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  1. 1. Unit II :Planning, Decision Making and Organizing. PLANNING.
  2. 2. PLANNING. <ul><li>After Completing your Lessons on </li></ul><ul><li>PLANNING, you should understand:- </li></ul><ul><li>1.What managerial planning is & why it is important. </li></ul><ul><li>2.The various types of plans and how they relate to one another. </li></ul><ul><li>3.The logical steps in planning. </li></ul><ul><li>4.How the steps in planning constitute a rational approach to setting objectives and selecting the means of reaching them. </li></ul><ul><li>5.The meaning of the commitment principle. </li></ul><ul><li>6.The importance of reviewing plans periodically. </li></ul>
  3. 3. <ul><li>Ensure that everyone understand the group’s </li></ul><ul><li>purposes and objectives and also the methods to </li></ul><ul><li>achieve them. For this you have to design an </li></ul><ul><li>environment for the effective performance of </li></ul><ul><li>individuals working together in groups. </li></ul><ul><li>Planning involves selecting missions & </li></ul><ul><li>objectives and actions to achieve them . Planning </li></ul><ul><li>also strongly implies managerial innovation . </li></ul>
  4. 4. TYPES of PLANS. <ul><li>1.Purpose or Missions. THEY </li></ul><ul><li>2.Objectives. ARE </li></ul><ul><li>3.Strategies. LIKE </li></ul><ul><li>4.Policies. A </li></ul><ul><li>5.Procedurers. HIERARCHY. </li></ul><ul><li>6.Rules. HIERARCHY </li></ul><ul><li>7.Programmes OF </li></ul><ul><li>8.Budgets. PLANS. </li></ul>
  5. 5. STEPS IN PLANNING. <ul><li>1.Being Aware of Opportunity. </li></ul><ul><li>2.Setting Objectives or Goals. </li></ul><ul><li>3.Considering Planning Premises. </li></ul><ul><li>4.Identifying Alternatives. </li></ul><ul><li>5.Comparing Alternatives in the light of </li></ul><ul><li>of Goals sought. </li></ul><ul><li>6.Choosing an Alternative. </li></ul><ul><li>7.Formulating Supporting Plans. </li></ul><ul><li>8.Numberizing Plans by making Budgets. </li></ul><ul><li>{Refer 3.11-Fig.3.4 for more details} </li></ul>
  6. 6. Commitment Principle. <ul><li>Commitment Principle Implies that long –range planning is not </li></ul><ul><li>really planning for future decisions but, rather ,planning for </li></ul><ul><li>future impact of today’s decisions. In other words, a decision is a </li></ul><ul><li>commitment ,normally of funds, direction of action or reputation. </li></ul><ul><li>And decisions lie at the core of planning. While studies and </li></ul><ul><li>analyses preceded decisions, any type of plan implies that some </li></ul><ul><li>decision has been made. Indeed ,a plan does not really exist as </li></ul><ul><li>such until a decision has been made. Knowing this ,the astute </li></ul><ul><li>manager will recognize the validity of gearing longer-term </li></ul><ul><li>considerations to present decisions. To do otherwise is to </li></ul><ul><li>overlook the basic nature of both planning and decision making. </li></ul>
  7. 7. Application of Commitment Principle. <ul><li>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 commercial jet 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 order to recoup total costs and make reasonable profit. </li></ul><ul><li>See Figure 3.6 in page 3.17 </li></ul>
  8. 8. Planning-SUMMARY. <ul><li>1.Planning involves selecting missions and objectives and the action to achieve them . </li></ul><ul><li>2.Plans requires decision making that is , choosing from among the alternative future courses of action. </li></ul><ul><li>3.Planning and controlling are closely interrelated. </li></ul><ul><li>4.Thereare many types of plans, such as purposes and missions, objectives or goals, strategies, policies, procedures,rules,programs and budgets. </li></ul><ul><li>5.Once aware of an opportunity, a manager plans rationally by establishing objectives, making assumptions about the present and future environment, finding and evaluating alternative courses of action and choosing a course to follow like a plan & supporting budget, with attention to the total environment. </li></ul><ul><li>6.The commitment principle says that plans should cover a period of time, long enough to fulfill commitments involved in decisions made. Short range plans should be coordinated with long range plans. </li></ul>
  9. 9. Summary of major principles or Guides of planning. <ul><li>The Purpose and Nature of Planning:- </li></ul><ul><li>Principle of contribution to objectives, Principle of objectives, Principle of </li></ul><ul><li>primacy of planning, Principle of efficiency of plans. (Refer 6.13) </li></ul><ul><li>The Structure of Plans:- </li></ul><ul><li>Principle of planning premises & Principle of the strategy and </li></ul><ul><li>policy framework. </li></ul><ul><li>The Process of Planning:- </li></ul><ul><li>Principle of the limiting factor, The commitment principle & </li></ul><ul><li>Principle of Navigational change. </li></ul><ul><li>(see 8.14) </li></ul>
  10. 10. Management by Objectives <ul><li>Defined as: </li></ul><ul><li>‘ 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.’ </li></ul><ul><li>All individuals do not share this view of MBO as a system of </li></ul><ul><li>managing. Some still define MBO in a very narrow limited way. </li></ul>
  12. 12. STRATEGIC PLANNING PROCESS. <ul><li>KEY ELEMENTS:- </li></ul><ul><li>1.INPUTS. </li></ul><ul><li>2.ENTERPRISE PROFILE. </li></ul><ul><li>3.ORIENTATION of TOP MANAGERS. </li></ul><ul><li>4.PURPOSE and OBJECTIVES. </li></ul><ul><li>5.EXTERNAL ENVIRONMENT. </li></ul>
  13. 13. DECISION MAKING. <ul><li>After Completing this chapter ,you should understand: </li></ul><ul><li>1.What decision making is . </li></ul><ul><li>2.The Principle of limiting factor. </li></ul><ul><li>3.The nature and process of evaluation of alternatives. </li></ul><ul><li>4.Three approaches for selecting from alternatives. </li></ul><ul><li>5.The nature of programmed and unprogrammed decisions. </li></ul><ul><li>6.Modern approaches to decision making in the light of uncertainties. </li></ul><ul><li>7.Factors determining the importance of the decision. </li></ul><ul><li>8.The utility of decision support systems (DSSs). </li></ul><ul><li>9.The systems approach to decision making. </li></ul>
  14. 14. What Decision Making is ? <ul><li>Decision Making is Defined as : </li></ul><ul><li>‘ SELECTION OF A COURSE OF ACTION FROM AMONG ALTERNATIVES.' </li></ul><ul><li>It is at the core of planning. Plans get translated into </li></ul><ul><li>action only when a decision –a commitment of </li></ul><ul><li>resources,directioin,or reputation-has been made. The </li></ul><ul><li>main job of a manager is to take decision on what to be </li></ul><ul><li>done, who to do it, and when,where,and occasionally </li></ul><ul><li>even how it will be done. Decision making is, however , </li></ul><ul><li>only a step in planning. </li></ul>
  15. 15. Principle of Limiting Factor. <ul><li>Limiting factor refers to the factors that stand in way of </li></ul><ul><li>accomplishing a desired objective. It is necessary to </li></ul><ul><li>recognize the limiting factors in a given situation so </li></ul><ul><li>that it is possible to narrow the search for alternatives </li></ul><ul><li>that are required in overcoming the limiting factors. </li></ul><ul><li>The principle of limiting factor is as </li></ul><ul><li>follows: By recognizing and overcoming those </li></ul><ul><li>factors that stand in the way of a goal, the best </li></ul><ul><li>alternative course of action can be selected. </li></ul>
  16. 16. The Nature & Purpose of Evaluation of Alternatives <ul><li>1.Quantitative and Qualitative Factors . </li></ul><ul><li>2.Marginal Analysis. </li></ul><ul><li>3.Cost Effectiveness Analysis. </li></ul>
  17. 17. Three Approaches for SELECTING an alternative <ul><li>(i) Experience. </li></ul><ul><li>(ii) Experimentation. </li></ul><ul><li>(iii) Research and Analysis </li></ul>
  18. 18. The Nature of programmed & unprogrammed decisions. <ul><li>A Programmed Decision applies to structured or routine </li></ul><ul><li>problems. It relies primarily on previously establishes criteria. It </li></ul><ul><li>is in effect decision making by precedent. </li></ul><ul><li>Eg:Withdrawing cash from ATM machine/Recording standard </li></ul><ul><li>inventory items. </li></ul><ul><li>A Non Programmed Decision is used for unstructured ,novel, and </li></ul><ul><li>ill defined situations of a non-recurring nature. </li></ul><ul><li>Eg:Marketing of a small video camera by Kodak. </li></ul><ul><li>STRATEGIC DECISIONS IN GENERAL ARE </li></ul><ul><li>NONPROGRAMMED DECISIONS,SINCE THEY </li></ul><ul><li>REQUIRE SUBJECTIVE JUDGMENTS. </li></ul>
  19. 19. Modern Approaches to Decision Making in the light of Uncertainties. <ul><li>1.Risk Analysis : An intelligent decision maker </li></ul><ul><li>would like to know the size & nature of the risk </li></ul><ul><li>involved in choosing a course of action Eg:Specialists coming with best estimates </li></ul><ul><li>2.Decision Trees: Depicts in the form of a tree the </li></ul><ul><li>decisionpoints,chance events, and probabilities involved </li></ul><ul><li>in various courses that might be undertaken. </li></ul><ul><li>3.Preference Theory (Utility Theory) explains the </li></ul><ul><li>individual attitude toward risk ;assumed that the </li></ul><ul><li>decision makers allow the statistical probabilities as </li></ul><ul><li>applied to decision making. </li></ul>
  20. 20. Factors Determining the Importance of the Decision. <ul><li>Managerial Decisions should not only be correct but </li></ul><ul><li>also economic as far as possible . </li></ul><ul><li>The following guideline will be useful: </li></ul><ul><li>1.Less important decisions. </li></ul><ul><li>2.Extent of responsibility. </li></ul><ul><li>3.Size of resources involved. </li></ul><ul><li>4.Degree of flexibility. </li></ul><ul><li>5.Degree of certainty of goals and premises. </li></ul><ul><li>6.Impact of decisions. </li></ul><ul><li>{Refer Page 6.9} </li></ul>
  21. 21. The Utility of Decision Support Systems (DSSs) <ul><li>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 process more effective.DSSs also help managers react quickly to changing needs. </li></ul><ul><li>MIS (Management Information Systems)& DSSs </li></ul><ul><li>-similarities & differences. </li></ul>
  22. 22. The Systems Approach to Decision Making <ul><li>Decisions cannot usually be made ,of course ,in a </li></ul><ul><li>closed –system environment. Many elements of </li></ul><ul><li>the environment of planning lie outside the </li></ul><ul><li>enterprise. Every dept. or section of an enterprise </li></ul><ul><li>is a sub system of the entire enterprise; Managers </li></ul><ul><li>of these units should be responsive to the policies & </li></ul><ul><li>programs of the units as well of the total enterprise. </li></ul><ul><li>Thinking and attitudes of the employees must be taken </li></ul><ul><li>into account whenever a manager makes a decision. </li></ul>
  23. 23. Comparison: MIS & DSS <ul><li>MIS (Management Information System ) V/S DSS (Decision Support System) </li></ul><ul><li>Focus on Structured tasks& routine decisions Focus on semi structured tasks, requiring. </li></ul><ul><li>e.g. use of procedures ,decision rules . Managerial judgment. </li></ul><ul><li>Emphasis on data storage. Emphasis on data manipulation . </li></ul><ul><li>Often only indirect access to data by managers. Direct data access by managers. </li></ul><ul><li>Reliance on computer expert. Reliance on manager’s own judgment. </li></ul><ul><li>Access to data possibly requiring a wait for Direct access to computer and data.. </li></ul><ul><li>manager's turn </li></ul><ul><li>MIS manager not completely understanding the Manager knowing decision environment. </li></ul><ul><li>Nature of the decision. </li></ul><ul><li>Emphasis on Efficiency. Emphasis on Effectiveness. </li></ul>
  24. 24. Chapter Summary <ul><li>Decision making is the process of selecting a course of action </li></ul><ul><li>from alternatives; it is the core of planning. Mangers must make </li></ul><ul><li>choices on the basis of limited or bounded rationality-learning </li></ul><ul><li>about the situations. From the various alternatives, managers </li></ul><ul><li>should narrow them down to those few that deal with limiting </li></ul><ul><li>factors; these are the ones that stand in the way of achieving a </li></ul><ul><li>desired objective. Alternatives are then evaluated in terms of </li></ul><ul><li>quantitative and qualitative factors. Programmed decisions are </li></ul><ul><li>suited for structural problems and routine decisions, mainly made </li></ul><ul><li>by lower –level managers& non managers.NonProgrammed </li></ul><ul><li>decisions are used for unstructured problems and non routine </li></ul><ul><li>decisions are made especially by the upper level managers. </li></ul>
  25. 25. Factors that determine the importance of a decision are:- <ul><li>(a) The size of the commitment </li></ul><ul><li>(b) The flexibility or inflexibility of plans. </li></ul><ul><li>(c) The certainty or uncertainty of goals and premises. </li></ul><ul><li>(d) The degree to which variables can be measured. </li></ul><ul><li>(e) The impact on people. </li></ul>
  26. 26. ORGANIZING. The Nature & Purpose <ul><li>After completing this chapter, you should understand: </li></ul><ul><li>1.The purpose of an organization structure. </li></ul><ul><li>2.The meaning of ‘Organizing’ & ‘Organization’. </li></ul><ul><li>3.The distinction between Formal & Informal organization. </li></ul><ul><li>4.The Organization structures and their levels. </li></ul><ul><li>5.The concept of span of a management. </li></ul><ul><li>6.The nature of entrepreneuring and intrapreneuring. </li></ul><ul><li>7.The logic of organizing and its relationship to other managerial functions. </li></ul><ul><li>8.That organizing requires taking situations into account. </li></ul>
  27. 27. ORGANIZATION must incorporate:- <ul><li>1.Verifiable objectives as part of planning. </li></ul><ul><li>2.A clear idea of the major duties or activities involved. </li></ul><ul><li>3.An understood area of discretion or authority so that the person filling the role knows what can be the accomplished goals. </li></ul><ul><li>In addition to make a role work out for effectively, </li></ul><ul><li>provision should be made for supplying needed </li></ul><ul><li>information & other tools necessary for performance </li></ul><ul><li>in that role. </li></ul>
  28. 28. Formal & Informal Organization. <ul><li>Formal Organization : means the intentional structure of </li></ul><ul><li>roles in a formally organized enterprise. Formal organization doesn't mean ‘rigid’ </li></ul><ul><li>& it must be flexible. There should be room for discretion, for advantageous </li></ul><ul><li>Utilization of creative talents and for recognition of individual likes& capacities in </li></ul><ul><li>the most formal of organization. </li></ul><ul><li>Informal Organization: means a net work of </li></ul><ul><li>personal and social relations not established or required by the </li></ul><ul><li>formal organization but arising spontaneously as people associate </li></ul><ul><li>with one another .Any personal activity without conscious joint </li></ul><ul><li>purpose ,even though contributing to joint results. E.g.: Playing </li></ul><ul><li>Chess during lunch time may aid in the achievement of organization </li></ul><ul><li>goals. </li></ul>
  29. 29. LOGIC of ORGANIZING: SIX STEPS. <ul><li>1.Establishing enterprise objectives. </li></ul><ul><li>2.Formulating supporting objectives, policies and plans. </li></ul><ul><li>3.Identifying and classifying the activities necessary to accomplish these. </li></ul><ul><li>4.Grouping these activities in the light of the human and material resources available and the best way, under the circumstances of using them. </li></ul><ul><li>5.Delegating to the head of each group the authority necessary to perform the activities. </li></ul><ul><li>6.Tying the groups together horizontally and vertically through authority relationships and information flows. </li></ul>
  30. 30. Organizational Environment for ENTREPRENEURING & INTRAPRENEURING. <ul><li>Entrepreneuring : Apply to managing small business or even large business and to managers carrying out entrepreneuring roles through which they initiate changes to take advantage of opportunity. Commitment for systematic innovation is the main goal. </li></ul><ul><li>Intrapreneuring: Apply to persons who focus on innovation and creativity and who transforms a dream or an idea into a profitable venture by operating within the organizational environment. </li></ul><ul><li>Entrepreneur does the same thing but outside the </li></ul><ul><li>organizational setting. </li></ul><ul><li>Some thinkers doesn’t demark these differences. </li></ul>
  31. 31. Principle of SPAN of management & the factors determining an effective SPAN . <ul><li>The Principle of Span of the management </li></ul><ul><li>states: That there is a limit to the number of </li></ul><ul><li>subordinates a manager can effectively </li></ul><ul><li>supervise, but the exact number will </li></ul><ul><li>depend on the impact of several underlying </li></ul><ul><li>factors. Span cannot be uniform in any </li></ul><ul><li>organization </li></ul>
  32. 32. Basic Questions for Effective Organizing: <ul><li>1.What determines the span of management and hence the levels of organization? </li></ul><ul><li>The Principle of the span of management states </li></ul><ul><li>that there is a limit to the number of </li></ul><ul><li>subordinates a manager can effectively </li></ul><ul><li>supervise ,but the exact number will depend on </li></ul><ul><li>the impact of several underlying factors. </li></ul>
  33. 33. Q:2.What determines the basic framework of departmentation and what are the strengths weaknesses of the basic forms ? <ul><li>Departmentation by Time : Grouping activities on the basis of time-Shifts-for economic, technological or other reasons. Can be seen in Hospitals where round the clock activities are undertaken. Steel furnace –continuous and you can see even three shifts. </li></ul><ul><li>Advantages & Disadvantages see page 8.2) </li></ul>
  34. 34. ii)Departmentation by Enterprise Function <ul><li>Grouping activities : Production: Purchase of Raw materials, Package materials,Despatch materials, maintaining machines, controlling the labor force at the production centers, paying excise duty, Inventory Control Etc.. </li></ul><ul><li>Selling : Finding customers, market survey,knowingcompetitors, pricing, billing & realizing the money, Servicing. </li></ul><ul><li>Financing: Raising the money, collection, safeguarding, accounting , spending Etc.. </li></ul><ul><li>Advantages &Disadvantages : Page 8.2 see Figure 8.1 too. </li></ul>
  35. 35. iii) Departmentation by Territory or Geography. <ul><li>E.g.: Marketing organization or Banking net works grouping state wise/region wise/zone wise Etc.. </li></ul><ul><li>Advantages vs. Disadvantages </li></ul><ul><li>see 8.4 See Fig 8.2 too </li></ul>
  36. 36. iv) Customer Departmentation. <ul><li>Primary interest in customers-as they are the key </li></ul><ul><li>to the way activities are grouped when each of </li></ul><ul><li>the different things an enterprise does for them </li></ul><ul><li>is managed by one dept head. </li></ul><ul><li>E.g. commercial Bank differentiating to </li></ul><ul><li>Community –city banking, Corporate banking, </li></ul><ul><li>Institutional banking, Real Estate &Mortgage </li></ul><ul><li>loans, Agricultural banking etc.. </li></ul><ul><li>See 8.6 for Fig & Advantages & Disadvantages. </li></ul>
  37. 37. v) Process or Equipment Departmentation. <ul><li>President </li></ul><ul><li>Engineering Production Marketing Finance Personal </li></ul><ul><li>I </li></ul><ul><li>I See Page 8.7 </li></ul><ul><li>Punch presses Welding Electroplating </li></ul><ul><li>Advantages:- Disadvantages:- </li></ul><ul><li>Achieves economic advantage. Coordination of depts. difficult. </li></ul><ul><li>Uses specialized technology. Responsibility for profit is at the top. </li></ul><ul><li>Utilizes special skills. Is unsuitable for developing general managers. </li></ul>
  38. 38. vi) Departmentation by Product. <ul><li>Grouping activities on the basis of product or product lines </li></ul><ul><li>growing in multiline& large scale enterprises. Different </li></ul><ul><li>products–Product Managers, Sales & Service managers. </li></ul><ul><li>Managerial job becomes complex. </li></ul><ul><li>Advantages Disadvantages </li></ul><ul><li>Attention & effort on product line. Requires more persons with </li></ul><ul><li>managerial abilities . </li></ul><ul><li>See 8.8 </li></ul>
  39. 39. MATRIX ORGANIZATION <ul><li>It is the combination of Functional & Product </li></ul><ul><li>patterns of departmentation in the same </li></ul><ul><li>organization structure. More used in engineering </li></ul><ul><li>functions & seldom used in Product marketing </li></ul><ul><li>Organization. See Fig 8.6 </li></ul>
  40. 40. Problems with matrix management. <ul><li>1.State of Conflict between functional & project managers as </li></ul><ul><li>both compete for limited resources . </li></ul><ul><li>2.Role conflict, role ambiguity and role overload may lead in </li></ul><ul><li>stress for the functional & project managers & team members. </li></ul><ul><li>3.An imbalance of authority & power as well as vertical and </li></ul><ul><li>horizontal influence of the project and functional managers. </li></ul><ul><li>4.Because of potential conflicts, managers may want to protect </li></ul><ul><li>themselves against blame by putting everything in writing, which </li></ul><ul><li>increases administration costs. </li></ul><ul><li>5.Matrix organization requires many time –consuming meetings. </li></ul><ul><li>See 8.12 </li></ul>
  41. 41. Guidelines for making Matrix Management Effective. <ul><li>1.Define the objective of the project or task. </li></ul><ul><li>2.Calarify the roles,authorities,and responsibilities of managers and team members. </li></ul><ul><li>3.Ensure that influence is based on knowledge and information, rather than on rank. </li></ul><ul><li>4.Balance the power of functional and project managers. </li></ul><ul><li>5.Select an experienced for the project who can provide leadership. </li></ul><ul><li>6.Undertake organization and team development. </li></ul><ul><li>7.Install appropriate cost, time and quality controls that report deviations from standards in a timely manner. </li></ul><ul><li>8.Reward project managers and team members fairly. </li></ul>
  42. 42. CHAPTER SUMMARY <ul><li>1.Formal organization is the intentional structure of roles. Informal Organization is a net work of personal and social relations neither established nor required by a formal authority but arising spontaneously. </li></ul><ul><li>2.The term of ‘span of management' refer to the number of people a manager can effectively supervise. A wide span of management results in few organizational levels and a narrow span results in many levels. </li></ul><ul><li>3.There is no definite number of people a a manager can always effectively supervise; the number depends on several underlying factors. They include (a) the degree of subordinate training required and possessed (b) the clarity of authority delegated ( c) the clarity of plans (d) the rate of change (e) the use of objective standards (f) the effectiveness of communication technique (g) the amount of personal contact needed and (h) the level in the organization. </li></ul><ul><li>4.The steps in organizing include (a) formulating objectives,subobjectives, policies, plans to achieve the ends (b) identifying and classifying activities (c) grouping these activities (d) delegating authority (e) coordinating authority as well as informal relationships </li></ul>