COURSE MATERIAL

FYBBA Honors: SEM I: ESSENTIALS OF MANGAMENT

GLS UNIVERSITY
FACULTY OF BUSINESS ADMINISTRATION | FYBBA: REGULAR: SEMESTER I
 UNIT 1
Introduction to Management, Forecasting, Planning and
Decision-Making

INTRODUCTION TO MANAGEMENT
Management is “The art of getting things done by a group of people with the effective utilisation of available
resources”.

Peter F. Drucker defines management as, “Management is an organ; organs can be described and defined only
through their functions.”

According to Henry Fayol, “To manage is to forecast and plan, to organise, to compound, to coordinate and to
control.”

According to F.W. Taylor, “Management is the art of knowing what you want to do and then seeing that it is
done in the best and cheapest way.”

According to Koontz and O’Donnel, “Management is the creation and maintenance of an internal environment In
an enterprise where individuals, working in groups, can
perform efficiently and effectively towards the attainment of group goals. It is the art
of getting the work done through and with people in formally organised groups.”

With the development of an organisation the complexities also increase and there
comes the need of an effective management system. This is the requirement of every
organisation, not necessarily a business organisation but also for banks, schools,
hospitals and many more.

The concept of management was developed from the days of Adam. Management is
required where a group of people are working to achieve any objective.

Henry Fayol gave the management theory in (1916) which was based on his
experiences in a mining company. This management theory was compiled in a book
named “The General and Industrial Management”.

He classified the elements of management into five categories as mentioned below:

Planning
Organising
Commanding
Co-ordination
Control

Other important contribution was made by Frederick Winslow Taylor (19th century)
who was the father of Scientific Management. He gave the following principles of
Scientific Management:

Science is not a rule of thumb: Where the worker is allotted fair work,
standardised and proper system of payment which discarded the old method of
working.

Harmony in group action: There should be peace and friendship in the group
action and any kind of dissatisfaction should be eliminated.

Co-operation: There should be cooperation between management and workers;

this is achieved by mutual understanding and change in thinking.

Maximum output: It is achieved through division of work and responsibility by the

management and workers together.

Improvement of workers: Workers should be well examined on the physical,

educational and psychological parameters and should be provided with the training for
their growth.

Some of the other major works in the management field were done by Peter F.
Drucker, Max Weber, George Elton Mayo, Mary Parker Follett, Henry L. Gantt etc.

CHARACTERISTICS OF MANAGEMENT
The following are the characteristics of management:
management is an art as well as a science
it is an activity of effective utilisation of available resources
it is a continuous process
each activity in management is directed towards the achievement of pre-determined
objectives
it is a group of organised activities
it is a factor of production
it is a system of activity
it is a discipline
it is a purposeful activity
it is a distinct entity
it aims at maximising profit
it helps in effective decision making
it is a profession
the principles and practices of management have universal applications
it is dynamic in nature
it is needed at all levels
it is the function of executive leadership

FUNCTIONS/ PROCESS OF MANGEMENT:

POSDCORB is coined by the co- work of Luther Gulick and Lyndall Urwick.

PLANNING:
➢ Planning is the fundamental management function, which involves deciding beforehand,
➢ what is to be done,
➢ when is it to be done,
 ➢ how it is to be done and
➢ who is going to do it.
➢ It is an intellectual process which lays down an organization's objectives and develops various courses of
action, by which the organization can achieve those objectives.
➢ It chalks out exactly, how to attain a specific goal. It is the brain of management process.

ORGANISING:
➢ It involves deciding the ways and means with which the plans can be implemented.
➢ It entails defining jobs and working relationships, assigning different tasks associated with the plans,
arranging and allocating resources, design a structure which distinguishes duties, responsibilities and
authorities, scheduling activities, in order to maintain smoothness and effectiveness in operations.

STAFFING:
➢ It involves obtaining, utilizing and retaining, qualified and competent personnel to fill all positions of an
organization, from top to operative echelon.
➢ In finer terms, staffing is placing the right person at the right job.

DIRECTING:
➢ The process of instructing, guiding, counselling, motivating, and leading people in an organization to
achieve the organizational goals is known as Directing.
➢ It encompassed many elements like motivation, leadership, supervision, besides communication.
➢ It is a managerial function which is performed throughout the life of an organization. It is the heart of
management process.

CO- ORDINATION:
➢ According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity
of action in the pursuit of common goals”.
➢ Co-ordination is the unification, integration, synchronization of the efforts of group members so as to
provide unity of action in the pursuit of common goals. It is a hidden force which binds all the other
functions of management.

REPORTING:
➢ Reporting involves regularly updating the superior about the progress or the work-related activities.
➢ The information dissemination can be through records or inspection.

BUDGETING:
➢ Budgeting is the process of allocating resources to various activities indicated in the plan.
➢ It is the financial version of the plan.
➢ Changes in the operational plan will change the budget.
 ➢ If the changes in the operational plan hits snags due to budget constraints the executives has to find new
sources of funds or scale down the ambitions in the plan.

FORECASTING
INTRODUCTION
Forecasting is the technique of estimating the relevant future events and problems on the basis of past and
present behaviour or happenings. The future cannot be guessed without knowing the events which have
occurred in the past and are occurring presently. Thus, forecasting involves detailed analysis of the past and
present events to get a clear cut idea about probable events in the future. So, forecasting may require the use of
various statistical techniques. At the same time, all the forecast does not require the same type of statistical
analysis or techniques. Thus, forecasting depends upon an analysis of past events and current conditions with a
view to draw conclusions about future events.

MEANING
Forecasting is a systematic guessing of the future course of events with the help of analysis of past and present
events.

Forecasting provides a basis for a planning. Planning cannot be done without forecasting. According to Fayol,
forecasting includes both assessing the future and making provision for it.

DEFINITION
Neter and Wasserman state that, "Business forecasting refers to the statistical analysis
of the past and current movement in the given time series so as to obtain clues about the
future pattern of those movements."

FORECASTING PROCESS

Forecasting period may be a short-term or long-term. In either of the cases certain stages or steps have to be
passed through while making the forecast. These stages or steps have been briefly discussed below:
Developing the Basis:
The future estimates of various business operations will have to be based on the results obtainable
through systematic investigation of the economy, products and industry.

Estimation of Future Operations:

On the basis of the data collected through systematic investigation into the economy and industry
situation, the manager has to prepare quantitative estimates of the future scale of business operations.
Here the managers will have to take into account the planning premises.

Regulation of Forecasts:
It has already been indicated that the managers cannot take it easy after they have formulated a business
forecast. They have to constantly compare the actual operations with the forecasts prepared in order to
find out the reasons for any deviations from forecasts. This helps in making more realistic forecasts for
future.

Review of the Forecasting Process:

Having determined the deviations of the actual performances from the positions forecast by the managers, it
will be necessary to examine the procedures adopted for the purpose so that improvements can be made in the
method of forecasting.

FORECASTING TECHNIQUES OR TYPES OR METHODS:

Various techniques of forecasting are used in the field of business because the future of any business can never
be predicted with certainty. An accurate forecasting may reduce the degree of uncertainty. However, no
technique can be considered as a correct one which universally applicable. In practice, more than one technique
can be combined for making the forecasting effective. So, some of the techniques are discussed below:

1. Similarity Events Method:

It is otherwise called Historical analogy method. In this method, forecast is made on the basis of
events happened in the past which are most similar to current events. For example, in
analyzing the changes in the attitude of employee regarding in equality, the management can
find out prudential attitude of employee in the days to come by considering past attitude. The
similarity of events of past and present is properly analyzed in order to make an effective
forecast.

2. Jury of Executive Option:

This method is also called Delphi technique. The opinion of experts is sought under this method
and the meritorious one is accepted. For example, an opinion on profitability of starting a new
unit is received from various experts and decision is made on the basis of experts opinion.

The opinion may be on the area of sales, finance, purchase and the like.
Some ideas are generated which can be evaluated for their feasibility and profitability. Experts
may requested comment on the opinion of the others in order to arrive at a consensus of
opinion.

The reason for favouring a particular opinion by an expert is known to the management.

3. Survey Method:
Field survey can be conducted to collect information regarding the attitude of people. For
example, information may be collected through surveys about the savings habits of the public.
Both quantitative and qualitative information may be collected.
Such information is useful for proper forecasting. The demand for both new and existing products can be
forecast through survey method.

4. Sales Person's Opinion:

The sales force of the existing product can be forecast with the help of opinions of sales persons.
Sales persons are very closer to the consumers and/ or customers. So, the opinions expressed
by the sales persons are of great value. A reasonable sales trend can be predicted based on the
opinions of sales persons.

5. Business Barometers:
Index Numbers are used to measure the state of condition of business between two or more
periods. Business trend, seasonal fluctuations of a business and cyclical movements are
studied with the help of index numbers. Index numbers indicate the direction in which the
business is going on. Besides these index numbers give some advance signals for likely changes
in the future. For example, a pay rise to the government employees, industrial and agricultural
employees may reflect higher sales volume and higher income after some time. Thus, it is very
easy to forecast the future trend of a business with the help of business activity index number.
However, index numbers do not give an assurance for success. The reason is that all types of
business do not follow the general trend.

6. Expectation of Consumer:
Under this method, a survey is conducted in order to know the future needs of consumers. An
 overall forecast can be made on the basis of the expectations of consumers. An organisation
can find out the consumer preferences, impact of advertisement on buying behaviour and the
lacuna prevailing in the existing product.
This is also known as "Marketing research Method."

7. Time Series Analysis:

In time series analysis, the future is forecast on the assumption that past activities are good
indicators of future activities. In other words, future activities are the extension of the past.
This method is quite accurate where future is expected to be similar to the past. Time series
analysis can be applied. Only when the data are available for a long period of time. In a
nutshell, forecasts are based on the assumption that the business conditions affecting its
steady growth or decline are reasonably expected to remain unchanged in the future.
 Introduction to Planning
Planning is essential in every walk of life. Each and every person has to frame a
plan to proceed to achieve his/herschemes. The plan period may be short or long.
Planning is the first and foremost function of management. F.W. Taylor had
pointed out in his report on Scientific Management that planning is separated
from execution.

Meaning and Definition of Planning

Planning is an intellectual process of thinking resorted to decide a course of
action which helps in achieving the pre-determined objectives of the
organisation in future.

Planning provides a clear sense of direction to the activities of the organisation

and to the job behaviour of managers and others. It strengthens their confidence
in understanding where the organisation is heading and best way to make the
organisation move along the chosen path is to achieve the goals of the
organisation.

According to Koontz and O’Donnel, “Planning is deciding in advance what to do,

how to do it, when to do it and who is to do it. It bridges the gap from where we are
to where we want to go.”

According to George R. Terry, “Planning is the selecting and relating of facts and
the making and using of assumptions regardingthefuture in thevisualization
andformulation ofproposedactivities believednecessary to achieve desired results.”

Henry Fayol defined planning as “Planning is deciding the best alternatives

among others to perform different managerial operations in order to achieve the
pre- determined goals.”

Characteristics of Planning
The following are the characteristics of planning
1. planning is looking into the future
2. planning involves pre-determined line of action
3. planning discovers the best alternative out of available many
alternativesplanning requires considerable time for
implementation
4. planning is a continuous process
5. planning’s object is to achieve pre-determined objectives in a
better wayplanning integrates various activities of the
organization
6. planning is done for a specific period
7. planning not only selects the objectives but also develops policies,
programs andprocedures to achieve the objectives
8. planning is required at all levels of management
9. planning is an inter-dependent process which co-ordinates the various
businessactivities
 10.planning directs the members of the organisation
11.growth and prosperity of any organisation depends upon planning

Objectives of Planning
Planning in any organisation serves to realise the following
objectives:

1. Reduces Uncertainty
2. Induces co-operation and coordinationReduces competition
3. Achieves the predetermined goals
4. Anticipates unpredictable contingencies

Nature of Planning
There are number of ways available to complete a certain job. Planning chooses
any one of the best alternatives out of the available ones. Economy and certainty
are considered while selecting the best alternative.
Thus, the nature of planning is brieflydiscussed below:
1. planning is the primary function of managementplanning contributes to
objectives
2. planning is an intellectual activity planning results in higher efficiency
planning is a continuous process planning is flexible
3. planning provides unity and consistencyplanning is common to all
4. planning is the basis for all managerial functionsplanning coordinates
various business activities planning considers limiting factors

Importance of Planning
Planning helps the businessman get early success. Success without planning is
almost impossible in business. So,the planning function is very important due to
the followingreasons:
1. planning manages objectives
2. planning converts uncertainty into certainty planning enables economy in
operation planning helps in coordination
3. planning tackles increasing complexities of businessplanning provides
effective control
4. Effective utilisation of resources is achieved through Planning
5. Planning avoids business failures
Steps in Planning Process
The planning process is different from one plan to another and one organization
to another. Given below is a planning process that may be treated as commonly
acceptable:
Analysis of external environment
Analysis of internal environment
.determination of objectives
determining planning premises and constraints
examination of alternative courses of action
weighing alternative course of action
selection of the best alternative
establishing the sequence of activities formulation of action programs
determining secondary plans
employees follow-up and evaluation

Methods of Planning
According to the usage and nature of planning, the methods or types or
componentsor elements of planning are divided into the following categories:
Objective Plans: Objectives are the basic foundation for planning operations. It
also plays an important role in the managerial work of organizing, directing, and
controlling.
Standing Plans: These plans include policies and procedures that are liable for
repetitive action. These plans provide a ready guideline for solving recurring
problemsand are not used for special problems.
Master Plans: It covers the complete course of action along with the
consideration of time and strategy. Small plans are added together in a way to
speed up the course ofaction.
 Advantages of Planning
The advantages of planning are as given
below:better utilization of resources
helps in achieving
objectives minimizes future
uncertaintiesimproves
competitive strength
effectively controls
the economy in operation provides
motivation and enables cooperation
promotes growth and improvement
develops rationality among management
executivesdelegation of authority facilitated
encourages innovation
prevents hasty judgment
reduces red-tapism
improves the ability to cope with change
creates forward-looking attitude in management
develops efficient methods and procedures of actionin
anticipation of crisis
Disadvantages of Planning
Though planning is a primary function of management and it facilitates other
functionsof management, it suffers from certain limitations as given below:
Inflexibility
Limitation of
forecasts
Unsuitability
Time
consuming
Costly
Mental ability
False sense of security
Delay during emergency period
CLASSIFICATION OF PLANS
1. Classification on the Basis of Levels in the Organisation:
Similar to objectives, plans are made for different organisational levels.
Plans classified on this basis are discussed below:

1. Strategic Plans:
Strategic plans are made to achieve the overall organisational goals. They
achieve strategic goals through effective allocation of resources over different
functional/ product areas. They match the organisational strengths and
weaknesses with the environmental opportunities and threats. They are
comprehensive and general in nature. They are made for all functional areas of
business. They are made by the top- level managers in consultation with board
members and middle- level managers and generally relate to a period of more
than 5 years.
The questions most commonly answered through strategic plans are:
(a) What are the ways in which overall goals can be achieved?
(b) How to allocate resources over different areas of the enterprise?
(c) How to respond to the external environment?
(d) How to coordinate the firm’s internal strengths and weaknesses with its
externalenvironment?
Strategic plans are usually made to plan the growth rate, diversification plans,
changethe product line etc.
2. Tactical Plans:
Tactical plans are the means to support and implement strategic plans. They are
made to achieve tactical goals of the organisation. They are related to
departmental goals of the enterprise. These plans are made by middle-level
managers in consultation with lower-level managers and normally relate to
intermediate period of 1 to 5 years. While strategic plans are general in nature,
these plans are more specific and precise.
The important questions answered through tactical plans are:
(a) How to deal with changes in competitors’ policies?
(b) How to deal with changes in the demand for products?
(c) How to increase company’s share in the market?
3. Operational Plans:
Operational plans support the tactical plans. They are made to achieve
operational goals of the enterprise. These plans are highly specific and
determine what different sections of the organisation need to perform. While
resources are allocated in strategic plans, their efficient use to achieve overall
organisational goals is ensured by operational plans.
These plans are made by lower-level managers in consultation with middle-level
managers and relate to short periods of time of less than one year, say some
weeks, months or even days. Different single-use and standing plans are made in
operational planning to achieve the overall organisation goals. Plans to meet the
delivery schedules, adjust the production schedules, budget the costs etc. are the
common activities performed in operational planning.
Plans (strategic, tactical and operational) classified on the basis of levels in
the organisation are tabulated as follows:
 These plans related to three types of goals can be diagrammatically
represented as follows:
2. Classification on the Basis of Use:
On the basis of use, plans can be:

1. Single-Use Plans
2. Standing Plans.
Single-Use Plans:
Single use plans are made to serve a specific objective. They cease to exist once
the objective is achieved. They are, thus, short lived plans made for
nonrecurring activities. For example, if company wants to install a machine, it
has to plan its purchase; whether it wants to buy a new machine or a second hand
machine, whether it wants to buy or acquire it on lease. Various alternative
courses of action will be guided by their respective returns and costs and once
the machine is acquired, the plan does not exist any more. Single use plans are
intended to achieve a particular objective which is not likely to be repeated in
future. These are meant to deal with problems which are non-repetitive and
distinct in nature
Standing Plans:
Standing plans are made to deal with situations which occur repeatedly in the
organisation. They standardize the recurrent activities so that routine decisions
with respect to such activities can be taken by lower level managers and top-level
managerscan concentrate on strategic issues.
These plans can be repeatedly used in similar situations. Managers refer to these
plans to deal with problems of recurring nature and, thus, save time, money and
efforts in making decisions every time a problem of the same type arises.
For example, standing plans can be made for dealing with leave cases of
employees.Every time an employee goes on leave, he follows leave rules framed
in the standing
plans. This saves top managers from the botheration of personally dealing with
leave case of every employee. “Standing plans are directives that serve to
increaseorganisational effectiveness by standardizing many routine decisions.”
Merits of standing plans:
(a) These plans guide daily behaviour so that managers can delegate part of
theirwork load to subordinates. Standing plans, therefore, facilitate delegation.
(b) They facilitate co-ordination as there is pre-determined way to solve
recurrentorganisational problems.
(c) As the decisions for recurring problems are routinized, organisational
efficiencytends to increase.
(d) They provide ready basis for making decisions and, thus, facilitate fast
decision-making.
(e) They save top managers’ time, money and energy by providing a basis for
quickaction.
1. Long-term Plans:
These plans are normally made for a minimum period of 5 years. They relate to
goals and usually cover all functional areas of the business. Future being
uncertain, these plans foresee environmental changes (by applying techniques of
forecasting) so that organisations can accept them when they occur. They relate
to investment in fixed assets which generate returns over a long-period of time.
They aim to achieve strategic goals of the organisation over a long time period.
2. Medium-term Plans:
These plans normally relate to a period of one to 5 years. They are the
supporting plans that help to achieve long-term plans. Plans made to analyse the
impact of advertisement campaign on expansion of business into new markets are
medium-termplans. These plans usually relate to tactical goals.
3. Short-term Plans:
These plans are normally prepared for a period of one year, though in some
cases, these may even relate to a period of less than one year. They look into
immediate future of the company. They are usually made for specific functional
areas. Plans made to retain or promote sales, to train workers (so that labour
turnover rate is reduced) are short- term plans. They relate to operational goals
of the enterprise.
1. Production plans:
“Production plans consist of planning and overseeing the process of converting
inputs into value – enhanced output.” The areas of production plans are:
production system, efficiency of operations, location of company facilities,
design of company facilities, and day-to-day process planning.
These plans set the targets of production. They are designed according to
production policy of business organisations. Firms may produce throughout the
year, pile inventories and sell them during peak season or produce only during
the peak season of demand. In the latter case, they can diversify into other areas
during slack seasonto keep their plant and machinery occupied.
2. Marketing plans:
Marketing plans are designed by marketing managers. They “tell sales and
marketing personnel who will sell what, where, when, to whom, in what quantity
and how.” They help to sell the products and develop new products to increase
the share of market; to plan for sale in cash or credit; if it decides to sell on
credit, to determine the credit terms and credit policies for the sales department.
Production plans and marketing plans aim to satisfy consumer needs and are
inter-dependent. The productiondepartment produces according to expected sale
and sales department sells what is produced.
3. Financial plans:
Finance managers prepare financial plans for raising and utilizing / allocating
financial resources effectively. These plans meet the fixed and working capital
requirements of the firm. They plan for financial cuts during recessionary
economic conditions and raising additional funds during boom.
All departments need funds for their effective functioning. Production
department needs raw material for smooth flow of production and marketing
department needs funds for advertising and sales promotion campaigns.
Financial plans contribute to financial strength of the organisation through
effective cost control techniques that reduce cost of operations.
4. Human resource plans:
These plans make optimum use of the most productive asset of the organisation,
its people. They ensure best match between the employees and their jobs, thus,
avoiding manpower shortages and surpluses. They forecast the demand for
labour, analyse the present supply and balance the projected demand and supply
of labour.
These plans forecast the size and nature of human resource required by the
organisation to achieve its strategic goals. They identify human resource
requirements of the organisation and plan to satisfy these requirements. They
forecast quantitative(how many people are needed) and qualitative (what type of
people are needed) human resource needs of the organisation.
They also plan for ways in which people are developed so that they contribute to
organisational goals effectively.
(1) Objectives :
 As Allen has put it “Objectives are goals established to guide the
efforts of the company and each of its components.”
 Objectives are the goals that a business unit wants to achieve
over a period of time.
 Peter Drucker has said, “Business performance requires that each
job be directed towards the objective of the whole business.”

(2) Mission :
 The term mission also indicates the end which is to be achieved
over the whole life of an organization. It suggests idealism.
 Mission is the guiding principle that makes an organization
meaningful.

(3) Goal: A goal is the aim of the organization expressed in specific

terms.
 Goals are generally measurable. They are time specific and also
realistic. Some people call them targets also.

(4) Policies: Policies are also plans. They are general statements that
guide the subordinates in decision-making in various departments in
THE ORGANIZATION. Policies deal with ‘how to do’ the work.
 Policies must be communicated to the staff n very clear terms.
The reasons for the policy may be explained to them so that they
willingly accept it.

(5) Strategies: A strategy is a type of plan which is prepared to meet

the challenges posed by the activities of competitors and other
environmental forces.
  Strategy is a contingent plan, as it is prepared to meet the
demands of a particular situation. It relates an organization to its
external environment.

(6) Procedures :
 Procedures lay down a standard way of doing a job, it ensures the
smooth functioning of various activities of the organization.
 Procedure may be useful, it should be standardized and should be
reasonably stable. It should be reviewed periodically and should be
updated to changed conditions.

(7) Rules: A rule is the simplest plan of action. It dictates that a particular
work is to be done in a particular manner. It specifies what should be
done or not done in a given situation.
 Rules ensure uniformity of action.
 ‘Smoking is prohibited in the Institute.
(8) Budgets: A budget is a plan giving the expected
results expressed in numerical terms. It may be entirely expressed in
financial terms or it may be expressed as a number of units, man-hours,
or other any measurement that can be expressed in numbers.
 A budget may be prepared for sales, production, material, labor,
and any cash or capital expenditure.
 Budgets are usually believed to be control devices. But the
making of a budget is clearly planning.

(9) Programmes: A program is a sequence of activities

taken to implement the policies and to achieve the objectives.
It lays down very clearly the steps to be taken, the resources to be used,
and the time period within which the task is to be completed.
CLASSIFICATION OF PLANS:

CLASSIFICATION

Breadth Time Specificity Frequency of use

Frame

1. Strategic 1. Long term 1. Directional 1. Single use

2. Operational 2. Short term 2. Specific 2. Standing

1. Strategic Plans :
 Plans that apply to the entire organization, establish the organization’s
overall goals, and seek the position of the organization in terms of its
environment.
2. Operational Plans:
 Plans that specify the details of how the overall goals are to be
achieved.
3. Long-term Plans :
 Plans with a time frame beyond three years.
4. Short-term Plans :
 Plans covering one year or less.
5. Specific Plans :
 Plans that are clearly defined and that leave room for interpretation.
6. Directional Plans :
 Plans that are flexible and that set out general guidelines.
7. Single-use Plan :
 A one-time plan specifically designed to meet the needs of unique
situations.
8. Standing Plans:
 Ongoing plans that provide guidance for activities performed
repeatedly.