Chapter Two

The Planning Function

Introduction
Planning is:
• The process of determining the:
• Goals
• Course of action
• Planning is concerned with:
• Ends (what to be done) and
• Means (how it is to be done).
• The output of planning is a plan itself.
Meaning and Definition
Planning is:
 The process of determining how the organization can
get where it wants to go.
 Outlining the activities that are necessary to achieve
organization’s goals.
 The ongoing process of developing the business'
 mission and objectives and
 determining how they will be accomplished.
• Planning includes both:
– mission,
– a tactic for accomplishing a specific goal.
Planning answers six basic questions in
regard to any intended activity.
•The ‘what’ or what to do
• The ‘when’ or when to do
• The ‘where’ or where to do
• The ‘who’ or who does it
• The ‘how’ or how it is done or by whom
it is done • The ‘how much’ or how much
is required to do
Nature and Importance of Planning
The important characteristics/nature of planning are the
following:
– Planning is a primary management function
– Planning is a continuous process
– Planning concerns all managers
– Plans are arranged in a hierarchy
– Planning commits the organization into the future
– Planning has action orientation
– Planning is antithesis of status quo
– Ability to adjust
– The efficiency and effectiveness of plans
Importance of Planning
1) Planning minimizes risk & uncertainty
2) Planning leads to success
3) Planning provides Direction#
4) Planning focuses attention on organizational goals
5) Planning facilitate control
6) Planning is Economical
7) Planning helps management to adopt and adjust to
changing environments
8) Planning lays ground for other managerial
functions
Types of plans
Plans can be classified on different
bases or dimensions.
The most important ones are:
1. Repetitiveness (frequency of
use)
2. Time dimension/ horizon
(duration) &
3. Scope/ breadth dimension.
Based on repetitiveness,
1. Standing plans
• Used again & again;
• Used to handles repetitive problems
Involves
 Mission or purpose; goals/ objectives, strategy; policy;
procedure; method and rule.
2. Single – use plans.
 Developed to address a specific organizational situation.
Includes
– Programs: set of activities designed to accomplish a
particular set of goals.
– Projects :Project is a subset of a specific program
– Budgets: a numerated/ numbered program.
 Serves as a benchmark for controlling.
Budgets are 3 types.
1. Variable or flexible budget - budgets that vary
according to the organization’s level of output.
2.Program budget –
3. Zero – base budget - the programs started
from the scratch or “base zero.
Based on time horizon
1. Long – range planning:
– Concerned with distant future.
– The time usually ranges from 5-10 years, depending
the size and the nature of the organizations.
2. Intermediate – range planning
– Ranges between long & sort range planning;
– They are usually developed for 1-5 years, depending on
the size and nature of the organization.
3. Short – range planning
– They are not developed separately
– Taken as operational plans
– Derived from the long ranging or intermediate plans.
– The time length is commonly taken as less than 1 year.
Based on scope/ Breadth
1. Strategic planning:
 Is a general plan
 Is a process of analysing & deciding the organ’s
 vision,
 mission;
 objective;
 strategy (major courses of action) and
 the major resource allocations.
 developed by top level managers
 Mostly long range in its time horizon
In the process, three basic questions are answered:
1. Where are we now?
This is answered through:
• Perform internal and external environmental analyses,
• Determine SWOT: Strengths, Weaknesses,
Opportunities and Threats.
2. Where do we want to be?
This is through:
• Review vision, mission and objectives, and
3. How do we get there?
• Answered by review of courses of actions and
strategies.
2. Tactical planning
– Aimed at achieving tactical goals
– Developed to implement specific parts of strategic plan.
– Refers to action plans through strategic plans are
3. Operational planning
– Focuses on carrying out technical plans to achieve
operational goals.
– is mainly short range; more specific & detailed.
– Made at operational level.
– concerned with day- to day; week – to - week
activities
Contingency planning
• Is the determination of alternative courses of
action to be taken if the original plans are
disrupted or become inappropriate.
• Is proactive in nature.
• Is necessary at each level of management and
The planning process
• Indicates the major steps taken in planning.
Step 1: Understanding the existing situation
Refers to:
– Awareness to the external environment: to identify
opportunities (O) & threats (T).
• Includes economic, political, socio cultural, legal
and technological environments
– Awareness to the internal environment: to identify
strength(S)and Weakness(W).
– Resources: Includes analyzing human, financial and
material resources.
 Setting realistic objectives depends on this awareness
Step 2: Forecasting
– Refers to assumption what the future looks like.
Step 3: Establishing objectives
– specify the expected results
– Indicate the end points
Involves determining:
• What is to be done,
• Where the primary emphasis to be located, &
• What is to be accomplished.
• Organizational objectives give direction to the major
plans.
Step 4: Determining the alternative courses of
action
– Refers to Determining strategies.
Step 5: Evaluating alternative courses of action
– Is assessing the alternatives by weighing them in light of
premises and goals.
Step 6: Selecting a course of action
– Is the point at which the plan is adopted.
– It is the real point of decision making.
Step 7: Formulating derivative plans
– Derivative plans are those support the basic or main
plan.
Step 8: Numberizing plans by budgeting
– Converting them into budgets
Step 9: Implementing the plan
– Develop an action plan to implement it.
– The manager must decide these issues
– Who will do what
– By what date will the tasks be initiated &
completed
– What resources will be available for the process
(human & material)
– How will the plan be evaluated
– What reporting procedures are to be used
– What type & degree of authority will be granted
to achieve these ends
Step 10: Controlling & evaluating the results
Refers to:
– Monitor the progress; i.e. evaluate the reported
results,
– Make any modifications necessary
Organizational Objectives
Types of objectives in organizations
1. Organizational objectives:
 Formal targets of the organization
Help the organization accomplish its purpose.
concern areas as organizational efficiency,
productivity, and profit maximization.
Individual objectives
– Include high salary, personal growth and
development, peer recognition, and societal
recognition.
– The organizational and individual objectives must
be compatible
Goals and objectives
– Commonly used interchangeably
– Represent the end point towards which all
management functions are aimed.
– Are the important ends towards which
organizational and individual activities are
directed.
Purposes of goals
1. To provide guideline and direction
– They provide guidance and a unified direction
for people in the organization.
2. To facilitate planning
– Goal setting practices strongly affect other aspects of
planning; and good planning facilitates future goal
setting.
3. To inspire motivation and commitment
– Serve as sources of motivation to employees of the
organization.
4. To promote evaluation and control
– Performances can be assessed in the future in terms of
how successfully today’s goals are accomplished.
The Difference between goals and objectives
• Goals are the refinements of an organization’s mission where
as objectives state end-results and they are more specific
and need to be supported by sub-objectives.
• Goals are broad where as objectives are narrow.
• Goals are general intentions; where as objectives are precise.
• Goals are intangible; where as objectives are tangible.
• Goals are abstract; where as objectives are concrete.
• Goals can't be validated as is; where as objectives can be
validated.
• Goals can be likened to a mission and to complete the
mission one has to complete certain tasks.
• Objectives make up a goal and they are SMART (specific;
measurable; attainable/ achievable; relevant and time
bound)
Hierarchy of objectives/ goals
• Hierarchy of objectives is a series of objectives
linked to one another.
Top level
Mission/ purpose;
overall objectives;
Middle level
more specific overall
objectives; division
objectives
Lower level
department/ unit
objectives individual)
Management by objectives (MBO)
• Definitions & applications of MBO differ widely.
• MBO is a system of managing or a special planning
technique.
• Integrate many key managerial activities in a
systematic manner
• MBO is the philosophy of management and an
approach to planning.
• MBO emphasizes that the management and the
subordinates work together in identifying and
setting up of objectives.
Planning techniques
Forecasting
 Is one of the tools for planning and decision making.
Forecasting techniques
The quantitative forecasting techniques
 Use mathematical analysis.
a. Time-series analysis
 Extends past information into the future through
calculation of a best fit line.
 assumes that the past is a good predictor of the future
 useful when the manager has a lot of historical data
are available, trends are stable, and patterns are
apparent.
Casual modeling
• Determine casual relationships between different
variables.
• The common techniques are:
– Regression models are equations that use one
set of variable to predict another variable, i.e.
– Econometric models are casual models that
predict major economic shifts and the potential
impact of those shifts on the organization.
– Economic indicators are a key population
statistic or indexes that reflect the economic
well-being of a population.
The qualitative forecasting techniques
– Rely on individual or group judgments or
opinions
Some of the widely used qualitative approaches
to forecasting are
a. The Delphi method/ procedure
b. The jury-of-executive/ expert-opinion approach
c. The sales-force-composition method.
d. The customer evaluation/expectation
 Chapter Three
Decision Making

Introduction
Meaning and Definition of decision making
What is decision making?
• Decision making is defined as a rational choice among alternatives.
• Options are the necessary conditions for decision making.
• If there are no options to choose from, decision is not needed.
• In making decisions, a manager makes a judgment to reach at a
conclusion of selection from a list of known alternatives.
A manager makes decisions constantly while performing the functions
of
a. planning,
b. organizing,
c. staffing,
d. Leading and
e. controlling.
• Managers at all levels are engaged in
decision making and make big & small
decisions daily.
They make decisions while
• Planning a budget
• Organizing a work schedule
• Interviewing a prospective employee
• Watching a worker on the assembly line
• Making adjustment to projects, etc.
• Decision-making is the process of selecting an
alternative course of action that will solve a
problem.
• A problem exists whenever there is a difference
between what actually happens and what the
manager wants to have happen.
• Decision making refers to problem solving
• Problem solving is the process of taking
corrective action in order to meet objectives.
• Since a manger solves a problem through
making decisions, the two terms can be used
interchangeably.
• Some of the more effective decisions involve
creativity.
Rational Decision Making Process
Decision making process has seven (7) steps
Step 1. Define the problem
• Defining the problem is the critical step.
• The good method for manager to define the
problem is to focus on the problem but not on
the symptoms.
• Finding a solution to the problem will be greatly
aided by its proper identification.
• The consequence of not properly defining the
problems is wasted time & energy.
Step 2. Identify the limiting or critical factors
• Once the problem is defined, the manager needs to
develop the limiting or critical factors of the problem.
• Limiting factors are the constraints those rule out
certain alternative solutions.
• The common limitations are time, resources,
personnel, money, facilities, and equipment.
• They narrow down the range of possible alternatives.
Step 3. Develop potential alternatives
• Develop & list as many possible alternative solutions
to the problem as you can.
• These alternatives should eliminate, correct, or
neutralize the problem.
• Doing nothing about a problem sometimes is the proper
alternative at least until the situation has been thoroughly
analyzed.
• In developing alternatives, the goal has to be
creative and wide-ranging as possible.
• Sources for alternatives include:
– Experience
– Persons (whose opinions & judgments are
respected)
– The practice of successful manager
– Group opinions through the use of task forces
& committee
– The use of outside sources, including
managers in other organizations.
Step 4. Analyze the alternatives
• Decide the relative merits and demerits of each of the alternatives.
Step5. Select the best alternative
• Find a solution that appears to offer the fewest serious
disadvantages & the most advantages.
Step 6. Implement the solution
• A decision has to be put into effect.
• A decision has to be put into effect.
• Needs individual commitment
• decisions need effective implementation to yield the desired results.
Step 7. Establish a control & evaluation system.
On-going actions need to be monitored. It should provide feedback on
• how well the decision was implemented
• what results are positive & negative , and
• what adjustments are necessary to get the results that were wanted
& when the solution was chosen.
 Types of Decisions

Types of decisions are

1. Programmed decisions
• Made in response to repetitive & routing problems.
• Mathematical model used
2. Non – programmed decisions
• Made for novel and unstructured problems
• Used for problem hasn’t arisen in exactly the same
manner before,.
• are more complicated.
• They require the expenditure of lots of money, worth
of resources every year.
• Handled by general problem solving processes,
judgments, intuitions, and creativity.
Types of decisions & level of management
Programmed Decisions
• Concern of middle and lower level management
• Concern with problems that arise frequently
• Structured problems handled
Non- Programmed
• Concern with top level management
• Problems arise infrequently handled
• Unstructured problems handled
 Top Non
programmed

Unstructured

Structured
Programmed

Lower

Organizational Hierarchy Nature of problems

Nature of decision making
 Chapter Four
Organizing Function
4.1. Introduction
• Organizing refers to:
– The process managers organize the
necessary resources to accomplish their
goals.
– the second of the universal
management functions
– The process of establishing the orderly
use of resources by assigning &
coordinating tasks.
– transforms plans into reality
4.2.What is organizing? Meaning and
Importance
Meaning of Organizing.
– Organizing is structuring the work of the
organizations to accomplish the goals
identified in planning process.
– What is Organization?
• Organizations are groups of people, with
ideas & resources, working toward common
goals.
Purpose of Organizing:
• to make the best use of the organization's
The Organizing Process
• Organizing is an ongoing managerial process
whether forming a new organization, or
reorganizing the existing one,
Managers do take five fundamental steps.
1. Consider Plans and Goals:.
2. Determine the Work Activities Necessary to
Accomplish Objectives
3. Classify and Group Activities
4. Assign and Delegate Appropriate Authority
5. Design a Hierarchy of Relationships
Major Principles Used in Organizing
Organizing makes use of the following principles.
• Division of Work: is dividing large tasks into smaller
packages of work to be distributed among several people.
• Hierarchy (Scalar Chain): Scalar chain represents a line of
authority in an organization.
• Span of Management/ Span of Control: The span of
management or control refers to the number of people and
departments that report directly to a particular manager.
• Span of Control is an important decision because:
• It can affect what happens to work relationships in one
particular department.
• It can affect the speed of decision making in situations where
multiple levels in the hierarchy are necessarily involved.
 There are two types of span of
management
1. Wide Span of management
2. Narrow Span of management
The number of span of control (having wide
or narrow span of control) is determined by
the following variables
Complexity and variety of the
subordinates’ work
• The more complex subordinate’s job, the
fewer should be number of subordinates.
The ability and training of the subordinates
• The more capable and experienced the
subordinates are, the greater should be the
number of subordinates.
• If the subordinated being supervised are
talented individuals, you need not control
them closely. Therefore more number of
subordinates for one manager can be
assigned.
• The more trained the subordinates are, the
greater should be the number of subordinates.
The ability of the manager
• If the manager has high potential ability, the
number of subordinates can be made too
many.
• Company’s philosophy for centralization
and decentralization
• companies that favor centralization usually has
narrow span of control (tall structure)
• companies that encourage decentralization
usually display wide span of control (flat
structure)
• Coordination: Co-ordination is the process of
integrating the activities of separate departments
in order to pursue organizational goals effectively.
• Without co-ordination, people would lake lose
sight of their roles within the total organization
and be tempted to pursue their own
departmental interests at the expense of
organizational goals.
Departmentation: Departmentalization is
the process of combining jobs (activities)
into groups.
• These sets of activities may further be
sub-divided into sections or units.
• These groupings may be done on the basis
of primary function such as production,
finance, sales, personnel etc. or it may be
done on derivate basis, such as type of
customers, geographical areas etc.
Bases for Departmentalization
• Functional Depart mentation
• Territorial (Geographic) Departmentation
• Customer Departmentation
• Process Departmentalization