Planning (PDF)

**MODULE 2** **PLANNING** **INTRODUCTION:** Change is the rule of present-day business. A manager is supposed to operate in a dynamic economy where there is no scope for complacency. Planning is a tool in the hands of a manager who wants to face problems created by change. Successful managers dea...

**MODULE 2** **PLANNING** **INTRODUCTION:** Change is the rule of present-day business. A manager is supposed to operate in a dynamic economy where there is no scope for complacency. Planning is a tool in the hands of a manager who wants to face problems created by change. Successful managers deal with foreseen problems and unsuccessful manager's struggle with unforeseen problems. The difference lies in planning. Every enterprise which strives to survive and grow must place heavy emphasis upon planning. A planner foresees opportunities and devises ways and means to take advantage from them. There may be cases where little bit of planning helps in achieving objectives. This may happen in favorable situations. In a competitive business world, a manager cannot wait for favorable circumstances, he must decide in the face of uncertainties. There is no place for guesswork or chance. The need is for proper planning. **MEANING**: Planning helps in determining the course of action to be followed for achieving various organizational objectives. It is a decision in advance; what to do, when to do, how to do and who will do a particular task. Planning is a process which involves 'thinking before doing.' It is concerned with a mental state of the manager. He thinks before undertaking a work. Other functions of management like organizing, controlling, and directing are also undertaken after proper planning. **DEFINITIONS:** Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures, and programs from among alternatives 'Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results." According to Terry planning is based on certain assumptions which are required to formulate policies of the business. The purpose of planning is to achieve business objectives. Koontz and O'Donnell: The selection from among alternatives for future courses of action for the enterprise as a whole and each department with it. Although the exact future can seldom be predicted and factors beyond control may interfere with the best-laid plans, unless there is planning, events are left to chance. It is an intellectually demanding process and requires the selection of a course of action. **NATURE OR CHARACTERISTICS OF PLANNING:** 1. **Planning is goal oriented:** Planning is a process to determine the objectives or goals of an enterprise. It lays down the means to achieve these objectives. The purpose of every plan is to contribute in the achievement of objectives of an enterprise. 2. **Planning is primary function of management:** The functions of management are broadly classified as planning, organisation, direction and control. It is thus the first function of management at all levels. Since planning is involved at all managerial functions, it is rightly called as an essence of management. 3. **Planning as an intellectual process:** Planning is a mental work basically concerned with thinking before doing. It is an intellectual process and involves creative thinking and imagination. Wherever planning is done, all activities are orderly undertaken as per plans rather than on the basis of guess work. Planning lays down a course of action to be followed on the basis of facts and considered estimates, keeping in view the objectives, goals and purpose of an enterprise. 4. **Planning as a continuous process:** Planning is a continuous and permanent process and has no end. A manager makes new plans and also modifies the old plans in the light of information received from the persons who are concerned with the execution of plans. It is a never ending process. 5. **Planning involves forecasting:** Planning largely depends upon accurate business forecasting. The scientific techniques of forecasting help in projecting the present trends into future. 'It is a kind of future picture wherein proximate events are outlined with some distinctness while remote events appear progressively less distinct." 6. **Planning is an integrated process:** A plan should be formulated in the light of limiting factors which may be any one of five M's viz., men, money, machines, materials and management. 7. **Planning includes efficiency and effectiveness dimensions**: Plans aim at deploying resources economically and efficiently. They also try to accomplish what has been actually targeted. The effectiveness of plans is usually dependent on how much it can contribute to the predetermined objectives. 8. **Planning is realistic**: A plan always outlines the results to be attained and as such it is realistic in nature. 9. **Planning a pervasive**: Planning is called a pervasive function of management because planning occurs at all levels of management in a business organisation directing all managers in different business units to work towards achieving the business goals and objectives. 10. **Planning involves choice**: Planning essentially involves choice among various alternative courses of action. If there is one way of doing something, there is no need for planning. The need for planning arises only when alternatives are available. 1. **Setting Objectives:** - This is the primary step in the process of planning which specifies the objective of an organization, i.e. what an organization wants to achieve. - The planning process begins with the setting of objectives. - Objectives are end results which the management wants to achieve by its operations. - Objectives are specific and are measurable in terms of units. - Objectives are set for the organization for all departments, and then departments set their own objectives within the framework of organizational objectives. 2. **Developing Planning Premises:** - Planning is essentially focused on the future, and there are certain events which are expected to affect the policy formation. - Such events are external in nature and affect the planning adversely if ignored. - Their understanding and fair assessment are necessary for effective planning. - Such events are the assumptions based on which plans are drawn and are known as planning premises. 3. **Identifying Alternative Courses of Action** - Once objectives are set, assumptions are made. - Then the next step is to act upon them. - There may be many ways to act and achieve objectives. - All the alternative courses of action should be identified. 4. **Evaluating Alternative Course of Action** - In this step, the positive and negative aspects of each alternative need to be evaluated in the light of objectives to be achieved. - Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the planning premises and within the availability of capital. 5. **Selecting One Best Alternative** - The best plan, which is the most profitable plan and with minimum negative effects, is adopted and implemented. - In such cases, the manager's experience and judgement play an important role in selecting the best alternative. 6. **Implementing the Plan** - This is the step where other managerial functions come into the picture. - This step is concerned with "DOING WHAT IS REQUIRED". - In this step, managers communicate the plan to the employees clearly to help convert the plans into action. - This step involves allocating the resources, organising for labour and purchase of machinery. 7. **Follow Up Action:** - Monitoring the plan constantly and taking feedback at regular intervals is called follow-up. - Monitoring of plans is very important to ensure that the plans are being implemented according to the schedule. - Regular checks and comparisons of the results with set standards are done to ensure that objectives are achieved. 1. **Focuses on objectives and results:** Every organization exists to achieve certain objectives. Planning concentrates attention on the dominant goals of the organization. It forces the members of the organization not to get lost in the craze of routine activities and lose sight of the broad objectives for which the organization was established. 2. **Reduces uncertainty and risk.** Uncertainty and change are inevitable and planning cannot eliminate them. But planning enables an organization cope with uncertainty and change. With the help of planning, an enterprise can predict future events and make due provision for them. Instead leaving future events to chance, they can be made to occur in a d manner. Planning seeks to minimize risk while taking advantage of opportunities. Planning helps to identify potential threats and it also keeps management alert to the changing environment of business opportunities 3. **Provides sense of direction.** Planning saves an organization from drifting and avoids aimless activities. It directs human efforts into endeavors the contribute to the accomplishment of goals. Planning makes work more meaningful and activities more orderly. It bridges the gap between where we are and where we want to go. Without planning action is likely to become random activity, producing nothing but chaos. 4. **Encourages innovation and creativity:** Innovation and creativity a prerequisite to continuous growth and steady prosperity of business Planning is forward-looking and it enables an enterprise to cope with technological and other developments. Planning requires continuous monitoring of environment for new ideas and developments. As a result, the enterprise becomes dynamic. Being anticipatory in nature, planning improves the adaptability of an organization to the changing environment 5. **Helps in coordination**: Planning is the best stage for the integration of diverse forces at work. Sound planning interrelates all the activities or resource of an organization. It also helps to relate internal conditions and processes to external events and forces. The activities and efforts of various departments and divisions can be harmonized with the help of an overall plan. Planning seeks to achieve a coordinated structure of operations. 6. **Guides decision-making**: Planned targets serve as the criteria for the evaluation of alternatives so that the best course of action may chose. By predicting future, planning helps in taking future-oriented decisions. Sound plans prevent hasty judgment and haphazard action \"Without planning, business decisions would become random ad hoc choices as though a pilot set out without knowing whether he wished to fly London, Hong Kong or Johannesburg.\" When plans covering future exit decisions consistent with the future are made. Therefore, decision automatically get a future orientation. In the absence of plans there is sound basis for making future-oriented decisions. 7. **Provides a basis for decentralization**: Planning helps in the delegation authority to lower levels of management. Well-established plans serve guides to subordinates and reduce the risk involved in delegation authority. Planning also helps to improve the motivation and morale employees by providing targets of performance. 1. **Long term planning:** Long-term planning covers a long period in future, eg. 5, 10 or 15 years. It considers all long-term economic, social and technological factors as well as their influence on the long-term objectives of the organization. Long-term planning involves commitment of resources for long term, eg, development of new product. 2. **Medium-term Planning:** Also known as intermediate planning, it focuses on a period between two and five years. Such planning is more detailed and specific than long-term planning. It includes plans for purchase of materials, sales budget, labor overhead expenses etc. It also covers Project planning concerned with specific projects like modernization. 3. **Short-term Planning:** Such planning covers a short period usually one year. It deals with specific activities to be to accomplish the objectives laid down under long-range planning It relates to current functions and their sub-functions, eg, work methods, employe training, etc. It contains a detailed outline of certain specific activities to be complete with a specified time limit. It may be called activity planning. 1. **Corporate planning:** Corporate planning or organization planning is concerned with the organization. It is usually for long term and is done by the top level of management. It lays down the overall objectives, strategies, and policies for the total enterprise. It is original and decisional and provides a basis for planning at the divisional and departmental level. It energizes and provides a motivational framework for employees at all levels. It is also known as strategic planning. The focus here is on the total enterprise. 2. **Divisional Planning:** It determines the scope of a division\'s activities and establishes policies and budgets to attain divisional goals. It is also known as tactical planning or operational planning. Whereas corporate planning is concerned with the selection of broad plans to achieve organizational goals, divisional planning redefines these goals in terms of activities of each division, eg, production, sales, finance, personnel, etc. The plans formulated at this level are more specific but limited in scope. The focus is on specific functional areas of business. 3. **Unit Planning:** It involves development of specific plans for each department or a division so as to accomplish the divisional plans. The focus here is on day-to-day actions of work units and on meeting planned schedules and budgets. **[MANAGEMENT BY OBJECTIVES AND MANAGEMENT BY EXCEPTION]** MBO and MBE are the two models of management. The aim of these two models is to help the management focus on the attainable goal, as well as to channelize their efforts into the achievement of the best possible results with the help of available resources at that point in time. MBO is an acronym for Management by Objectives. MBO is a system of management wherein each member takes part in the organization effectively. Conversely, MBE is a short form for Management by Exception. MBE is a model of strategic management wherein the managers can focus only on exceptionally important matters and take important decisions. **BASIS FOR COMPARISON** **MBO** **MBE** ---------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------- Meaning MBO is the strategic management tool used to improve the organization\'s performance by defining the objectives which both management and employees agree upon together. MBE is the system of identifying and reporting any issue to the management only when a managerial level of experience is required for resolving it. Objectives To measure and judge performance and to relate individual performance to organizational goals. To free up the time of the management, so that they can focus on the most important issues first. Nature Philosophy of Decentralization Control Technique Participation of employees High Comparatively low Responsibility Ambiguity There is no responsibility ambiguity because it is assigned clearly. Responsibility ambiguity is present. Functions Helps in setting goals Reports exceptions to the top executives [**MANAGEMENT BY OBJECTIVES (MBO)** ] MBO is a management approach to improve the firm's performance. They do so by clearly setting the objectives. The company's management sets these objectives after consulting with the employees first. It relies on the assumption that when employees have a say in goal setting and action plans, the participation and commitment of employees increases. The concept of Management by Objectives (MBO), was first proposed by Peter Drucker. But it is George Odiorne, who developed this concept. MBO states top company goals and uses the same to identify employees' objectives. For this purpose, the organizational goals are set and communicated to the employees by the members of the concern, with an aim of achieving the objectives. The aim is to provide direction to the employees. This makes them fully aware of the fact about what they are expected to do at the workplace. It also determines the roles and responsibilities of the employees. Besides, it also ascertains the future course of action. It requires the various levels of management to agree on clearly defined objectives. It tends to improve an organization's performance by keeping the goals and subordinate objectives in tandem. Alternatively, we call MBO as results management or management by results. In this process, the company's management and employees jointly determine the common objectives, define responsibilities and use them as a criterion to meet the company's goals and targets. - **Goal Orientation**: MBO lays emphasis on deciding the individual goals in harmony with the goals of the organization. The goals tend to state the responsibilities of various parts of the organization. Also, it helps to join the organization with its parts and environment as well. - **Participation**: MBO is a process that requires a high level of participation of the concerned employees in the establishment of goals and appraisal of performance. So, the employees get that opportunity to influence decisions and understand job relationships. - **Key Result Area**: MBO aims at improving performance in the areas which are of utmost importance by identifying Key Result Areas (KRAs). - **Systems Approach**: MBO works on a systems approach to manage a firm. It seeks to integrate the individual with the firm and the firm with its business environment. - **Resource Optimization**: The main aim of MBO is to meet the best possible use of the physical and human resources of the firm [**MANAGEMENT BY EXCEPTIONS** **(MBE)**] Management By Exception (MBE) is a philosophy that authorizes the company's management to focus on the most important or critical matters and take vital decisions on that. At the same time facilitate the front-line employees to complete their routine activities. Hence, the supervisors can dedicate their effort and attention to more pressing issues. The notion of Management by Exception (MBE) is given by Fredrick Winslow Taylor in the year 1919. As per this approach employees bring only those issues to the management which are crucial in nature. It includes exceptional items of major discrepancies in day-to-day activities. Hence, usual and unimportant items should not be brought to the notice of the manager. The theory that works behind this notion is that, if the standard is set for a task, and it works fine then it is needless to report every detail to the manager. This is because it will only waste the time. As per this approach, employees have the decision-making power for certain tasks. Further, if any deviations occur, that causes difficulty for the business and employees are not able to manage the same at their level. In such a case, the employee should reach out to their immediate boss and inform him/her about the same. It aims at utilizing the time of management in the best manner. This is possible by involving them only when there are any discrepancies from the routine tasks. The aim of this tool is to help the manager to identify and isolate the issues that demand his decisions and actions. Hence, they need to pay less attention to those issues which do not need much brainstorming and could be handled by the subordinates also. **Importance of MBE** - **Easy Determination of Responsibility**: The objectives, standard of job performances, duties and rights are stated in detail for various levels of management. - **Saves time**: Management has various matters to deal with, requiring their attention and time. By delegating the decision-making authority of routine jobs to the subordinate staff, the management gets the time to think about crucial matters. - **Optimum utilization of abilities**: MBE delegates the decision-making authority to different levels of management. As per this technique, each individual in his power depending on his managerial level is free to take decisions. So, he is fully responsible for the outcome or action. - **Increase in Productivity**: In this delegation of authority to the middle and lower levels of management takes place. It assists them in their job performance and also gets a sense of belongingness. - **Develops subordinates**: With increased responsibilities, subordinates learn how to handle various issues on their own, without going to managers every now and then. It not just trains them to take initiative but also improves their decision-making ability. **FORECASTING** In preparing plans for the future, the management authority has to make some predictions about what is likely to happen in the future. It shows that the managers know something of future happenings even before things actually occurrence of the event. Forecasting may be defined as the process of assessing the future normally using calculations and projections that take account of the past performance, current trends, and anticipated changes in the foreseeable period ahead. **PURPOSE OF FORECASTING** 1. **Basis of Planning**: Forecasting is the key to planning. It generates the planning process. Planning decides the future course of action which is expected to take place in certain circumstances and conditions. Unless the managers know these conditions, they cannot go for effective planning. Forecasting provides the knowledge of planning premises within which the managers can analyse their strengths and weaknesses and can take appropriate actions in advance before actually they are put out of market. Forecasting provides the knowledge about the nature of future conditions. 2. **Promotion of Organization**: The objectives of an organization are achieved through the performance of certain activities. What activities should be performed depends on the expected outcome of these activities. Since expected outcome depends on future events and the way of performing various activities, forecasting of future events is of direct relevance in achieving an objective. 3. **Facilitating Co-ordination and Control**: Forecasting indirectly provides the way for effective co-ordination and control. Forecasting requires information about various factors. Information is collected from various internal and external sources. Almost all units of the organization are involved in this process. It provides interactive opportunities for better unity and co-ordination in the planning process. Similarly, forecasting can provide relevant information for exercising control. The managers can know their weaknesses in the forecasting process and they can take suitable action to overcome these. 4. **Success in Organization**: All business enterprises are characterized by risk and have to work within the ups and downs of the industry. The risk depends on the future happenings and forecasting provides help to overcome the problem of uncertainties. **TECHNIQUES OF FORECASTING:** There are various methods of forecasting. However, no method can be suggested as universally applicable. In fact, most of the forecasts are done by combining various methods. A brief discussion of the major forecasting methods is given below: 1. **Past Performance / Historical Analogy Method**: Under this method, forecast regarding a particular situation is based on some analogous conditions elsewhere in the past. The economic situation of a country can be predicted by making comparison with the advanced countries at a particular stage through which the country is presently passing. Similarly, it has been observed that if anything is invented in some part of the world, this is adopted in other countries after a gap of a certain time. Thus, based on analogy, a general forecast can be made about the nature of events in the economic system of the country. It is often suggested that social analogies have helped in indicating the trends of changes in the norms of business behavior in terms of life. 2. **Survey Method**: Surveys can be conducted to gather information on the intentions of the concerned people. For example, information may be collected through surveys about the probable expenditure of consumers on various items. Both quantitative and qualitative information may be collected by this method. Based on such surveys, demand for various products can be projected. Survey method is suitable for forecasting demand---both of existing and new products. To limit the cost and time, the survey may be restricted to a sample from the prospective consumers 3. **Opinion Poll**: Opinion poll is conducted to assess the opinion of the experienced persons and experts in the field whose views carry a lot of weight. For example, opinion polls are very popular to predict the outcome of elections in many countries including India. Similarly, an opinion poll of the sales representatives, wholesalers or marketing experts may be helpful in formulating demand projections. If opinion polls give widely divergent views, the experts may be called for discussion and explanation of why they are holding a particular view. They may be asked to comment on the views of the others, to revise their views in the context of the opposite views, and consensus may emerge. Then, it becomes the estimate of future events. 4. **Business Barometers**: A barometer is used to measure the atmospheric pressure. In the same way, index numbers are used to measure the state of an economy between two or more periods. These index numbers are the device to study the trends, seasonal fluctuations, cyclical movements, and irregular fluctuations. These index numbers, when used in combination with one another, provide indications as to the direction in which the economy is proceeding. Thus, with the business activity index numbers, it becomes easy to forecast the future course of action. However, it should be kept in mind that business barometers have their own limitations and they are not sure road to success. All types of business do not follow the general trend but different index numbers have to be prepared for different activities, etc. 5. **Time Series Analysis**: Time series analysis involves decomposition of historical series into its various components, viz. trend, seasonal variances, cyclical variations, and random variances. When the various components of a time series are separated, the variation of a particular situation, the subject under study, can be known over the period of time and projection can be made about the future. A trend can be known over the period of time which may be true for the future also. However, time series analysis should be used as a basis for forecasting when data are available for a long period of time and tendencies disclosed by the trend and seasonal factors are fairly clear and stable. 6. **Regression Analysis**: Regression analysis is meant to disclose the relative movements of two or more inter-related series. It is used to estimate the changes in one variable as a result of specified changes in other variable or variables. In economic and business situations, a number of factors affect a business activity simultaneously. Regression analysis helps in isolating the effects of such factors to a great extent. For example, if we know that there is a positive relationship between advertising expenditure and volume of sales or between sales and profit, it is possible to have estimate of the sales based on advertising, or of the profit on the basis of projected sales, provided other things remain the same. 7. **Input-Output Analysis**: According to this method, a forecast of output is based on given input if relationship between input and output is known. Similarly, input requirement can be forecast based on final output with a given input-output relationship. The basis of this technique is that the various sectors of economy are inter­related and such inter-relationships are well-established. For example, coal requirement of the country can be predicted based on its usage rate in various sectors like industry, transport, household, etc. and how the various sectors behave in future. This technique yields sector-wise forecasts and is extensively used in forecasting business events as the data required for its application are easily obtained. **DECISION MAKING** **MEANING** Decision-making can be defined as the process of selecting a right and effective course of action from two or more alternatives for the purpose of achieving a desired result. **DEFINITION** George R. Terry, "Decision making is the selection based on some criteria from two or more possible alternatives." **TYPES OF DECISIONS** 1. **Programmed decisions**: They are otherwise called routine decisions or structured decisions. The reason is that these types of decisions are taken frequently and they are repetitive in nature. This decision is taken within the purview of the policy of the organization. Only lower-level management takes programmed decision and has short-term impact. Granting over time work, placing purchase order (for materials) etc., are some of the examples of programmed decisions. 2. **Non-programmed decision**: They are otherwise called strategic decisions or basic decisions or policy decisions or unstructured decisions. This decision is taken by top management people whenever the need arises. A careful analysis is made by the management before taking a policy decision. The management may publish its policy in small book which is known as policy manual. Policy decision involves heavy expenditure to management. Starting a new business, whether to export or not, acquisition of a business etc. are some of the examples of non-programmed decisions. This decision has a long-term impact on business. A slight mistake in the policy decision is bound to injure the entire organization. 3. **Major decision**: Major decision relates to the purchase of fixed assets with more value. The purchase of land and building is an example of major decision. This decision is taken by the top management. 4. **Minor decision**: Minor decision relates to the purchase of current assets with less value. Purchase of pencil, pen, ink, etc., are some of the examples of minor decision. This decision is taken by lower-level management people. 5. **Operative decision**: A decision which relates to day-to-day operation of an organization is known as operative decision. This type of decision is taken by middle level management people normally. The reason is that they are working at supervisory level and have a good knowledge of the operations. The time of payment of overtime wages is fixed by middle level management people. It is an example of operative decision.\" 6. **Organizational decision**: The decision-maker takes a decision and implements it for effective functioning of organization and it is called organizational decision. He takes this decision on his authority and capacity. 7. **Personal decision**: The decision-maker takes a decision for his personal life which is known as personal decision. He implements this decision in his home and sets right his personal life. This decision does not reflect the functioning of an organization. The decision maker is not a member of an organization while taking a personal decision. 8. **Individual decision**: Confusion exists regarding the difference between individua decision and personal decision. They are not one and the same. The decision-maker is a member of an organization while taking an individual decision. He can implement it in the organization. He is delegated with authority to take individual decision. He considers the policy and situation prevailing in an organization while taking individual decision,\" 9. **Group decision**: A committee is formed by the top management for specific purposes. Here, the top management feels that no individual can take effective decision to solve a problem. The top management fixes the time within which the committee is expected to submit its report with concrete decisions. 10. **Departmental decision**: Here, the decision-maker is department head department manager. He takes a decision to run the department. Department decision has no impact on other departments. This decision is implemented within the concerned **PERSONAL PHASE OF DECISION MAKING** Generally, the manager is a decision-maker in an organization. Two managers do not take same decision even though the same data are supplied to them. So, there are some differences in decision-making. These are due to personal characteristics and qualities of managers. The existence of different characteristics and qualities in managers is due to the following: 1. **Intelligence**: Here, intelligence is the ability of using common sense in decision- making. So, the intelligence is not concerned with formal education. Highly educated persons do not take best decisions in all cases. There is a need of perception of quality managers to take the best decisions. 2. **Education**: Education develops the broad outlook of the decision-maker. Higher education is different from good education. A good education helps the decision-maker to take best decision even in complex situations rather than higher education. Higher education is nothing but getting master degree from a recognized educational institution. In other words, good education is acquiring thorough knowledge in a particular area of subject-matter. At the same time, the level of knowledge may not increase correspondingly to the long years of education. If a person has inner urge to learn more and more, he will become an expert in taking decisions. 3. **Experience**: The experience of an individual can improve the decision-making ability. Decision-maker can survive only when he has skill for original thinking. Decision-maker should use his personal experience in taking a decision. 4. **Courage**: The decision-maker should have courage to take and implement a decision. The very success of decision depends upon the courage of the decision-maker. 5. **Motivation**: Everybody wants recognition for their action. Likewise, a person who takes a decision wants to have it by his colleagues. If it is not so, he will not take even a simple decision in future. Recognition of a decision is a motivation tonic to the decision-maker. Next, the decision-maker does not expect both criticism and suggestions. 6. **Forecasting ability**: The quality of a decision depends upon the forecasting ability of the decision-maker. If the decision-maker has the forecasting ability, even decisions made in a hurried manner may produce good results at times. Besides, he may use the available opportunities and avoid problematic situations. In this way, the need for taking additional decisions is also avoided. 7. **Self-confidence**: First, the decision-maker has correctness of his decision. Then, he take decision as and when required. On the other hand, if the decision-maker has no self- confidence, he will make delay in the decision making process and it will make the situation go from bad to worse. **STEPS IN DECISION MAKING** Decision-making is not an easy job. It requires a lot of skill. A decision-making is affected by several factors. So, the manager can take good decisions by adopting a procedure. A manager may not be able to take good decisions if he fails to follow a sequential set of steps. The decisions-making process depends upon the nature of problem and the nature of organization. The following is the simple process followed in taking a decision in normal situations: 1. **Identification of a problem**: Identification of a problem means recognition of a problem. Problem arises due to difference between what is and what should be. The changes of business environment form the main reason for creating of a problem. So, the manager should define what the problem is. A well-defined problem is half solved. Then, the manager should find the causes of a problem. This is not an easy job. Finding of causes of a problem is used to take quality decision. The manager should continuously watch the decision-making environment and understand the real problem and its causes. The manager may look into the management reports, find deviations from budget i any, compare the company\'s results with the competitor\'s results and efficiency of employee etc. These are used to identify the problem correctly. Here, the manager has to use hi experience, imagination and judgement in order to find out the real nature of the problem 2. **Diagnosing the problem**: There is a slight difference between problem identification and diagnosing the problem. A doctor can diagnose the disease of a patient. A patient cannot find out what is the real disease. But, a doctor can do so with the informatic given by a patient. Information is very useful to the doctor. In management, the manager is acting as a doctor while diagnosing the problem. 3. **Collect and analyze the relevant information**: The next step is that require at various levels information should be collected by the manager. Then, the manager has to study the information with great care. It is very useful to analyze the problem free different angles. If the problem is analyzed from different angles, a quality and quick decision may be taken by the manager. The manager should see that only relevant information also is collected and analyzed. 4. **Discovery of alternative course of action**: Creative thinking is necessary develop or discover many alternative courses of action. If there is no alternative, there no need of taking a decision. If there are more and more of alternatives, the manager have more freedom to take a decision. A problem can be solved in many ways. At the same time, a solved problem should not arise again in the future. It is advisable to the manager that he should discover a number of alternatives. The problem of limiting factors is also considered by the manager. Some alternatives cannot be selected due to limiting factors. Time and cost are the probable limiting factors of organization. 5. **Analyzing the alternatives**: Next, the pros and cons of available alternatives are analyzed. Some alternatives offer maximum benefits than others. An alternative is with other alternatives. The decision maker can prepare a list of limits for each alternative compared 6. **Screening of alternatives**: The available alternatives are screened in the order of maximum benefits derived from them. Each alternative is evaluated in terms of risks involved in implementing them. Both tangible and intangible factors are considered while evaluating or screening each alternative. Tangible factors include profits earned, time taken, money invested, rate of returns on investment, rate of depreciation etc. Intangible factors include public relations, goodwill of the company, loyalty of employees etc. Sometimes, two or more alternatives are equally suitable by nature. The decision-maker should find the actual difference of alternatives which will be the deciding factor to select an alternative. The following criteria has been suggested by Peter F. Drucker to evaluate alternative course of action: a. Risk: Degree of risks involved in each alternative. b. Economy of efforts: Cost, time and efforts involved in each alternative. c. Timing or situation: Whether the problem is urgent. d. Limitations of resources: Physical, financial and human resources available with the organization. 7. **Selection of best alternative**: Now, 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. 8. **Conversion of decision into action**: The future course of action is scheduled on the basis of selected alternative or decision. Here, the manager must consider the policy of the management. The selected alternative decision is communicated to concerned persons This communication facilitates easy implementation of decision. The languages of decision should be simple and easily understandable. 9. **Implementation**: Next, the manager must implement the decision to achieve desired goals. Decision-making process comes to an end with the actual implementation of decision. Implementation is equally important to the selection of alternatives; Implementation plan should provide for time and procedure sequence. Necessary resources should also be allocated and responsibility for specific tasks should be assigned to individuals 10. **Verifying the decision**: It is the duty of every manager to see whether the decision is properly implemented or not. Verification of implementation of decision ensures the achievement of objectives. The selected alternative may be an ill-chosen one and might cause loss to the organization. This can be measured with the help of verifying the decision if the manager feels that the selected alternative is not the best one; an amendment may be made to achieve desired goals. This is the simple process of decision-making. **DELEGATION** It is impossible for any person to execute all the work in an organization, to achieve the objectives of the organization. Similarly, in a growing concern also, a single person could not be vested with the entire decision-making authority. So, the superior assigns duties or responsibilities to his subordinates and also delegates necessary authority to them. **MEANING** Delegation is a process which enables a person to assign a work to others and delegate them with adequate authority to do it. **DEFINITION** Louis A. Allen, \"Delegation is the dynamic of management, it is the process a manager follows is dividing the work assigned to him so that he perform that part which only he, because of his unique organizational placement, can perform effectively and so that he can get other to help them with what remains\". Mc Farland, \"Delegation is the primary formal mechanism by which the network of authority relationship is established\" **PRINCIPLES OF DELEGATION** 1. **Delegation to go by results expected**: The nature of duty has equal rank with the extent of delegation of authority. It should be noted that the objectives of the organization are to be accomplished in time. The superior should clearly know what he expects from the subordinate before the delegation of authority. 2. **Non-delegation of responsibility**: A superior can delegate authority but not responsibility. Assigning duties does not mean delegation of responsibility. The superior should be in touch with the subordinates to know whether duties are performed and the authority is exercised properly. The ultimate responsibility for the performance of duties remains with the superior. 3. **Authority and responsibility should commensurate with each other**: A subordinate can discharge his duties effectively and efficiently if there is proper delegation of authority, otherwise a subordinate cannot succeed in accomplishing the assigned tasks. Authority without responsibility will make the subordinate a careless person. Likewise, responsibility without authority will make the subordinate an inefficient person. So there should be a proper balance between authority and responsibility. 4. **Unity of command**: The principle of unity of command insists that a subordinate should get instruction from only one superior. In other words, a subordinate should be assigned duties and responsibilities by only one superior and he is accountable only to the concerned superior. If a subordinate gets orders, instructions, and directions from more than one superior, it will create uncertainty and confusion in the organization. In such a situation, the subordinate will find it very difficult to determine whose instructions, orders or directions he should carry out first. 5. **Definition of limitations of authority**: A person knows well that an authority alone can delegate the authority properly. There should be written manuals which help a person to understand the authority in right direction. This will avoid confusion regarding the delegation of authority and enable effective functioning of the concerned person.