Admas University

Faculty of Business
Department of Management

Introduction To Management
(Mgmgt 1011)

Prepared By Ins. Mesfin G. (MBA)

 Chapter Three

Planning Function
 What is Planning?
• Determining specified objectives & how to
accomplish them.
• The process by which managers set objectives,
assess the future, & develop courses of action
to accomplish these objectives.
• Planning is deciding in advance what to do,
how to do it, when to do it, and who is to do it.
• It helps to bridge the gap from where we are, to
where we want to go.
• Planning is a higher order mental process
What is Planning?
• from the various definitions given
above that planning involves two
things.
1. Determining the aims and objectives
2. Selecting on the bases of past
experience, present facts and
circumstances and future possibilities,
the best course of action to realize the
planning objective.
 Elements of Planning
1. What will be done – what are the
objectives of business?
2. What resources will be required – This
involves :
– Estimation of the available and potential
resources,
– estimation of resources required for the
achievement of objectives,
– And filling the gap between the two, if any.
 Elements of Planning
3. How it will be done – This involves two things:
– (i) Determination of tasks, activities, projects, programmes,
etc., required for the attainment of objectives,
– (ii) Formulation of strategies, policies, procedures, methods,
standard and budgets for the above purpose.
4. Who will do it – It involves assignment of
responsibilities to various managers relating to
contributions they are expected to make for the
attainment of enterprise objectives.
5 When it will be done It involves determination of the
timing and sequence.
 Nature or Characteristics of Planning
1. Planning is a Continuous Process
• It is never ending activity.
• Planning is thus, an ongoing process of adjustment to
change.
2. Planning concerns all Managers
• Planning is not the responsibility of the top
management.
3. Plans are arranged in a Hierarchy
– The corporate plan
– Business unit
– Functional plan
Nature or Characteristics of Planning
4. Planning is goal oriented:
• All plans arise from objectives.
5. Planning is a primary function:
• Planning is the foundation of management.
6. Planning is a mental Exercise:
• involving imagination, foresight and sound
judgment. It makes them think in logical
and systematic manner.
 Nature or Characteristics of Planning
7. Planning is flexible:
• Planning is based on a forecast of future events.
8.Planning includes efficiency and
effectiveness dimensions:
• Plans aims at deploying resources
economically and efficiently.
9. Planning is a means to an end.
• Planning is not an end by itself, but a means
to an end.
 Importance of Planning
1. To coordinate efforts.
• Planning helps to focus attention on objectives.
This ensures maximum utility of
• Managerial
• Time and
• Efforts.
2.Planning anticipates problems and
uncertainties (Reduces Uncertainty)
• Provide information
 Importance of Planning
3. To prepare for change/To offset
uncertainty
– The growing complexity of the modern
business with:
– Rapid technological changes,
– Dynamic changes in the consumer preferences
– Growing competition
4. To develop performance standards.
– Plans define expected behavior
 Types of Plans
Plans can be classified on the bases of different
factors:
1. Plans Based on Scope/Breadth
Dimension
• These types of plans refer to the level of
management
1. Strategic Plans
2. Tactical (Intermediate) Plans
3. Operational Plans.
 Types of Plans
1. Plans Based on Scope/Breadth Dimension
1. Strategic Plans
• determine the major objectives of an
organization and the policies
– require looking external environment of the
organization for threats and opportunities.
– They take longer period of time.
– They tend to be top management responsibility
– Involves a great deal of uncertainty
 Types of Plans
1. Plans Based on Scope/Breadth Dimension
2. Tactical (Intermediate) Plans
• They usually center on translating the broad
objectives set by top-level management into
more specific goals.
3. Operational Plans.
• Operational plans are concerned with
– the day-to-day activities of the organization and
– developed by lower level managers
 Types of Plans
2. Plans Based on Time Dimension
• These plans show how long they stay
in operation.
1. Long-term Plans: -
– These plans establish long-term goals and
work out strategies, policies and
programs to achieve the goals.
– They extend beyond five years.
 Types of Plans
2. Plans Based on Time Dimension
These plans show how long they stay in operation.
2. Medium-term Plans: -
– These plans are usually made to support long-term plans.
– They cover a period of more than one year, but less than five
years.
3. Short-term Plans: -
– Generally such types of plans are made to achieve short-term
goals
– instrumental in implementing long-term plans.
– These plans are action-oriented
– the responsibility of lower level managers.
 Level of Time Detailed ness
Type of Plan Scope
Manageme
nt

Strategic plan Wide TLM* More than 5 Years Less

Tactical plan Medium MLM* 1 to 5 Years Medium
Operational Narrow LLM* Less than 1 Year More
plan
 Types of Plans
3. Plans Based on Formality/Status
1. Formal Plans –
• Are written, documented plans developed
through an identifiable process.
– Well documented plan.
2. Informal Plans –
• Are unwritten plans which are made in the daily
life of individuals.
– Not offer a written record.
– Little or no sharing of goals
 Types of Plans
4.Based on their use dimension or
repetitiveness plans

• Can be classified in to
1. Standing plans
2. Single use plans
 Types of Plans
1. Standing plans
Standing Plans- are used to guide activities
that occur over a period of time.
• These are plans that are designed to be
used again and again.
– Policies
– Procedures/ Standard operating
procedures
– Rules & Regulations.
 Types of Plans
1. Standing plans
Policies
– Plans in that they are general statements or understandings
which guide or channel thinking in decision making.
– A policy is a standing plan that communicates broad
guidelines for decisions and action.
Procedures/ Standard operating procedures
– Required method of handling future activities.
– Plans that describe a series of action to be taken within the
framework.
– defines specific actions to be taken in specific situations
Rules & Regulations.
– are plans that describe exactly how one particular situation
is to be handled.
– There is no room for flexibility
 Types of Plans
2. Single use plans
- These types of plans focus on
relatively unique situations within
the organization and are used only
once.
- They are also called one-time plans.
1. Project/ Program
2. Budget
 Types of Plans
2. Single use plans
1. Project/ Program
• A project is a small and separate portion of a plan.
• Each project has limited scope and distinct directives
concerning assignments and time.
• specify activities, resources, and timetables for
completing projects
• A program is a comprehensive plan that includes future
use of different resources in an integrated pattern and
establishes a sequence of required actions, time
schedules for each in order to achieve stated objectives.
 Types of Plans
2. Single use plans
2. Budget
Budget: Budgeting is the formulation of plans
for a given future period in numerical or
financial terms.
A budget is a financial plan outlining how
funds will be spent in a given period of
time and how these funds will be
obtained
 Types Of Plans
Frequency
Breadth Time Frame Formality of Use

Strategic Long term Formal Single use

tactical medium Informal • Project
Operational Short term • Program
• Budget
Standing
• Policies
• Procedure
• Rules
© Prentice Hall, 2002
 Principles of Planning
1. Contribution to objectives.
2. Efficiency of plans
measured by the amount it contributes to purpose and
objectives
3. The limiting factor.
4. Flexibility
5. Navigational change
It implies reviewing plans from time to time
6. Communication.
7. Feasibility
 Process of Planning
1. Establish objective
• Set objectives to the entire organization and to
each work unit, not only for long-term but also
for the short range.
• Objectives specify the expected results and
indicate the end point of what is to be done
 Process of Planning
2. Developing premises
• Premises are assumptions about the environment
in which plans are made and implemented.
• Thus, assumptions about the likely impact of
important environmental factors such as
• economic conditions
• production costs and prices
• probable competitive behaviour
• capital and material availability
• governmental control and so on.
 Process of Planning
3. Identifying Alternative Courses of Action
• The third step is planning is to search alternative
courses of action.
• What are the most promising alternatives to
accomplishing our objectives
4. Evaluating alternatives
• Examined their strong and weak points
• Alternatives have to be carefully evaluated
against factors like costs, associated risks
involved, benefits likely to arise, availability of
spare capacity, etc.
 Process of Planning
5. Selecting a course of action /best Alternative
• After evaluating each alternative based in the goals
and premises, the next step is to decide or select the
best course of action that will help efficiently achieve
the organization objectives.
6. Formulating derivative plans:
• The management has to formulate the secondary plan
to support the basic plan.
• The plans derived from various departments, units,
activities, etc. in a detailed manner are know as
‘derivative plans’.
• An arrangement of detailed sequence and timing
 Process of Planning
7. Numberizing Plans by Making Budgets
• to give them meaning that is to numberize plans by converting
them to budgets,
• this helps to establish verifiable targets of achievement, to
facilitate control and hear.
8. Implementing the plan
• Putting into action
9. Controlling and evaluating the results
• Once the plan is implemented, the manager must
monitor the progress
• Evaluate the reported results, and
• Make any modifications necessary.
 Objectives
• Objectives specify future conditions that a
manager hopes to achieve.
Characteristics of sound objectives.
a) Priority of objectives
• This implies that at a given time, accomplishing
one objective is more important than
accomplishing others.
• Priority of objectives also reflects the relative
importance of certain objectives regardless of
time.
 Objectives
b) Hierarchy of objectives
• Objectives are arranged in hierarchy from overall
company wide objectives to individual
objectives.
c) Organizational objectives should be stated in writing
• Objectives should be specific and communicated
clearly to all so that all members of the
organization are aware of what is expected from
them.
• This eliminates ambiguity and confusion.
 Objectives
d) Objectives should be specific and measurable.
• General objectives are difficult to interpret and
measure.
e) Objectives should be realistic and attainable
• Over optimistic but unrealistic objectives serve
as moral deflator and hence are ineffective.
 Objectives
There are two objective setting approaches.
A Cascade Approach from Top to Lower Organizational Units.
– The objective setting processes begin at the top with a clear
and concise statement of central purpose of the organization.

– Long-range organizational goals are formulated for this

statement.
– The long-range goals lead to the establishment of more short-
range performance Objectives for the organization.
– Derivative objectives are then developed for each major
division or department.
– Objectives are then established for the various sub units in
each major division.
– The process continues down through the organizational
 Objectives
There are two objective setting approaches.
B). Management by Objectives (MBO)
• It is a system of management whereby managers
work in combination with subordinates to
identify goals and make plans for achieving
them.
• It aims to increase organizational performance by
aligning goals and subordinate objectives
throughout the organization.
 Objectives
There are two objective setting approaches.
B). Management by Objectives (MBO)
• It is a system of management whereby managers
work in combination with subordinates to
identify goals and make plans for achieving
them.
• It aims to increase organizational performance by
aligning goals and subordinate objectives
throughout the organization.
 Objectives
• MBO involves the following four steps.
– The manager explains the rationale and methodology
of MBO to subordinates.
– The superior and subordinate meet to set objectives
for the coming plan period.
– One or more intermediate review of performance are
conducted to determine if the individual is making satisfactory
progress towards attaining the established goals.
– At the conclusion of the time period set for the
achievement of the objectives, a final review is
conducted. In the review the manager should attempt
to determine “What went wrong?” “What went
right?”
 Limitations of Plans
Major planning limitations are classified into two
categories.
1. Internal Inflexibilities
• Internal inflexibilities are those that exist with
in an organization.
• Major internal inflexibilities that may limit
planning are related to
• Human psychology,
• Policies and procedures and
• Capital investment.
 Limitations of Plans
Major planning limitations are classified into two categories.

2. External or Imposed Inflexibilities

• These inflexibilities usually emerge from sources
outside of the organization. Some of the major
external inflexibilities include:
A. Political Climate
B. Labor Unions
C. Technological Change
D. Sociological and Cultural Factors
E. Educational variable
 Admas University
Faculty of Business
Department of Management

Introduction To Management
(Mgmgt 1011)

Prepared By Ins. Mesfin G. (MBA)

Chapter Four

Decision Making
 Definition of decision making
• Decision-making can be defined as a solution
selected after examining several alternatives
chosen
• It is a process including information, choice of
alternative actions, implementation and
evaluation that is directed to the achievement of
certain stated goals.
• Is defined as the process of selecting or
choosing based on some criteria, the best
course of action from number alternatives.
 Definition of decision making
Decision-making is:
• A selection process;
• The application of intellectual abilities
to a great extent;
• A dynamic process;
• Situational; and
• Taken to achieve the objectives of an
organization.
Decision Making Situations or Rational
1. Decisions under certainty:- decisions made in
which the external conditions are identified and
very predictable /whenever there is complete
data & information.
2. Decisions under risk:- those decisions in which
probabilities can be assigned to the expected
outcomes of each alternative.
3. Decisions under uncertainty: - it is a case
where neither there is complete data not
probabilities can be assigned to the surrounding
conditions.
 Types of Decision
There are two types of decisions:
1. Programmed
• Is one that is routine and repetitive.
• Rules and policies are established well in
advance to solve recurring problems
quickly.
• On the basis of pre-established set of
alternatives, programmed decisions can be
made in a routine way.
 Types of Decision
There are two types of decisions:
2. Non-programmed decisions.
• Deal with unique problems.
• In such cases, the decision maker has to
make a decision, in a poorly structured
situation one in which they are no pre-
existing, solutions.
• They are basically non-repetitive in nature
and may be called as strategic decisions.
 Decision Making Process
1. Ascertain the need for a decision/Identify
the problem:
• The decision making process
begins by determining a problem
exists;
• That is, there is an unsatisfactory
condition.
 Decision Making Process
2. Analyse the Problem:
• A successful manager must have
the ability to weed out the wheat
from the chaff before deciding on a
specific course of action.
• He must try to solve the problem,
not the symptoms.
 Decision Making Process
3. Develop Alternatives
• This involves developing a list of the
alternative that may be viable in dealing
with the stated problem.
4. Evaluate Alternatives
• Once the alternatives are enumerated. The
decision maker must critically evaluate each
one and identify the strong and weak points
when compared against the criteria and the
weights established.
 Decision Making Process
4. Evaluate Alternatives
• Risk- Degree of risks are include in each
alternative.
• Economy of efforts- Cost, time and efforts are
included in each alternative.
• Timing or situation- Whether the problem is
urgent has to be considered.
• Limitations or resources- Physical, financial
and human resources available in the
organization need consideration.
 Decision Making Process
6. Select the Best Alternative
• The decision maker can select the best alternative
after careful evaluation an alternative which
gives:
– Maximum benefits to the organization is selected.
– At the same time, the selected alternative should fit
with the organizational objectives.
Approach may adopted for selection
– a) Experience
– b) Experimentation
– c) Research and Analysis
 Decision Making Process
7. Putting Decision into Action
–Implementation of decision
8. Following up Decisions
–To see whether the decision is
properly implemented or not.