Module -2

Overview of Planning
DEBASISH KANUNGO
 Meaning of planning
Planning is deciding in advance what to do, how to do it, when to do
it and who to do it. It involves anticipating the future and consciously
Choosing the future course of action.

“According to Haimann, Planning is the

function that determines in advance what should be done.”
Definition
According to Terry : Planning is the selecting & relating of
facts and making & using of assumptions regarding the
future in the visualization & formulation of proposed
activities believed necessary to achieve the goal.

As per M S Hurlay : Planning is deciding in advance what is

to be done

As per J P Barger : Planning is an ability to visualize future

process & results.
CHARACTERISTICS

Future looking

Pre determined line of action

Done for specific period

Required at all level of mgt

Helps in directing

Helps in growth of the organisation

Continuous process
NATURE

An intellectual activity

The primary function of management

Continuous process

Helps in efficiency maximisation

Flexible

Common function

Applied at all level of management

IMPORTANCE

Converts uncertainty into certainty

Helps in operation

Helps in coordination

Taking complexity

Effective control

Effective utilization of resources

Avoiding business failure

ADVANTAGES
Better utilization of resources

Achieving objective

Improves competitive strength

Helps in motivation

Promotes growth

Develops rationality

Prevents hasty judgement

Reduced red-tapism ( excessive regulation)

...cont...

Encourages innovative thoughts

Improves flexibility

Development of efficient methods

Delegation of authority

Anticipation of crisis
 DISADVANTAGES / OBSTACLES

Unreliability of forecast : long term plans cant always be forecasted

Fear :Fear can be a barrier to effective planning. When management
focuses on the fear of change or lack of success rather than the
potential for growth, it makes it difficult to plan for the future of an
organization
Short-sightedness :Short-sighted behaviour can cause executive
managers to stop in their tracks. By focusing on current projects rather
than broader, long-term goals and on day-to-day management rather
than future growth and profitability, short-sightedness is a barrier to
effective planning.
Cont...
Communication Barriers : Difficulty in communicating goals and
plans can stall a planning session. Whether communication barriers
stem from language or cultural differences, or whether a manager
simply is an ineffective communicator, poor communication can
make it hard to express goals and organizational mission.

Poor Leadership : Leaders who are insecure or fearful in their own

position within an organization are ineffective when it comes to
planning. A leader must inspire those around him to work to their full
capability
Process of planning

The main step in planning proccess are as follow:-

Step 1- DEFINE THE TASK-
Step 2- IDENTIFY RESOURCES-

Step 3- CONSIDER ALTERNATIVE-

step 4- CREATE THE PLANNING-

Step 5- WORK THE PLAN-

Step 6- EVALUATE-
 Planning
Activity Formu‐ Importance
Period Approach
Covered lation
Long Short Formal Informal
Term Term

Proactive Reactive

Corporate Functional Strategic Operational

 [A] Activities Covered
[1] Corporate Planning
▪ Determines long‐term objectives of org. as a whole
▪ Generates plans to achieve these objectives
▪ Future Oriented
▪ Integrated
[2] Functional Planning
▪ Undertaken for sub‐functions within each major
function
▪ Derived from Corporate Planning
▪ Segmental
 [B] Importance of Contents
[1] Strategic
▪ Sets long‐term direction of org. which it wants to
proceed in future
▪ Encompasses all functional areas of Business
▪ Involves analysis of environmental factors
▪ Period is a problem
[2] Operational
▪ Tactical/Short‐term Planning
▪ Aimed at sustaining the org. in its production and
distribution of current products and/or services to
existing markets
 [C] Time Period
▪ Depends upon the type of Business and structure of
the organisation
▪ What may be a long‐term period of planning for one
organisation may be a short period for others.
▪ Ideal planning period depends upon
Commitment Principle:
“Long‐range planning is not really planning for future
decisions, but rather planning the future impact of
today’s decision.”
[1] Long Term Planning
▪ Strategic in Nature
▪ Involves, generally, 3‐5 yrs
▪ Involves analysis of environmental factors

[2] Short Term Planning

▪ Operational in nature
▪ Involves 6 months‐1 yr
▪ Aimed at sustaining organisation in its production
and distribution of current products and/or
services to existing market.
 [D] Approach
[1] Proactive Planning
▪ Designing suitable course of action in anticipation
of likely changes in relevant environment
▪ To take decisions in advance
[2] Reactive Planning
▪ Organisations response comes after
environmental changes have taken place
▪ Useful for fairly stable environment over a long
period of time
 [F] Degree of Formalisation
[1] Formal Planning
▪ Taken by larger org.
▪ Well‐structured, systematic process
▪ Involves different steps
▪ Rational
▪ Well‐documented and regular
[2] Informal Planning
▪ Taken by smaller org.
▪ Part of Manager’s regular activities
▪ Based on Manager’s:
 Memory of events
 Intuition
 Gut‐feeling
DECISION MAKING
 Decision making
Decision Making Process defined simply as:

“ A process of making a choice between a numbers of options and committing to a

future course of actions”.

According to George Terry:

“ Decision making is the selection based on some criteria from two or more
alternatives”

According to Andrew Smilagyi :

“ Decision making is the process involving information, choice of alternative actions,

implementations, and evaluation that is directed to the achievement of certain
goals
CHARACTERISTIC

A process of selection
An End process
An Intellectual process
A Dynamic process
Depends on situation
Leads to fulfillment of objective
Utilization resources
Involves evaluation of alternatives
 ELEMENTS
Intelligence
Experience
Educational standard
Social & religious attitude
Alternatives
Environment
Centralization vs decentralization
Individuals' psychology
Proper communication
BENEFITS

Better relation with employees

Loyalty from employees
Increases efficiency
Control becomes easy
 PROCESS
1. Identification of problem
2. Diagnosing the problem
3. Collection & analyzing relevant information
4. Discovering alternative course of action
5. Analyzing the alternatives
6. Screening alternatives
7. Selection of best alternative
8. Conversion of decision into action
PROBLEM IDENTIFICATION

Manager should find cause of the problem

On the basis of experience imagination &
judgment
DIAGNOSING

To diagnose manager needs

skill experience & education
COLLECTING & ANALYZING INFO

Identifying the problem from different

angles
DISCOVERING ALTERNATIVES

A problem can be solved in many

ways!!!!!
Scan the environment
ANALYZING ALTERNATIVES

Comparing one alternative with other

Preparing a list of alternatives
SCREENING ALTERNATIVES

EVALUATING ALTERNATIVES IN TERMS OF RISK

CONSIDERING TANGIBLE & INTANGIBLE FACTORS
RISK
ECONOMY
TIMING
LIMITATION F RESOURCES
SELECTION OF BEST ALTERNATIVES

Alternatives can be selected on the basis of

following approaches
1. Experience
2. Experimentation
3. Research & analysis
CONVERSION

MANAGER CONSIDERS THE POLICY OF THE

ORG.
ALTERNATIVES ARE COMMUNICATED TO
CONERNED PERSONS
DESIONS IMPLEMENTED
TECHNIQUES OF DECISION MAKING

Running a business requires the ability to

make good decisions. One wrong choice can
affect the entire company. It is crucial for
business owners to understand the weight
behind each decision they make, and to
continually improve their decision-making
skills.
There are two approaches and ten tools and
techniques used for decision making
 APPROACHES

CLASSICAL APPROACH ADMINISTRATIVE

APPROACH
The Classical Model

List alternatives Assumes all information

& consequences is available to manager

Assumes manager can

process information
Rank each alternative
from low to high
Assumes manager knows
the best future course of
the organization

Select best
alternative

35
 The Classical Model
Classical model of decision making: a prescriptive model that tells how
the decision should be made.

Assumes managers have access to all the information needed to

reach a decision.

Managers can then make the optimum decision by easily ranking their
own preferences among alternatives.

Unfortunately, managers often do not have all (or even most) required
information.
36
 The Administrative Model
Administrative Model of decision making: Challenged the classical
assumptions that managers have and process all the information.

As a result, decision making is risky.

Bounded rationality: There is a large number of alternatives and

information is vast so that managers cannot consider it all.

Decisions are limited by people’s cognitive abilities.

Incomplete information: most managers do not see all alternatives

and decide based on incomplete information. 37
Why Information is Incomplete

Uncertainty Ambiguous
& risk Information

Incomplete
Information

Time constraints &

information costs
38
 Incomplete Information Factors
Time constraints and Information costs:
Managers do not have the time or money to search for all alternatives.

This leads the manager to again decide based on incomplete information.

Satisficing:

Managers explore a limited number of options and choose an

acceptable decision rather than the optimum decision.

This is the response of managers when dealing with incomplete

information.

Managers assume that the limited options they examine represent all
options. 39
 TOOLS & TECHNIQUES
There are dozens of different techniques and tools that can be used
when trying to make a decision. Here are some of the more popular
options, many of which use graphs, models or charts.
Decision matrix: A decision matrix is used to evaluate all the options of
a decision. When using the matrix, create a table with all of the options
in the first column and all of the factors that affect the decision in the
first row. Users then score each option and weigh which factors are of
more importance.  A final score is then tallied to reveal which option is
the best.
T-Chart: This chart is used when weighing the plusses and minuses of
the options. It ensures that all the positives and negatives are taken
into consideration when making a decision.
 CONT…
1. Multivoting: This is used when multiple people are involved in making a
decision. It helps whittle down a large list options to a smaller one to the
eventual final decision.

2. Pareto analysis: This is a technique used when a large number of decisions

need to be made. This helps in prioritizing which ones should be made first
by determining which decisions will have the greatest overall impact.

3. Cost-benefit analysis: This technique is used when weighing the financial

ramifications of each possible alternative as a way to come to a final
decision that makes the most sense from an economic perspective.
1. SWOT Analysis: SWOT stands for strengths, weaknesses,
opportunities and threats, which is exactly what this planning tool
assesses.

2. PEST Analysis: An acronym for political, economic, social and

technological, PEST can improve decision-making and timing by
analyzing external factors. This method considers present trends
to help predict the future ones
CONTROL
 CONTROL
1. As per Knootz and O’Donnel “”Controlling is the measurement of
accomplishment against the standards and correction of
deviations to assure attainment of objectives according to the
plans””

2. As per Henry Fayol “” control consists of verifying whether

everything occurs in conformity ,is with the plans adopted ,the
instructions issued and principles established .
 CONTROL

1. As per G. Terry “ controlling is determining what is being

accomplished, that is evaluating the performance and if
necessary applying corrective measures so that performance
takes place as per the plans””

2. As per Robert N Anthony “management control is a process

by which managers assure that resources are obtained and
used effectively and efficiently””
CONTROL AREAS
The main areas of control are

1. Policies of the organisation

2. Personnel control

3. Control over capital expenditure

4. Control over production

5. Control over wage and salary paid

6. Control over cost of production

7. Control over public relation

8. Control over R&D

9. Control over tools and equipments

 FUNCTIONS
Following are the characteristics of controlling function of management-

1. Controlling is an end function- A function which comes once the

performances are made in conformities with plans.

2. Controlling is a pervasive function- which means it is performed by

managers at all levels and in all type of concerns.

3. Controlling is forward looking- because effective control is not

possible without past being controlled. Controlling always look to
future so that follow-up can be made whenever required.
Controlling is a dynamic process- since controlling requires taking
review methods, changes have to be made wherever possible.

Controlling is related with planning- Planning and Controlling are

two inseparable functions of management. Without planning,
controlling is a meaningless exercise and without controlling,
planning is useless.

Control involves management : it recommends the future course of

action on the basis of evaluation and measurement

Influencing factor : control avoids the undesirable happenings and

shapes the future plan
Process of control

Control has the following steps

Establishing standards

Measuring performance

Comparison of actual with standards

Taking corrective actions

Establishing standards

Setting standards are useful

Standards may be qualitative or quantitative

Quantitative : no. of units, revenue, hours employees

Qualitative : goodwill,morale,motivation etc

Measuring performance

Performance should be compared with the established

standards

Several techniques are used to measure performance

Comparison of actual with standards

The actual performance should be measured with standards

If Actual performance=standards ( no need for further action)

Taking corrective actions

Management has to find out the reason for deviation before

taking corrective actions

Deviation may be due to defective selection ,lack of motivation

etc
TYPES OF CONTROL

Basic types of managerial control are

Standardising control
Preserving control
Delegation of authority control
Measurement control
Motivating control
Standardising control

Controls are use to standardise performances for

increasing efficiency

Cost may be reduced by time and motion studies,

inspections and work schedules
Preserving control

Company assets are protected or preserved through the

allocation of responsibilities.

Proper accounts are maintained for assets and its usage .

Delegation of authority control

Control puts some limits to delegation of authority .

Approval of top management is needed.

Policy manual, procedure manual, and internal audit are

some of the techniques for this
Measurement control

Controls are used to measure job performances

Performances are measured through budgets, reports,

production rate etc
Motivating control

Controls are designed to motivate employees

It includes promotion, rewards, profit sharing,

TECHNIQUES FOR CONTROL
1. Statistical control reports
2. Personal observation
3. Cost accounting & cost control
4. Break even analysis
5. Special control reports
6. Management audit
7. Return on investment
8. Zero base budgeting
9. Standing orders
10. Budgetary control
….cont….
1. Internal audit
2. Responsibility accounting
3. Managerial statistics
4. PERT ( PERFORMANCE EVALUATION & REVIEW
TECHNIQUE)
5. CPM ( CTRITICAL PATH METHOD)
6. Production control
7. External audit & control
8. MIS( Management Information System)
 ORGANISATIONAL STRUCTURE
There are many different kinds of organizational structures found
in companies.

Organizational structures can be tall, in the sense that there are a

number of tiers between entry-level employees and the leaders of the
company.

Organizational structures can also be fairly flat, in the sense that there
are only a couple of levels separating the bottom from the top.

It depends on goals, pay structure, and division of work

4 common types of organizational
structures

1. Functional

2. Divisional

3. Matrix

4. Flatarchy
 Functional Organization Structure
A functional organization structure is a hierarchical organization structure
wherein people are grouped as per their area of specialization.
These people are supervised by a functional manager with expertise in the
same field. This expertise helps him effectively utilize the skills of employees,
which ultimately helps organizations in achieving its business objectives.
In this kind of organization structure, people are classified according to the
function they perform within the organization.
The organizational chart for a functional organization structure shows the
president, vice president, finance department, sales department, customer
service, administration, etc.
Each department will have its own department head who will be responsible
for the performance of his section. This helps the organization control the
quality and uniformity of performance.
The functional organization structure is suitable for an organization
which has ongoing operations and produces standard products or
goods, such as manufacturing industries.

Here, all authority (i.e. budget allocation, resource allocation, decision

making, etc.) stays with the functional manager. Usually, the position
of the project manager does not exist in this type of organization
structure
 Advantages of the Functional
Organization Structure
Employees are grouped by their knowledge and skills, which helps
achieve the highest degree of performance.

Employees are very skilled. Efficiency is gained because they are

experienced in the same work and they perform very well.

Their roles and responsibilities are fixed, which facilitates easy

accountability for the work.

The hierarchy is very clear and employees don’t have to report to multiple
supervisors. Each employee reports to his or her functional manager,
which reduces the number of communication channels.
There is no duplication of work because each department and each
employee has a fixed job responsibility.

Employees feel secure, and therefore, they perform well without fear.

Since there is a sense of job security, employees tend to be loyal to the

organization.

Employees have a clear career growth path.

Cooperation and communication are excellent within the department.

Disadvantages of the Functional Organization Structure
Employees may feel bored due to the monotonous, repetitive type of work and
may lose enthusiasm for the job.

If the performance appraisal system is not managed properly, conflicts may

arise. For example, an employee may feel demoralized when a lower performing
employee is promoted.

A highly-skilled employee costs more.

The departments have a self-centered mentality. The functional manager pays

more attention to his department; he usually doesn’t care about other
departments.
Communication is poor among the departments, which causes poor inter-department
coordination. This decreases flexibility and innovation. Moreover, there is a lack of
teamwork among different departments.
Employees may have little concern and/or knowledge about events outside their
department. This causes obstacles in communication and cooperation.
The functional structure is rigid, making adaptation to changes difficult and slow.
Due to bureaucratic hierarchy, delays frequently occur in decision making.
Generally, the functional manager makes decisions autocratically without consulting his
team members. This may not always work in favor of the organization.
When the organization becomes larger, functional areas can become difficult to manage
due to their size. Each department may start behaving like a small company with its own
facilities, culture, and management style.
  Divisional organizational structure
A divisional organizational structure usually consists of several parallel
teams focusing on a single product or service line.
Examples of a product line are the various car brands under General
Motors or Microsoft's software platforms. One example of a service line is
Bank of America's retail, commercial, investing and asset management
arms.
Unlike departments, divisions are more autonomous, each with its own
top executive--often a vice president--and typically manage their own
hiring, budgeting and advertising.
Though small businesses rarely use a divisional structure, it can work for
such firms as advertising agencies which have dedicated staff and
budgets that focus on major clients or industries.
 Advantages
Divisions work well because they allow a team to focus upon a single
product or service, with a leadership structure that supports its major
strategic objectives.

Having its own president or vice president makes it more likely the
division will receive the resources it needs from the company.

Also, a division's focus allows it to build a common culture and esprit

de corps that contributes both to higher morale and a better
knowledge of the division's portfolio.

This is far preferable to having its product or service dispersed

among multiple departments through the organization.
 Disadvantages
A divisional structure also has weaknesses. A company comprised of competing
divisions may allow office politics instead of sound strategic thinking to affect its
view on such matters as allocation of company resources.
Thus, one division will sometimes act to undermine another.
Also, divisions can bring compartmentalization that can lead to incompatibilities.
For example, Microsoft's business-software division developed the Social
Connector in Microsoft Office Outlook 2010. They were unable to integrate
Microsoft SharePoint and Windows Live until months after Social Connector could
interface with MySpace and LinkedIn.
Some experts suggested that Microsoft's divisional structure contributed to a
situation where its own products were incompatible across internal business units.
 Matrix organizational structure
The matrix organizational structure is a typical because it brings
together employees and managers from different departments to
work toward accomplishing a goal.

The matrix structure is a combination of the functional and divisional

structures.

The former divides departments within a company by the functions

performed, while the latter divides them by products, customers or
geographical location. Small business owners should understand the
benefits and limitations of the matrix structure before implementing
it in their businesses
The matrix organizational structure divides authority both by
functional area and by project. In a matrix structure, each employee
answers to two immediate supervisors: a functional supervisor and
a project supervisor.

The functional supervisor is charged with overseeing employees in

a functional area such as marketing or engineering.

Project supervisors manage a specific and often impermanent

project.

They absorb employees from various functional areas to complete

their project teams. This kind of organizational structure has
several advantages.
Type of Matrix Organization Structure

The matrix organization structure can be classified into

three categories, largely depending on the level of power of
the project manager. These categories are as follows:

Strong Matrix Structure

Balanced Matrix Structure

Weak Matrix Structure

Advantages of a Matrix Organization Structure
Highly skilled and capable resources can be shared between the
functional units and projects, allowing more open communication
lines which help in sharing the valuable knowledge within the
organization.
The matrix structure is more dynamic than the functional structure
because it allows employees to communicate more readily across the
boundaries, creating a good, cooperative, work environment which
helps to integrate the organization.
Employees can broaden their skills and knowledge areas by
participating in different kinds of projects. The matrix structure
provides a good environment for professionals to learn and grow their
careers.
In functional departments, employees are very skilled, and project
teams can get these highly-skilled employees whenever their
services are needed.

Since there is a sense of job security, employees tend to be loyal

to the organization and perform well, and therefore, the efficiency
of a matrix organization is higher.
 Disadvantages of a Matrix Organization
Structure
Employees may have to report to two managers, which adds
confusion and may cause conflict. This usually happens in a balanced
matrix organization where both bosses have equal authority and
power.

A conflict may arise between the project manager and the functional
manager regarding the authority and power.

If the priorities are not defined clearly, employees may be confused

about their role and responsibility, especially when they are assigned a
task which is different from, or even counter to, what they were doing.
If any resource is scarce, there might be competition to use it, which
may cause hostility within the workplace and could affect the
operation.
It is generally perceived that matrix organizations have more
managers than required, which increases overhead costs.
In a matrix organization, the workload tends to be high. Employees
have to do their regular work along with the additional project-related
work, which can exhaust them. It is also possible that the employee
may ignore either his functional responsibilities or project
management responsibilities if overtaxed.
A matrix structure is expensive to maintain. Organizations have to pay
extra to keep resources because not all resources will be occupied at
all times. Some resources are needed only for a short duration.
 Flat organisation
A flat organisation will have relatively few layers or just one layer of
management.
This means that the “Chain of Command” from top to bottom is short
and the “span of control is wide”.
Span of control refers to the number of employees that each
manager is responsible for.
If a manager has lots of employees reporting to them, their span of
control is said to be wide.
A manager with a small number of direct reports has a narrow span
of control. Due to the small number of management layers, flat
organisations are often small organisations.
Advantages of Flat Organisations

Greater communication between management and workers.

Better team sprit as fewer management layers increase

interraction between employees on different levels (layers).

Less bureaucracy and easier decision making

Fewer management layers may reduce costs as managers cost

more than non managers. Also employees at higher levels in the
organisation expect to be paid more than those on lower levels
 Disadvantages of Flat Organisations
Employees may have more than one manager as there are a
number of managers at the same level in the organisation

May hinder the growth of the organisation especially if managers

have wide spans of control.

Structure limited to small organisations such as partnerships, co-

operatives and private limited companies.

Lack of layers may reduce opportunities for high level strategic

management.