UNIT II

PLANNING AND
DECISION MAKING
MEANING OF PLANNING
 Planning is deciding in advance what to do, how to
do it , when to do it and who is to do it.
 It involves anticipating the future and consciously
choosing the future course of action.
 Planning is the process and a plan is the outcome of
this process.
 Hence, a plan is a blueprint for the future course of
action.
DEFINITIONS

 According to Haimann, -
“ It is the function that determines in advance
what should be done. It consists of selecting
the enterprise objectives, policies,
programmes, procedures and other means of
achieving these objectives.”
DEFINITIONS

“Planning involves selecting enterprise

objectives, departmental goals, and
programmes and determining the ways of
reaching them. Planning thus provides a
rational approach.”
NATURE OF PLANNING
 PLANNING IS GOAL-ORIENTED.
 PLANNING IS A PIMARY FUNCTION.
 PLANNING IS ALL-PERVASIVE.
 PLANNING IS AN INTELLECTUAL/RATIONAL
PROCESS.
 PLANNING IS A CONTINUOUS PROCESS.
 PLANNING IS FORWARD-LOOKING.
 PLANNING INVOLVES CHOICE.
 PLANNING IS AN INTEGRATED PROCESS.
 PLANNING IS DIRECTED TOWARDS EFFICENCY.
LIMITATIONS

 Lack of accurate information.

 Time and cost.
 Inflexibility.
 Resistance to change.
 Lack of ability to plans.
 False sense of security.
 Environmental constraints.
HIERARCHY OF PLANNING
 According to scope planning can be of following
type-

Corporate
Planning
Divisional/ Functional
Planning
Group / Sectional Planning
According to the time span

PLANNING
LRP MRP SRP

 LRP – Long-range Strategic Planning.

 MRP- Medium-range or Intermediate Planning.
 SRP- Short- range Operational Planning.
TYPES OF MANAGEMENT PLANS
(Components of Planning)

MULTI-USE PLANS SINGLE-USE PLANS

 Objectives  Programmes
 Strategies  Budgets
 Policies  Schedules
 Procedures  Projects
 Rules  Methods
 PLANNING PROCESS
Perception of Establishing Planning Identification
opportunities objectives premises Of alternatives

Establishing
Formulation of Choice of Evaluation of
sequence
supporting plans Alternative plans alternatives
of activities
MEANING OF DECISION-MAKING

 “DM is a process of selection from a set of

alternative courses of action which is thought
to fulfill the objective of the decision problem
more satisfactorily than others.”
- By Haynes and Massie
FEATURES OF DM

 Goal-oriented process.
 Set of alternatives.
 Dynamic process.
 Related to the environment.
 Freedom to the decision maker.
 Continuous or ongoing process.
 Intellectual or rational process.
TYPES OF DECISIONS

 Programmed and Non-programmed

Decisions.
 Routine and Strategic Decisions.
 Organizational and Personal Decisions.
 Individual and Group Decisions.
PROGRAMMED & NON-PROGRAMMED DM
PROGRAMMED
 Deal with repetitive & routine
problems.
 Highly certain conditions.
 Solutions acc. to established
procedures.
 Require little judgment &
deliberation.
 Usually made by lower-level
executives.
NON-PROGRAMMED
 Unique & novel problems.
 Highly uncertain conditions.
 Each situation is different &
needs a creative solution.
 Involve much thought &
judgment.
 Generally made at higher
levels.
DECISION-MAKING PROCESS

Discuss
Identify the Diagnose the Evaluate
alternative
problem problem course of action alternatives

Implement & Choose the

Follow up Best alternative
ENVIRONMENT OF DM

CERTAINTY

UNCERTAINTY RISK
MODELS / THEORIES OF DM
RATIONAL ECONOMIC
MODEL
 Perfect rationality
 Normative
 Exhaustive search for all
possible alternatives.
 Perfect knowledge of
problems & outcomes.
 Optimal decision.
ADMINISTRATIVE
MODEL
 Bounded rationality.
 Descriptive.
 Limited search for a few
alternatives.
 Imperfect knowledge of
problems & outcomes.
 Satisfying / good enough
decision.