COURSE CODE:: MP101Course ::Management theory and Practice

Unit -2::DECISION MAKING AND PLANNING

OBJECTIVES

Learn the concept of decision making

Describe various types of decision making

Discuss the concept of strategic decision making

Describe the concept of planning

Explain the concept of planning premises

INTRODUCTIONDecision making is a cognitive process that involves selecting the most appropriate course of action among all available alternatives. It aims at identifying the problem and finding out the solution to that problem. A decision can be effective if it is made after taking into consideration the allotted time and making judicious use of available resources of an organization.

No organization can make decisions without proper planning. Organizational planning determines the ways to fulfill the objectives defined in the decision-making process. In other words, planning is a process that involves fulfilling the set goals and objectives of the organization and making strategies to attain them.

The planning process starts with the formulation of a plan, which is a framework that reflects the realistic view of organizational goals. An efficient plan helps an organization to determine the progress of activities involved in the accomplishment of goals.

CONCEPT OF DECISION MAKING

Process that involves identifying and selecting an alternative from various available options.

An organization needs to make a decision within a certain period of time.

An efficient decision-making involves determining the objectives of making a particular decision, developing alternative actions, and making the final decision if the alternative actions are fulfilling the set objectives.

DECISION MAKING PROCESS

The steps involved in the decision-making process are explained as follows: Creating a constructive environment: Refers to the first step of the decision-making

process in which a productive environment is created for efficient decision making.

Developing possible alternatives: Involves generating maximum alternatives from the available options, so that the final decision would be more comprehensive.

Exploring the developed alternatives: Involves evaluating feasibility, implications, and risks involved with the alternatives that are developed in the second step.

DECISION MAKING PROCESS (CONTD.)

Selecting the best alternative: Involves selecting the most appropriate alternative from all the generated alternatives.

Checking the decision: Requires proper review and reconsideration of the selected alternative before implementing it.

Communicating the decision and implementing it: Involves conveying the decision to those who may be affected by it or involved in implementation.

DECISION-MAKING MODELS Rational Model: Refers to a decision making model

based on thinking/cognition.

Bounded Rationality Model: Refers to a decision-making model that signifies that cognitive thinking and the time to make any decision is limited.

Contingency Model: Refers to a decision making model which is based on the approach that a single solution is not feasible for solving all problems.

STRATEGIC DECISION-MAKING AND ITS FEATURES

Strategic decision-making refers to take the critical decisions to achieve the organizational objectives.

The main features of a strategic decision are as follows: Integrating various functions in the organization: Implies that strategic

decisions aim at coordinating the activities of different SBUs to achieve organizational goals of quality, cost, revenue, and innovation.

Considering broad range of stakeholders: Implies that strategic decisions affect the needs of various stakeholders, such as customers, shareholders, owners, managers, and government.

Concerning with both efficiency and effectiveness: Implies that strategic decisions aim at doing the right things in the right way.

PLAN AND ITS TYPES Plan refers to a scheme or program prepared in advance to accomplish a particular goal or objective. A plan is grouped into two categories, namely, recurring and non-recurring plans.

Recurring plan: Refers to a long-term plan that is repeatedly used by an organization in similar kind of situations. Following are the types of recurring plans: Objectives: Refer to a desired level that an organization strives to achieve through its activities. Rules: Refer to clearly spelled out actions without any discretion or flexibility. Procedures: Refer to plans stating requisite methods of handling future activities. Strategies: Refers to integrated action plans that aim at achieving particular objectives at the time of adverse

situations in an organization. Policies: Guide an organization in conducting and managing its operations.

PLAN AND ITS TYPES (CONTD.)

Non-recurring plan: Refers to a short-term plan prepared to accomplish a particular objective of an organization. Some of the non-recurring plans are explained as follows:

Budget: Refers to a plan that forecasts the expenditures and revenue of an organization for a certain period of time.

Schedules: Refer to plans created for achieving a specific objective of organization within a defined time limit.

Programs: Involve a temporary grouping of a number of activities to complete a specific task within a particular time period.

CONCEPT OF PLANNING Involves making of a plan, which should be realistic and feasible in nature.

An efficient plan should have the following elements: Policies: Refer to generalized statements that provide direction for decision making.

However, all policies cannot be termed as decisions. Procedures: Refer to sequential or step-by-step methods desirable for executing

the future course of actions. Strategies: Refer to an action plan aimed at achieving long-term objectives by using

available resources. Programs: Refers to the sum of goals, policies, procedures, tasks, and rules, which

are collectively necessary to reach an end objective. Budget: Refers to a statement of resources invested and returns generated in

achieving the desired output.

NATURE OF PLANNING

Intellectual Process: Refers to a process that requires using cognitive ability.

Focuses on Objectives: Refers to the main purpose of planning, which is determining the goals or objectives.

Pervades all Managerial Activities: Refers to the pervasive nature of planning.

Selection Process: Refers to the purpose of planning which is aimed at selecting one out of various alternative options available.

Directed towards Improvement: Implies that planning is aimed at improving the current situation and solving problems efficiently.

Flexible and Continuous Process: Implies that planning is not just a start up activity rather it is required at all places, by all people at every time.

DEFINE STRATEGIC PLANNING

Corporate planning is a continuous process of making entrepreneurial decisions systematically and with the best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions, and measuring the results against expectations through organized systematic feedback. --- Drucker

Corporate long range planning is not a technique; it is a complete way of running a business. Corporate planning is a way of keeping the company’s eyes open. --- Hussey

REASONS FOR FAILURE OF PLANNING

Improper Preparation: Results in the failure of planning, especially when it is done by inexperienced individuals.

Unclear goals and objectives: Hamper the overall planning process to a large extent. Therefore, it is a responsibility of the top management to communicate the goals and objectives of the organization to individuals involved in the planning process.

Lack of support from the top management: Leads to the failure of the planning process. The successful execution of planning requires consistent support from top management.

Poor communication: Deters the participation of all the individuals concerned to make planning successful. Poor communication may result in lack of understanding and cooperation among individuals.

SUMMARY Decision making is a process that involves identifying and selecting an

alternative from various available options.

Strategic decision-making refers to take the critical decisions to achieve the organizational objectives. The responsibility to take the strategic decisions lies with the top management of the organization.

Planning, if executed properly, can help in minimizing the effort, energy, and wastage of resources as well as maximize results.

Strategic planning refers to a management tool that helps an organization to plan its desired future.

Planning may fail due to several reasons, such as improper preparation, lack of vision, inexperienced managers, unclear goals and objectives, lack of knowledge regarding planning premises.

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