MANAGEMENT&ENTREPRENEURSHIP

DEVELOPMENT

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 MODULE 1

MANAGEMENT AND PLANNING

Management: Nature and Functions of Management –

Importance, Definition, Management Functions, Levels of Management, Roles of Manager, Managerial Skills, Management & Administration,
Management as a Science, Art & Profession (Selected topics of Chapter 1, Text 1).
Planning: Planning-Nature, Importance, Types, Steps and Limitations of Planning; Decision Making – Meaning, Types and Steps in Decision Making
(Selected topics from Chapters 4 & 5, Text 1).

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Learning Objectives:
Examine the meaning, importance and nature of
management
Understand the differences between management and
administartion
Describe the functions and roles of a manger
Identify the quantitative approach to management
thought
explain the systems approach to management thought

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 Introduction
 Management is ‘the art of getting things done through

people”.
 A manager is one who contributes to organizations goals

indirectly by directing effort of other-not by performing the task

himself.

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Definition of management
George r terry: “consisting of planning, organizing,
actuating and controlling, performed to determine and
accomplish the objective by the use of people and
resources”
Planning means that managers think of there actions in
advance.
Organization means that Managers coordinate the
human and material resources of organization.
Actuating means that motivate and direct subordinates.
Controlling means manager attempt to no deviation
from norm plan.

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 Meaning of Management
Management is a process - Systematic method of
handling activities.

Management is a discipline - Field of study having

well defined concepts and principles.

Management is a human activity - Refers to the

people who engage in the process of management.

Management is a career - Career focused on

Specialization.

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 Nature and characteristics of management
1)It should be stable.
2)It should applicable to all kind of organization.
3)It is transparent.
4)Its approaches are to be very clear and goal oriented.
5)It should be simple yet effective.
6)It should be responsive to many external elements.
7)It should have well defined goals, and effective means to
accomplish the goals.
8)It should have good planning, organization, staffing, directing
and controlling functions.
9)It should provide conducive atmosphere of work.
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 Nature & Characteristics of Management

 Characteristics of Management

1. Management is a continuous process

2. Management is an art as well as science.

3. Management aims at achieving predetermined objectives.

4. Management is a factor of production.

5. Management is decision-making.

6. Universal application.

7. Management is needed at all levels.

8. Management aims at maximum profit

9. Dynamic.

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 Nature & Characteristics of Management

 Characteristics of Management

10. Management as a career.

11. Management is a profession.

12. Management is a discipline.

 Nature Of Management

1. Multidisciplinary

2. Dynamic nature of principles.

3. Relative not absolute principles.

4. Management – science or art.

5. Universality of management.

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 Scope and Functional Areas of
Management
 Functional Areas
o Production.

o Marketing.

o Finance and accounting.

o Personnel.

A. Production
1. Purchasing.

2. Materials management.

3. Research and Development.

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 Scope and Functional Areas of
Management

B. Marketing
1. Advertising

2. Marketing research

3. Sales management

C. Finance and accounting

1. Financial Accounting.

2. Management Accounting.

3. Costing.

4. Investment Management.

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 Scope and Functional Areas of
Management

D. Personnel

1. Recruitment and Selection.

2. Training and Development.

3. Wage and Salary Administration.

4. Industrial Relations.

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Functions of management
 Well accepted functions of management are
1) Planning
2) Organizing
3) Staffing
4) Directing
5) Controlling

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Planning
Planning is the function that determines in advances what
should be done.
It is a process of deciding the business objectives and
charting out the methods of attaining objectives.
Planning is done for every division, department or sub-
unit of the organization.
Performed by managers at all levels-top, middle and
supervisory.
Plans made by top management may cover periods as long
as five or ten year.
Plans made by middle or first line manger, cover much
shorter period.
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Organizing
To organize a business is to provide it with everything
useful to its functioning: Personnel, raw materials, tools,
capital.

Divided into two main sections 1)Human Organization

2)Material Organization

Once Managers have established objectives and developed

plans to achieve them, they must design and develop a
human organization that will be able to carry out those
plans successfully.

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Staffing
Function involved in building the human organization.

In staffing, the manager attempts to find right person for

each job.
Staffing fixes a manager’s responsibility to recruit and

make certain that there is enough manpower available to

fill all positions of organization.
It involves training of future manager and suitable system

of compensation.

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Directing
Manager explains to his people what they have to do and
helps them do it to the best of their ability.
Three sub functions- Communication, leadership and
motivation.
Communication is the process of passing information and
understanding from one person to another.
Leadership is the process by which a manger guides and
influences the work of his subordinates.
Motivation is the act of stimulating or inspiring workers.
Two types of motivation-Financial and non financial.

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Controlling
The manager must ensure that everything in conformity
with plans adopted, the instructions issued and the
principles established.

Controlling function of management involves three

elements
1)Establishing standards of performance.
2)Measuring current performance and comparing it
against the established standards.
3)Taking action to correct any performance that does not
meet those standard

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 Roles of Management

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Interpersonal Roles
a) Figurehead: In this role every manager has to perform
duties of a ceremonial nature, such as greeting visiting
dignitaries, attending the wedding of an employee,
taking an important customer to lunch and so on.

b) Leader: As a leader, every manger motivate and

encourage his employees. He must also try to reconcile
their individual needs with the goals of the organization.

c) Liaison: In this role of liaison, every manager must

cultivate contacts outside his vertical chain of command
to collect information useful for his organization

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Informational Roles
a) Monitor: As monitor, the manager has to scan his
environment for information, interrogate his liaison
contact and his employs.
b) Disseminator: In the role of disseminator, the manager
passes some of his privileged information directly to his
key subordinates who would otherwise have no access to
it.
c) spokesman: As a spokesman, he communicates the
information/goals of organization to his staff, and progress
of work to his superiors.
He also communicates performance of company to
shareholder and the rules and responsibilities to his
subordinates.
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Decisional Roles
a) Entrepreneur: In this role, manager proactively looks
out for innovation to improve his organization.
b) Disturbance Handler: In this role, manager must
seek solutions for various unanticipated problems like a strike
may loom large, a major customer may go bankrupt, a
supplier may renege on his contract, and so on.
c) Resource allocator: in this role, the manager must
divide work and delegate authority among his subordinates.
he must decide who will get what.
d) Negotiator: The manager at all levels has to spend
considerable time in negotiation. Manager negotiates with
the employees and tries to resolve any internal problems like
trade agreements, strikes and grievances of employees.

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 Levels of Management

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 Levels of management
 The levels of management consisting of various managerial positions
in the structure of an organization, differ from one organization to
another, depending on the size of business activity.
 Levels of management are 1)Top management
2)Middle management
3)First line or supervisors.
 The top management consists of chairman, Directors, Company
president, vice president, CEO’s. These are the people who make
policies for the organization, set goals and targets.
 The Middle management includes finance manager, sales manger,
marketing manager, personnel manager, department heads etc.
 The lower level managers are the supervisors and foremen. They are
basically one step above the workers.

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Managerial Skills
Management is a challenging job.
It requires certain skills to accomplish such a challenge.
Thus, essential skills which every manager needs for doing
a better management are called as Managerial Skills.
1. Conceptual Skills
2. Human Relations Skills
3. Technical Skills
All managers require above three managerial skills.
However, the degree (amount) of these skills required
varies (changes) from levels of management and from an
organization to organization.

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1. Conceptual Skills
Conceptual skill is the ability to visualize (see) the
organization as a whole.
It includes Analytical, Creative and Initiative skills.
It helps the manager to identify the causes of the
problems and not the symptoms.
It helps him to solve the problems for the benefit of the
entire organization.
It helps the manager to fix goals for the whole
organization and to plan for every situation.
Conceptual skills are mostly required by the top-level
management because they spend more time in planning,
organizing and problem solving .

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2. Human Relations Skills
Human relations skills are also called Interpersonal skills.
It is an ability to work with people.
It helps the managers to understand, communicate and
work with others.
 It also helps the managers to lead, motivate and develop
team spirit. Human relations skills are required by all
managers at all levels of management.
All managers have to interact and work with people.

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3.Technical Skills
Technical skill is knowledge and ability in a specialized
area of business, e.g. electrical engineering or
accountancy.
These skills require specialized knowledge and proficiency
in the mechanics of particular job.
Technical skills help the managers to use different
machines and tools.
It also helps them to use various procedures and
techniques.
The low-level managers require more technical skills. This
is because they are incharge of the actual operations.

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Managerial Skills

 The above diagram shows the managerial skills which are required by
managers working at different levels of management.
 The top-level managers require more conceptual skills and less technical
skills.
 The lower-level managers require more technical skills and fewer
conceptual skills.
 Human relations skills are required equally by all three levels of
management.

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Management and administration
At the top level more time is spent in
administrative activity and as one moves down in
the organisation more time is spent in
management activity.

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Management and administration
At the top level more time is spent in
administrative activity and as one moves down in
the organisation more time is spent in
management activity.

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Management and administration
According second view management is a comprehensive generic
term which includes administration.
E.F.L. Brech regards management as a comprehensive generic
function embracing the entire process of planning, organising,
directing and controlling.
According to him administration is only a branch of
management which encompasses two of its functions-planning
and control.
According to this view, the functions of management can be
divided into two categories: a) administrative management b)
operative management.
Upper level of management is usually called administrative
management.
Lower level is known as operative management.

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Management and administration

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 Management as a Science, Art or
Profession
 It is an art in the sense of possessing of managing skill by a person. It is a

science also because of developing principles or laws which are

applicable in a place where a group of activities are coordinated.

 Management as science : Science is a systematized body of knowledge.

 Management is an art : Management is the art of getting things done

through others in dynamic situations.

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Management as Art and Science
The stream of management reveal characteristics of art
and science.
Every discipline of science is complete only when it is
applied for solving various kinds of problems faced by
human beings in an organisation or in other fields.
Management is the art of making people work more
effectively to maximize their output.
By the use of effective management skills people in an
organisation work more efficiently as they are guided by
the scientific principles and practices laid down by various
researchers of management.

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Management as a science
We can call discipline as science if its
1)methods of inquiry are systematic and empirical
2)information can be ordered and analysed.
3) results are cumulative and communicable.

 All scientific information collected first as raw data is finally ordered

and analysed with help of statistical tools.
 Communication of result also permits repetition of study.
 When study is replicated and second try provides results similar to
the original, one derives much for confidence in result.

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 Management as an art.
Under science one normally learns the “why” of a
phenomenon, under art one learns the “how” of it.
Art is thus concerned with the understanding of how a
particular work can be accomplished.
It is art of getting things done through others in dynamic
and non repetitive situation.
The manager has to constantly analyze the existing
situation, determine the objectives, seek alternatives,
implement, coordinate, control and evaluate information
and make decisions.

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Management as an art.
Knowledge of management theory and principles is
indeed a valuable aid and kit of manager but it can
not replace his other managerial skills and qualities.
This knowledge has to be applied and practiced by
manger.
In this sense management is an art.
It is like the art of musician or the art of painter who
seeks to achieve the desired effect with color or
instruments, mainly with his own skill.

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Management –A profession?
Characteristic of profession
1. Existence of an organised and systematic knowledge.
2. Formalised methods of acquiring training and experience.
3. Existence of an association with professionalization as its goal.
4. Existence of an ethical code to regulate the behavioral of the
members of the profession.
5. Charging of fees based on service, but with due regard for
priority of service over the desire for monetary rewards.

Management does not possess all above characteristic of a

profession.

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Management –A profession?
There is no uniform code of conduct or licencing of
mangers.
The entry to managerial jobs is not restricted to individual
with a special academic degree only.
In the light of this we can conclude that management can
not be called a profession.
However , the present trend is towards professionalisation
of management.

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Management –A profession?
Nowadays it is required to acquire management degree or
training in management to be called good manager.
There is increased demand for qualified managers with
M.B.A degree.
Peter drucker-”A degree in management does not by itself
make an individual a professional a manager any more
than does a degree in philosophy make an individual a
philosopher”.
This leads to loosing of good and skilled managers who do
not have required degree.

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Questions
1. Explain the functional areas of management.
10 marks, june/july 2014
2. Discuss the roles of management.
6marks, june/july 2014
3. Write four differences between administration and
management. 4 marks, june/july 2014
4. Define the term management. Explain the process of
management in detail. 10 marks dec/jan 2015.
5. Describe the contributions of F.W. Taylor for scientific
management process. 10 marks dec/jan 2015.

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Questions
6. Classify briefly about the Functional areas of management.
(10Marks)
7. Determine Management as Art or a science. (5Marks)
8. Derive the contributions of Taylor to the scientific Management.

(10Marks)
9. Briefly Explain the Morden management approaches
(10Marks)
10. Determine the roles of management
(5Marks)
11. What is management? Give the different meanings of management
(5Marks)

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 Planning
Planning: Planning-Nature, Importance,
Types, Steps and Limitations of Planning;
Decision Making – Meaning, Types and
Steps in Decision Making (Selected topics
from Chapters 4 & 5, Text 1).

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Learning Objectives:
Describe the nature and importance of planning
 present the various types of plans
Explain the steps in planning and strategic planning
process
 identify the limitations of planning and suggest ways
to make it effective
 list the skills required for effective planning
Understand strategic planning in indian industry

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 LESSON PLAN
Sl TOPIC Date Date Remark
no planne engaged s
d
1 Nature, importance and purpose of
planning process
2 Objectives-types of plans (Meaning
Only)
3 Decision making

4 Importance of planning

5 steps in planning and planning

premises
6 hierarchy of plans

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 PLANNING
Planning is the first and foremost function of
management.
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 and
to where we want to go. It is in essence the exercise of
foresight”.

According to M.S. Hardly “Planning is deciding in advance

what is to be done. It involves the selection of objectives,
policies, procedures and programmes from among
alternatives.”

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 Planning is thus deciding in advance the future state of
business of an enterprise, and the means of attaining it. Its
elements are :

1. What will be done – what are the objectives of business

in the short and in the long run.

2. What resources will be required – This involves

estimation of the available and potential resources,
estimation of resources required for the achievement of
objectives, and filling the gap between the two, if any.

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 3. How it will be done – This involves two things :
(i) determination of tasks, activities, projects, programmes,
etc., required for the attainment of objectives, and (ii)
formulation of strategies, policies, procedures, methods,
standard and budgets for the above purpose.

4. Who will do it – It involves assignment of responsibilities

to various managers relating to contributions they are
expected to make for the attainment of enterprise
objectives. This is preceded by the breaking down of the
total enterprise objectives into segmental objectives,
resulting into divisional, departmental, sectional and
individual objectives.

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 5. When it will be done – It involves determination of the
timing and sequence, if any, for the performance of
various activities and execution of various projects and
their parts.

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Benefits
(1) Planning focus managers to think ahead.
(2) It leads to development of performance standards.
(3) Having to formulate plans forces management to
articulate clear objectives.
(4) Planning makes organization to be better prepared
for sudden developments.

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Features
1. Planning is primarily concerned with looking into
future. It requires forecasting the future.
2. Planning involves selection of suitable course of action.
It means there are several ways to achieving objectives.
3. Planning is undertaken at all levels of the organization
because managers at all level are concerned with
determination of future course of action.
4. Planning is flexible. Planning involves selection of best
course of action under specific environment. If
environment changes an adjustment is needed between
various factors of planning.
5. Planning is pervasive and continuous managerial
function.

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NATURE OF PLANNING
Planning is a continues process.
The nature of planning may be understood in terms
of it being a rational approach, open system, flexibility
and pervasiveness.

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NATURE OF PLANNING
A Rational Approach
Planning is a rational approach for defining where one
stands, where one wants to go in future and how to reach
there.
a manager chooses appropriate means for achieving the
stated objectives.
rational approach fills the gap between the current status
and future status.

The desired and the current results are usually expressed

in terms of objectives, which can be achieved by an action
or set of actions.
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 NATURE OF PLANNING
 An Open System Approach
An organization is an open system because it accepts
inputs from the environment and exports output to
environment.
Planning adopt an open system approach.
Open system approach indicates that the gap between
current and desired status
The action required to bridge this gap is influenced by
a variety of environmental ,economic,legal, political,
technological, socio-cultural and competitive factors.
These factors are dynamic and change with time.
Therefore managers have to take into account the
dynamic features of environment while doing planning.

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NATURE OF PLANNING
Flexibility of Planning
Its ability to change direction to adopt to changing
situations without undue cost.
The plans must be flexible to adapt to changes in
technology, market, finance, personal and
organizational factors.
However flexibility is possible only within limits,
because it involves extra cost.
Some times the benefit of flexibility may not be worth
the cost.

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NATURE OF PLANNING
Pervasiveness of Planning
Planning is pervasive and it extends throughout the
organization.
Planning is the fundamental management function
and every manager irrespective of level, has a planning
function to perform within his particular area of
activities.
Top management is responsible for overall objectives
and action of the organization.
Similarly a departmental head has to decide the
objectives of his department within the organizational
objectives and also the methods to achieve them.
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Planning at various levels

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IMPORTANCE OF PLANNING
Planning is of great importance in all types of
organization .
Without planning, business decisions would become
random, ad hoc choices.

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IMPORTANCE OF PLANNING
To minimize risk and uncertainty:
The organization continuously interacts with the
external dynamic environment where there is great
amount of risk and uncertainty.
In this changing dynamic environment where social
and economic conditions alter rapidly, planning helps
the manager to cope up with and prepare for
changing environment.
 By using rational and fact based procedure for
making decisions, manager can reduce the risk and
uncertainty.

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IMPORTANCE OF PLANNING
To focus attention on objectives:
Planning focuses on organizational objectives and
direction of action for achieving these objectives.
It helps managers to apply and coordinate all
resources of the organization effectively in achieving
the objectives.
The whole organization is forced to embrace identical
goals and collaborate in achieving them and to avoid
a needless overlapping of activities.

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IMPORTANCE OF PLANNING
To facilitate control:
Planning sets the goals and develops plans to achieve
them.
These goals and plans become the standards or
benchmarks against which the actual performance
can be measured.
Control involves the measurement of actual
performance, comparing it with the standards and
initiating corrective action if there is deviation.
Control ensures that the activity confirm to plans.
Hence control can be exercised if there are plans.

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IMPORTANCE OF PLANNING

Planning helps in the process of decision

making:
Planning specifies the actions and steps to be taken in
order to accomplish organizational objectives.
It serves as a basis for decision-making about future
activities.
It also helps managers to make routine decisions
about current activities.

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IMPORTANCE OF PLANNING

Economic operation and leads to sucess:

Planning does not ensure success, but planning leads
to success.
If work is planned in advance, there will not be no
confusion arising and things will happen as per plan.
This results in economical operation and reduces
uncoated expenditure.

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IMPORTANCE OF PLANNING
Planning affects performance

A number of empirical studies provide evidence of

organizational success being a function of formal
planning, the success being measured by such factors
as return on investment, sales volume, growth in
earnings per share and so on.
An investigation of firms in various industrial
products as machinery, steel, oil, chemicals and drugs
revealed that companies that engaged in formal
planning consistently performed better than those
with no formal planning.

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Purpose of planning
1. To select from many available alternatives so as
to achieve the objectives of the enterprise,
economically, effectively and efficiently.
2. To direct all other functions of management.
3. To set up the goals of an enterprise in
perspective, within the environment.
4. To help planned goals of an enterprise to break
up into more easily handlable additive
segmented goals.

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Purpose of planning
5. To form the basis for budget.
6. To forecast the future to avoid uncertainty and
change.
7. To provide effective control.
8. To search for alternatives and adopt the best way of
accomplishing the work and
9. To focus the vision on the objectives and goals.

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Principle
This principleof navigational
requires change
that managers should periodically
check on events and redraw plans to maintain a course
towards a desired goal.
It is the duty of the navigator to check constantly, whether
his ship is following the right direction in the vast ocean to
reach the distinction as scheduled.
In the same way, a manager should check his plans to
ensure that these are processing as required.
He should change the direction of his plans if he faces
unexpected events.
It is useful if plans contain an element of flexibility.
It is the responsibility of the manager, to adapt and
change the direction of plans, to meet the challenge of
constantly changing environment that could not be
foreseen.
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TYPES OF PLANNING
Planning can be classified on the basis of coverage of
activities, importance of contents in planning, approach
adopted in planning process, time dimension and degree
of formalization in planning process.

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Corporate and functional planning
The planning activities at the corporate level which cover
the entire organizational activities are known as corporate
planning.
The focus in corporate planning is to determine long term
objectives as a whole and to generate plans to achieve these
objectives bearing in mind the probable changes in
dynamic environment.
This corporate planning is the basis for functional planning.
Functional planning which is derived from corporate
planning is undertaken for each major function of the
organization like production, marketing, finance etc.,

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Strategic and tactical planning
Strategic planning sets future directions of the
organization in which it wants to proceed in future.
Strategic planning involves a time horizon of more
than one year and for most of the organization it
ranges between 3 and 5 years.
Tactical Planning also known of Operational planning
on the other hand involves deciding the most effective
use of resources already allocated to achieve the
organizational objectives.
The time horizon in operational planning is less than
one year.
Operational planning is undertaken out of the
strategic planning.

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Strategic and Tactical planning

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Long and short term planning
The long term planning is strategic in nature and
involves more than one year period and can extend to
15 to 20 years or so.
Short term planning usually covers one year.
Short term plans are made with reference to long
term plans because short term plans contribute to
long term plans.

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Proactive and reactive planning
Planning is an open system approach and hence it is
affected by environmental factors which keep on changing
continuously.
The organization’s response to these changes differs.
 Based on these responses planning may be proactive and
reactive.
Proactive planning involves designing suitable courses of
action in anticipation of likely changes of environment.
Managers adopting proactive changes do not wait for
environment to change, but take action in advance of
environmental changes.
For this, continuous scanning of environment is necessary.

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Proactive and reactive planning
In reactive planning response comes after
environmental changes take place.
By the time organization responds to change in
environment there may be further change in
environment.
Hence this type of planning is suitable in the
environment which is fairly stable over a long period
of time.

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TYPES OF
Plans are classified into PLANS
standing plans and single use plans.
Standing plans provide guidelines for further course of action
and are used over a period of time.
Standing plans are designed for situations that recur often
enough to justify a standardize approach.
Examples of such plans are organizational mission, long term
objective, strategies, policies, procedures and rules.
single use plans are designed for specific end; when that end is
reached, the plan is dissolved or formulated again for next end.
Examples of such plans are project, budgets, quotas, targets etc.

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TYPES OF PLANS

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Objectives
Objectives are goals or aims which the management
wishes organisation to achive.
Every organization is established for the purpose of
achieving some objectives.
An individual who starts a business has the objective of
earning profits.
A chartable institution which starts schools and colleges
has the objectives of rendering service to the public in the
field of education.
According to Mc Farland, “Objectives are the goals,
aims or purposes that the organizations wish to
achieve over varying periods of time”.
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Characteristics of Objectives-
(1) Objectives are multiple in numbers
Every business enterprise has a package of objectives
set in various key areas.
 Peter Drucker has emphasized setting objectives in
eight key areas namely market standing, innovation,
productivity, physical and financial resources,
profitability, manager performance and development,
worker performance and attitude, and public
responsibility.

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Characteristics of Objectives-
(2) Objectives are tangible or intangible
For some of objectives there are quantifiable
values are available and are tangible.
Some of the objectives such as productivity,
physical and financial resources are tangible
Objectives in the areas of manager’s performance,
workers morale is completely intangible.

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Characteristics of Objectives-
(3) Objectives have a priority
At a given point of time one objective may be
important than another.
For example maintaining minimum cash balance is
important than due date of payment.

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 Characteristics of Objectives-
(4) Objectives are generally arranged in hierarchy:
It implies that organization has corporate objectives at
the top and divisional, departmental and sectional
objectives at the lower level of organization.
(5) Objectives some time clash with each other:
An objective of one department may clash with the
objectives of other department.
For example the objectives of production of low unit
cost achievement through mass production of low
quality products may conflict with goal of sales
department selling high quality products.

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Requirements of Objectives
(1) Objectives must be clear.
(2) Objectives must support one another.
(3) Objectives must be consistent with organizations
mission.
(4) Objectives should be consistent over period of time.
(5) Objectives should be periodically reviewed.

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Advantages of Objectives
(1) Unified planning: Various plans are prepared at various level
in the organization. These plans are consistent with the
objectives and hence objectives encourage unified planning.

(2) Individual motivation: Objectives act as motivators for

individual and departments imbuing their activity with a
sense of purpose.

(3) Coordination: Objectives facilitate coordinated behavior of

various groups which otherwise may pull in different
directions.

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Advantages of Objectives
(4) Control: Objectives provide yardstick for
performance. The actual performance is compared with
standard performance and hence objectives facilitate
control.

(5) Basis for decentralization: Department-wise or

section wise objectives are set in order to achieve
common objectives of the organization. These objectives
provide basis for decentralization.

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STEPS IN PLANNING
(1) Establishing goals/objectives:
(2) Establishing planning premises:
(3) Deciding the planning period:
(4) Identification of alternatives:
(5) Evaluation and selection of alternative:
(6) Developing derivative/supportive plans:
(7) Measuring and controlling the process:

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(1) Establishing goals/objectives:
The first step in planning process is to determine the enterprise
objectives.
These are set by upper level managers after number of
objectives has been carefully considered.
 The objective set depends on the number of factors like
mission of the organization, abilities of the organization etc.,
Once the organizations objectives are determined, the section
wise or department wise objectives are planned at the lower
level.
Defining the objectives of every department is a very essential
one; then only clear cut direction is available to the
departments.
Control process is very easy if the objectives are clearly defined.

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(2) Establishing planning
premises:
This is the second step in planning which involves
establishing planning premises, i.e. certain assumption
about the future on the basis of which plan will be
ultimately formulated.
Planning premises are planning assumptions— the
expected environmental factors, information relating to
the future such as general economic conditions,
population trends, competitive behavior, Capital and
material availability etc.

The planning premises can be classified as below:

(1) Internal and External premises.
(2) Tangible and Intangible premises.
(3) Controllable and non-controllable premises.

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2) Establishing planning premises:
(1) Internal and External premises.
Premises may exist within or outside the enterprise.
Internal premises exist inside the enterprise and
include sales forecasts, ability of the organization in
the form of machines, methods of design, behavior of
the owners and employees etc.,

The external premises exists outside the enterprise

and include general business and economic
environment, technological changes, government
policies and regulations, population growth etc.,

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2) Establishing planning premises:
(2) Tangible and Intangible premises:
Tangible premises are those which can be
quantified.
They include population growth, industry
demand, capital and resources invested etc.,

Intangible premises are those which being

qualitative in character cannot be measured.
Political stabilities, sociological factors, attitudes
and behavior of the owners etc.,

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2) Establishing planning premises:
3)Controllable and non-controllable premises:
Some of the planning premises are controllable and
others are non-controllable.
Some examples of non-controllable factors are strikes,
wars, natural calamity, legislation etc., Because of the
presence of non-controllable factors
organizations have to revise plans periodically in
accordance with current development.
Controllable factors are those which can be controlled
and cannot upset calculation of the organisation
regarding plan.
The controllable factors are availability of resources,
skill of managers and labor etc.,

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(3) Deciding the planning period:
Once the long term objectives and planning premises are
decided, the next task is to decide the period of the plan.
Some plans are made for a year and in others it will be
decades.
In each case there is some logic in selecting a particular
time range for planning.

The factors which influence the choice of a period are

(a) Lead time in development and commercialization of a new product:
(b) Time required for recovering capital investment or the pay back
period:
(c) Length of commitment already made:

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(3) Deciding the planning period:
(a) Lead time in development and
commercialization of a new product:
An aircraft building company planning to start a new
project should have a planning period of five to ten
years where as a small manufacturer of spare parts who
can commercialize his idea in a year or so makes annual
plans.

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(3) Deciding the planning period:
(b) Time required for recovering capital investment
or the pay back period:

The pay back period also influence the planning period.

For example, if a machine costs 50 lakhs and generates
cash in flow of Rs. 10 lakhs a year, it has a pay back period of
5 years.
Therefore the plans should also be for at least five years.

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(3) Deciding the planning period:
(c) Length of commitment already made:

The plan period should be long enough to enable

the fulfillment of already made commitments.
For example if a company has agreed to supply
goods for five years, it needs to plan for the same
period to fulfill its commitments.

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(4) Identification of alternatives

The fourth step in planning is identifying alternatives.

A particular objective can be achieved through
various actions.
For example an organization’s objective is to grow
further which can be achieved in several ways like
expanding in the same field of business or product
line, diversifying in other areas, joining hands with
other organization and so on.
With each category there may be several alternatives.

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(5) Evaluation and selection of
alternative
Once the alternatives are identified the next step is to
evaluate the alternatives in the light of the premises
and goals and to select the best course or courses of
action.
This is done with the help of quantitative techniques
and operations research.
In addition software packages are available for
evaluating alternatives.

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(6) Developing
derivative/supportive plans:
Once the plan is selected, various plans are derived so
as it support the main plan.
The derivative may be planning for buying
equipments, buying raw material etc.
These derivative plans are formulated out of the main
plan and therefore, they support.

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(7) Measuring and controlling the
process:
One should not allow plan to run on its own
without monitoring its progress.
Managers need to check the progress of their
plans so that remedial action can be taken to make
plan work or change the plan if it is unrealistic.
Hence process of controlling is a part of any plan.

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 
DECISION-MAKING
Decision-making is an essential part of modern management.
Decisions are made by the managers and actions are taken by
others.
Major decisions are taken carefully and consciously by the
application of human judgment and experience where as minor
decisions are made almost subconsciously using rules.
Decision-making permeates through all managerial functions
namely planning, organizing, staffing, directing and control.
In planning it is through objectives and policies laid down and
manager decides many things such as what to produce, what to
sell, where , when and how so on.
Decision making is commitment to something, a point of view, a
principle or course of action.
It is selecting the best among alternative courses of action.

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The decision-making has the
following factors:
(1) Decision-making implies that there are various alternatives and
the most desirable alternative is chosen to solve the problem.

(2) Existence of alternatives suggests that the decision-maker has

freedom to choose an alternative of his liking.

(3) Decision-making like any other managerial process is goal

oriented. It implies that the decision maker attempts to achieve
some results through decision making.

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Types of Decisions
1. Programmed and non-programmed decisions:

2. Major and minor decisions:

3. Simple and complex decisions

4. Strategic and tactical decisions:

5. Individual and group decisions:

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 1)Programmed and non-
programmed decisions:
Programmed decisions are those that are made in accordance to
policy, procedure and rules.
These decisions are routine and repetitive and programmed
decision are relatively easy to make.
For example determining salary payment to the workers who have
been ill, offering discounts for regular customers etc. are
programmed decision.

Non-programmed decisions are novel and non-repetitive.

If a problem has not arisen before or if there is no clear cut method
for handling it, it must be handled by non-programmed decision.
For example what to do about a failing product line is a no
programmed decision because no definite procedure exists for it.

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 1)Programmed and non-
programmed decisions:
For programmed decision clear cut rules exists and hence
it is not possible for two persons to reach different
solutions to the some problem.

In case of non-programmed decision there are no clear cut

rules for handling the problem, each manager may bring
his own judgments to bear on the decision, it is possible
for two managers to arrive at distinctly different solutions
to the same problem.

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2) Major and minor decisions:

The decisions which have their impact for long-

period or which have impact on other departments
are known as major decision.
On the other hand decisions which does not have
long term effect or affecting one department are
known as minor decisions.
Major decisions are made at higher level and minor
decisions are taken at lower level in the
organizational hierarchy.

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3) Simple and complex decisions

If very few variables are to be considered for solving a

problem the decision is simple.

If the variables are many, then it is a complex

decision.

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 4) Strategic and tactical/routine decisions:
Strategic decision is a major choice of actions concerning
allocation of resources and contribution to the achievement of
organizational objectives.
Strategic decisions are major and non-programmed decisions
having long term impact.
For example lowering product price, installation of automatic
plant etc.
Strategic decisions are made by the higher level managers.
Tactical or routine decision is which are supportive of, rather
than central to the company’s operation.
Decisions relating to provisions of air conditioning, parking
facilities are tactical decisions.
These decisions are made at the lower level of the organization.

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5) Individual and group decisions:
Decision may be taken either by an individual or group.
Decisions which are routine in nature, with few variables
and definite procedures exists to deal with them are taken
by individuals.
On the other hand decisions which have their impact on
other departments, which may result into some changes in
the organization, are generally taken by groups.
Group decision making has advantages like increased
acceptance, Better communication and better
coordination.
It has some drawback like delay in arriving at decision,
group may be indecisive , group may compromise or
dominate etc.

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Individual and group decisions:
To utilize advantage of group decision and avoid its
disadvantage , two new techniques are proposed
known as Nominal group technique and Delphi
technique.

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 Individual and group decisions:
Nominal group technique
The members independently generate their idea and give in
writing.
The idea are summerised and discussed for clarity and
evaluation.
Finally each members slightly gives his rating and opinion
about each idea through voting system.
The one with maximum vote is selected as group decision

Delphi technique.
Persons who are physically dispersed and anonymous to one
another are asked to send their opinion on a through mail.
A carefully designed questionnaire is circulated for this purpose.
The response is summerised into feedback report and sent back
to them with second questionnaire.
A final summery is developed on the basis of replies received
second time.
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Steps in Rational Decision Making
(1) Recognizing the problem.
(2) Deciding priorities among the problems.
(3) Diagnosing the problem.
(4) Developing alternative solutions or courses of
activities.
(5) Evaluating alternatives.
(6) Converting the decision into effective action and follow
up of action.

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Steps in Rational Decision Making
(1) Recognizing the problem:
When a manager makes a decision it is in effect the
organization’s response to a problem.
Hence it is necessary to search the environment for the
existence of a problem. A problem is said to exist;

(a) When there is deviation from past experience. For

example the present year’s sales are lower than previous
year, the expenses are more than previous years etc.,
(b) When there is deviation from plan. For example sales
are lower than anticipated, expenses are more than
expected etc.,
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 Steps in Rational Decision
Making
(1) Recognizing the problem:

(c) When competitors outperform. For example other

companies manufacture the goods of same quality at
lower costs.
(d) When people bring problems to the manager, For
example workers may complain about poor ventilation.

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Steps in Rational Decision Making
(2) Deciding priorities among problems:
A manager might have identified a number of problems.
All these problems vary in their importance.
He may find that some of the problems are such that they
can be solved by their subordinates because they are closest
to them.
All such problems should be passed on to them.
Some problems may need information available only at
higher level or affecting other departments.
Such problems are referred to higher level managers.
Those problems which can be best solved by him are to be
focused.
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Steps in Rational Decision Making
(3) Diagnosing
Symptoms the problems:
of the problem that are observed by the manager may some
times mislead him.
The symptom may lead manager to suspect one part when the defect
may lie hidden in another part.
For example if there is decline in sales, the management may think that
the problem is one of poor selling procedure or the saturation of the
old market.
But the real problem may be inability to move quickly to meet
changing needs of the customers.
For diagnosing the problem a manager should follow the systems
approach.
He should study all the sub-parts of his organization which are
connected with the sub-part in which the problem seems to be located.

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Steps in Rational Decision Making
ADeveloping
(4) alternative
problem can solutions
be solved in or courses
several ways; of action:
however all the ways
cannot be equally satisfying.
If there is only one way of solving a problem, then no question
of decision arises.
Therefore decision maker must identify various alternatives
available in order to get most satisfactory result of a decision.
while developing alternatives; the concept of limiting factor
should be applied.
Limiting factor which can make the accomplishment of
alternatives difficult or impossible.
For example, if an organization has limitation in raisin finance,
it cannot consider projects involving high investment.

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Steps in Rational Decision Making
A
(4) Developing alternative
decision maker solutions
can identify or coursesusing
alternatives of action:
his own
experience, practices followed by others and using creative
technique.

A decision maker using past experience takes into account

the action taken by the decision maker in the past .
The successful action of the past may become an
alternative for the future.
The limitation of this is, what was successful in the past
may not be so in the present context because of change in
context under which decision was made.

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Steps in Rational Decision Making
Copying
(4) Developing alternative
from experiencesolutions oriscourses
of others anotherofway
action:
of
generating alternatives.
Alternatives used by successful decision makers can be
thought of alternatives of decision making.

The third method of generating alternatives is through

creative process where various exercises are taken to
generate entirely new ideas.
Creative ideas of individuals or groups help in developing
alternatives.

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Steps in Rational Decision Making
(5) Measuring and comparing consequences of the alternative
Once various alternatives are developed, the next step is to
solution:
measure and compare their consequences of alternatives using
quality and acceptability.
The quality of a decision must be determined considering both
tangible and intangible consequences.
Tangible consequences are those which can be quantitatively
measured or mathematically demonstrated.
Intangible consequences cannot be measured quantitatively.
A decision though good in quality may be poor in acceptability
or decision though acceptable may not be good in quality.
In such cases managers must find the relative importance of
these two.

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Steps in Rational Decision Making
(5) Measuring and comparing consequences of the alternative
In production, finance, purchase etc. the solution’s quality
solution:
is important than acceptability,
where as in all human maters such as lighting condition,
layout of office etc., the acceptability is more important.

If sufficient information about quality or acceptability of a

solution is not available, it is suggested to experiment it on
a small scale known as pilot testing.
For example a company may test a new product in a
certain market before expanding its sale nationwide.

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Steps in Rational Decision Making
(6) Converting the decision into effective action and follow up of
This step involves communication of decisions to the employees.
action:
Decision must be communicated in clear and unambiguous terms.
All necessary efforts should be made to secure employees
acceptance in decision.
Association of employees in decision making not only enhance the
acceptability, but also improves the quality of decision.

Sometimes due to non-availability of data, a manager may not take

correct decision.
As a safeguard against incorrect decision, the manager while
converting a decision into effective action should institute a system
of follow-up so that he can modify or alter his decision at the
earliest opportunity.

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ENVIRONMENT OF DECISION-
MAKING
A decision-maker may not have the complete
knowledge about decision alternatives or about the
outcome of a chosen alternative.
This problem may be highly complex and uncertain.
These conditions of knowledge are referred to as the
‘environment of decision making’.
The environment may be of three types; certainty
,risks and uncertainty.

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ENVIRONMENT OF DECISION-
MAKING

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 ENVIRONMENT OF DECISION-MAKING
1) Decision-making under certainty:

The term certainty refers to accurate knowledge of the

outcome of each alternative.
All relevant data are available for making decision.
For example a company wants to transport goods from five
warehouses to a number of customers.
It is possible to obtain the relevant facts for the problem like
type of transport available, the cost of transporting a unit from
each warehouse to each customer.
With this it is possible to design least cost distribution pattern.

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 ENVIRONMENT OF DECISION-MAKING
2) Decision-making under risk:
In decision making under risk, the consequences of a
particular decision cannot be specified with certainty but
can be specified with known probability values.
The value of probability is a measure of likelihood of the
occurrence of that event.
In such cases, alternatives are evaluated by computing the
expected value of the payoff associated with each
alternative.
 For example, while estimating the demand of a product
for future where there is great amount of uncertainty, a
manager can make three estimates of demand associated
with the probability of occurrence as show in table

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 ENVIRONMENT OF DECISION-MAKING
2) Decision-making under risk:

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 ENVIRONMENT OF DECISION-MAKING
3) Decision making under uncertainty:
Uncertainty is said to exist when the decision maker does
not know the probabilities associated with the possible
outcomes..
They can use MaxiMin criterion , MaxiMaxi criterion or
Minimax regret criterion.

MaxiMin : If a manufacturer is pessimistic or cautions in

his approach, he can choose that decision act which
maximizes the minimum pay-off, which is called as
MaxiMin criterion.

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ENVIRONMENT OF DECISION-MAKING
3) Decision making under uncertainty:
MaxiMaxi : If a manufacturer is optimistic he may choose
that decision act which maximizes the maximum pay-off.
This is called as max-max criterion.

 Minimax regret: A manager using minimax regrets

criterion look at the decision problem neither as
pessimistic nor as optimistic.
As the name implies the minimax regret criterion is the
one by which the decision maker minimizes the
maximum regret can occur, no matter what the outcome.

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Hierarchy of plans
The plans are generally arranged in a hierarchy within
any organization.
Top level- Goals and objectives

Second level-Strategies(Single use plans & Standing

plans)
Third level-Action plan

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Hierarchy of plans

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Hierarchy of plans
The top management sets the goals and objectives.
These occupy the top priority.
Strterigies are carried out by means of plans known as single
use plans and Standing plans.
Single use plans are developed to achieve a specific goal after
reaching the goal, the plan is dissolved.
Example: Budgets, Construction of building etc
Standing plans are developed for projects that happens again
and again.
Example: Admission process of college, Recruitment procedure
of organisation etc
Action plans are executed by lower level organisation(Foreman
and supervisors of the shop)

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 Limitations of Planning
1.Lack of reliable data :
 Planning loses its value if reliable information is not
available or if the planner fails to utilize the reliable
information.
2. Lack of initiative:
 Planning is a forward looking process. If a manager has a
tendency to follow rather than lead, he will not be able to
make good plans.
 Therefore, the planner must take the required initiative.
3. Costly process :
 Planning is time consuming and expensive process. This
may delay action in certain cases.
 planning involves costs of gathering and analyzing
information and evaluation of various alternatives.

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 Limitations of Planning
4. Non-acceptability of change :
 Resistance to change is another factor which puts limits on
planning.
 It is a commonly experienced phenomenon in the business world.
 Sometimes, planners themselves do not like change and on other
occasions they do not think it desirable to bring change as it
makes the planning process ineffective.

5. External limitations :
 The effectiveness of planning is sometimes limited because of
external factors which are beyond the control of the planners.
 Sudden break-out of war, government control and many other
factors are beyond the control of management.
 This makes the execution of plans very difficult.

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Questions
1. What is the nature of planning? Explain the importance
and purpose of planning. 10 marks, june/july 2014
2. Explain the process of decision making. 10 marks,
june/july 2014
3. explain the reasons which make planning process, an
important activity in management. Write the hierarchy
of organizational plans. 10 marks, dec/jan 2015
4. describe the steps that are generally followed in the
planning process. 10 marks, dec/jan 2015

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Questions
5. Explain the important steps in planning. (10Marks)
6. What are single use and standing plans ? Explain
with examples. (5Marks)
7. Explain the Nature of planning . (5Marks)

8. Classify the types of planning (5Marks)

9. What is Decision Making? Formulate the steps in
rational decision making (10Marks)

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