is
thinking before doing things. It is also maximum utilization of all resources on an optimum way.

Planning bridges
WHERE WE WHERE WE
ARE? WOULD BE?
Gap
Some of the features of planning can be mentioned as below:
 Planning is an intellectual process.
 Planning is basic function of management.
 Planning is goal oriented activity.
 Planning is pervasive all the levels of management do plan.
 Planning is a never ending process
 Planning is future oriented activity.
 Planning is action oriented activity.
 Planning facilities decision making process.

Importance of Planning
Planning is continuous and never ending process up to the existence of the organization. It is also
a primary and inseparable function of management. It defines a clear line of action so that
wastage resources can be minimized. A good planning is the foundation of an organization and a
sign of efficient management. It brings smoothness in future course of action.
The following are the major importance of planning:

Focus of goal & objectives

Minimize uncertainties

Maintain effective control

Innovation and creativity

Importance of planning
Organizational effectiveness

Economy in operation

Facilitates coordination

Avoids business failure

1. Focus on goal and objectives
Planning is the directly towards attainment of the organizational goal and objectives. It
makes the goal and objectives. It avoids confusion and defines clear line of action and
responsibility of all level of management. Planning facilities in bringing unity of action and
coordination among all the units of works. Thus, in order to draw attention of managers and
subordinates, planning is essential.
2. Minimize uncertainties
Business firm has to face several types of risks and uncertainties in the future. Planning is
essential to minimize such future risks and uncertainties. It involves forecasting and
anticipating future uncertainty and change. Every organization has to perform its activities
within the changing environment of the society. A proper planning always makes its effort to
minimize the future risks and uncertainties.
3. Maintain effective control
Planning is needed to maintain effective control. It determines the standard of work to be
performed. Management provides instruction and guidelines to the work on the basic of
standard. Planning helps to compare actual performance with that of planned performance. It
also helps to identify the deviation between planned and actual performance. If there is any
deviation between standard and actual performance, the necessary corrective action is taken.
Control without planning is not possible. So, planning makes control effective and
meaningful.
4. Innovation and creativity
Planning is an intellectual and mental process. This involves creative thinking,
foresightedness, intelligence and imagination. An effective planning always encourages for
new innovation and creativity in the organization. This is a must to grow and expand
business activities. It encourages the managers to think ahead and plan for innovation of new
technique in the organization. It also contributes in motivating and developing morale among
the employees. Thus, a sound planning contributes to generate innovative and creativity.
5. Organizational effectiveness
Planning helps to eliminate wastage and utilize available resources in the best possible way.
It leads to maximize productivity and minimized cost of production. It makes all the
organizational activities more effective and efficient. Planning function involves setting
goals and objectives and selecting the best alternative to achieve per-determined goals. The
sound and well planning contributes in minimizing cost of production and developing
organizational effectiveness.
6. Economy in the operation
Planning helps to achieve economy in the operation of organizational activities. It helps to
control unnecessary activities as well as the chance of duplication of activities which results
in reducing the cost of production. Planning defines a clear line of action for all level of
management and subordinates. It integrates all the available resources of the organization
 towards a common goals. Therefore, good planning brings economy operation of
organizational activities.

7. Facilitates coordination
Planning is a primary function of management, which maintains coordination with other
function of management. It clearly clarifies the roles and responsibility expected from every
positions of an organization. This helps to harmonize the efforts of people working in an
organization. It is essential to develop feeling of cooperation and team sprit among all the
members of the organization. In facts, clearly defined plans and policies are the effective
means of coordination.
8. Avoids business failure
The basic motives of planning is to overcome the probability of business failure. The main
task of planning process is select a best course of action among many alternatives. Beside
this, it also define a clear line of action for every member. It helps to maintain unity in
action, better coordination among all the team member of the organization. It minimizes risk
and uncertainty in performance and wastage of organizational resources. Finally, it
contributes to maximize productivity and minimize the cost of production. This avoids
business failure and brings organizational sustainability.

Types of Planning
Planning is a formal process and systematic schedule of the jobs /works to be done in the
future. Every organization has to prepare a plan to achieve predetermined objectives in the
proper time. The types of planning depends upon the nature and size of the organization.
Such plan may be prepared either short period or long period and may prepared by top
level management or operational level management. The following are the basis of
classification of organizational plans:

Types of Planning

On the Basis of Hierarchy On the Basis of Use On the basis of

Flexibility
Corporate Planning Single Use Planning
Specific Planning
Tactical Planning Standing Use planning
On the Basis of Hi Flexible planning
Operational Planning
 On the Basis of Hierarchy
On the basis of Hierarchy, Planning may be classified into three groups; corporate Planning,
strategic planning and operational planning.
1. Corporate Planning
Corporate plan is a long term plan which is prepared by top-level management. It is prepared
after the environment scanning. Corporate plan guide manager and subordinates to be aware
the long journey ahead, the difficulties and the benefits that can result. Corporate plan clearly
defines the objectives of the organization and strategies to achieve the defined objective.
Strategy involves the clear explanation of programs, policies and schedules and the way of
utilizing the available resources to attain the targeted goal because there is high degree of
uncertainty in corporate plan. This plan may be related to production, market, competition,
use of technology, social responsibility etc. Corporate plan is also known as strategic plan.
2. Tactical Plan
Tactical plan is medium-term plan which is prepared by middle level management. It is
consistent and guided by the corporate plan of organization. It is sub-division of corporate
plan to be implemented in the practical field. The middle level management concentrates on
allocation of work and resources and set the program accordingly. Thus, under tactical plan,
all the divisional manager identify the priorities of activities and formulate plan as per
corporate plan. It is prepared to perform divisional activities like production, finance,
marketing, personnel and others. This plan works as mediator between corporate plan and
operational plan.
3. Operational Plan
Operational plan is short term plan which is prepared by lower level management. It is the set
of day to day performing activities of each unit developed for defining operational goal and
specific action to implement the tactical plan. It is specific action plan of each and every
activity of the unit. It involves preparation a schedule of each unit of work implement in
practice. It is also concentrates in the best use of available resources.

Types Plan Time Horizen Responsibility

Corporate plan Long Term Top Management

Tactical plan Medium Term Middle Management

Operational plan Short Term Lower Management

On the Basic of Use
On the basis of use, plan may be classified into two groups; Single use plan and standing plan
1. Single Use Plan
Such a plane is prepared for a specific purpose in non-programmed situation. These plan
are prepared for non-repetitive activities and they are used only once. After completion
of the defined objectives, such a plan becomes worthless. Single use plan include
programs, projects, schedules, budgets etc.
2. Standing Plan
Standing plans are also known as repeated use plan. Such a plan is prepared for
programmed decision making situation in organization. This plan gives broad guidelines
for repetitive activities. Such plan once developed will be implemented in the
organization to achieve organizational objectives in different situations. These plan are
used over a long period of time. Examples of standing plan are mission, objectives,
policies, procedures, rules and regulation, strategies etc.

On the basis of Flexibility

On the basis of flexibility, plan may be classified into two groups; specific plan and flexible
plan
1. Specific Plan

Specific is developed for a particular department or unit about the activities to be

performed. These plan are formulated to define the specific goal. All the members of an
organization are clear about the task to be performed and resources to be used. Specific
procedures, budget allocation, specific schedules of activities are the examples of the
specific plan.

2. Flexible Plan

Flexible plan is changeable on the basis of time and situation. It is not specific on terms of
procedures and allocation of resources. The Plan only provides guidelines to the
members. The members can modify such plan on the basis of their facility, need and
requirement. Yearly plan of school and college is an example of flexible plan which are
subject to change.
Hierarchy of Planning
 Planning is pervasive function of management. It forms a hierarchy. The managers at
different levels from different types of plan. The following are the arrangement of plans in a
hierarchy:

Mission

Goals/Objectives

Strategies

Hierarchy of Plan Policies

Procedures

Rules

Program

Budget

1. Mission/Vision:
Mission is the reasons/purpose for existence of an organization. Mission focus on the
need that satisfy the customer rather than the services it produces. It tells who we are
and what we do as well as what we would like to become. Mission is developed by top
and senior level management, which defines the fundamental unique purpose that sets
an organization apart from the other organizations of similar type. It also involves the
organization's philosophy about how it does business and treats its employees. The vision
of the organization refers to a desired future state an organization that the organization
would like to achieve. The vision of the organization motives the employees and energies
them to achieve organizational goal. It tells the employees about the strategy.
2. Goal /Objectives:
Goal are the planned results to be achieved. The goal is a desired future state of an
organization then an organization can realize. Goals are the destinations that an
organization plans to reach. Goal/objectives specify what is to be accomplished by whom
and should be shown in quantitative terms, if possible. Every organization must have set
certain objectives. Objectives should be stated clearly for all departments, units and
employees. Objectives have to communicate down to each units and employees at all level.
 At the same times, managers must contributes ideas and participate in the objectives setting
process. They must also understand how their actions contribute to achieving objectives. If
the end result is clear, it becomes easier to work towards the goal. The goal is generally
SMART (specific, measurable, attainable, realistic & timely) in nature.

3. Strategies:
Strategy is a comprehensive master plan stating how an organization will achieve its
mission and goals. It determines the basic long term objectives of an organization, adoption
of courses of action and allocation of resources necessary to achieve the desired goals. It
maximizes competitive advantages and minimize competitive disadvantages.

4. Policies
Policy is the comprehensive guidelines foe decision making that links the formulation of
strategy with its implementation. It defines the area within which decision is to be made
and ensures that decision will be consistent with objectives. The managers develop policies
to make sure that employees of the organization make decisions and take actions that
support the mission, goals and strategies.
5. Procedures
Procedures are the sequential steps that describe in details how a particulars task is to be
performed. It generally indicates how a policy is to be implemented and carried out. They
are the guides to action and details the exact manner in which certain activity must be
accomplished.
6. Rules
Rules are the detailed guidelines to action. They are specific and rigid in nature and are
strictly to be obeyed be all the members of an organization. It is essential to operate an
organization in an orderly way. They must be followed precisely and observed strictly. The
violation of rules is associated with disciplinary action.
7. Programs
Program is the statement of activities essential to accomplish a single use plan. It is a
comprehensive plan consisting of complex set of goals, procedures, rules, resource flow
etc. It is an aggregate of several related action plans that are designed to accomplish a
mission.
8. Budgets
Budget is short term financial plan, which is presented in terms of money. It is designed to
allocate the resources of an organization. It is basis of measuring actual performance
achieved with that of standard and identifying the gap/variance.

Methods of Planning
There is different methods to formulate a plan in an organization. The method of planning is
based on the types of organization or its nature. Some organizations follow centralized
method of planning while other follow decentralized. In some case, the organization follows
mixed type of planning as well. Different method used for planning are described as below;
1. Top-Down Method
It is a centralized method of planning where top level management are directly involved in
formulating plans and policies of the organization. Normally, autocratic organization
follow such type of planning. In this method, top level management do not consul their
subordinates in formulating plans, policies, objectives etc. of the organization. When top
level management formulate the plan, they communicates with the subordinates in order
to implement the plan. In formulating this type of plan. Top level executives use all effort,
knowledge and experiences from their respective field. Long-term plans are formulated
through this method of planning.

Plan
Top Level Management

Middle Level Management

Lower Level Management

2. Bottom-up method
It is a decentralized method of planning where top level managers take suggestions, views
from subordinates before formulating the plans. In this method, the plan is first formulated
at the lower level and is forwarded to middle level managers and ultimately to the top level
for final review and approval. It is democratic type of method of planning where lower
level manager's views, ideas and inputs are highly considered. This method encourages the
lower managers and make participate in planning activities of an organization.

Top Level Management Plan

Middle Level Management

Lower Level Management

3. Participative method
This is a mixed types of planning method where both top-bottom and bottom-up method
are used combined. It is one of the effective types of planning method used by the modern
organization where top level managers, middle level managers and lower level managers
seat together and share their ideas, views, experiences, learnings, skills, knowledge
 mutually in order to formulate a plan. It is also known as interactives method of planning
as top, middle and lower level managers interact excessively to formulate a plan.

Top Level Management

Plan

Middle Level Management Lower Level Management

Steps/Process of Planning
Planning is an intellectual task. It is necessary to complete some procedures or steps in the
planning process. The following are the common steps of planning process:

1. Analyze opportunities

2. Setting goals

3. Determination of premises

4. Determination of alternatives

5. Evaluation of alternatives

6. Selecting a best course of action

7. Formulation of derivative plans

8. Implementation of Plan

9. Reviewing the planning process

1. Analyze opportunities
This is pre-step of planning. If, it is essential to make a successful plan, the manager has
to analyze the Strengths, Weakness, Opportunities and Threats (SWOT) from the
changing environment of the business. Strengths and weakness are the outcome of
 internal environment like availability of materials, machine, manpower, organizational
structure, technology adopted etc. In a similar manner, opportunities and threats are the
outcome of external environment and affected by many factors like political, economic,
socio-cultural and technology.
2. Setting Goal/ Objectives
The first and actual starting point of planning is to determine goals/ objectives.
Objectives indicate the intended result to be achieved. So objectives must be specific,
clear and practical. They should be time-bound and expressed in numerical terms. A
minor mistake in setting objectives might affect the implementation of a plan. Therefore,
the management has to define the objectives clearly by considering organizational
resources and opportunities. After clarification of the overall objectives, it should be
broken down onto specific objectives of different departments, branches, sections and
individuals. The goal must be SMART for successful future.
3. Determination of premises
After development of goals of the organization, the next step involved in planning
process is to develop the planning premises. Premises are assumptions of the future on
the basis of which the plan is formulated. The future environment is estimated on the
basis of forecasting. Premises may be tangible and intangible or internal and external.
Tangible premises involve capital investment, units of production, units sold, cost per
unit, time available etc. Similarly, intangible premises involves employees moral,
goodwill, motivation, managerial attitude etc. Internal premises involves money,
materials, machines and management whereas external premises involve competitors,
strategy and government policy, and technological change, social and cultural beliefs.
4. Determination of alternatives
Once the planning premises are developed, the next step is to identify the various
alternatives courses of action for the achievement of organizational objectives. The
information about alternatives may be obtained from primary or secondary sources. The
management must develop alternatives through support of experienced and intellectual
experts in management. The determination of alternative course of action is the basis of
plan formulation.
5. Evaluation of alternatives
This is a logical step to evaluate each and every alternative from the point view of cost
and benefits. The basic objectives of such evaluation is to figure out the best alternative.
Each alternative is studied and evaluated in terms of some common factors such as risk,
responsibility, planning, premises, resources, technology. Therefore, management must
apply a broad-based analytical approach for the evaluation of available alternatives. On
the basis of organizational requirement, the management may apply many techniques of
analysis from different disciplines such as mathematics, sociology, psychology,
economics etc. The evaluation technique must be must be scientific and practical so that
best course of action can be selected.

6. Selecting a best course of action

After evaluating the all alternatives, the management selects the best course of action. For
this purpose, management has to consider past experience, present situation and future
contingencies of such decision. Therefore, it is essential to consider about the various
 premises and environments of an organization and their impact on future course of action.
Besides, it needs to forecast about the comparative cost and benefit factors.
7. Formulation of derivative plans
Once the best alternative is selected, master plan is prepared. In order to convert this
master plan into action, some supportive plans of the key functional areas to be
formulated which is consultation of middle and lower level management. This action
plans involve formulation of policies, rules, schedules and budget to achieve defined
objectives. It is difficult to implement basis plan without formulation of derivative plans.
8. Implementations plans
After selection of a course of action and preparation of derivative plans, if not
implemented, the plan remains in paper only. This step of planning brings all the
procedures of plan into action. For the implementation of a plan, the management needs
to take some steps such as to communicate with subordinates who initiate plan to action,
provide necessary instruction and guidance, make arrangement of all resources like
materials, machine, money, equipment etc. and make timely supervision and control of
subordinates.
9. Reviewing the planning process
Planning is the continuous function and lasts till the organization is in existence. For this,
it is necessary to know about the actual performance. The manager can take corrective
action in proper time only after evaluating the actual performance. A right decision at the
right time is necessary to achieve determined objectives according to plan. It is also
essential to adapt with the changing environment of the business organization.

Strategic Planning
Strategic planning is the comprehensive master plan stating how to the organization will
achieve its mission and objectives. It is a dynamic and long term range planning which
focuses on the organization as a whole. It is the clear direction how the organizational long
term goals can be achieved with available resources in a dynamic environment. Basically, the
top level management consisting of board of directors and chief executive formulate the
strategic plan. It is the vehicles that senior management should use to set the organizational
vision. Strategies required to achieve that vision, make the resources deployment decisions to
achieve the selected strategies, build alignment to the vision and strategic direction
throughout all levels of the organization.
"Strategic plan is a general plan outlining decision for 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.” - Invancevich, Donnelly, Gibson

Strategic planning focuses on environmental scanning to analyze the opportunities and

threats that may arise due to changing environment. Generally, strategic planning process
 consists of collecting of information from the environment, developing mission, setting
objectives, determining strategies and preparing portfolio plan.

SWOT Analysis
SWOT is a short form that stands for strengths weaknesses opportunities and threats. SWOT
analysis is the primary stage of strategic planning and concentrates on collecting information
from the environment. SWOT analysis is the most renowned tool for audit and analysis of
the overall strategic position of the business and its environment. It is process of matching
organizational strengths and weakness with environmental opportunities and threats to
determine organizational right niche. It is focuses on organizational mission and objectives.
Top management needs to collect information from the internal and external environment
before formulating a strategic plan for the organization. SWOT analysis provides useful
information to the managers that will be helpful to formulate and implement strategic plan.

"SWOT analysis is careful evolution of an organization’s internal strengths and weakness

and external opportunities and threats.” Ricky W. Griffin
1. Strength(s):
Strengths is the competitive strong position of the organization in term of resources. It refers
to availability of resources, advanced technology, scientific organizations structure, high
employee’s moral, provision of adequate physical facilities, sound inter personal relation. It
gives advantages to an organization as compared to its competitors in business. The strength
position should be capitalized on to meet the organizational objectives.
2. Weakness (w):
Weakness is the deficiency or shortcoming of resources to meet organizational mission and
objectives. It stands for unavailability of resources, old technology, traditional organization’s
structure, less employee’s moral, lack of physical facilitates etc. It is the responsibility of
management, as necessary far as possible, to improve weakness to meet defined objectives. It
is necessary to modify the present mission and objectives if it is not possible to improve
weakness.
3. Opportunities (o):
Opportunities is a favorable situation created by external environment of the organization. If
such opportunity is exploited it may generate high performance. It stands for favorable state of
external environmental factor form the view point of smooth running of business organization.
It involves decrease in competition, creation of new market, high economic growth rate, change
in technology, change in government policy etc. It is the responsibility of the management to
grab such opportunities to meet organizational goals.
4. Threat (T):
Threat is an unfavorable situation created by external environment to the organization. If such
threat is not properly identify it may generate low performance with in the organization. It is
created by unfavorable change in the environment which involves increase competition, losing
market share, low economic growth rate, change in technology, change in government policy
etc. The management needs to develop new strategy to cope with such types of challenges.
DECION MAKING
Decision Making is the art of making a choice. Decision Making is the process of selecting a best course of
action out of many alternatives. It is process of;
• Identifying and defining the problems.
• Developing alternatives solutions.
• Evaluating them in terms of possible consequences and choosing the best solution among
them.
• Implementing the decision effectively.
It is necessary to run & operate an organization smoothly and effectively to achieve defined objectives. It is
continues process. A manager continuously involves in the decision making process;
• Setting goals
• Determining plans& taking action
• Formulating strategies & policies
• Assigning jobs to subordinates
• Evaluating performance.
• The success of an organization depends on good and right decision making ability of the
manager & implementation if practical field.

Decision making is the selection based on some criteria from two or more possible alternatives”
- George R. Terry
“Decision making is the act of choosing one alternatives from among a set of alternatives.”
-Ricky W. Griffin
“Decision making is the process of identifying and choosing alternatives course of action in manner
appropriate to the demands of the situation.” - Robert Kreitner

NATURE/ FEATURE OF DECISION MAKING

1. Selective process
2. Human and rational process
3. Dynamic process
4. Goal oriented
5. Continuous process
6. Freedom to decision maker
7. Positive or negative impact

IMPORTANCE OF DECISION MAKING

1. Pervasive function
2. Indispensable component
3. Evaluation of managerial function
4. Selection of best alternative
5. Establishment of plans and policies
 6. Successful operation of business
Types of Decision Making
1. Programmed and Non-Programmed decision making
2. Strategic, Tactical and Operational decision making
3. Individual and Group decision making

Programmed decisions
It is Routine and repetitive in nature. Manager can easily solve problems as per past decision for similar
problems. First line manager take such types of decision on the basic of framework of policies, rules,
regulation and producers. In practical field, more than 90% of managerial decisions are of these types.
Non-Programmed Decisions
These decisions are also known as unique or creative nature decision. These decisions are taken to solve
the non-recurring and unstructured problems. In case of such a decision, no existing policies or standard
operating procedures to guide decision maker. Non-Programmed decisions include business objectives,
product diversification, Changing marketing strategy, new investment, policies decision etc.
Strategic decisions
These decisions are known as basic decisions. Such type's decisions are necessary for long run survival and
growth of business organization. These decisions are taken by top level management. If these decisions
are not taken timely, the organization cannot exist in the competitive market. Investment extra capital,
expansion of business, replacement and addition of machine equipment, recruitment and selection of new
staffs, making and revision of policies etc. are examples of strategic decisions.
Tactical Decisions
Tactical decisions are medium term decisions. These decisions are related to the implementation of
strategic decisions. They are directed towards developing divisional plans, structuring workflows,
establishing distribution channels, acquisition of resources such as men, materials and money. These
decisions are taken at the middle level of management.
Operational Decisions
These decisions relate to day-to-day operations that have only a short-term impact on an organization.
These decisions are taken by lower level management. Operational decisions generally are very specific
and have a high degree of certainty. These decisions are taken for the implementation of strategic and
tactical plans. These decisions involve change of work schedule of work, employee of remuneration
distribution, office set up. Repair of machine equipment, Assigning work to employees etc.
Individual Decisions
A single person is involved in the decision making process like general manager, departmental manager.
These types of decision are more common in small organization or autocratic management. The decision
maker has to use his personal skill, knowledge, idea, and experience to make decision. In individual
decisions, the decision maker has to consider organizational objectives and working environment while
taking decision.
Group Decisions
A group of persons are involved in the decision making process like BOD, CEO, Partners, Shareholders. In
large organization, such types of decisions are taken line Joint stock Company, partnership firms, and
cooperative. In such types of decision making, it takes long time. The group of authorities discusses the
matter in details and finally come to decision through mutual understanding or majority vote. Group
decisions are made for special/unique of creative nature subject matter.