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PLANNING.
After Completing your Lessons on
PLANNING, you should understand:-1.What managerial planning is & why it is important.
2.The various types of plans and how they relate to one another.
3.The logical steps in planning.
4.How the steps in planning constitute a rational approach tosetting objectives and selecting the means of reaching them.
5.The meaning of the commitment principle.
6.The importance of reviewing plans periodically.
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Ensure that everyone understand the groups
purposes and objectives and also the methods to
achieve them. For this you have to design an
environment for the effective performance of
individuals working together in groups.
Planning involves selecting missions &
objectives and actions to achieve them. Planning
also strongly implies managerial innovation.
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TYPES of PLANS.
1.Purpose or Missions. THEY
2.Objectives. ARE
3.Strategies. LIKE
4.Policies. A
5.Procedurers. HIERARCHY.
6.Rules. HIERARCHY
7.Programmes OF
8.Budgets. PLANS.
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STEPS IN PLANNING.
1.Being Aware of Opportunity.
2.Setting Objectives or Goals.
3.Considering Planning Premises.
4.Identifying Alternatives.
5.Comparing Alternatives in the light of
of Goals sought.
6.Choosing an Alternative.
7.Formulating Supporting Plans.
8.Numberizing Plans by making Budgets.
{Refer 3.11-Fig.3.4 for more details}
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Commitment Principle.
Commitment Principle Implies that longrange planning is not
really planning for future decisions but, rather ,planning for
future impact of todays decisions. In other words, a decision is a
commitment ,normally of funds, direction of action or reputation.
And decisions lie at the core of planning. While studies and
analyses preceded decisions, any type of plan implies that some
decision has been made. Indeed ,a plan does not really exist as
such until a decision has been made. Knowing this ,the astute
manager will recognize the validity of gearing longer-term
considerations to present decisions. To do otherwise is to
overlook the basic nature of both planning and decision making.
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Application of Commitment
Principle.
There is no uniform or arbitrary length of time for
which a company should plan or for which a given
programme or any of its parts should be planned. An
airplane company embarking on a new commercialjet aircraft project should probably plan this
programme for at least 12 years ahead, with 5 or
6years for engineering and development and at least
as many more years for production and sales, in orderto recoup total costs and make reasonable profit.
See Figure 3.6 in page 3.17
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Planning-SUMMARY.
1.Planning involves selecting missions and objectives and the action to achievethem.
2.Plans requires decision making that is , choosing from among the alternativefuture courses of action.
3.Planning and controlling are closely interrelated.
4.Thereare many types of plans, such as purposes and missions, objectives orgoals, strategies, policies, procedures,rules,programs and budgets.
5.Once aware of an opportunity, a manager plans rationally by establishingobjectives, making assumptions about the present and future environment,finding and evaluating alternative courses of action and choosing a courseto follow like a plan & supporting budget, with attention to the total
environment.6.The commitment principle says that plans should cover a period of time,long enough to fulfill commitments involved in decisions made. Shortrange plans should be coordinated with long range plans.
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Summary of major principles or
Guides of planning.
The Purpose and Nature of Planning:-Principle of contribution to objectives, Principle of objectives, Principle of
primacy of planning, Principle of efficiency of plans. (Refer 6.13)
The Structure of Plans:-Principle of planning premises & Principle of the strategy andpolicy framework.
The Process of Planning:-
Principle of the limiting factor, The commitment principle &Principle of Navigational change.
(see 8.14)
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Management by Objectives
Defined as:
A comprehensive managerial system that
integrates many key managerial activities in a
systematic manner and that is consciously
directed toward the effective and efficient
achievement of an organizational and
individual objectives.All individuals do not share this view of MBO as a system of
managing. Some still define MBO in a very narrow limited way.
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HOME WORK.
TAKING A PLANNING
PROBLEM THAT NOW FACES
YOU,PROCEED TO DEALWITH IT IN ACCORDANCE
WITH THE PLANNING STEPSOUTLINED IN THIS
CHAPTER.
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STRATEGIC PLANNING
PROCESS.
KEY ELEMENTS:-
1.INPUTS.
2.ENTERPRISE PROFILE.3.ORIENTATION of TOP MANAGERS.
4.PURPOSE and OBJECTIVES.
5.EXTERNAL ENVIRONMENT.
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DECISION MAKING.
After Completing this chapter ,you should understand:
1.What decision making is .
2.The Principle of limiting factor.
3.The nature and process of evaluation of alternatives.
4.Three approaches for selecting from alternatives.5.The nature of programmed and unprogrammed
decisions.
6.Modern approaches to decision making in the light ofuncertainties.
7.Factors determining the importance of the decision.8.The utility of decision support systems (DSSs).
9.The systems approach to decision making.
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What Decision Making is ?
Decision Making is Defined as :
SELECTION OF A COURSE OF ACTION FROMAMONG ALTERNATIVES.'
It is at the core of planning. Plans get translated into
action only when a decisiona commitment of
resources,directioin,or reputation-has been made. The
main job of a manager is to take decision on what to be
done, who to do it, and when,where,and occasionallyeven how it will be done. Decision making is, however ,
only a step in planning.
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Principle of Limiting Factor.
Limiting factor refers to the factors that stand in way of
accomplishing a desired objective. It is necessary to
recognize the limiting factors in a given situation so
that it is possible to narrow the search for alternativesthat are required in overcoming the limiting factors.
The principle of limiting factor is as
follows: By recognizing and overcoming thosefactors that stand in the way of a goal, the best
alternative course of action can be selected.
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The Nature & Purpose
of Evaluation of Alternatives
1.Quantitative and Qualitative Factors .
2.Marginal Analysis.
3.Cost Effectiveness Analysis.
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Three Approaches for SELECTING
an alternative
(i) Experience.
(ii) Experimentation.
(iii) Research and Analysis
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The Nature of programmed &
unprogrammed decisions.A Programmed Decision applies to structured or routine
problems. It relies primarily on previously establishes criteria. It
is in effect decision making by precedent.
Eg:Withdrawing cash from ATM machine/Recording standard
inventory items.
A Non Programmed Decision is used for unstructured ,novel, and
ill defined situations of a non-recurring nature.
Eg:Marketing of a small video camera by Kodak.
STRATEGIC DECISIONS IN GENERAL ARE
NONPROGRAMMED DECISIONS,SINCE THEY
REQUIRE SUBJECTIVE JUDGMENTS.
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Modern Approaches to Decision
Making in the light of Uncertainties.1.Risk Analysis: An intelligent decision maker
would like to know the size & nature of the risk
involved in choosing a course of action Eg:Specialists comingwith best estimates
2.Decision Trees: Depicts in the form of a tree thedecisionpoints,chance events, and probabilities involved
in various courses that might be undertaken.
3.Preference Theory (Utility Theory) explains the
individual attitude toward risk ;assumed that the
decision makers allow the statistical probabilities as
applied to decision making.
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Factors Determining
the Importance of the Decision.Managerial Decisions should not only be correct but
also economic as far as possible.
The following guideline will be useful:
1.Less important decisions.2.Extent of responsibility.
3.Size of resources involved.
4.Degree of flexibility.
5.Degree of certainty of goals and premises.6.Impact of decisions.
{Refer Page 6.9}
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The Utility of
Decision Support Systems (DSSs)
DSSs use computers to facilitate the decision
making process of semi structured tasks. It is
not to replace the managerial judgment ,but to
support it and to make the decision processmore effective.DSSs also help managers react
quickly to changing needs.
MIS (Management Information Systems)& DSSs
-similarities & differences.
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The Systems Approach
to Decision Making
Decisions cannot usually be made ,of course ,in a
closedsystem environment. Many elements of
the environment of planning lie outside the
enterprise. Every dept. or section of an enterpriseis a sub system of the entire enterprise; Managers
of these units should be responsive to the policies &
programs of the units as well of the total enterprise.
Thinking and attitudes of the employees must be taken
into account whenever a manager makes a decision.
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Comparison: MIS & DSS
MIS (Management Information System) V/S DSS (Decision Support System)
Focus on Structured tasks& routine decisions Focus on semistructured tasks, requiring.
e.g. use of procedures ,decision rules . Managerial judgment.
Emphasis on data storage. Emphasis on datamanipulation .
Often only indirect access to data by managers. Direct data access bymanagers.
Reliance on computer expert. Reliance on managersown judgment.
Access to data possibly requiring a wait for Direct access tocomputer and data..
manager's turn
MIS manager not completely understanding the Manager knowingdecision environment.
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Chapter Summary
Decision making is the process of selecting a course of action
from alternatives; it is the core of planning. Mangers must make
choices on the basis of limited or bounded rationality-learning
about the situations. From the various alternatives, managers
should narrow them down to those few that deal with limitingfactors; these are the ones that stand in the way of achieving a
desired objective. Alternatives are then evaluated in terms of
quantitative and qualitative factors. Programmed decisions are
suited for structural problems and routine decisions, mainly made
by lowerlevel managers& non managers.NonProgrammed
decisions are used for unstructured problems and non routine
decisions are made especially by the upper level managers.
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Factors that determine the
importance of a decision are:-
(a) The size of the commitment
(b) The flexibility or inflexibility of plans.
(c) The certainty or uncertainty of goals andpremises.
(d) The degree to which variables can be
measured.
(e) The impact on people.
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ORGANIZING.
The Nature & PurposeAfter completing this chapter, you should understand:
1.The purpose of an organization structure.
2.The meaning of Organizing & Organization.
3.The distinction between Formal & Informalorganization.
4.The Organization structures and their levels.
5.The concept of span of a management.
6.The nature of entrepreneuring and intrapreneuring.
7.The logic of organizing and its relationship to othermanagerial functions.
8.That organizing requires taking situations intoaccount.
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ORGANIZATION
must incorporate:-
1.Verifiable objectives as part of planning.
2.A clear idea of the major duties or activities involved.
3.An understood area of discretion or authority so that
the person filling the role knows what can be theaccomplished goals.
In addition to make a role work out for effectively,
provision should be made for supplying neededinformation & other tools necessary for performance
in that role.
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Formal & Informal Organization.
Formal Organization :means the intentionalstructure of
roles in a formally organized enterprise. Formal organization doesn'tmean rigid
& it must be flexible. There should be room for discretion, foradvantageous
Utilization of creative talents and for recognition of individual likes&capacities in
the most formal of organization.
Informal Organization: means a net work ofpersonal and social relations not establi shed or requi red by the
formal organization but arising spontaneously as people associate
with one another .Any personal activity without conscious joint
purpose ,even though contr ibuting to joint r esul ts. E.g.: Playing
Chess dur ing lunch time may aid in the achievement of organization
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LOGIC of ORGANIZING:
SIX STEPS.1.Establishing enterprise objectives.
2.Formulating supporting objectives, policies and plans.
3.Identifying and classifying the activities necessary toaccomplish these.
4.Grouping these activities in the light of the human and materialresources available and the best way, under the circumstancesof using them.
5.Delegating to the head of each group the authority necessary to
perform the activities.6.Tying the groups together horizontally and vertically through
authority relationships and information flows.
O i ti l E i t f
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Organizational Environment for
ENTREPRENEURING &
INTRAPRENEURING.Entrepreneuring: Apply to managing small business or even
large business and to managers carrying out entrepreneuringroles through which they initiate changes to take advantage ofopportunity. Commitment for systematic innovation is the
main goal.Intrapreneuring: Apply to persons who focus on innovation and
creativity and who transforms a dream or an idea into aprofitable venture by operatingwithinthe organizational
environment.
Entrepreneur does the same thing but outside theorganizational setting.
Some thinkers doesnt demark these differences.
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Principle of SPAN of management & the
factors determining an effective SPAN.
The Principle of Span of the management
states: That there is a limit to the number of
subordinates a manager can effectivelysupervise, but the exact number will
depend on the impact of several underlying
factors. Span cannot be uniform in any
organization
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Basic Questions for Effective
Organizing:
1.What determines the span of management andhence the levels of organization?
The Principle of the span ofmanagement states
that there is a limit to the number of
subordinates a manager can effectivelysupervise ,but the exact number will
depend on
h im f r l n rl in
Q 2 Wh t d t i th b i f k f
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Q:2.What determines the basic framework of
departmentation and what are the strengths
weaknesses of the basic forms ?
i) Departmentation by Time: Grouping
activities on the basis of time-Shifts-for
economic, technological or other reasons.
Can be seen in Hospitals where round theclock activities are undertaken. Steel furnace
continuous and you can see even three
shifts.Advantages & Disadvantages see page 8.2)
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ii)Departmentation by Enterprise
Function
Grouping activities : Production: Purchase of Rawmaterials, Package materials,Despatch materials, maintaining
machines, controlling the labor force at the production centers,
paying excise duty, Inventory Control Etc..
Selling :Finding customers, market survey,knowingcompetitors,
pricing, billing & realizing the money, Servicing.
Financing: Raising the money, collection, safeguarding,
accounting , spending Etc..
Advantages &Disadvantages : Page 8.2 see Figure 8.1 too.
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iii) Departmentation by Territory or
Geography.
E.g.: Marketing organization or Banking net
works grouping state wise/region wise/zone
wise Etc..
Advantages vs. Disadvantages
see 8.4 See Fig 8.2 too
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iv) Customer Departmentation.
Primary interest in customers-as they are the key
to the way activities are grouped when each of
the different things an enterprise does for them
is managed by one dept head.E.g. commercial Bank differentiating to
Communitycity banking, Corporate banking,
Institutional banking, Real Estate &Mortgage
loans, Agricultural banking etc..
See 8.6 for Fig & Advantages & Disadvantages.
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v) Process or Equipment
Departmentation.
PresidentEngineering Production Marketing Finance Personal
I
I See Page 8.7Punch presses Welding Electroplating
Advantages:- Disadvantages:-
Achieves economic advantage. Coordination of depts. difficult.
Uses specialized technology. Responsibility for profit is at the top.Utilizes special skills. Is unsuitable for developing general managers.
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vi) Departmentation by Product.
Grouping activities on the basis of product or product lines
growing in multiline& large scale enterprises. Different
productsProduct Managers, Sales & Service managers.
Managerial job becomes complex.Advantages Disadvantages
Attention & effort on product line. Requires more persons with
managerial abilities .
See 8.8
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MATRIX ORGANIZATION
It is the combination of Functional & Product
patterns of departmentation in the same
organization structure. More used in engineeringfunctions & seldom used in Product marketing
Organization. See Fig 8.6
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Problems with matrix management.
1.State of Conflict between functional & project managers as
both compete for limited resources.2.Role conflict, role ambiguity and role overload may lead in
stress for the functional & project managers & team members.
3.An imbalance of authority & power as well as vertical and
horizontal influence of the project and functional managers.
4.Because of potential conflicts, managers may want to protect
themselves against blame by putting everything in writing, which
increases administration costs.5.Matrix organization requires many timeconsuming meetings.
See 8.12
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Guidelines for making Matrix
Management Effective.
1.Define the objective of the project or task.
2.Calarify the roles,authorities,and responsibilities of managers
and team members.
3.Ensure that influence is based on knowledge and information,
rather than on rank.
4.Balance the power of functional and project managers.
5.Select an experienced for the project who can provide
leadership.
6.Undertake organization and team development.
7.Install appropriate cost, time and quality controls that report
deviations from standards in a timely manner.
8.Reward project managers and team members fairly.
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CHAPTER SUMMARY
1.Formal organization is the intentional structure of roles.Informal Organization is a net work of personal and socialrelations neither established nor required by a formal authority
but arising spontaneously.
2.The term of span of management' refer to the number of
people a manager can effectively supervise. A wide span ofmanagement results in few organizational levels and a narrowspan results in many levels.
3.There is no definite number of people a a manager can alwayseffectively supervise; the number depends on several
underlying factors. They include (a) the degree of subordinatetraining required and possessed (b) the clarity of authoritydelegated ( c) the clarity of plans (d) the rate of change (e) theuse of objective standards (f) the effectiveness ofcommunication technique (g) the amount of personal contactneeded and (h) the level in the organization.
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