Planning & Decision Making

PLANNING Overview

  • Chapter 2 focuses on the concept and significance of planning in management.

OBJECTIVES

  • After studying this unit, you should be able to:

    • Define planning and understand its primary role in management.

    • Explain various classifications and types of plans.

    • Discuss the importance of planning and the steps involved.

    • Analyze reasons for failure in planning and its limitations.

    • Identify tools used in planning.

INTRODUCTION

  • Definition of a Plan:

    • A specific documented intention comprising an objective (end) and an action statement (means).

  • Planning Process:

    • An intellectual process involving setting objectives, determining action courses, implementing plans, and evaluating outcomes.

    • Authors Koontz, O’Donnell & Weihrich (1980) emphasize its conscious and knowledge-driven aspects.

PLANNING and UNCERTAINTY

  • Purpose of Planning:

    • Mitigates uncertainty by creating strategic courses of action to achieve goals.

  • Types of Uncertainty:

    • State Uncertainty: Unstable environment.

    • Effect Uncertainty: Unpredictable impacts of environmental changes.

    • Response Uncertainty: Unpredictable outcomes derived from decisions.

MANAGEMENT FUNCTIONS AND PLANNING

  • Planning is integral in decision-making:

    • Establishes "what to do, how, when, and who" in task delegation.

    • Denominated the primary function as it informs all subsequent management functions, including:

      • Organizing

      • Staffing

      • Motivating

      • Communicating

      • Controlling

CLASSIFICATION OF PLANS

  • Types of Plans:

    • Standing Plans: Repeatedly used frameworks like policies, procedures, and rules.

    • Single Use Plans: Typically developed for specific short-term objectives, such as programs and budgets.

TYPES OF PLANS

  1. Strategic Plans:

    • Outline general direction and major activities for long-term organizational goals (1 to 10 years).

    • Defined by Chandler (1962) as establishing long-term goals and the allocation of resources.

  2. Tactical Plans:

    • Focus on how to compete effectively at divisional or departmental levels (6 months to 2 years).

  3. Operational Plans:

    • Day-to-day plans created by first-line managers (up to 1 year).

  4. Business Plans:

    • Market service strategies and financial requirements for operations.

MANAGERIAL PLANNING PYRAMID

  • Hierarchical Levels of Planning:

    • Top Management: Strategic planning over long horizons.

    • Middle Management: Intermediate planning for specific units.

    • Lower Management: Operational planning for everyday tasks.

ELEMENTS OF PLANNING

  • Purpose/Mission:

    • Defines organizational scope and distinguishes from competitors.

  • Objectives:

    • Serve as performance yardsticks and guide policy formulation. They should adhere to the SMART criteria (Specific, Measurable, Achievable, Relevant, Time-bound).

IMPORTANCE OF OBJECTIVES

  • Objectives serve crucial roles such as setting targets, measuring achievements, ensuring commitment, and motivating individuals to overcome challenges.

STRATEGIES, POLICIES, AND PROCEDURES

  • Strategies: Action plans addressing adverse environmental factors to meet objectives.

  • Policies: Guidelines supporting strategic goals.

  • Procedures: Detailed steps designed to handle structured problems - more specific than policies.

  • Rules: Fixed directives for specific situations, with no flexibility.

  • Programs: Comprehensive plans that encompass related activities with coordinated efforts.

  • Budgets: Quantitative representations of anticipated expenditures and revenues.

IMPORTANCE OF PLANNING

  • Essential for:

    • Addressing uncertainties and changes.

    • Focused attention on achieving objectives.

    • Cooperative economics.

    • Facilitating control mechanisms.

PLANNING PROCESS

  1. Assess Opportunities: Understanding potential future fortuity.

  2. Establishing Objectives: Defining expected outcomes and primary focuses.

  3. Premising: Formulating assumptions regarding the environment of implementation.

  4. Determining Alternatives: Narrowing down to promising action paths.

  5. Evaluating Alternatives: Weighing pros and cons, considering factors such as ROI and risk.

  6. Selecting a Course of Action: Finalizing the chosen plan.

  7. Formulating Derivative Plans: Supporting plans for implementation.

  8. Numbering Plans by Budgeting: Translating plans into budgetary figures.

FAILURES IN PLANNING

  • Common reasons include:

    • Lack of Commitment: Distraction by immediate problems.

    • Psychological Barriers: Confidence issues leading to risk aversion.

    • Undefined Objectives: Goals that are not SMARTly outlined.

    • Ineffective Training: Inadequate knowledge for planning.

    • Top Management Support: Insufficient backing leads to ineffective planning.

    • Lack of Clear Delegation: Ambiguous roles hinder effective planning.

    • Technical Issues: Lack of technical skills among managers impacting planning execution.

LIMITS TO PLANNING

  • Key limitations include:

    • High costs relative to detail.

    • Planning complexity driven by market demands.

    • Challenges of rapid change impacting reliability.

    • Political and regulatory constraints affecting organizational flexibility.

    • Capital investment decisions influencing future planning premises.