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PLANNING.

After Completing your Lessons on

PLANNING, you should understand:-1.What managerial planning is & why it is important.

2.The various types of plans and how they relate to one another.

3.The logical steps in planning.

4.How the steps in planning constitute a rational approach tosetting objectives and selecting the means of reaching them.

5.The meaning of the commitment principle.

6.The importance of reviewing plans periodically.

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Ensure that everyone understand the groups

purposes and objectives and also the methods to

achieve them. For this you have to design an

environment for the effective performance of

individuals working together in groups.

Planning involves selecting missions &

objectives and actions to achieve them. Planning

also strongly implies managerial innovation.

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TYPES of PLANS.

1.Purpose or Missions. THEY

2.Objectives. ARE

3.Strategies. LIKE

4.Policies. A

5.Procedurers. HIERARCHY.

6.Rules. HIERARCHY

7.Programmes OF

8.Budgets. PLANS.

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STEPS IN PLANNING.

1.Being Aware of Opportunity.

2.Setting Objectives or Goals.

3.Considering Planning Premises.

4.Identifying Alternatives.

5.Comparing Alternatives in the light of

of Goals sought.

6.Choosing an Alternative.

7.Formulating Supporting Plans.

8.Numberizing Plans by making Budgets.

{Refer 3.11-Fig.3.4 for more details}

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Commitment Principle.

Commitment Principle Implies that longrange planning is not

really planning for future decisions but, rather ,planning for

future impact of todays decisions. In other words, a decision is a

commitment ,normally of funds, direction of action or reputation.

And decisions lie at the core of planning. While studies and

analyses preceded decisions, any type of plan implies that some

decision has been made. Indeed ,a plan does not really exist as

such until a decision has been made. Knowing this ,the astute

manager will recognize the validity of gearing longer-term

considerations to present decisions. To do otherwise is to

overlook the basic nature of both planning and decision making.

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Application of Commitment

Principle.

There is no uniform or arbitrary length of time for

which a company should plan or for which a given

programme or any of its parts should be planned. An

airplane company embarking on a new commercialjet aircraft project should probably plan this

programme for at least 12 years ahead, with 5 or

6years for engineering and development and at least

as many more years for production and sales, in orderto recoup total costs and make reasonable profit.

See Figure 3.6 in page 3.17

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Planning-SUMMARY.

1.Planning involves selecting missions and objectives and the action to achievethem.

2.Plans requires decision making that is , choosing from among the alternativefuture courses of action.

3.Planning and controlling are closely interrelated.

4.Thereare many types of plans, such as purposes and missions, objectives orgoals, strategies, policies, procedures,rules,programs and budgets.

5.Once aware of an opportunity, a manager plans rationally by establishingobjectives, making assumptions about the present and future environment,finding and evaluating alternative courses of action and choosing a courseto follow like a plan & supporting budget, with attention to the total

environment.6.The commitment principle says that plans should cover a period of time,long enough to fulfill commitments involved in decisions made. Shortrange plans should be coordinated with long range plans.

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Summary of major principles or

Guides of planning.

The Purpose and Nature of Planning:-Principle of contribution to objectives, Principle of objectives, Principle of

primacy of planning, Principle of efficiency of plans. (Refer 6.13)

The Structure of Plans:-Principle of planning premises & Principle of the strategy andpolicy framework.

The Process of Planning:-

Principle of the limiting factor, The commitment principle &Principle of Navigational change.

(see 8.14)

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Management by Objectives

Defined as:

A comprehensive managerial system that

integrates many key managerial activities in a

systematic manner and that is consciously

directed toward the effective and efficient

achievement of an organizational and

individual objectives.All individuals do not share this view of MBO as a system of

managing. Some still define MBO in a very narrow limited way.

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HOME WORK.

TAKING A PLANNING

PROBLEM THAT NOW FACES

YOU,PROCEED TO DEALWITH IT IN ACCORDANCE

WITH THE PLANNING STEPSOUTLINED IN THIS

CHAPTER.

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STRATEGIC PLANNING

PROCESS.

KEY ELEMENTS:-

1.INPUTS.

2.ENTERPRISE PROFILE.3.ORIENTATION of TOP MANAGERS.

4.PURPOSE and OBJECTIVES.

5.EXTERNAL ENVIRONMENT.

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DECISION MAKING.

After Completing this chapter ,you should understand:

1.What decision making is .

2.The Principle of limiting factor.

3.The nature and process of evaluation of alternatives.

4.Three approaches for selecting from alternatives.5.The nature of programmed and unprogrammed

decisions.

6.Modern approaches to decision making in the light ofuncertainties.

7.Factors determining the importance of the decision.8.The utility of decision support systems (DSSs).

9.The systems approach to decision making.

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What Decision Making is ?

Decision Making is Defined as :

SELECTION OF A COURSE OF ACTION FROMAMONG ALTERNATIVES.'

It is at the core of planning. Plans get translated into

action only when a decisiona commitment of

resources,directioin,or reputation-has been made. The

main job of a manager is to take decision on what to be

done, who to do it, and when,where,and occasionallyeven how it will be done. Decision making is, however ,

only a step in planning.

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Principle of Limiting Factor.

Limiting factor refers to the factors that stand in way of

accomplishing a desired objective. It is necessary to

recognize the limiting factors in a given situation so

that it is possible to narrow the search for alternativesthat are required in overcoming the limiting factors.

The principle of limiting factor is as

follows: By recognizing and overcoming thosefactors that stand in the way of a goal, the best

alternative course of action can be selected.

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The Nature & Purpose

of Evaluation of Alternatives

1.Quantitative and Qualitative Factors .

2.Marginal Analysis.

3.Cost Effectiveness Analysis.

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Three Approaches for SELECTING

an alternative

(i) Experience.

(ii) Experimentation.

(iii) Research and Analysis

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The Nature of programmed &

unprogrammed decisions.A Programmed Decision applies to structured or routine

problems. It relies primarily on previously establishes criteria. It

is in effect decision making by precedent.

Eg:Withdrawing cash from ATM machine/Recording standard

inventory items.

A Non Programmed Decision is used for unstructured ,novel, and

ill defined situations of a non-recurring nature.

Eg:Marketing of a small video camera by Kodak.

STRATEGIC DECISIONS IN GENERAL ARE

NONPROGRAMMED DECISIONS,SINCE THEY

REQUIRE SUBJECTIVE JUDGMENTS.

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Modern Approaches to Decision

Making in the light of Uncertainties.1.Risk Analysis: An intelligent decision maker

would like to know the size & nature of the risk

involved in choosing a course of action Eg:Specialists comingwith best estimates

2.Decision Trees: Depicts in the form of a tree thedecisionpoints,chance events, and probabilities involved

in various courses that might be undertaken.

3.Preference Theory (Utility Theory) explains the

individual attitude toward risk ;assumed that the

decision makers allow the statistical probabilities as

applied to decision making.

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Factors Determining

the Importance of the Decision.Managerial Decisions should not only be correct but

also economic as far as possible.

The following guideline will be useful:

1.Less important decisions.2.Extent of responsibility.

3.Size of resources involved.

4.Degree of flexibility.

5.Degree of certainty of goals and premises.6.Impact of decisions.

{Refer Page 6.9}

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The Utility of

Decision Support Systems (DSSs)

DSSs use computers to facilitate the decision

making process of semi structured tasks. It is

not to replace the managerial judgment ,but to

support it and to make the decision processmore effective.DSSs also help managers react

quickly to changing needs.

MIS (Management Information Systems)& DSSs

-similarities & differences.

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The Systems Approach

to Decision Making

Decisions cannot usually be made ,of course ,in a

closedsystem environment. Many elements of

the environment of planning lie outside the

enterprise. Every dept. or section of an enterpriseis a sub system of the entire enterprise; Managers

of these units should be responsive to the policies &

programs of the units as well of the total enterprise.

Thinking and attitudes of the employees must be taken

into account whenever a manager makes a decision.

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Comparison: MIS & DSS

MIS (Management Information System) V/S DSS (Decision Support System)

Focus on Structured tasks& routine decisions Focus on semistructured tasks, requiring.

e.g. use of procedures ,decision rules . Managerial judgment.

Emphasis on data storage. Emphasis on datamanipulation .

Often only indirect access to data by managers. Direct data access bymanagers.

Reliance on computer expert. Reliance on managersown judgment.

Access to data possibly requiring a wait for Direct access tocomputer and data..

manager's turn

MIS manager not completely understanding the Manager knowingdecision environment.

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Chapter Summary

Decision making is the process of selecting a course of action

from alternatives; it is the core of planning. Mangers must make

choices on the basis of limited or bounded rationality-learning

about the situations. From the various alternatives, managers

should narrow them down to those few that deal with limitingfactors; these are the ones that stand in the way of achieving a

desired objective. Alternatives are then evaluated in terms of

quantitative and qualitative factors. Programmed decisions are

suited for structural problems and routine decisions, mainly made

by lowerlevel managers& non managers.NonProgrammed

decisions are used for unstructured problems and non routine

decisions are made especially by the upper level managers.

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Factors that determine the

importance of a decision are:-

(a) The size of the commitment

(b) The flexibility or inflexibility of plans.

(c) The certainty or uncertainty of goals andpremises.

(d) The degree to which variables can be

measured.

(e) The impact on people.

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ORGANIZING.

The Nature & PurposeAfter completing this chapter, you should understand:

1.The purpose of an organization structure.

2.The meaning of Organizing & Organization.

3.The distinction between Formal & Informalorganization.

4.The Organization structures and their levels.

5.The concept of span of a management.

6.The nature of entrepreneuring and intrapreneuring.

7.The logic of organizing and its relationship to othermanagerial functions.

8.That organizing requires taking situations intoaccount.

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ORGANIZATION

must incorporate:-

1.Verifiable objectives as part of planning.

2.A clear idea of the major duties or activities involved.

3.An understood area of discretion or authority so that

the person filling the role knows what can be theaccomplished goals.

In addition to make a role work out for effectively,

provision should be made for supplying neededinformation & other tools necessary for performance

in that role.

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Formal & Informal Organization.

Formal Organization :means the intentionalstructure of

roles in a formally organized enterprise. Formal organization doesn'tmean rigid

& it must be flexible. There should be room for discretion, foradvantageous

Utilization of creative talents and for recognition of individual likes&capacities in

the most formal of organization.

Informal Organization: means a net work ofpersonal and social relations not establi shed or requi red by the

formal organization but arising spontaneously as people associate

with one another .Any personal activity without conscious joint

purpose ,even though contr ibuting to joint r esul ts. E.g.: Playing

Chess dur ing lunch time may aid in the achievement of organization

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LOGIC of ORGANIZING:

SIX STEPS.1.Establishing enterprise objectives.

2.Formulating supporting objectives, policies and plans.

3.Identifying and classifying the activities necessary toaccomplish these.

4.Grouping these activities in the light of the human and materialresources available and the best way, under the circumstancesof using them.

5.Delegating to the head of each group the authority necessary to

perform the activities.6.Tying the groups together horizontally and vertically through

authority relationships and information flows.

O i ti l E i t f

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Organizational Environment for

ENTREPRENEURING &

INTRAPRENEURING.Entrepreneuring: Apply to managing small business or even

large business and to managers carrying out entrepreneuringroles through which they initiate changes to take advantage ofopportunity. Commitment for systematic innovation is the

main goal.Intrapreneuring: Apply to persons who focus on innovation and

creativity and who transforms a dream or an idea into aprofitable venture by operatingwithinthe organizational

environment.

Entrepreneur does the same thing but outside theorganizational setting.

Some thinkers doesnt demark these differences.

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Principle of SPAN of management & the

factors determining an effective SPAN.

The Principle of Span of the management

states: That there is a limit to the number of

subordinates a manager can effectivelysupervise, but the exact number will

depend on the impact of several underlying

factors. Span cannot be uniform in any

organization

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Basic Questions for Effective

Organizing:

1.What determines the span of management andhence the levels of organization?

The Principle of the span ofmanagement states

that there is a limit to the number of

subordinates a manager can effectivelysupervise ,but the exact number will

depend on

h im f r l n rl in

Q 2 Wh t d t i th b i f k f

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Q:2.What determines the basic framework of

departmentation and what are the strengths

weaknesses of the basic forms ?

i) Departmentation by Time: Grouping

activities on the basis of time-Shifts-for

economic, technological or other reasons.

Can be seen in Hospitals where round theclock activities are undertaken. Steel furnace

continuous and you can see even three

shifts.Advantages & Disadvantages see page 8.2)

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ii)Departmentation by Enterprise

Function

Grouping activities : Production: Purchase of Rawmaterials, Package materials,Despatch materials, maintaining

machines, controlling the labor force at the production centers,

paying excise duty, Inventory Control Etc..

Selling :Finding customers, market survey,knowingcompetitors,

pricing, billing & realizing the money, Servicing.

Financing: Raising the money, collection, safeguarding,

accounting , spending Etc..

Advantages &Disadvantages : Page 8.2 see Figure 8.1 too.

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iii) Departmentation by Territory or

Geography.

E.g.: Marketing organization or Banking net

works grouping state wise/region wise/zone

wise Etc..

Advantages vs. Disadvantages

see 8.4 See Fig 8.2 too

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iv) Customer Departmentation.

Primary interest in customers-as they are the key

to the way activities are grouped when each of

the different things an enterprise does for them

is managed by one dept head.E.g. commercial Bank differentiating to

Communitycity banking, Corporate banking,

Institutional banking, Real Estate &Mortgage

loans, Agricultural banking etc..

See 8.6 for Fig & Advantages & Disadvantages.

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v) Process or Equipment

Departmentation.

PresidentEngineering Production Marketing Finance Personal

I

I See Page 8.7Punch presses Welding Electroplating

Advantages:- Disadvantages:-

Achieves economic advantage. Coordination of depts. difficult.

Uses specialized technology. Responsibility for profit is at the top.Utilizes special skills. Is unsuitable for developing general managers.

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vi) Departmentation by Product.

Grouping activities on the basis of product or product lines

growing in multiline& large scale enterprises. Different

productsProduct Managers, Sales & Service managers.

Managerial job becomes complex.Advantages Disadvantages

Attention & effort on product line. Requires more persons with

managerial abilities .

See 8.8

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MATRIX ORGANIZATION

It is the combination of Functional & Product

patterns of departmentation in the same

organization structure. More used in engineeringfunctions & seldom used in Product marketing

Organization. See Fig 8.6

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Problems with matrix management.

1.State of Conflict between functional & project managers as

both compete for limited resources.2.Role conflict, role ambiguity and role overload may lead in

stress for the functional & project managers & team members.

3.An imbalance of authority & power as well as vertical and

horizontal influence of the project and functional managers.

4.Because of potential conflicts, managers may want to protect

themselves against blame by putting everything in writing, which

increases administration costs.5.Matrix organization requires many timeconsuming meetings.

See 8.12

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Guidelines for making Matrix

Management Effective.

1.Define the objective of the project or task.

2.Calarify the roles,authorities,and responsibilities of managers

and team members.

3.Ensure that influence is based on knowledge and information,

rather than on rank.

4.Balance the power of functional and project managers.

5.Select an experienced for the project who can provide

leadership.

6.Undertake organization and team development.

7.Install appropriate cost, time and quality controls that report

deviations from standards in a timely manner.

8.Reward project managers and team members fairly.

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CHAPTER SUMMARY

1.Formal organization is the intentional structure of roles.Informal Organization is a net work of personal and socialrelations neither established nor required by a formal authority

but arising spontaneously.

2.The term of span of management' refer to the number of

people a manager can effectively supervise. A wide span ofmanagement results in few organizational levels and a narrowspan results in many levels.

3.There is no definite number of people a a manager can alwayseffectively supervise; the number depends on several

underlying factors. They include (a) the degree of subordinatetraining required and possessed (b) the clarity of authoritydelegated ( c) the clarity of plans (d) the rate of change (e) theuse of objective standards (f) the effectiveness ofcommunication technique (g) the amount of personal contactneeded and (h) the level in the organization.