Description of Module

Subject Name Food Technology

Paper Name Food Business Management
Paper No. 14
Module Planning and Decision Making
Name/Title
Module Id FT/FBM/07
Objectives To know the about the concept of Planning, its importance,
different types of plans, steps in planning process, guidelines for
successful planning, limitations of planning and decision making
process
Keywords Planning, Decision Making, Group Decision Making.

Planning and Decision Making

Planning and Decision making are two inter-related aspects that determine the effective
functioning of an organization. Without planning, an organization is a boat without a rudder and
by setting goals and deciding how to achieve them, planning provides a steering mechanism for
it.
Heinz Weihrich and Harold Koontz define planning as one that “involves selecting missions and
objectives and the actions to achieve them, which in turn requires decision making i.e., choosing
from alternative future courses of action”. In other words, planning is about deciding in the
present “what is to be done in the future, by whom, how, when and where”
(I) Planning- the concept
 Planning is an intellectual process- requires application of imagination and creative skills
along with foresight and sound judgment to solve problems at work.
 It is pervasive i.e. it extends throughout the organization at all levels. However, the scope,
extent and the nature of planning varies at different levels.
 It is an integrated process i.e., plans made at different levels ,whether they are long term or
short term, must be coordinated well enough to achieve the goals of the organization
 It is Goal oriented- without any specific objective in mind the whole process of planning is
futile. Therefore, well defined goals are a pre-requisite for effective planning.
 It is a perpetual process i.e., it is a continuous process. Plans may be changed, modified
according to the needs of the organization at any point of time.
(II) Importance of Planning
Planning is a very important aspect in all types of organizations (including MNC’s like Kellog’s,
Cadbury as well as other small scale industries).This is because organizations that plan in
advance are more likely to succeed than those which fail to plan for the future.
The advantages/significance of planning includes:
 Quick achievement of objectives- Every organization works towards achieving certain
objectives and planning is the means to do so within the specified time limit.
 Unity in purpose and direction- it gives focus to the managers and provides a smooth
progress of the organization.
 Optimum utilization of resources- e.g. planning helps in the utilization of the by-products
produced in any process, thus utilizing each and every element of resource available to derive
profit.
 Increases efficiency of managers- by providing a focus to the management so that they
proceed in a unidirectional manner towards the organizational objective.
 Assists in controlling organizational activities- i.e. effective functioning of the organization
which is inturn attributed to the optimum utilization of the resources.
 Provides Guidelines for Decision-making: Planning emphasizes on choosing an alternative
from among the course of actions that are necessary to carry out a task which helps people
take future oriented decisions.
 Other advantages of good planning include better coordination, control, and efficiency in
operations and provide encouragement to innovation and creativity and avoid duplication of
efforts.
(III) Types of Plans
There are different types of plans which are classified as:
 Vision

Mission

Tactical Plans

Operational, Standing,
Single-Use

Organizational Level

Strategic Tactical Operational

Market Standing
Innovation
Human + financial resources
Productivity
Social Responsibility
Profit Requirements
Physical Resources

 Strategic plans: set the long term goals of the organization and generally the period of a
strategic plan lasts 3-5 years. These plans establish overall objectives for organizations and
analyze the various environmental factors that affect organizations. E.g. New product
development, diversification of business etc. (The 8 major areas for strategic goals are listed
in figure)
 Tactical Plans: these plans aim at achieving short term goals by deciding the detailed use of
resources. In other words, these indicate the actions required to be taken at the departmental
level to execute a strategic plan.
 Operational Plans: these plans are laid out by lower level managers to achieve the tactical
goals. They serve as the department manager’s guide to day to day operations i.e. they spell
out the things that must be accomplished within a time frame to achieve operational goals.

Unless operational goals are achieved, tactical and strategic goals cannot be
accomplished.

II.

Frequency of Use

Single –Use Plans Standing Plans

 Single-Use Plans: are one-time plans that are aimed towards achieving a specific goal and
cease to exist once that goal has been achieved. These are used for situations that are unique.
The components of single-use plan include:
 Programs: These are large scale single use plans that are devised to work towards obtaining
important non-recurring goals. They are action based and results oriented and spell out the
duration, the use of resources and the steps to be taken to achieve the goals.
 Projects: These are similar to programs except that they are executed at a smaller scale with
less complexity.
  Budget: A budget is a statement of expected results expressed in numerical terms. It is a
blue-print designed to achieve a goal and indicates the financial resources necessary for
carrying out the various activities included in a program.
 Standing Plans: are those that have been designed to deal with situations that keep recurring
after a specific interval of time i.e. they are used for situations that the managers may come
across on a regular basis.
The components include
 Mission/ Purpose: identify the basic function or purpose or tasks of an enterprise or agency
or any part of it. For eg. The purpose of food companies is to produce the product, distribute
and sell it.
 Objectives: are the ends towards which the activity is aimed. They emanate primarily from
the mission statement of the organization and should be as specific as possible.
 Policies: are the general statements or understandings that guide or channel thinking in
decision making. They define an area within which a decision is to be made and ensure that
the decision will be consistent with and contribute to an objective.
 Procedures: are the plans that establish a required method of handling future activities. They
lay down the exact manner/ sequence of actions in which the certain activities must be
accomplished.
 Rules: lay out specific required actions or non-actions, allowing no discretion. They are the
simplest type of plan. For eg: “No Smoking” is a rule that allows no deviation from a stated
course of action.
 Strategies: Strategy is defined as the determination of the basic long term objectives of an
organization and adoption of courses of action and allocation of resources to achieve the
necessary goals.
(IV) Steps in Planning Process

Perception of Establishing Planning

opportunity Objectives premises

Evaluation of Choice of
Identification of
Alternatives Alternative
Alternatives
plans

Formulation of Establishing
Supporting sequence of
Plans Activities

1. Perception of Opportunities: It precedes planning and involves awareness of the

managers in the light of the market, competition, what customers want and the strengths
and weaknesses of the organization.
2. Establishing Objectives: This is to be done for long term as well as short range. They
specify the expected results and indicate where we want to be, what we want to
accomplish and when.
3. Planning Premises:Planning Premises involves deciding in what environment- internal or
external- the plans will operate.
4. Identification of alternatives: Identification of alternatives involves searching for
alternative courses of action to accomplish the objectives.
5. Evaluation of alternatives: It is done by weighing all the pros and cons of all alternatives
identified in the previous step and deciding which one gives us the best chance of
meeting the goals at the lowest cost and highest profit.
6. Choice of alternative plans: Selecting the course of action we will pursue.
7. Formulation of supporting plans: Formulation of supporting plans such as plans to buy
equipment, raw material, hire and train workers, develop a new product.
8. Establishing sequence activities: Establishing sequence activities like developing budgets
such as volume and price of sales, operating expenses, expenditure for capital equipment.
(V) Guidelines for Successful Planning

 Involve the right people in the planning process.

 Communicate the plan throughout the organization.
 Goals should be SMART.
 Making people accountable
 Redesigning the plan
 Evaluating the plan
 Acknowledging and Celebrating Accomplishments

(VI) Limitations of Planning

 Lack of accurate information may lead to development of plans that can be incorrect and
misleading.
 Time consuming process: the collection of data and revision of plans takes up a
considerable amount of time.
 Expensive: gathering information and testing of various courses of actions involves a
large amount of expenditure.
 Inflexibility: planning may result in inflexibility and may stifle innovation and creativity.
 Resistance to change
 False sense of security: it may create an illusion that once the plan is made, the
organizational process will automatically be efficient.

(VII) Decision Making

Decision making is an integral part of the planning process. Decision making is the process of
choosing a solution from available alternatives and Rational Decision Making is a systematic
process of defining problems, evaluating alternatives, and choosing optimal solutions.
Steps to Rational Decision making include:

1. Define the problem: a problem is defined by scanning, diagnosing and categorizing .

2. Identify decision criteria i.e. the standards used to guide judgments and decisions. The more
criteria a potential solution meets, the better that solution is.
3. Weight the criteria: each criterion is compared to a standard
or ranked on its own merits (absolute) or each criterion is compared directly to every other
criterion (Relative).
4. Generate alternative course of action: The idea is to generate as many alternatives as
possible.
5. Evaluate each alternative:This step can take much longer and be more expensive than other
steps in the process.
6. Compute the optimal decision: Multiply the rating for each criterion
by the weight for that criterion and then the decision is made.
 Limits to Rational Decision Making
Bounded Rationality:A decision-making process is restricted in the real world by:
 Limited resources
 Incomplete and imperfect information
 Managers’ limited decision-making capabilities
 Using Groups to Improve Decision Making:

Group Decision Making has the following advantages:

1. It views problems from multiple perspectives.
2. It finds and accesses more information.
3. It generates more alternative solutions.
However, it has equal number of limitations too, which are:
1. It is susceptible to groupthink and to considering a limited number of solutions.
2. It takes considerable time.
3. One or two people can dominate group discussion.
4. Members of the group don’t feel personally accountable for decisions and actions.

Group Decision making has the following features:

 Structured Conflict:
C-Type Conflict (Cognitive conflict)
It is a disagreement that focuses onproblem- and issue-related differences of opinion.
A-Type Conflict (Affective conflict)
It is a disagreement that focuses onindividuals or personal issues.
 Nominal Group Technique: This can be done by following the steps given below:
 During a quiet time, group members write down as many problems and solutions as possible.
 Each member shares one idea at a time.
 Ideas are posted on flipcharts until all ideas are shared.
 Group discusses advantages/disadvantages.
 Ideas are ranked during a second quiet time.
 Members read rankings aloud, and the idea with the highest average rank is selected.
 Delphi Technique: it is described as follows:
 Assemble a panel of experts.
 Create a questionnaire of open-ended questions.
 Summarize the responses and feed back to the panel until the members reach agreement.
 Create a brief report and send to the panel members for agreement/disagreement.
 Continue the feedback process until panel reaches agreement.

 Step- ladder Technique is described below:

 Brain- Storming: There are four rules of Brainstorming:

 The more ideas, the better.
 All ideas are acceptable, no matter how wild or crazy.
 Other group members’ ideas should be used to come up with even more ideas.
 Criticism or evaluation of ideas is not allowed.

The advantagesof Electronic Brainstorming include:

 Overcomes production blocking

o technology allows everyone to record their ideas as they are created
o no ideas are lost while waiting for your turn to speak
 Overcomes evaluation apprehension
o anonymity creates free expression

However, it comes with the following limitations:

 Greater expense.
 No automatic acceptance of ideas because of one’s position.
 Some people of the group find it difficult to express themselves in writing.
 Lack of typing skills can frustrate participants.