decision making is a part of planning

7/27/2019 Decision Making is a Part of Planning

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Decision Making is a part of Planning - Explain

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 organizationalactions. 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.

There is close relationship between planning and decision-making. Decision-making has

priority over planning function. It is the starting point of the whole management process. Infact, decision-making is a particular type of planning. A decision is a type of plan involving

commitment to resources for achieving specific objective. 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 operating decisions such as training

of manpower and so on. Without management decisions, no action can take place and

naturally the resources would remain idle and unproductive. Thus it is a part of Planning.

Why Rational and Right Decisions Are Not Possible?

Rational decisions are the best decisions under the available circumstances. All decisions

should be rational as such decisions facilitate expansion of business and give more profit,

goodwill and prosperity to a business unit. Rationality and decision-making are closely

related concepts. Rationality principle is applicable to all types of decisions. All decisions

(business, economic, social etc.) should be fair and rational. They should serve as examples

over a long period. For such decisions, rational/scientific/balanced approach is essential

while making decisions. In the absence of such approach, decisions are likely to be faulty

and dangerous to the Organisation and also to all concerned parties.

Rationality in decision-making is possible through human brain which has the ability to

learn, think, analyze and relate complex facts and variables while arriving at a decision. A

manager has to introduce rationality in his decision-making by using his skills, experience,

knowledge and mental abilities.

On some occasions, such rational and right decisions are not taken due to variety of possible

reasons. It is also possible that the decision taken may be rational when taken but is

treated as wrong/irrational/faulty because' the results available from the decision taken are


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not as expected/positive/encouraging. Rational decisions may not be possible when the

approach of the decision-maker is casual and superficial. He may not be alert, careful and

cautious while taking the decisions or he might not have followed the decision-making

process in a scientific manner. In brief, all business decisions should be rational as far as

possible as such rational decisions offer many benefits/advantages. However, rational

decisions may not be taken on certain occasions. According to Herbert A. Simon, humanbeings are not always rational in the decisional process.

Factors responsible for the growth of public sector in India :

1. Indian Constitution :

A developing country suffers from various economic, social, political and cultural

bottlenecks. It does not merely aim at bringing about economic growth within the existing

framework. Its fundamental objective is to usher in a completely new socio-economic order.In India the Directive Principles of State Policy are to serve as the guidelines while framing

laws to promote welfare of the people and ensuring social, economic and political justice. T.

Ramaswami has rightly observed that public enterprises are an offshoot of the philosophy

enshrined in the Indian constitution."

2. Establishment of a socialist society :

Since 1955, India resolved to establish a socialist pattern of society in India. The private

sector was to play an effective role in it, no doubt. Yet basic, key and strategic industries

which were of vital importance for the economic regeneration of the country, were entrusted

to the public sector. Gradually, insurance, banking, finance and many other sectors whichwere considered vital for the promotion of socialist objectives in the country were brought

under the public sector. Thus on ideological ground "the increasing participation of the

state in industrial and commercial enterprises is inevitable, irresistible and compulsive."

3. Policy of economic planning :

After independence India adopted the planned path to economic development. Under the

Five-Year Plan certain objectives were laid down. Targets were fixed. It was considered

that public sector enterprises would serve as an effective tool for a better and rapid

implementation of planned programmes. The public sector is more suitable to achieve the

national goals and priorities than the private-sector.

4. Industrial policy resolutions :

The Industrial Policy Resolutions of 1948 and 1956 also laid the foundation of a mixed

economy, where the public and private sectors were to coexist. The 1980 Industrial Policy

also emphasized upon the active and dynamic role of the public sector.


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5. Development of the infrastructure :

Our colonial past had hindered comprehensive development of infrastructure, so vitally

essential for economic development. Development of infrastructure such as roads, railways,

telecommunications, bridges, power, water supply, irrigation, etc., can be properly

developed only when the state steps in. Today in many developing countries, such as Brazil,Mexico, Ethiopia, Sri Lanka, etc., a sizable section of power generation, transport and

communication and irrigation systems belong to the public sector. For example, in India,

Nigeria, Ghana, etc., more than 90 per cent electricity generation is done by the public

sector.

6. Long gestation period :

There are certain basic and heavy industries which are highly capital intensive. Such

undertakings may give rise to returns after a long period. Take the case of steel, fertilizers,

chemicals, aluminium, etc. The private sector may not be in a position to wait for a long

period. Besides, such industries enjoy a sort of semi-monopolistic position in the economy.Development of private monopoly in such basic industrial activity is not a very rational

step. Public sector is justified in this case.

7. Risky enterprises :

Besides, private entrepreneurs may be shy to come forward for certain activities where the

elements of risk and uncertainty are too high. For instance, take the case of the exploration

of oil and natural gas, generation of atomic energy, etc. Private enterprise is dominated by

short-sighted calculation of cost and profit. It cannot view the social needs from an

aggregative point of view. Such activities also have to be assumed by the state itself.

8. Foreign collaboration :

If an industry calls for external aid and Foreign collaboration, then also an enterprise in

the public sector is in a favourable position. It can more easily assure a guaranteed return

to the foreign participant. Besides, the countries of the socialist bloc prefer to render

technical and financial assistance to the public enterprises.

9. Removal of regional disparities :

Public enterprises may be used as a tool for reducing regional disparities in economic

development. In India certain states like Orissa, Rajasthan, Madhya Pradesh, etc., arecomparatively more backward. Through central government initiative public sector projects

may be sponsored in such areas. Public sector financial institutions may play a central role

in promoting industrial and commercial activities in these backward regions.

10. Reduction of economic inequalities :


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Extension of the public sector is also justified on the ground that it can serve as an effective

means for dealing with the problem of wide economic inequalities. If profits are earned by

public enterprises, such profits can be further diverted for general welfare. Such profits,

again, do not lead to private enrichment. Such enterprises can create employment

opportunities for the poor unemployed. They also act as model employers and improve the

incomes of the employees. Thus the setting up of public enterprises is likely to have afavorable redistributive effect on income and wealth in the society.

Factors responsible for the growth of PRIVATE sector in India

As a recent report in this newspaper (June 26, 2010) showed, in the decade 2000-2010, the

private corporate sector overtook the public sector both in terms of net sales and net profits.The private sector's share in the net sales of manufacturing and services sector output

increased from 48.83 per cent in 2000-01 to 68.55 per cent in 2009-10, with the public

sector's share consequently falling from 51.17 per cent to 31.45 per cent.

Similarly, the private sector's share of net profit in the non-agricultural economy increased

from 39.17 per cent to 63.86 per cent for the same period, with a decline in public sector

share from 60.83 per cent to 36.14 per cent.

In short, the past decade has seen India's "mixed economy" become an essentially private

enterprise economy. Thousands of entrepreneurs, led by some inspiring leaders who have

acquired a global footprint, are driving the growth process in India.

Several factors, both positive and negative, explain this phenomenon. On the positive side

is the rise of Indian enterprise, especially in the energy, telecommunications, civil aviation,

manufacturing, finance and banking and information technology sectors.

The sharp increase in foreign direct investment during this decade has also contributed to

the increase in the share of the private sector in national income, sales and profits.

On the negative side, the inability of the public sector to generate internal resources for

growth and the fiscal constraints on government that have contributed to a decline in

public investment have contributed to a decline in the share of the public sector.

While the dynamism and the growth of private enterprise are cause for celebration, the

sluggishness of public investment is a matter of concern. India needs more public

investment, especially in social and economic infrastructure, to sustain upwards of 9 per

cent national income growth and also to fuel private sector dynamism.

decision making is a part of planning

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