Sunday, March 19, 2017

Concept of Planning, MBO and Decision Making

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.
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 to wards 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.
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.
b)      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.
c)       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.
d)      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.
e)      A long range plan must be integrate with short term plans, for achieving pre-determined goals.
f)       Flexible organisations
g)      The managers should build organisation in such away 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.

Introduction: Management by Objective (MBO)
The concept Management by Objectives was coined by Peter Drucker in 1954. As per this concept, the organisational goals are broken down to different level objectives and assigned to individuals at different level in order to have the organisational goal. It is a technique and philosophy of management based on converting an organisational objective into a personal   objective on the presumption that establishing personal objectives makes an employee committed, which leads to better performance.
Koontz defined MBO as follows: “MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective and. Efficient achievement of organisational objectives.”
According to George Odiome,  “MBO is a process whereby superior and subordinate managers of an Organisation jointly define its common goals, define each individual's major areas of responsibility in terms Of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members."
According to John Humble, “MBO is a dynamic system which seeks to integrate the company's needs to clarify and achieve its profits and growth goals with the manager's need to contribute and develop himself. It is a demanding and rewarding style of managing a business."
A careful study of the above definitions brings out the following features of MBO:
a.       Management by Objectives is a philosophy or a system, and not merely technique.
b.      It emphasizes participative goal setting.
c.       It clearly defines each individual responsibility in terms of results.
d.      It focuses attention on what must be accomplished (goals) rather than on how it is to be accomplished.
e.      It converts objective needs into personal goals at every level in the organisation.
f.        It establishes standards or yardsticks (goals) as operation guides and also as basis of performance evaluation.
g.       It is a system intentionally directed toward effective and efficient attainment of organisational and personal goals.
h.      Periodic review of performance is an important feature of MBO.
i.         MBO provides the means for integrating the organisation with its environment, its sub- systems and people.
j.        Employees are provided with feedback on actual performance as compared to planned performance.
Objectives of MBO
Objectives of MBO can be classified under the following heads:
1.       Primary Objectives: Primary objectives are related to the company and not to individuals. Earning of profits out of providing goods and services to the customers is the primary objective of a company.
2.       Secondary Objectives: These objectives help in achieving primary objectives. Secondary objectives, like primary objectives, are impersonal in nature. The goal of adding new products will be a secondary goal which will help in achieving the primary objective.
3.       Individual Objectives: These are the goals which individual members in an organization try to achieve no daily, weekly, monthly or yearly basis. These objectives are achievable as subordinate to primary and secondary goals.
4.       Social Objectives: These are the goals of an organization towards society. These include the obligations required by the community, government agencies etc. These also include goals intended to further social, physical and cultural improvement of the society.
Process of MBO
MBO is a process for accomplishing enterprise objectives, enhancement of employee’s commitment and participation. This process consists of a number of steps. They are:
1.       Setting of organisational objectives: The first step in MBO is to set verifiable objectives for the organisation. The objectives that are set also indicate the measures for achieving the objectives. The objective setting usually commences at the top level of the organisation and moves downwards to the lowest managerial levels. It goes in sequence like this:
        (a) Defining the purpose of the organisation
        (b) Long-range and strategic objectives
        (c) Short-range organisational objectives
        (d) Departmental objectives
        (e) Individual manager’s objectives.
2.       Setting of subordinates’ objectives: Since organisational objectives are accomplished through individuals, each individual manager should know in advance what he is expected to accomplish. The objectives of the subordinates are set by the superior with their consultation and agreement. This process makes them committed.
3.       Matching resources with objectives: When objectives are set, there should be a connection between objectives and resources. This helps the organisation in allocating the resources in an economical manner.
4.       Appraisal: Appraisal is the periodical review of performance to measure whether the subordinate is accomplishing his objective or not. If not, what are the problems and how these problems can be overcome?
5.       Recycling: The process of objective setting involves recycling. It means that first of all objectives are set in consultation with the subordinates, and then the subordinates set objectives for their subordinates, and so on. Thus, objective setting is a joint process through interaction between the superior and the subordinates. The three aspects involved in the recycling process consist of setting of objectives at various levels, action planning in the context of those objectives, and performance review. Each of these aspects provides the base for others.
The main benefits of MBO are as follows:
1.       Improved Planning: MBO involves participative decision-making which makes objectives explicit and plans more realistic. It focuses attention on goals in key result areas. MBO forces managers to think in terms of results rather than activities. It encourages people to set specific pleasurable goals instead of depending on hunches or guesswork. An integrated hierarchy of objectives is created throughout the organisation. Precise performance objectives and measures indicating goal accomplishment are laid down. There is a time bound programme.
2.       Co-ordination: MBO helps to clarify the structure and goals of the organisation. Harmony of objectives enables individuals at various levels to have a common direction. Every individual knows clearly his role in the organisation, his area of operation and the results expected of him. MBO result in clarification of organisational roles and structure. It promotes and integrated view of management and helps interdepartmental co-ordination.
3.       Motivation and Commitment: Participation of subordinates in goal setting and performance reviews tend to improve their commit­ment to performance. The corporate goals are converted into personal goals at all levels to integrate the individual with the organisation. Timely feedback on performance creates a feeling of accomplishment Job enrichment and sense of achievement help to improve job satisfac­tion and morale. Improved communication and sense of involvement provides psychological satisfaction and stimulates them for hard work. MBO ensures perfor­mance by converting objective needs into personal goals and by providing freedom to subordinates.
4.       Accurate Appraisal: MBO replaces trait based appraisal by per­formance based appraisal. Quantitative targets for every individual ena­ble him to evaluate his own performance. Performance under MBO is innovative and future oriented. It is positive, more objective and par­ticipative. Emphasis is on job requirements rather than on personality. MBO provides an objective criterion for evaluation of actual performance. "Indeed one of the major contributions of MBO is that it enables us to substitute management by self-control, for management by domina­tion.
5.       Executive Development: The MBO strategy is a kind of self-discipline whereby shortcomings and development needs are easily iden­tified. It stresses upon a long term perspective and self-development. MBO releases potential by providing opportunities for learning, innova­tion and creativity. It encourages initiative and growth by stretching capabilities of executives.
6.       Organisational Change and Development: MBO provides a frame­ work for planned changes. It enables managers to initiate and manage change. It helps to identify short-comings in organisational structure and processes. In this way, MBO improves the capacity of the organisation to cope with its changing environment. When an organisation is managed by objectives, it becomes performance-oriented and socially-useful.
Originally MBO was developed for business organisations but now it is being used by social welfare organisations also. But MBO might not be very successful in welfare organisations because of the abstract nature of the values to be measured in specific and quantified terms, general unwillingness on the part of personnel to subject their efforts to precise evaluations and lack of measuring instruments which could generate valid and reliable data. MBO has special significance in the areas of long range planning and performance appraisal.
Limitations of MBO
Although MBO is generally taken as the panacea for all the problems of an organisation, it is not without weaknesses or limitations. The following are the limitations of MBO:
1. MBO cannot be implemented effectively on account of difficulty in setting verifiable    objectives.
2. Open atmosphere for appropriate objective-setting is absent because of differences in the status of subordinates.
3. Managers may not get time to do even their normal work as MBO involves much paperwork and holding of many meetings.
4. There is a tendency on the part of the managers to emphasis’s short-term objectives and to become more precise in objective setting and accomplishment.
5. MBO is a philosophy of managing an organisation in a new way. However, many managers fail to understand and appreciate this new approach.
6. MBO represents the danger of inflexibility in the organisation, particularly when the objectives need to be altered. In a dynamic environment, a particular objective may not be valid for ever.
                 In spite of all these weaknesses, MBO is considered as one of the unique techniques of managing the organisation. However, the full benefits of it can only be derived if the following basic requirements are taken into account.
Essential Conditions for Successful Implementation of MBO
a)      Support from all: In order that MBO succeeds, it should get support and co-operation from the management. MBO must be tailored to the executive's style of managing. No MBO programme can succeed unless it is fully accepted by the managers. The subordinates should also clearly understand that MBO is the policy of the Organisation and they have to offer cooperation to make it successful. It should be a programme of all and not a programme imposed on them.
b)      Acceptance of MBO programme by managers: In order to make MBO programme successful, it is fundamentally important that the managers themselves must mentally accept it as a good or promising programme. Such acceptances will bring about deep involvement of managers. If manages are forced to accept NIBO programme, their involvement will remain superfluous at every stage. The employees will be at the receiving-end. They would mostly accept the lines of action initiated by the managers.
c)       Training of managers: Before the introduction of MBO programme, the managers should be given adequate training in MBO philosophy. They must be in a position to integrate the technique with the basic philosophy of the company. It is but important to arrange practice sessions where performance objectives are evaluated and deviations are checked. The managers and subordinates are taught to set realistic goals, because they are going to be held responsible for the results.
d)      Organisational commitment: MBO should not be used as a decorative piece. It should be based on active support, involvement and commitment of managers. MBO presents a challenging task to managers. They must shift their capabilities from planning for work to planning for accomplishment of specific goals. Koontz rightly observes, "An effective programme of managing by objective must be woven into an entire pattern and style of managing. It cannot work as a separate technique standing alone."
e)      Allocation of adequate time and resources: A well-conceived MBO programme requires three to five years of operation before it provides fruitful results. Managers and subordinates should be so oriented that they do not look forward to MBO for instant solutions. Proper time and resources should be allocated and persons are properly trained in the philosophy of MBO.
f)       Provision of uninterrupted information feedback: Superiors and subordinates should have regular information available to them as to how well subordinate's goal performance is progressing. Over and above, regular performance appraisal sessions, counseling and encouragement to subordinates should be given. Superiors who compliment and encourage subordinates with pay rise and promotions provide enough motivation for peak performance.
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.

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, its 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.
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.

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