Planning, Strategic Planning and Decision Making
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In this post I
have given a brief explanation of Planning,
Strategic Planning and Decision Making.
These notes are useful B.Com 3rd Semester Students under CBCS
Pattern. Some of the topics are not yet included in these notes which will be
added very soon.
Just scroll down
through this post and all your queries relating to Management Principles and
Applications will be solved.
This Chapter is Included in both CBCS and NEP 2023 Pattern.
- In NEP 2023 Pattern, this chapter is covered under Business Organisation and Management (BOM) 1st Sem
- In CBCS Pattern, this chapter is covered under both Business organisation and Management (BOM) 1st Sem and Management Principles and Applications (MPA) 3rd Sem
Refer Subject wise Important Questions and Plan Your Studies Accordingly
- Business Organisation and Management Important Questions (BOM) 1st SEM NEP 2023
- Business Organisation and Management Important Questions (BOM) 1st SEM CBCS
- Management Principles and Applications Important Questions (MPA) 3rd SEM CBCS
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Table of
Contents |
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1. Meaning of
Planning 2. Different
types of plans with difference 3. Nature of
Planning – Essential of a good plan 4. Objectives
and Importance of Planning 5. Limitations
of Planning 6. Principles
of Planning 7. Planning
Process – Meaning and Steps 8. Planning
Premises 9. Decision
Making – Meaning and Steps 10.
Significance of Decision Making 11. Techniques
of Decision Making 12. Strategic
Planning – Meaning and Steps |
Introduction of Planning
Planning
is the primary function of management.
Planning concentrates on setting and achieving objectives through
optimum use of available resources.
Planning is necessary for any organisation for its survival growth and
prosperity under competitive and dynamic environment. Planning is a continuous process to keep
organisation as a successful going concern,
In the words of:
Koontz
and O’Donnel – “Planning is deciding in advance, what to do, how to do it, when
to do it, and who is to do it. It
bridges the gap from where we are to where we want to go.”
Allen
– “Management planning involves the development of forecasts, objectives,
policies programmes, procedures, schedules and budgets.”
Haynes
and Massie - Planning is a decision making process of a special kind. It is an intellectual process in which
creative thinking and imagination is essential.”
Alfred
and Beatty - “Planning is the thinking process, the organized foresight, the
vision based on fact and experience that is required for intelligent action.
Different types of plans are framed by
the managers at different levels which are given below:
a) Objectives: Objectives are the goals
established to guide the efforts of the management. Objectives are the ends
towards which all the managerial activities are directed. Objective should be
measurable and must be achievable within a given time limit. Example of
increase in sales revenue by 10% by reducing prices.
b) Policies: Policy can be defined as
organisation’s general response to a particular problem. In simple words, it is
the organisation’s own way of handling the problems. Example: Different business firms may follow different sales
policies as stated below: “We don’t sell
on credit”; “It is our policy to deal with wholesalers only.”
c) Procedures: Procedure can be defined as the
exact manner in which an activity has to be accomplished. Procedures give
details of how things are to be done. Example of procedure: Procedure of filing
forms to get admission in a particular school.
d) Methods: Methods can be defined as
formalized or systematic way of doing routine or repetitive jobs. The managers
decide in advance the common way of doing a job. For example: Method of
charging depreciation, methods for valuation of stock FIFO or LIFO.
e) Rules: Rules
are specific statements that tell what is to be done. Rules are to be enforced
rigidly. They do not allow for any flexibility or discretion. For example: No
smoking in the business premise.
f) Strategy: A strategy is a comprehensive
plan to achieve the organisational objectives. It is a general programme of
action and a deployment of resources towards the attainment of comprehensive
objectives.
g) Programmes: Programmes are the combination
of goals, policies, procedures and rules. All these plans together form a
program.
h) Budget: Budget is the monetary and
quantitative expressions of business plans and policies to be pursued in the
future period of time. The term budgeting is used for preparing budgets and
other procedures for planning, co-ordination and control of business
enterprises.
********************************Also Read:
Unit 4:********************************Also Read:********************************
Distinguish between – Objectives and policies
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Basis |
Objectives |
Policies |
|
a)
Aim |
Objectives determine the final goal of the
enterprise. |
Policies are framed to achieve objectives
efficiently. |
|
b)
Level of Management |
Objectives are determined by the owners or
the top level management. |
Policies are determined by top, middle and
Lower level of management. |
|
c)
What |
Objectives determine what is to be done. |
Policies decide how the work is to be done. |
|
d)
How |
Objectives decide the way in which a
specific job to be done. |
Policies decide the procedures to be adopted
for completion of the job. |
Distinguish between Rules and methods.
|
Basis |
Rules |
Methods |
|
1. Meaning |
Rules are norms regarding behaviour of employees. |
Methods are formalized way of doing routine and repetitive jobs. |
|
2. Purpose |
Rules ensure discipline. |
It increases efficiency of operation. |
|
3.
Effect of violation |
Penalty attached to violation of rules. |
No penalty for violation of methods. |
|
4. Flexibility |
Generally rules are rigid. |
Methods are flexible. |
|
5. Association |
Associated with control. |
Not associated with control. |
Distinguish between policy and Strategy.
|
Basis |
Policies |
Strategies |
|
1. Meaning |
Policies are guidelines which facilitate the achievement of
predetermined objectives. |
A strategy is a plan prepared for meeting the challenge posed by
the activities of competitors or some other external environmental forces. |
|
2.Purpose/Aim |
Formulated to deal with repetitive problems. |
Formulated to counter environmental threats and capitalize on
opportunities. |
|
3.Concern/ Coverage |
Concerned with the company as a whole or particular departments. |
Concerned with the company as a whole. |
|
4. Nature of Plan |
It is a type of standing
plan to be used repetitively again and again. |
It is a single use plan
for meeting challenges. After its implementation, it is not used again. |
|
5. Situation |
The situations to be faced by a policy are comparatively known. |
A strategy is formulated to deal with unknown environment in
future. |
Distinguish between procedures and Policies.
|
POLICIES |
PROCEDURES |
|
Policies are
guidelines which facilitate the achievement of predetermined objectives. |
Procedures are sequences of steps to be followed for performing some
important jobs. |
|
They are general statements. |
They are specific statements. |
|
Policies are flexible. |
Procedures are more rigid. |
|
Scope for discretion. |
No scope for discretion. |
|
Decided by top level management |
Decided by middle & low level management |
|
There may be
different policies for different departments. |
There are same procedures for all departments |
|
They are not dependent on procedures |
They are dependent on policies |
Distinguish between procedures and methods.
|
Procedures |
Methods |
|
Procedures are
sequences of steps to be followed for performing some important jobs. |
Methods are formalized
way of doing routine and repetitive jobs. |
|
Procedures are more rigid. |
Methods are less
rigid or flexible. |
|
Procedures help
in implementation of policy. |
Methods help in
standardisation of activity. |
Distinguish between policies and rules.
|
Policies |
Rules |
|
Policies are guidelines which facilitate the
achievement of predetermined objectives. |
Rules are norms regarding behaviour of
employees. |
|
They are general statements. |
Rules are
specific statements. |
|
Policies describe
what is to be done under different situations. |
Rules describe
what is to be done and what is not to be done by the employees. |
|
Policies are less
rigid. |
Rules are very
rigid. |
Nature and Characteristics of Planning or Essentials of a good plan
a) Primacy of planning or primary function: .Planning
is a primary function. That is, it is a primary requisite to the managerial
functions of organising, staffing directing, motivating, coordinating,
communicating and controlling. A manager must do planning before he can
undertake the other managerial functions.
b) Goal-oriented or focus on objectives: Planning
is goal-oriented. That is, planning is linked with certain goals or objectives.
A plan starts with the setting of objectives; and then, develops policies,
procedures, strategies, etc. to achieve the objectives.
c) Pervasiveness of planning: Planning
pervades all levels of management. That is planning is done at all levels of
.management. In other words, every manager, whether he is at the top, in the
middle or at the bottom or organisational structure, plans.
d) Essentially a decision-making process: Planning
is essentially a decision-making process, since it involves careful analysis of
various alternative courses of action and choosing the best.
e) Integrated process: Planning
is an integrated process. That is it facilitates and integrates all other
functions of management.
f) Selective Process: Planning
is a selective process. That is, it involves the selection of the best course
of action after a careful analysis of the various alternative courses of
action.
g) Flexible: Planning must be flexible. That is,
generally, the process of pi3nning must be capable of being adapted to the
changes in the environment. In fact, successful planning should be flexible.
h) Formation of premises: Planning
requires the formation of premises (i.e., assumptions). It is only on the basis
of premises or assumptions regarding the future (i.e., the future political,
social and economic environments) that the plans will be ultimately formulated.
i)
Directed
towards efficiency: The main purpose of planning is to increase
the efficiency of the enterprise. That means, planning is directed towards
efficiency.
j)
Continuous
Process: Planning is a continuous process. That is, the management has to
keep itself engaged in planning at the times because of the uncertainties of
the future.
k) Planning and control are inseparable: Planning,
which is looking ahead, and control, which is looking back, are inseparable.
They are the Siamese twins of management. Unplanned action cannot be
controlled, for control involves keeping activities in course by correcting
deviations from plans.
l)
Future
Oriented: Planning is future-oriented. 1ts essence is looking ahead. It is undertaken to handle future
events effective and achieve some objectives in the future.
m) Action oriented: Planning
is action-oriented. That is, planning should be undertaken in the light of
organisational preferences. The course of action determined must be realistic.
That is it should be neither impossible nor too easy to achieve.
n) Inter-dependent process: Planning
is an inter-dependent process. It requires
the Co-operation of the various sections and sub-sections of the organisation.
o) Involves participation: Planning
involves the participation of all the managers as well as the subordinates. In
the words of Koontz and O'Donnell, "Plans must be formulated in an
atmosphere of close participation and high degree of concurrence".
p) A means and not an end: Planning
is riot an end. It is only a means to achieve an end. i.e., the accomplishment
of the pre-determined objectives or goals of the organisation.
Objectives of Planning
Planning
in an organisation is essential for achieving the following objectives.
a) To reduce
uncertainty about future conditions.
b) To promote
co-ordination and co-operation among various activities of the organisation.
c) To achieve
economy in operation through making optimum use of available resources.
d) To achieve
predetermined objectives efficiently and effectively.
e) To enable
the organisation to survive and grow under competitive and dynamic environment.
********************************Also Read:
Unit 4:********************************Also Read:********************************
Importance and Advantages of Planning
Planning
is of vital importance in the managerial process. No enterprise can achieve its
objectives without systematic planning. “Planning is the heart of management”
The following points highlight the importance of planning function of
management:
a. Planning provides directions: By
stating i n advance how work is to be done, planning provide direction for
action. If goals are well defined, employees are aware of what the organisation
has to do and what they must do to achieve those goals. Departments and
individuals in the organisation are able to work in coordination. Planning
keeps the organisation on the right path. If there was no planning,
employees would be working in different directions and the organisation would
not be able to achieve its goals efficiently.
b. Planning reduces the risks of uncertainty: Business
enterprises operate in an uncertain environment and face several types of
risks. Planning enables these enterprises to predict future events and prepare
to face the unexpected events. With the help of planning, managers can identify
potential dangers and take steps to overcome them. Thus, planning helps risk
and uncertainty.
c. Planning facilitates decision-making:
Decision-making involves searching for various alternative courses of action,
evaluating them and selecting the best course of action. Under planning,
targets are laid down. With the help of these targets, managers can better
evaluate alternative courses of action and select the best alternative. Plans
lay down in advance what is to be done and how it is to be done.
Therefore, decisions can be taken with greater confidence.
d. Planning reduces overlapping and wasteful
activities: Since planning ensures clarity in thought and action, work is
carried on smoothly without interruptions. There is no confusion and
misunderstanding. Useless and redundant activities are minimized or eliminated.
It is easier to detect inefficiencies and take corrective measures to deal with
them.
e. Planning promotes innovative ideas: Planning
is thinking in advance and, therefore, there is scope of finding better ideas
and better methods and procedures to reach the objectives/goals of the
enterprise. This forces managers to think differently about the future of the
organisations from the present. Thus, planning makes the managers innovative
and creative.
f.
Planning
establishes standards for controlling: Planning provides the goals or
standards against which the actual performance can be measured and evaluated. A
comparison of actual performance with the standards helps to identify the
deviations and to take corrective action. Planning makes control meaningful and
effective. ‘Control is blind without planning.” Thus, planning provides the
basis of control.
Limitations of Planning
Planning
is essential for a business organisation. It is difficult to manage operations
without formal planning. It is important for the organisation to move towards
achieving goals. But often things to not always go according to plan.
Unforeseen events and changes, rise in costs and prices, environmental changes,
government interventions, legal regulations, all affect our business plans.
Plans then need to be modified. Therefore, planning might fail due to the
following limitations:
a. Planning does not work in dynamic environment: The
business environment is dynamic, nothing is constant. The environment consists
of a number of dimensions— economic, political, technological, legal and social
dimensions. The organisation has to constantly adapt itself to the changes in
business environment. However, it is not always possible to accurately assess
future trends in the environment.
i.
Competition in the market can upset financial
plans.
ii.
Sales targets have to be revised and according
is cash budgets also need to be modified since then are based on sales figures.
Thus, planning
cannot foresee everything and thus these are obstacles to effective planning.
b. Planning is a time consuming process: Planning
is a time consuming process. It requires collection of information, its
analysis and interpretation. These activities may take considerable time.
Sometimes plans to be drawn up take so much of time that there is not much time
left for implementation of plans.
c. Planning involves huge costs: Planning
is an expensive process in terms of money. When plans are drawn up, huge costs
are involved in the formulation of plans. If the costs are not justified by the
benefits derived from the plan, it may have adverse effect on the enterprise.
There are a number of incidental costs as well, like expenses on Board’s
meetings, discussions with professional experts and preliminary investigations
to find out the Viability of the plan.
d. Planning creates rigidity: Planning
leads to rigid mode of functioning for managers. This has adverse effect on the
initiative to be taken by them.
e. Planning does not guarantee success: The
success of an enterprise is possible only when plans are properly drawn up
implemental. Managers have a tendency to rely on previously tried and tested
successful plans. But it is not always true that a plan which has worked
before, will work effectively again.
f.
Planning
reduces creativity: Planning is an activity which is done by top
management. Usually the rest of the
organisation just implements these plans. As a consequence, middle management
and other decision makers are neither allowed to deviate from plans nor are
they permitted to act on their own. They only carry out orders.
Principles of Planning
A
number of fundamental principles have been devised over the year for guiding
managers undertaking planning. Some of these principles are discussed as under,
a) Principle of contribution to objective: All types
of plans are prepared to achieve the objectives of the organisation. Both major
and derivative plans are prepared to contribute to the objectives of the
enterprise. Planning is used as a means to reach the goals.
b) Principles of primacy of Planning: This
principle states that planning is the first or primary function of every
manager; He has to plan first and then proceed to carry out other functions.
Other managerial functions are organized to reach the objectives se in
planning.
c) Principle of Planning Premises: In order
to make planning effective, some premises or presumptions have to be made on
the basis of which planning has to be undertaken. Plans are, generally not
properly structures. The reason being that planning premises are not properly
developed. This principle lays emphasis on properly analyzing the situation
which is going to occur in future.
d) Principle of Alternatives: Planning
process involves developing of many alternatives and then selecting one which
will help in achieving desired business goals. In the absence of various
alternatives proper planning will be difficult.
e) Principle of Timing: Plans can
contribute effectively to the attainment of business goals if they are property
timed. Planning premises and policies are useless without proper timing.
f) Principle of Flexibility: This
principle suggests flexibility in plans if some contingencies arise. The plans
should be adjusted to incorporate new situations. The dangers of flexibility
should be kept in mind. The changes may upset the earlier commitments. So the
cost of changes should be compared to the benefits of flexibility.
g) Principle of Commitment: There
should be a time frame for meeting
the commitments made. This will ensure the achieving of targets in time.
h) Principle of Competitive Strategies: While
formulating own. Plans a manager should keep in mind the plans of competitors.
The plans should be framed by thinking of what the. Competitors will do in
similar situations.
Planning Process
Planning
process involves the setting up of business objectives and allocation of
resources for achieving them. Planning determines the future course of action
for utilizing various resources in a best possible way. It is a combination of
information handling and decision making systems based on information inputs,
outputs and a feedback loop.
Steps
in the process of Planning.
a) Setting organisational objectives: The first
and foremost step in the planning process is setting organisational objectives
or goals, which specify what the organisation wants to achieve. For example, an increase in sales by 20%
could be the objective of the organisation. Objectives may also be set for each
individual department. They give direction to all departments.
b) Developing planning premises: Planning
is concerned with the future, which is uncertain. Therefore, the manager is
required to make certain assumptions about the future. These assumptions are
called premises. Assumptions are made in the form of forecasts about
the demand for a particular product, government policy, interest rates, tax
rates, etc. Therefore, accurate forecasts become essential for successful
plans.
c) Identifying alternative courses of action: Once
objectives are set and assumptions are made, then the next step is to identify
all possible alternative courses of action. For example,
in order to achieve the organisational objectives of increasing profit, the
alternatives may be
a. increase
the sales of an existing product,
or
b. Produces
and sells a completely new product.
d) Evaluating alternative courses: The
positive and negative aspects of each proposal need to be evaluated in the
light of the objective to be achieved, its feasibility and consequences. For example,
the risk-return trade-off is very common. The more risky the investment, the
higher is the possibility of returns. To evaluate such proposals, detailed
calculations of earnings, earnings per share, interest, taxes, dividends are
made.
e) Selecting the best possible alternative: This is
the real point of decision making. The best/ideal plan has to be adopted, which
must be the most feasible, profitable and with least negative consequences. The
manager must apply permutations and combinations and select the best possible
course of action. Sometimes, a combination of plans may be selected instead of
one best plan.
f) Implementing the plan: Once the
plans are developed, they are put into action. For this, the managers
communicate the plans to all employees very clearly and allocate them resources
(money, machinery, etc.
g) Follow-up action: The
managers monitor the plan carefully to ensure that the premises are holding
true in the present condition or not. If not, adjustments are made in the plan.
Making Planning successful
In
order to make planning function effective, it is necessary to create climate
for planning. In this context the
following points may be taken into consideration.
a) Planning
should be participative. All the senior managers should remove any type of
obstacles to planning and try to develop climate in which their subordinates
will be motivated to participate in the process of planning.
b) Planning
should originate from the top management who are in charge of preparing
strategic or long term plan, and other plans can be based upon it.
c) Planning
must be organized - An ideal organisational structure through appropriate
grouping of activities and clear delegation of authority, are necessary to
establish suitable environment for planned performance.
d) A long
range plan must be integrate with short term plans, for achieving
pre-determined goals.
e) Flexible organisations. The managers should build organisation in such a way that it will be willing and ready to accept challenges of change. It should be able to predict changes and be ready to welcome changes. Development of pro change attitude is highly desirable for growth of organisation.
Planning premises
Managerial
plans are based on certain assumptions which are called planning premises. They
constitute the ground on which plans will stand. Meaningful premises facilitate
consistency and coordination of plans. The premises may be of:
a.
Non-controllable premises such as economic conditions, political situations,
tastes, preferences of people etc.
b.
Semi-controllable premises such as firms market shares, union management
relations etc.
c.
Controllable premises such as policies of the organisation, procedures, rules
etc.
Effective
Premising:
a. To
effectuate the planning premises following guidelines may be adopted.
b. Selection
of the premises that bear materially on program.
c. Development
of alternative premises for contingency planning.
d. Verification
of the consistency of premises
e. Communication
of the premises.
Decision Making - Introduction
Decision-making is an essential aspect of
modern management. It is a primary function of management. A manager's major
job is sound/rational decision-making. He takes hundreds of decisions
consciously and subconsciously. Decision-making is the key part of manager's
activities. Decisions are important as they determine both managerial and
organisational actions. A decision may be defined as "a course of action
which is consciously chosen from among a set of alternatives to achieve a
desired result." It represents a well-balanced judgment and a commitment
to action.
It is rightly said that the first important
function of management is to take decisions on problems and situations.
Decision-making pervades all managerial actions. It is a continuous process.
Decision-making is an indispensable component of the management process itself.
The effectiveness of management depends on the
quality of decision-making. In this sense, management is rightly described as
decision-making process. According to R. C. Davis, "management is a decision-making
process." Decision-making is an intellectual process which involves
selection of one course of action out of many alternatives. Decision-making
will be followed by second function of management called planning. The other
elements which follow planning are many such as organising, directing,
coordinating, controlling and motivating.
Decision-making has priority over planning
function. According to Peter Drucker, it is the top management which is
responsible for all strategic decisions such as the objectives of the business,
capital expenditure decisions as well as such operating decisions as training
of manpower and so on. Without such decisions, no action can take place and
naturally the resources would remain idle and unproductive. The managerial
decisions should be correct to the maximum extent possible. For this,
scientific decision-making is essential.
Definitions
of Decision-making
The Oxford Dictionary defines the term
decision-making as "the action of carrying out or carrying into
effect".
According to Trewatha & Newport,
"Decision-making involves the selection of a course of action from among
two or more possible alternatives in order to arrive at a solution for a given
problem".
Steps Involved In Decision Making Process
Decision-making involves a number of steps
which need to be taken in a logical manner. This is treated as a rational or
scientific 'decision-making process' which is lengthy and time consuming. Such
lengthy process needs to be followed in order to take rational/scientific/result
oriented decisions. Drucker recommended the scientific method of
decision-making which, according to him, involves the following six steps:
1.
Identifying the Problem: Identification of the
real problem before a business enterprise is the first step in the process of
decision-making. It is rightly said that a problem well-defined is a problem
half-solved. Information relevant to the problem should be gathered so that
critical analysis of the problem is possible. This is how the problem can be
diagnosed. Clear distinction should be made between the problem and the
symptoms which may cloud the real issue.
2.
Analyzing the Problem: After defining the
problem, the next step in the decision-making process is to analyze the problem
in depth. This is necessary to classify the problem in order to know who must
take the decision and who must be informed about the decision taken. Here, the
following four factors should be kept in mind:
1.
Futurity of the decision,
2.
The scope of its impact,
3.
Number of qualitative considerations involved,
and
4.
Uniqueness of the decision.
3.
Collecting Relevant Data: After defining the
problem and analyzing its nature, the next step is to obtain the relevant
information/ data about it. There is information flood in the business world
due to new developments in the field of information technology. All available
information should be utilised fully for analysis of the problem.
4.
Developing Alternative Solutions: After the
problem has been defined, diagnosed on the basis of relevant information, the manager
has to determine available alternative courses of action that could be used to
solve the problem at hand. Only realistic alternatives should be considered. It
is equally important to take into account time and cost constraints and
psychological barriers that will restrict that number of alternatives.
5.
Selecting the Best Solution: After preparing
alternative solutions, the next step in the decision-making process is to
select an alternative that seems to be most rational for solving the problem.
The alternative thus selected must be communicated to those who are likely to
be affected by it. Acceptance of the decision by group members is always
desirable and useful for its effective implementation.
6.
Converting Decision into Action: After the
selection of the best decision, the next step is to convert the selected
decision into an effective action. Without such action, the decision will
remain merely a declaration of good intentions. Here, the manager has to
convert 'his decision into 'their decision' through his leadership.
7.
Ensuring Feedback: Feedback is the last step
in the decision-making process. It is like checking the effectiveness of
follow-up measures. Feedback is possible in the form of organised information,
reports and personal observations. Feed back is necessary to decide whether the
decision already taken should be continued or be modified in the light of
changed conditions.
Every step in the decision-making
process is important and needs proper consideration by managers. This
facilitates accurate decision-making.
Significance of Decision Making
A decision is always related to some
problem, difficulty or conflict. Decisions help in solving problems or
resolving conflicts. There are always differences of opinions, judgements, etc.
Managerial decision helps in maintaining group effectiveness. All problems may
not require decision-making but merely the supply of information may be
sufficient. For example, when will different groups report for re-orientation?
The supply of information about training programme may be enough.
Decision problems necessitate a choice
from different alternatives. A number of possibilities are selected before
making a final selection. Decision-making requires something more than a
selection. The material requiring a decision may be available but still a
decision may not be reached. The effect of a decision is to be felt in future
so it requires proper analysis of available material and a prediction for the
future. If decision premises do not come true, then decision itself may be
wrong. Sometimes decisions are influenced by adopting a follow-the-leader
practice. The leader of the group or an important manager of a concern sets the
precedent and others silently follow that decision.
From the above explanation, the following
benefits of decision making are obtained:
a) Basis of planning:
Decision-making is an integral part of the planning process. Planning can be
effective only through proper decision.
b) Effective control: The
function of control can be properly executed through an effective
decision-making process. This is due to the fact that in case any deviation
takes places between the standard result and the actual result, proper
decisions has to be taken for the control process.
c) Solution to hard problems: Proper
and sound decisions can help to solve harsh and complicated problems.
d) Best result: Decision-making is the right manner
can give best result to a problem. The best alternative can be selected from
among various alternatives.
e) Basis of success: The
decision-making process has its relation with other managerial functions. So,
its effective implementation will provide the basis of success for other
functions also.
Techniques of Decision-making
Decision
taken must be accurate and should not lead to confusion; the decisions taken
must also be scientific and available for accuracy and verification. The
important techniques that aid the manager in decision making are operations
research and other quantitative techniques.
1.
Operations Research: Operations Research is the application of
methods of science to complex problems arising in the direction and management
of large system of men, machines, materials and money in industry, business,
government and defense. Operations Research helps the decision maker to make objective
decisions. OR does this by providing factual basis to guide and support
judgment, easing the burden of effort and time on the executive. Some of the
managerial problems usually subjected to operations research analysis include
production scheduling, inventory control, sales policies, expansion of plant
etc.
2.
Models: Model building is the central concept in the application of OR
while making use of quantifying models. Models are simple convenient and
relatively economic resource conservation device for testing hypothesis. Mathematical models help the optimization
concept in decision making. This is very important in the calculation and
choice of best possible alternative solutions for a given problem.
3.
Simulation: This technique is used to test the
feasibility and possible outcome of various decision alternatives.
"Simulation is a quantitative technique for evaluating alternative courses
of action based upon facts and assumptions with a computerized mathematical
model in order to represent actual decision making under conditions of
uncertainty.
4.
Linear Programming: This is defined as "How could a company
with limited resources make optimum use with their resources, combination for
the achievement of the desired objective, or goal was, the central idea of this
mathematical technique". A linear or straight line relationship exists
between variables and that the limits of variation can be determined. It adopts
an analytical instead of intuitive approach in decision making.
5.
Games Theory: Games theory attempts to work out optimum
solution in which an individual in a given situation can develop a strategy
irrespective of what a competition does with maximizing gains or minimizing
losses. It involves mathematical study of tactics under conditions of uncertainty.
6.
PERT and CPM: Programme Evaluation and Review Technique is
useful to analyze and control the timing aspects of programmes. In planning and
controlling a programme, PERT helps in obtaining lower costs and reducing
programme time, bringing about better utilization of human and physical
resources. Critical Path Method (CPM) is
a commonly used term for all network analysis and for a particular version of
these techniques. PERT relies on three estimates, an optimistic, most likely
and pessimistic of the time each activity may take. CPM relies only one 'most
likely'.
7.
Probability Theory Analysis: Probability refers to a chance that a
particular event will occur. The events must be random and be effected by
chance and not by design. The probability of success is defined as the number
of successful outcomes divided by the total number of outcomes. It cannot be
denied that some element of probability does exist in all decision making.
Strategic Planning - Introduction
Strategic planning deals with the future, but only as it relates
to present decisions. Strategic planning is the process of selecting an
organisation's goals, determining the policies and programs necessary to
achieve specific objectives, and establishing the methods necessary to assure
that the policies and strategic programs are implemented. Simply, Strategic
planning is a process undertaken by an organisation to develop a plan
for achievement of its overall long-term organisational goals.
Strategic
Planning Steps
The description of the strategic
planning process combines the planning steps suggested by several writers. This
model consists of the following nine steps:
1. Define the
organisation's mission. A mission defines organisation's purpose and
that essentially seeks to answer the question: What
business are we in?
2. Establish
objectives. Objectives translate the mission into concrete terms. Setting
the objectives of the organisation is the most essential step in the strategic
planning process.
3. Analyzing
the organisation's resources. This analysis is necessary to identify the
organisation's competitive advantages and disadvantages.
4. Scan the
environment. Management will want to scan its environment to identify various
political, social, economic, and market factors that could impact on the
organisation.
5. Make
forecasts. The fifth step is a more detailed effort to forecast the
possible occurrence of future events.
6. Asses
Opportunities and threats. Opportunities and threats may arise from
many factors. Thus, the same environment that posed a threat to some
organisations offered opportunities to others.
7. Identify
and evaluate alternative strategies. In a given instance, a variety of
alternatives exist. Management should seek a set of alternatives that can
exploit the situation.
8. Select
strategy. Once the alternative strategies have been enumerated and
appraised, one will be selected.
9. Implement strategy. Once the strategy has been determined, it must be incorporated into the daily operations of the organisation. The best of strategies can go awry if management fails to translate the strategy chosen into programs, policies, budgets, and other long-term and short-term plans necessary to carry it out.
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