Management and Entrepreneurship

1. Management & Entrepreneurship
(Course Code:10AL51)
Department of IEM
JSS Academy of Technical Education, Bengaluru-560060

2. Principles of Management
CHAPTER 2: PLANNING / DECISION-MAKING

3. Nature and importance.
Purpose of planning process.
Objectives.
Types of plans (Meaning Only).
Decision making.
Steps in planning and planning premises.
Hierarchy of plans.
Outline

4. Introduction
Planning is of great importance in all types of organization whether business
or non-business, private or public, small or large.

5. Introduction
Planning is pervasive / universal and it extends throughout the organization.

6. Definition

7. Definition
• The process of setting objectives and determining how to accomplish them.
 Helps anticipate problems before they happen.
 Bridges the gap between where the business is now and where it wants to be.
Planning:

8. • Planning is deciding in advance what to do, how to do it, when to do it and
who to do it.
• It involves anticipating the future and choosing the future course of action.
Definition
• It should answer the questions “what” “who” “when” “where” and “how”.

9. Purpose and Elements of Planning

10. Purpose of Planning
Planning
Set the standards to
facilitate control
Provide
direction
Minimize
waste
Reduce the
impact of change

11. Elements of Planning
Plan Documents that outline how goals are going to be met.
Goal End result / outcome of a plan or a specific results to be achieved.
Objectives Specific results toward which effort is directed.

12. Benefits of Planning

13. Benefits of planning
Focus
An organization with FOCUS knows what it does best, what its customers
want and how to serve them.
Improves –
Flexibility
Ready and able to change in response to, or anticipation of, emerging
problems and opportunities. (Adaptability).
Action
Orientation
It emphasizes direction, establishes priorities, allocates resources more
efficiently, and anticipates change.
Control Planning & Control are interdependent.
Time
Management Prioritize work task in the order of importance.

14. Nature / Features of planning
1. Focus on realizing the objectives / goals set.
2. Intellectual process involving mental exercise.
3. Selective as it selects the best course of action.
4. Universal, as all the levels of management plan.
5. Lays foundation of the successful actions of management.
6. It is flexible.
7. It is Continuous.
8. Efficiency is measured by what it contributes to the objectives.

15. Objective of Planning
1. To focus attention on objective and results.
2. To reduce uncertainty and change.
3. To provide sense of direction.
4. To encourage innovation and creativity.
5. To help in coordination.
6. To guide decision making.
7. To provide a basis for decentralization.
8. To facilitate control.

16. 1. Intellectual process
2. Goal oriented
3. Pervasive / Universal
4. Pervades all managerial activity
5. Directed towards efficiency
6. Integrated process
Characteristics of Planning

17. • Clarity
• Simple
• Flexible
• Balanced
• Optimum use of resources.
Essentials of an ideal plan

18. The role of planning and controlling in the management process

19. Types of plans

20. Types of planning

21. Based on Time Frame
Short-range and long-range plans.
• Short-range plans = 1 year or less.
• Intermediate-range plans = 1 – 2 years.
• Long-range plans = more than 3 years.
• Top or Higher management levels focus on setting long-range plans and
directions for the organization.
• Lower management levels focus on short-range plans.

22. Strategic Plan
• Plans that apply to the entire organizations’ overall goals.
• Seek to position the organization in terms of its environment.
Examples
• A bigger market share.
• Lower costs to key competitors.
• Recognition as a leader in technology.
• Product innovation.
Based on Breadth

23. Operational / Tactical Plan
• Plans that specify the details of how the overall goals are to be achieved.
Example
An organizations monthly, weekly or day to day plans
Based on Breadth

24. Differences between strategic and operational planning

25. Specific Plan
• Plans that are clearly defined and that leave no room for interpretation.
Example
A manager who seeks to increase his unit’s work output by 8% over a given
12 months period.
Based on Specific

26. Based on Specific
Directional Plan
• Plans that are flexible and that set out general guidelines.
Example
Instead of detailing increase % of output, Manager formulates the plan for
improving profits by 5-10% over next 6 months.

27. Based on Frequency
 Single use Plans
• A one time plan specifically designed to meet the needs of a unique situation.
Example
Program of changing name of brands, projects.
 Standing Plans
• On going plans that provide guidance for activities performed repeatedly.
Example
Rules, policies, objectives, procedures, strategies.

28. Planning at various levels of Management

29. Steps in the Planning Process

30. Why and how do managers plan?
• Steps in the planning process
Identifying a
problem
Identifying
Decision Criteria
Allocating Weights
to the Criteria
Developing
Alternatives
Analyzing
Alternatives
Selecting an
Alternative
Implementing the
Alternative
Eight steps in the decision-making process.
decision- making process

31. E.g. —A manager deciding what laptop computers to purchase.

32. Cont.…

33. The hierarchical nature of various plans

34. • Mission or Purpose
The mission or purpose identifies this basic function or task of the organization.
E.g. The purpose of university.
• A mission statement links the organization activities to the needs of the
society.
The mission statement of Microsoft is:
“To enable people and businesses throughout the world to realize their full
potential. We consider our mission statement a commitment to our customers”.

35. Objectives
“Objectives are the goals, aims or purposes that the organizations wish to
achieve over varying periods of time”.
• A managerial objective is the intended goal which describes scope and
suggests direction to the efforts of a manager”.

36. Strategies
• A strategy is a plan which provides an optimal match between the firm and
external environment.
Policies
• A policy is a general guideline for decision making.
• Policy is a verbal, written or implied overall guide, setting up boundaries
that provide the general limits and directions in which managerial action
will take place”.

37. Procedures
• Policies are carried out by means of more detailed guidelines called
procedures.
• A procedure is a detailed set of instructions / systematic steps for
performing a sequence of actions / handling activities.

38. • Rules are detailed and recorded instructions that a specific action can or
cannot be performed in a given situation.
• Rules are more rigid than policies.
• Rules generally pertain to the administrative area of a procedure.
Rules
E.g.
• Sanctioning overtime wages to workers.
• Sanctioning traveling bills etc.,

39. Programme
• A programme is a sequence of activities directed towards the
achievement of certain objectives.
• A programme provides the definite steps which will be taken to
accomplish a given task in due time.
• Purchasing new machines.
• Introducing new product in the market.
E.g.

40. Budgets
• A budget is a single use plan.
• it is drafted for a particular period of time (e.g. Annually, quarterly, etc.)
• A budget is a statement of expected results expressed in quantitative terms
i.e. money, man hours, product units etc.
• It provides a standard by which actual operations can be measured and
variation could be controlled

41. Planning in the Hierarchy of Organizations

42. Decision Making

43. Decision: A reasoned / best choice among alternatives.
Examples:
• Where to advertise a new product
• What stock to buy
• What movie to see
• Where to go for dinner
• Decision-making is an essential part of modern management.
• It is selecting the best among alternative courses of action.
• Decision-making like any other managerial process is goal oriented.

44. Decisions Managers May Make – all Managerial functions

45. Decisions Managers May Make – all Managerial functions

46. Decisions Managers May Make – all Managerial functions

47. Decisions Managers May Make – all Managerial functions

48. Decision Making

49. Decision: A reasoned / best choice among alternatives.
Examples:
• Where to advertise a new product
• What stock to buy
• What movie to see
• Where to go for dinner
• Decision-making is an essential part of modern management.
• It is selecting the best among alternative courses of action.
• Decision-making like any other managerial process is goal oriented.

50. Making Decisions: Rationality (Case-1)
Hewlett-Packard (HP) acquired Compaq
• The company did no research on how customers viewed Compaq products.
• CEO publicly announced the deal.
• Privately warned top management team that CEO didn’t want to hear any
opposition pertaining to the acquisition.”
Situation
• By the time they discovered that customers perceived Compaq products as
inferior—just the opposite of what customers felt about HP products—it was
too late.
• HP’s performance suffered and CEO lost his/her job.

51. ASSUMPTIONS OF RATIONALITY
• A rational decision maker would be fully objective and logical.
• The problem faced would be clear.
• The decision maker would have a clear and specific goal and know all
possible alternatives and consequences.
• Making decisions rationally lead to selecting the alternative that maximizes the
achieving of goal.
• Decisions are made in the best interests of the organization
These assumptions apply to any decision— personal or managerial.

52. Decision Making Process: Steps in Rational Decision Making
(1) Recognizing the problem.
(2) Deciding priorities among the problems.
(3) Diagnosing / Analysing the problem.
(4) Developing alternative solutions or course of actions.
(5) Evaluating alternatives.
(6) Converting the decision into effective action and follow up of action.

53. Types of Decisions and Decision-Making Conditions

54. Types of Decisions
• Managers in all kinds of organizations face different types of problems and
decisions as they do their jobs.
• Depending on the nature of the problem, a manager can use one of two different
types of decisions.
1. STRUCTURED PROBLEMS AND PROGRAMMED DECISIONS
2. UNSTRUCTURED PROBLEMS AND NONPROGRAMMED DECISIONS

55. STRUCTURED PROBLEMS AND PROGRAMMED DECISIONS

56. STRUCTURED PROBLEMS
• Some problems are straightforward.
• The decision maker’s goal is clear, the problem is familiar, and information
about the problem is easily defined and complete.
• Customer returns a purchase to a store.
• When a supplier is late with an important delivery.
• A news team’s response to a fast-breaking event.
• A college’s handling of a student wanting to drop a class.
Such situations are called structured problems because they’re straightforward, familiar, and
easily defined.
Examples

57. • A server spills a drink on a customer’s coat.
The customer is upset and the manager needs to do something and it’s not an
unusual occurrence.
• There’s probably some standardized routine for handling it.
Decision:
• The manager offers to have the coat cleaned at the restaurant’s expense.
This is called programmed decision, a repetitive decision that can be handled
by a routine approach.
PROGRAMMED DECISIONS
Examples

58. The manager relies on one of three types of programmed decisions:
 Procedure
 Rule
 Policy
PROGRAMMED DECISIONS

59. • A procedure is a series of sequential steps a manager uses to respond
to a structured problem.
Example:
• A purchasing manager receives a request from a warehouse manager for 15 PDA
handhelds for the inventory clerks.
 The purchasing manager knows how to make this decision by following the established
purchasing procedure.
Procedure

60. • Rules are frequently used because they’re simple to follow and ensure
consistency.
Example:
• Rules about lateness and absenteeism permit supervisors to make disciplinary
decisions rapidly and fairly.
Rule
• Rules are detailed and recorded instructions that a specific action can
or cannot be performed in a given situation.
• Rules are more rigid than policies.

61. Policy
• Policy is a guideline for making a decision.
• In contrast to a rule, a policy establishes general parameters for the decision
maker rather than specifically stating what should or should not be done.
Sample policy statements:
• The customer always comes first and should always be satisfied.
• We promote from within, whenever possible.
• Employee wages shall be competitive within community standards.

62. UNSTRUCTURED PROBLEMS AND NONPROGRAMMED DECISIONS

63. UNSTRUCTURED PROBLEMS AND NONPROGRAMMED DECISIONS
Many organizational situations involve unstructured problems.
• Problems that are new or unusual and for which information is incomplete.
Example:
• Whether to build a new manufacturing facility in China.
• Introducing a new product into market.
• Nonprogrammed decisions are unique and nonrecurring and involve custom-
made solutions.

64. Differences between programmed and nonprogrammed decisions

65. Decision-Making Conditions

66. When making decisions, managers may face three different conditions:
1. Certainty.
2. Risk.
3. Uncertainty.
Decision-Making Conditions

67. CERTAINTY
Example:
• When a treasurer decides where to deposit the funds, he knows exactly the
interest rate being offered by each bank and the amount that will be earned
on the funds.
He is certain about the outcomes of each alternative.
Certainty, which is a situation where a manager can make accurate decisions
because the outcome of every alternative is known.
Most managerial decisions aren’t like this.

68. RISK
Under risk, managers have historical data from past personal experiences or
secondary information that lets them assign probabilities to different
alternatives.
Example
Estimating the demand of a product for future where there is great amount of
uncertainty.

69. • Making decision where you’re not certain about the outcomes / end results.
• This condition uncertainty.
• Under these conditions, the choice of alternative is influenced by the limited
amount of available information and by psychological orientation of the decision
maker.
 An optimistic manager will follow a maximax choice (maximizing the maximum possible payoff);
 A pessimist will follow a maximin choice (maximizing the minimum possible payoff); and
 A manager who desires to minimize his maximum “regret” will opt for a minimax choice.
Uncertainty

70.  Maxi-Min criterion
 Maxi-Max criterion or Minimax regret criterion
If a manufacturer is pessimistic or cautions in his approach, he can choose that
decision act, which maximizes the minimum pay-off.
 If a manufacturer is optimistic he may choose that decision act, which
maximizes the maximum pay-off.

71. Decision-Making Styles
Linear–Nonlinear Thinking Style
Recent research done with four distinct groups of people.
Outcome:
The way a person approaches decision making is likely affected by his or her
thinking style.

72. • William’s tenure as Nike’s CEO lasted a short and turbulent 13 months.
• Analysts attributed his abrupt dismissal to a difference in decision-making
approaches between him and Nike co-founder Knight.
• William tended to rely more on data and facts when making decisions.
• Whereas Knight had always used, his judgment and feelings to make
decisions.
Decision-Making Styles
Case example - Managers have different styles when it comes to making decisions

73. Decision-Making Styles
Linear thinking style
Characterized by a person’s preference for using external data and facts and
processing this information through logical thinking to guide decisions and
actions.

74. Decision-Making Styles
Nonlinear thinking style
Characterized by a preference for internal sources of information (feelings and
intuition) and processing this information with internal insights and feelings to
guide decisions and actions

75. Overview of Managerial Decision Making

76. End of module