UNIT- II

PLANNING

FUNCTIONS OF MANAGEMENT

• PLANNING: “Planning is a thinking process, the organized foresight, the vision based on fact and experience, that is required for intelligent action.”

• ORGANISING: “Organization is the process of defining and grouping the activities of the enterprise and establishing the authority relationship among them”

• DIRECTING: “Direction is a complex function that includes all those activities, which are designed to encourage a subordinate to work effectively”

• CONTROLLING: “Controlling is the process, by which managers assure that resources are obtained and used effectively in accomplishment of the organization's objective”

PLANNING

ACCORDING TO Killen: “ Planning is the

process of deciding in advance what is to be done , who is to do it , how it is to be done and when it is to be done”

Planning involves anticipation of future course of event and deciding best course of action

NATURE OF PLANNING PLANNING IS GOAL-ORIENTED: Planning is made to achieve the desired

objectives of the business.

PRIMACY OF PLANNING: Planning pervades all managerial

activity, it is the function of every manager. It facilitates organising,staffing,directing,and controlling .

PLANNING IS AN INTELLECTUAL ACTIVITY:

Planning is an intellectual process and the quality of planning will vary according to the quality of the mind of the managers.

ELASTICITY IN PLANNING: The process of planning should be adaptable

to changing environmental conditions.

PLANNING AIMS AT COORDINATION: Planning co-ordinates the

what,who,how,where and why of planning,without the co-ordination of different activities,one cannot have united and synchronised efforts.

PLANNING IS A CONTINOUS PROCESS: Planning is always continues in the

organisation in one or the other form. Plans are there modified and then certain deficiencies also point out and framed accordingly,in this way planning is a continous process.

OBJECTIVES and significance OF PLANNING MAXIMUM OUTPUT WITH MINIMUM COST: An efficient manager achieves the

maximum output at minimum cost by making the best possible use of men, machine, material, capital and equipment.

Reduces uncertainty: Planning helps in reducing uncertainty because it involves anticipation of future .Effective planning is result of deliberated thinking based on facts and figures. Planning gives an opportunity to business managers to for see various uncertainties which may be caused by changes in technology, taste and fashion of people etc . sufficient provision is made in plan the plan to offset these uncertainties.

Facilitates control: Planning helps the manager in performing their function of control . Planning and control are inseparable in the sense that unplanned action can not be control because control involves keeping activities on the predetermined course by rectifying deviation from plans.

Encourage Innovation and Creativity: it helps innovation and creative thinking among the manager because many new ideas come to the mind of a manager when he is planning . It creates forward looking attitude in managers .

Improves Motivation : A good planning system ensures participation of all managers which improves their motivation. It improves motivation of workers also because they know clearly what is expected to them . Planning also serves as a good training device for future managers.

Improves competitive strength: Effective Planning gives a competitive edge to the enterprises over other enterprises that do not have planning or effective planning . This is because planning may involve expansion of capacity , change in work methods, change in quality , anticipation technological changes.

SOCIAL JUSTICE AND HUMAN BETTERMENT: Excellent remuneration improves the standard of living of workers.

The growth of business generates employment opportunities. Equal pay for equal work without any discrimination brings social justice.

IMPORTANCE OF PLANNING1. The business objectives can be easily secured through

planning.2. Planning facilitates the process of decision-making.3. Planning helps the management to implement future

programmes in a systematic manner.4. Planning indirectly leads to large-scale economies by

avoiding waste of men, money, materials, and machinery.

5. Planning is the essence of all management activities: once planning is done well, other activities automatically follow.

6. Establishing clear authority and responsibility7. Planning encourages the sense of involvement and team

spirit.8. To secure economy in operation9. To help in co-ordination.

TYPES OF PLANNINGSTRATEGIC PLANNING: A strategic planning

is the process of deciding the objectives of the organization and determining the manner in which the resources of enterprises are to be deployed to relies the objective of uncertain environment.

OPERATIONAL PLANNING: Operational plan provide details of how strategic plan will be accomplished. Operational planning is concerned with the efficient use of the resources already allocated and with the development of a control mechanism to ensure efficient operations that organizational objective are achieved.

FORMAL AND INFORMAL PLANNING: A planning in BLACK and WHITE is known as formal planning. Informal planning is only thinking about it and nothing more.

CORPORATE PLANNING: The process of establishing corporate objective and formulating the policies, strategies and resource allocation that will best achieve these objectives.

FUNCTIONAL PLANNING: FP is segmental, and it is undertaken for each major function of the organisation like Production, Marketing, Finance, Human resource,etc.

SHORT TERM AND LONG RANGE PLANNING: STP relates to a period of less than one

year, e.g product design , training of work force, reduction of inventory level . MTP covers a period of over one year but less than five year. A planning for five years to 20 years or more is known as long term planning. e.g. globalization of production and marketing , increase in market share , Public image.

PROACTIVE PLANNING: PP involves designing suitable course of action in anticipation of likely changes in the relevant environment. In India, co’s like Reliance Industries, Hindustan lever, etc have adopted this kind of approach.

REACTIVE PLANNING: In RP, organization's response come after the environmental changes have taken place. After the changes take place, organizations start planning.

Establishment of objective

Evaluation and follow up

Evaluation of alternatives

Selection of plan and development of derivative plans

Development of the planning premises

Search of the alternatives

Collection of information and forecasting

PROCESS OF PLANNING

BARRIERS TO EFFECTIVE PLANNINGLACK OF RELIABLE DATA: Planning loses its

value, if there may be lack of reliable facts and figures.

LACK OF INITIATIVE: Planning is a forward looking, planners must take the required initiative, otherwise he will not be able to make good plans and makes planning process ineffective.

COSTLY PROCESS: Planning is time consuming and expensive process. If the management is not willing to spend on planning the results may not be good.

PROBLEMS OF RAPID CHANGE: A complex and rapidly changing environment, complications make planning extremely difficult.

RIGIDITY IN ORGANISATIONAL WORKING: Internal inflexibility in the

organisation may compel the planners to make rigid plans, which may sometimes makes the planning process ineffective.

EXTERNAL LIMITATIONS: External factors are very difficult to predict. Such as breakout of war, government control ,natural havocs and etc, which make the execution of plans very difficult.

PSYCHOLOGICAL BARRIER: Dynamic managers always look ahead, but some people consider present more important than future because present is certain. This will make the planning process ineffective.

7. FAILURE OF PEOPLE IN PLANNING: Some of the major reasons:-lack of commitment to planning,failure to formulate sound strategies, lack of clear and meaningful objectives,tendency to overlook planning premises,failure to see the scope of plan and lack of adequate control techniques.These factors are responsible for inadequate planning.

“Planning premises constitute the framework within which planning is done”

Assumptions denote the expected environment in future are known as planning premises Planning premises is divided into two parts:-

Planningpremises

Internal Premises

External Premises

PLANNING PREMISES AND FORECASTING

INTERNAL PREMISES: Internal premises include sales forecast, the existing policies and programs, capital investment policies, philosophy of management, etc.

External premises: External premises relate to the political, economic, social and technological forces in which the organization operates and the conditions which influence the demand for the organization’s products.

SIGNIFICANCE OF PLANNING PREMISES: If the premises are properly assessed, it will be possible to develop reliable plans to future.

FORECASTING Forecasting is a systematic attempt to probe future

with the help of known facts.

SIGNIFICANCE OF FORECASTING.

Pivotal(central and important) in an organization. Development of a business. Primacy to planning. Making and reviewing of forecasts on a continuous

basis will compel the managers to think ahead and to search for the best possible decision with a dynamic approach.

LIMITATIONS OF FORECASTING

It should not be forgotten that all forecasts are subject to a degree of error and they can never be made with a hundred percent accuracy.

Managers often neglect to examine whether the forecasts are supported by reliable information.

Managers must use their knowledge, experience and available information with a great degree of skill and take care to make forecasts more dependable.

PROCESS OF FORECASTING1. UNDERSTANDING THE PROBLEM: The first step in the FP is the understanding of real

problem about which forecasts are to be made. A manager must know clearly the purpose of forecasting.

2. ESTIMATION OF FUTURE: The prosperity of the future can be estimated with

the help of past experience and performance as well as the talents possessed by top management executives.

3. COLLECTION OF RESULTS: All the information can be collected. Relevant

records prepared and maintained to collect the results.

4. COMPARISON OF RESULTS: The actual results are compared with

estimated results to know deviations.

5. REFINING THE FORECASTS: If any factors or conditions have changed

during the period understudy,then those factors or conditions have to be taken in consideration for the future estimation,this will help in refining the process of forecasting.

KEY TO PLANNING• PRINCIPLE OF CONTRIBUTION TO

OBJECTIVES: For efficient planning well-defined objectives are needed. Objectives are to be rational (sensible) and understandable.

• PRINCIPLE OF PERVASIVENESS OF PLANNING: Planning is found at all level of management. Strategic planning is related to top management while intermediate planning are the concern of middle management.

• PRINCIPLE OF LIMITING FACTORS: Planning must take the limiting factors(man, machine, materials and management) into account.

• PROPER FORECASTING: One of the important steps in planning is forecasting. Management must have a mechanism of forecasting changes in environment which are influenced by ECONOMIC, SOCIAL, POLITICAL factors.

DECISION MAKING ACCORDING TO McFarland “A decision is an act of

choice wherein an executive forms a conclusion about what must be done in a given situation . A decision represents a course of behaviour chosen from a number of possible alternatives”

Decision making is a process of selection from a set of alternative course of action which is thought to fulfill the objectives of decision problem more satisfactorily than others.

CHARACTERISTICS OF A DECISION

Decision is the choice of the best course among alternatives.

Decision is the end process preceded by reasoning.

Decision making is a mental process because the final selection is made after thoughtful consideration.

Decision is aimed at achieving the objectives of the organisation.

Decision relates the means to the end.

DIFFICULTIES IN DECISION-MAKINGINCOMPLETE INFORMATION: Lack of information in

decision-making, makes the process incomplete.INEFFECTIVE COMMUNICATION: IC makes

implementation difficult. The manager should therefore care to communicate all decisions to the employees in clear, precise and simple language.

INCORRECT TIMING: If the decision is correct but the time is inopportune, it will not serve any purpose.

UN-SUPPORTING ENVIRONMENT: If there is all round goodwill and trust, the manager is encouraged to take decisions, On the other hand, under the opposite circumstances he avoids decision-making.

Decision Making Decisions

- choices from two or more alternatives - all organizational members make decisions

Decision-Making Process - a comprehensive, 8-step process - Step 1 - Identifying a Problem • problem - discrepancy between an existing and

a desired state of affairs

- must be such that it exerts pressure to act - manager is unlikely to characterize a situation as a problem unless s/he has resources necessary to act

The Decision-Making Process

Allocation of Problem Identification of Weights to Development of

Identification Decision Criteria Criteria Alternatives

“My salespeople Price Reliability 10 Acer Weight Screen size 8 Compaq need new computers” Warranty Warranty 5 Gateway Screen type Weight 5 HP Reliability Price 4 Micromedia Screen size Screen type 3 NEC

Sony Toshiba

Analysis of Selection of an Implementation Alternatives Alternative of an Alternative

Acer Acer Compaq CompaqEvaluation

Gateway Gateway Gateway of Decision HP HP Effectiveness Micromedia Micromedia NEC NEC Sony Sony Toshiba Toshiba

Decision Making (cont.) Decision-Making Process (cont.)

- Step 2 - Identifying Decision Criteria • decision criteria - what’s relevant in making a

decision - Step 3 - Allocating Weights to the Criteria

• must weight the criteria to give them appropriate priority in the decision

- Step 4 - Developing Alternatives • list the viable alternatives that could resolve the

problem without evaluating them - Step 5 - Analyzing Alternatives

• each alternative is evaluated against the criteria

Assessed Values of Notebook Computer Alternatives Against Decision Criteria

Decision Making (cont.) Decision-Making Process (cont.) -

Step 6 - Selecting an Alternative • choosing the best alternative from among those

considered - Step 7 - Implementing the Alternative •

implementation - conveying the decision to those affected by it and getting their commitment to it -

participation in decision-making process inclines people to support the decision

- decision may fail if it is not implemented properly - Step 8 - Evaluating Decision Effectiveness • determine

whether the problem is resolved

ORGANISING

“ORGANISING involves identification and grouping the activities to be performed and dividing them among the individuals and creating authority and responsibility relationships among them for the accomplishment of organisational objectives”

Steps In organizing(i) Determination of objectives: organization always relates to certain

objectives . So it is essential for the management to identify the objective before any activity.

(ii) Identification and grouping of the activities: each job should be properly classified and grouped. this will enable the people to know what is expected to them as member of group and will help in avoiding duplication

of efforts. (iii) Assignment of duties : after classification and grouping the activities

various jobs , they should be allotted to the individuals . Each individual should be given a specific job to do according to his ability and made

responsible for that.(iv) Developing authority and responsibility relationships: every one

should clearly know to whom he is accountable . This will help in the smooth working of the enterprises by facilitating delegation of

responsibility and authority.

Significance of organising clear cut authority and responsibility

Pattern of communication

Location of decision centers

Balancing of the activities

stimulating creativity

Opportunity for individual growth

ORGANISATION THEORIES1. CLASSICAL THEORY: The CT view the

organizations as machines and human beings as different components of the Organization.

2. NEO-CLASSICAL THEORY: The NCT concentrated only on formal organizations but neo-classicists focused on the human aspect of industry.

3. SYSTEM APPROACH: A system is composed of related and dependent elements which, when in interaction form a unitary whole.

4. CONTINGENCY APPROACH: It identifies the exact nature of inter-dependencies and their impact on organizational design and managerial style.

Forms of organisational structure LINE ORGANISATION: It is also known as the SCALAR ORGANISATION.

Under this, line of authority flows vertically from top to bottom.The authority is highest at the top and reduces through each successive level down the organisational structure.

MERITS:• It is very simple and can be understood by the

employees without any difficulty.• Every person knows from whom he gets orders

and to whom he is accountable.

DEMERITS:• LO is not suitable for big organisation because

there is lack of specialisation.• There is concentration of authority at the top.If

the top executives are not capable, the enterprise will not successful.

LINE AND STAFF ORGANISATION: In line and staff organisations, the

line serves to maintain unity of command and discipline whereas the staff provides expert knowledge and advice in the solution of managerial problems.

MERITS:• This type of organisation is based on planned

specialisation and brings about the expert knowledge for the benefit of the management.

• It has been observed that staff services have proved an excellent training medium for line officers.

DEMERITS:• As the staff specialists are not accountable for the

results as such they may not perform their duties well.

• The allocation of duties between the line and staff executive is generally not very clear,this may hamper coordination in the organisation.

FUNCTIONAL ORGANISATION: The functional authority occupies a mid-way

position between line and staff authority.It remains confined to functional guidance of different departments.It helps in maintaining quality and uniformity of the performance of functional areas throughout the organisation.

MERITS:• The functional organisation provides wide scope for

growth and mass production.• Every superior is an expert in his own area and he will be

successful in making proper planning,this will be able to improve the level of supervision.

DEMERITS:• The division of authority creates problems of discipline,the workers

have to obey many bosses,their loyalty becomes divided.• It promotes logical division of work and leads to specialisation at

every point.

DEPARTMENTATION “DEPARTMENT may be defined as a work-group bought together for performing certain functions of similar nature.Departments are the various parts or divisions of an enterprise.In other words,departmentation is the process of division of enterprise into different parts known as departments.”

ADVANTAGES:

1. When every department looks after one major function,expertise is developed and efficiency of operations increases.

2. Everyone knows his duties, authority, well-defined jobs which helps the individual in achieving better performance.

3. Appraisal of managerial performance becomes easier when specific tasks are assigned to departmental personnel.

Span of control Span of control refers to the number of

subordinates who can be managed effectively by a superior.Span of management also known as span of control or span of organization.

FACTORS INFLUENCING SPAN OF CONTROL COMMUNICATION: Effective communication,

favours larger number of levels because there will be no difficulty of information in spite of a large number of intervening layers.

NATURE OF WORK: Uniform nature of work,will provide wider scope.Work of simple and routine nature can be delegated to the subordinates.In this way,a supervisor can supervise more number of workers.

CAPABILITY OF SUPERVISORS:

A Supervisor, having various qualities like leadership, decision-making can supervise a higher number of workers.

Degree of decentralization : Availability of time:

Span of control

Span of control one level , tall , moderate

Delegation of authority Delegation refers to the assignment of

work to others and confer them the requisite authority to accomplish the job assigned. It enables the managers to distribute their load of work to others and concentrate on more important functions which they can perform better because of their position in the organization.

Delegation of authority means the assignment of work to others and granting them the requisite authority to accomplish the job assigned

Delegation of authority

Process of delegation of authority

ADVANTAGES• It relieves a manager from heavy load of work and

enables him to concentrate on higher functions of management.

• It facilitates taking of quick decisions at the lower levels.

• It helps in training the junior executives who can learn new skills.

• The subordinates feel motivated when they share authority with their boss.

CENTRALISATION Centralisation of authority means concentration of

decision-making at the top level of management. Decentralisation It refers to systematic delegation of authority at all

levels of management and in all departments of the organisation for taking decisions and actions appropriate at the respective levels.

Organisational structure “An OS is a set of planned relationships

between groups of related functions and between physical factors and personnel required for the performance of the functions”.

Importance of os Sound organisation facilitates the performance of

various managerial function by division of labour, clarity of authority and responsibility.

Organisation is an important means of bringing co-ordination among the various departments of the enterprise.

A sound organisational structure is flexible to give adequate scope for the improvement in technology.

Authority and responsibilityAUTHORITY

Authority denotes the powers and rights entrusted to make possible the performance of the work delegated.It may involve the right to decide or act.

Responsibility It may refer to duty or activity assigned.It really

means the obligation of a subordinate to perform the duty assigned to him.

Significance of decision making

Peter f. drurker “whatever a manager does , he does through decision making” Decision making spreads over all managerial functions and covers all the areas of

enterprises.Joseph A. litere says that decision making is the core of managerial activities

Decision making and planning are deeply interlinked

The determination of objectives , policies , programmes , strategies etc involves decision making

Manager also take decisions on the organizational design , staffing directing and leading the employees in the work situation .

The most out standing quality of a successful manager is his ability to make sound decisions

Stages in decision making

Defining the problem

Analyzing the problem

Collection of data

Developing the alternatives

Review of the key factors

Selecting the best alternative

Implementing the decision

feedback

highest

Lowest

Functional Authority

Concurring Authority

Compulsory consultation

Voluntary consultation

Levels of authority of a staff man