Nature of planning

  • In the world of management, planning is as fundamental as it gets. If you recall, the first of the managerial functions is planning. Many believe planning is the most fundamental of the managerial functions because all other functions, including organizing, leading, controlling, and staffing, stem from the planning function. Planning prepares organizations for tomorrow today by assessing what an organization wants to accomplish and how it will go about achieving that goal.
  • Managers will spend much of their time planning for all sorts of things that may or will occur in the organization. Typically a manager will create a plan that is aimed at accomplishing some organizational goal such as increasing sales or improving customer service. However, it is important to note that planning is an ongoing step that can be highly specialized based on an organization’s goals, division goals, departmental goals and team goals. It is up to the manager to recognize what goals need to be planned within their individual area.
  • Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action.

Purpose of planning

The planning done by managers is aimed at achieving the organizational goals. The planning helps people in concentrating their efforts on the most important jobs rather than wasting time on the lesser important work. The purpose of planning is also to minimize the cost of performance and eliminate unproductive efforts. It also helps the management in adopting and adjusting according to the changes that take place in the environment. Planning also provides a basis for teamwork as when the goals are properly defined assignments can be fixed and all the members can start contributing in the achievement of these objectives. Planning gives a sense of direction and ensured that efforts are being put to useful purpose instead of being wasted. Planning also facilitate control because without planning there will be nothing to control.
  • Gives direction
  • Reduces the impact of change
  • Minimizes waste and non value added activity
  • Sets standards

Features of planning

  • Primary Function
  • Pervasive
  • Futuristic
  • Involves decision making

Importance of Planning in Management

  • Planning Provides Direction
  • Planning Reduces Risks of Uncertainty
  • Planning Reduces Overlapping and Wasteful Activities
  • Planning Promotes Innovative Ideas
  • Planning Facilitates Decision Making
  • Planning Establishes Standards for Controlling

Planning process

  • Establishing objectives
  • Establishing planning premises
  • Identification of alternatives
  • Evaluation of alternatives
  • Selection of alternative
  • Formulation of supporting plans
  • Establishing a sequence of activities

Types of Plans

Plans can be classified as

  • mission or purposes,
  • objectives or goals,
  • strategies,
  • policies,
  • procedures,
  • rules,
  • programs, and
  • budgets
  • The mission, or purpose, identifies the basic purpose or function or tasks of an enterprise or agency or any part of it
Objectives, or goals, are the ends toward which activity is aimed
  • Strategy is the determination of the basic long‑term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals
  • Policies are general statements or understandings that guide or channel thinking in decision making
  • Procedures are plans that establish a required method of handling future activities
  • Rules spell out specific required actions or non actions, allowing no discretion
  • Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action
  •  A budget is a statement of expected results expressed in numerical terms

Steps in Planning

Management planning is the process of assessing an organization’s goals and creating a realistic, detailed plan of action for meeting those goals.
  • Establish Goals
            The first step of the management planning process is to identify specific company goals. This portion of the planning process should include a detailed overview of each goal, including the reason for its selection and the anticipated outcomes of goal-related projects.
  • Identify Resources
            Each goal should have financial and human resources projections associated with its completion.
  • Establish Goal-Related Tasks
            Each goal should have tasks or projects associated with its achievement.
  • Prioritize Goals and Tasks
            Prioritizing goals and tasks is about ordering objectives in terms of their importance. The tasks deemed most important will theoretically be approached and completed first. The prioritizing process may also reflect steps necessary in completing a task or achieving a goal.
  • Create Assignments and Timelines
            As the company prioritizes projects, it must establish timelines for completing associated tasks and assign individuals to complete them. This portion of the management planning process should consider the abilities of staff members and the time necessary to realistically complete assignments.
  • Establish Evaluation Methods
            A management planning process should include a strategy for evaluating the progress toward goal completion throughout an established time period. One way to do this is through requesting a monthly progress report from department heads.
  • Identify Alternative Courses of Action
            Even the best-laid plans can sometimes be thrown off track by unanticipated events. A management plan should include a contingency plan if certain aspects of the master plan prove to be unattainable. Alternative courses of action can be incorporated into each segment of the planning process, or for the plan in its entirety.

Planning Premises

Planning is made depending on some information. This information is included with planning premises. Some information ate available and some are not. These are very essential to make plan. These information are mainly known as planning premises. Sometimes efficient information are got from forecasting, in such situation planning premises become strong. For planning premises managers may not face any uncertainty for implementing planning.
        According to H. weihrich and H.koontz,
             ” Planning premises are identified as the anticipated environment in which plans are expected to operate.”
        According to C.B.Gupta,
            “Planning premises are the critical factors which lay down the boundary for planning”
There are mainly two types of planning premises include external premises and internal premises.
On the above discussion and definition finally we can say that plans are prepared based on the  some assumptions and condition which should be clearly identified. These assumptions are called planning premises.


Forecasting means assessment of future event based on experience. forecasting is essential for valuable managerial decision. Forecasting is a basis of long term planning of an organization. Forecast also basis of cost control and budgetary control. Forecasting enables organization to produce the required quantities at the right time and arrange well in advance for the various factors of production.
  • General features of forecasting:
  • It reflects past experience
  • Forecasting is not 100% correct
  • Forecasting provides some expectation
  • Planning is very much depending on forecasting.

Process of decision making

Decision making is defined as the selection of a course of action from among alternatives. Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.
Using a step-by-step decision-making process can help you make more deliberate, thoughtful decisions by organizing relevant information and defining alternatives. This approach increases the chances that you will choose the most satisfying alternative possible.
Step 1: Identify the decision
You realize that you need to make a decision. Try to clearly define the nature of the decision you must make. This first step is very important.
Step 2: Gather relevant information
Collect some pertinent information before you make your decision: what information is needed, the best sources of information, and how to get it. This step involves both internal and external “work.” Some information is internal: you’ll seek it through a process of self-assessment. Other information is external: you’ll find it online, in books, from other people, and from other sources.
Step 3: Identify the alternatives
As you collect information, you will probably identify several possible paths of action, or alternatives. You can also use your imagination and additional information to construct new alternatives. In this step, you will list all possible and desirable alternatives.
Step 4: Weigh the evidence
Draw on your information and emotions to imagine what it would be like if you carried out each of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved through the use of each alternative. As you go through this difficult internal process, you’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally, place the alternatives in a priority order, based upon your own value system.
Step 5: Choose among alternatives
Once you have weighed all the evidence, you are ready to select the alternative that seems to be best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may very likely be the same or similar to the alternative you placed at the top of your list at the end of Step 4.
Step 6: Take action
You’re now ready to take some positive action by beginning to implement the alternative you chose in Step 5.
Step 7: Review your decision & its consequences
In this final step, consider the results of your decision and evaluate whether or not it has resolved the need you identified in Step 1. If the decision has not met the identified need, you may want to repeat certain steps of the process to make a new decision. For example, you might want to gather more detailed or somewhat different information or explore additional alternatives.

Decision tree Analysis

  • A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility. It is one way to display an algorithm.
  • Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal, but are also a popular tool in machine learning.
  • A decision tree is a flowchart-like structure in which each internal node represents a “test” on an attribute (e.g. whether a coin flip comes up heads or tails), each branch represents the outcome of the test, and each leaf node represents a class label (decision taken after computing all attributes). The paths from root to leaf represent classification rules.
  • In decision analysis, a decision tree and the closely related influence diagram are used as a visual and analytical decision support tool, where the expected values (or expected utility) of competing alternatives are calculated.

A decision tree consists of three types of nodes:

  • Decision nodes – typically represented by squares
  • Chance nodes – typically represented by circles
  • End nodes – typically represented by triangle.

Decision trees are commonly used in operations research and operations management. If, in practice, decisions have to be taken online with no recall under incomplete knowledge, a decision tree should be paralleled by a probability model as a best choice model or online selection model algorithm. Another use of decision trees is as a descriptive means for calculating conditional probabilities.
Decision trees, influence diagrams, utility functions, and other decision analysis tools and methods are taught to undergraduate students in schools of business, health economics, and public health, and are examples of operations research or management science methods.


  • Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals.
  • Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an organization. Decisions made about the structure of an organization are generally referred to as organizational design decisions.
A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area.

Principles of organization

The principles of organization that can facilitate smooth functioning of organization are as follows:
1. Unity of objectives: There should be unity of objective for each member of the organization so that all collective efforts can be concentrated on the set goals. The objectives of organization should be well understood and formulated so that every member is familiar with it.
2. Division of work and specialization: The division of total work is done as to confine every individual to the performance of a single job. It facilitates specialization in the organization and enhances efficiency and quality. Every area of specialization should be interconnected to the total integrated system by means of coordinating together of all activities done in all departments.
3. Definition of job: There should be appropriate defining of every position in relation to other positions in the organization. The overlapping of functions should be avoided. It can be done by assigning duties and responsibilities to every position and its relationships with other positions in the organization.
4. Separation of line and staff functions: Line functions are those functions that help in accomplishing the main objectives of the company. These line functions should be separated from staff activities. The functions other than line functions are staff functions.
5 . Chain of Command and Scalar Principle: According to this scalar principle, the line of authority from top level to bottom level of organization should be clearly defined. This authority refers to the right to decide direct and coordinate. The structure of the organization should facilitate delegation of authority. The clarity is completely achieved through delegation by steps or levels from the top position to the operating level of the organization. It is also referred to as chain of command.
6. Parity of Authority and Responsibility or Principle of Correspondence: The responsibility delivered to every employee should be accompanied with its corresponding authority. Every subordinate should have sufficient authority to perform responsibilities entrusted to him. It will make him self reliant and can help him in taking quiet decisions without concerning higher departments or authorities.
7. Unity of command: Every subordinate should report to his assigned superiors or boss. It will avoid state of confusion, chaos, conflicts and lack of action in the organization.
8. Unity of Direction: The unity of direction states that group of activities with a common goal should be managed by one person. It encourages one head and one plan of action for a common objective of different activities.
9. Exception principle: The exception principle states that high level of managers should attend to exceptional matters only. The higher level of managers should deal with problems that concerns with unusual matter and policy decisions. The routine decisions should be referred to lower level of managers.
10. Span of supervision: It refers to the number of persons that a manager or supervisor can direct or control. Every manager is confined with restricted numbers of subordinates so that he can direct them efficiently within the limits of available time and ability. The number of persons is dependent on the nature of job and the desired frequency of intensity of supervision required in the organization.
11. Principle of Balance: The principle of balance states that there should be proper balance between various parts of the organization. No function should be given undue importance at the cost of other functions. This balance should also be maintained between centralization and decentralization, span of supervision and lines of communication and authority allocated to department and personnel at various levels.
12. Communication: The objectives of organization desires good communication network. The two way communication between superiors and subordinates helps in uniting organization into working as effectively operating system.
13. Flexibility: The flexibility in organizational structure helps in adapting to changes in the nature of the business as well as changes corresponding to technological innovations.
14. Continuity: The continuity in efficient performance of organization can be achieved by adapting to new changes that takes place inside or outside the organization. It will help organization to survive and excel for longer duration of time.

Formal and informal organization

  • The intentional structure of roles in a formally organized enterprise
  • Informal organization is a network of interpersonal relationships that arise when people associate with each other.

Types of organization structure

Organizations are set up in specific ways to accomplish different goals, and the structure of an organization can help or hinder its progress toward accomplishing these goals. Organizations large and small can achieve higher sales and other profit by properly matching their needs with the structure they use to operate. There are three main types of organizational structure: functional, divisional and matrix structure.
  • Functional Structure
            Functional structure is set up so that each portion of the organization is grouped according to its purpose. In this type of organization, for example, there may be a marketing department, a sales department and a production department. The functional structure works very well for small businesses in which each department can rely on the talent and knowledge of its workers and support itself. However, one of the drawbacks to a functional structure is that the coordination and communication between departments can be restricted by the organizational boundaries of having the various departments working separately.
  • Divisional Structure
            Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas. For example, the now-defunct Tecumseh Products Company was organized divisionally–with a small engine division, a compressor division, a parts division and divisions for each geographic area to handle specific needs. The benefit of this structure is that needs can be met more rapidly and more specifically; however, communication is inhibited because employees in different divisions are not working together. Divisional structure is costly because of its size and scope. Small businesses can use a divisional structure on a smaller scale, having different offices in different parts of the city, for example, or assigning different sales teams to handle different geographic areas.
  • Matrix
            The third main type of organizational structure, called the matrix structure, is a hybrid of divisional and functional structure. Typically used in large multinational companies, the matrix structure allows for the benefits of functional and divisional structures to exist in one organization. This can create power struggles because most areas of the company will have a dual management–a functional manager and a product or divisional manager working at the same level and covering some of the same managerial territory.

Line and staff positions

  • A line position is a position in the direct chain of command that is responsible for the achievement of the organizational goal
  • A staff position is intended to provide expertise, advice and support for line positions
  • Line department performs tasks that reflect the organization’s primary goal and mission
  • Staff department include all those that provide specialized skills in support of line department
  • Staff department have an advisory relationship with the line department and typically include research, marketing, labor relations.

Key elements in organizational design

  • Work specialization
The degree to which tasks in an organisation are divided into separate jobs
  • Departmentalization
The basis by which jobs are grouped together

Common forms of departmentalization

  1. functional
  2. geographical
  3. product
  4. customer
  5. project
  6. matrix
  • chain of command
The path that a directive and/or answer or request should take through each level of an organization; also called a scalar chain or the line of authority.
The right to take action, to make decisions, and to direct the work of others.
  • Span of control
The number of employees a manager can efficiently manage
  • Centralization/ decentralization
                      1. The degree to which decision making is concentrated at a single point in the organisation
                      2. The degree to which lower level employees provide input or actually make decisions
  • Formalization
Degree to which jobs within the organisation are standardized and the extent to which employee behavior is guided by rules and procedures

Matrix organization

  • A matrix organizational structure is a company structure in which the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have dual reporting relationships – generally to both a functional manager and a product manager.
  • The matrix organization structure is a combination of two or more types of organizational structures, such as the projectized organization structure and the functional organization structure.
  • These two types of organizational structures represent the two extreme points of a string, while the matrix organization structure is a balance of these two.
  • This combination may help organizations achieve higher efficiency, readiness, and quick market adaptation. Moreover, they often can respond faster to market or customer demand while decreasing the lead time to produce a new product.
  • This type of structure is most suitable for organizations operating in a dynamic environment.
  • However, if any organization is working in a stagnant environment, producing standard products, with customers rarely changing requirements, the matrix structure is not well suited for them. They should adopt the functional organization structure.

Team-based organization

  • Team-based organizations filter decision making down to all levels of management, while traditionally structured organizations rely on top management to make decisions. Team-based organizations require that all employees participate in the decision-making process. Employees feel they are part of the total organization, rather than members of an individual department. Consequently, team-based organizations run more efficiently and effectively, giving them a competitive edge in today’s global markets.
Structure of Team-Based Organizations
  • Teams of employees achieve progress toward a common goal while completing individual tasks. Cooperation is critical in team-based organizations, and this type of organization must be structured to facilitate communication. Team-based organizations are less hierarchical, and they exhibit more flexible structures that foster problem-solving, participation in decision-making and teamwork to achieve organizational goals. In team-based organizations, labor and management must work cooperatively.

Virtual organisation

  • This new form of organisation, i.e., ‘virtual organisation’ emerged in 1990 and is also known as digital organisation, network organisation or modular organisation. Simply speaking, a virtual organisation is a network of cooperation made possible by, what is called ICT, i.e. Information and Communication Technology, which is flexible and comes to meet the dynamics of the market.
  • Alterna­tively speaking, the virtual organisation is a social network in which all the horizontal and vertical boundaries are removed. In this sense, it is a boundary less organisation. It consists of individual’s working out of physically dispersed work places, or even individuals working from mobile devices and not tied to any particular workspace. The ICT is the backbone of virtual organisation.
  • It is the ICT that coordinates the activities, combines the workers’ skills and resources with an objective to achieve the common goal set by a virtual organisation. Managers in these organisations coordinate and control external relations with the help of computer network links. The virtual form of organisation is increasing in India also. Nike, Reebok, Puma, Dell Computers, HLL, etc., are the prominent companies working virtually.
  • While considering the issue of flexibility, organisations may have several options like flexi-time, part-time work, job-sharing, and home-based working. Here, one of the most important issues in­volved is attaining flexibility to respond to changes – both internal and external – is determining the extent of control or the amount of autonomy the virtual organisations will impose on their members.

Boundary less Organization

  • While traditional organizational structures have defined vertical and horizontal borders and hierarchies, boundary less organisations are defined specifically by a lack of structures and an approach to business that is based on the free flow of information and ideas to drive innovation, efficiency and growth in a world that’s constantly changing. The concept was pioneered by well-known management thinker and former General Electric chairman Jack Welch, who wanted to break down existing barriers between different parts. Adaptability and flexibility are important criteria of boundary less organisations.
  • Boundary less organizations will often make use of the latest technology and tools to facilitate the breaking down of traditional borders, such as virtual collaboration and flexible working. With regard to employees, they may have more responsibility for their own projects and targets and be more able to achieve results in a way that’s appropriate for the project at hand. Because many boundary less organizations are dispersed across geographic borders, employees may be from different cultures and countries but must work together. Because of this, boundary less organizations require a strong set of core values and a strong vision.