MODULE 2

FIRST FUNCTION OF MANAGEMENT: PLANNING (DECISION

MAKING)

Objectives

At the end of this module, the students are expected to:

1. define planning and explain its nature;

2.identify and describe the different types of plans;
3. familiarize with the steps of the decision-making process;
4. describe the different techniques in decision making analysis; and
5. apply planning as function of management.

PLANNING
What is a Planning?

Planning is a logical and systematic approach of formulating the objectives, programs,

policies, procedures, budgets, rules and regulations, and other types of plan.

Planning is considered the most basic of all managerial functions (organizing, staffing,
directing, and controlling). This is considered most basic because without this the other four
functions of the managers cannot be executed efficiently and effectively. How managers will
carry out other four functions to organize, staff, direct and control if there is no plan to execute.

Planning includes all the activities that lead to determining the future, defining what are
desired to attain, and developing appropriate schemes and actions to attain them. Planning is a
process which determines what will be the status or position of the organization in the future.
Planning set the philosophy, vision, mission, goals and objectives or PVMGO of the
organization which will set as the parameters in meeting success and anticipating what will
happen in the future.

Planning is the process of setting objectives and determining how to accomplish them.

The Nature of Planning (Iñigo, 2015)

Four major factors summarize the essential nature of planning. These are:

1. Contribution to purpose and objectives

Planning is required to facilitate accomplishment of business purpose and
objectives. This statement is taken from the nature of organized business. It is natural for
a proprietor to plan and identify his or her purpose in organizing a business. Without
formal planning, the business resources could be wasted.

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 2. Planning as the first basic function
As I mentioned above, it is logically that planning will be the first function to
execute other four managerial functions.

3. Planning as a function of all managers

It is obvious that all managers should know how to plan. They are the one who
planned for the organization’s success in carrying out the other functions of
management.

4. Planning for efficient organization

The efficiency of a plan is evaluated by the amount it contributes to purpose and
objectives as offset by the expenses and other things required to formulate and
implement it. Plans may also become inefficient in the attainment of objective by
affecting group satisfaction.

Types of Plans used by the Manager (Schermerhorn, 2011)

Managers are the one prepare and execute plans for the organization. They use
different plans as they face different challenges in the organization. Different challenges
obviously require different types of plans.

Here are the different types of PLANS:

1. Long-range and Short-range Plans

Long-term plans looked three or more years into the future, while short-term
plans covered one year or less.

The organization must see to it that they identified or distinguished what will be their long
and short range plan for everyone to understand. The top management usually set the long
term plan and set directions for the organization.

2. Strategic and Tactical Plans

Strategic Plans identifies long-term directions for the organizations. These are
long-term plans that set broad directions for the organization to develop and create a structure
in allocating the different resources for maximum performance impact. It begins with a vision
that clarifies the mission (is the purpose or reason for the existence of an organization) and
expresses what it hopes to be in the future, and it involves determining the goals (definite scope
and suggests direction maximize efforts of a manager) and objectives that will pursued in order
to accomplish that vision.

Tactical Plans, this plan carryout or implement the strategic plans of the organization.
For better understanding if the business goal is clear: increase profit to 40%. As for the stiff
competition on similar products, the business will require to take actions to meet the goal and
utilize and recognize opportunities. The organization will provide “tactics” to deal with the current
situation in such a way meeting the overall strategy.

In business, tactical plans often take the form of functional plans that indicate how
different components of the organization will contribute to overall strategy. Such functional plans

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include:

 Production plan – dealing with work methods and technologies;

 Financial plans – dealing with money and capital investment;
 Facilities plans – dealing with facilities and work layouts;
 Logistics plans – dealing with suppliers and acquiring resource inputs;
 Marketing plans – dealing with selling and distributing goods or services; and
 Human resource plans – dealing with building a talented workforce.

All organization plans if it will be long-range, short-range or strategic plans, it should be

congruent or parallel to the objectives. And the objectives should be parallel to goals; and goals
should be congruent to mission; and the mission should be congruent to the vision of the
organization. Why I am saying this, because the organization wants to aim their vision and if
your plans are not congruent, how the company will aim their vision? And all the resources of
the organization will definitely be wasted because your plans are not targeting its main goal
aiming the success of the organization in the future or not meeting its vision.

3. Operational Plans

These are a guide behavior and describe what needs to be done in the short
term to support strategic and tactical plans. It includes standing plans like policies and
procedures that are used over and over again, and single-use plans like budgets that apply to
one specific task or time period.

Standing Plans

Policy communicates broad guidelines for making decision and taking

action in specific circumstances. Organization has lots of policies which the employee should
abide, for example in human resources, they provide a policy how to give disciplinary action to
employees if there’s a violation in the rules and regulation; recruitment process, termination
process, etc. On the example, policy is a guide for the organization what will be their actions
and decisions to be made and those actions and decisions should be and will be based on the
set policies of the organization.

In reality employees knows the policies of the organization they are working with. It was
cascaded in their orientation or the HRD give copies of their employee’s or company’s
handbook. The policy should also be congruent meeting organization’s vision.

Procedures describe rules for what actions to be taken in specific

situations. This is commonly or often called SOP – Standard Operating Procedures. The policy
give broad guidelines in making actions or decisions, while procedure give specific or precise
actions to be taken. For example in giving disciplinary action in tardiness – in the employee’s
handbook there’s a section in how to give disciplinary action. Based on the policy the procedure
first is give memo for the first offense; 2 days suspension in the second offense, etc. So based
on the policy, the HRD should identify what will be their specific action to be taken in giving
disciplinary action to the employee, so if the violation fall in the first offense the action of the
HRD is to give only memo. And if the employee will violate the same policy in the future, and
because it is a second offense the action to be taken is give 2 days’ suspension.

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 Budgets are single-use plans that commit resources for specific periods
to activities, projects, or program. Organization should allocate budget for the all plans.
Organization need to spend a fair amount to have realization to the plans prepared by the
management. Without these important resources plans will not be executed or implemented in
just-in-time.

Activity 2:

Write the Mission of the company and Objectives of your department.

From the department objectives, choose one (1) objective that you
think is the key objective meeting the mission of your company. Write a
plan how to meet your chosen objective.

After, list the objectives of your company and examine it. Do you think
your plan meeting your chosen (key) objective will also meet the
company’s mission? (have a comprehensive explanation of your
answer)

(Will be submitted in Ubian LMS)

DECISION MAKING (Iñigo, 2015)

This is the process of choosing a specific procedure or course of action from among
several possible alternatives. Decision making can be determined by non-quantitative or
qualitative means such as institution, facts, experiences, and opinions. Also, it can be
determined by some quantitative techniques such as operations research, linear programming,
simulation, gaming and program evaluation review techniques.

Here are the some basic commonly use decision making and planning techniques and
tools:

Marginal Analysis is a tool used in decision making to figure out how much more output
will result if one variable (worker) is added. For better understanding, it is additional product or
output changing or adding one factor, which other factors are held constant (no change) to
increase profit. For example you add one additional worker, if one worker produced 10 units per
hour and you have 3 workers the units/hour is 30 and because of the additional worker the
output produced will increase from 30 to 40. It means that you only add in the labor cost but in
other costs (material, production, etc.) are held constant. It is an analysis of additional benefits
the company will have compared to the additional cost the company incurred pertaining to same
activity. This technique is particularly useful in evaluating the alternatives in decision making
process.

Financial Analysis
This is a tool in decision making applying quantitative and qualitative analysis.
For example, the company will have additional investment – the manager will analyze the
financial standing of the company and calculate the payback period and possible effect to the
company.

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 Break-even Analysis
This is another tool that sees the effect of having different alternatives available
on the price, fixed and variable cost per unit. The company will able to determine the break-
even point of each alternative which helps in making decision. Usually the manager calculates
to test in how many units will be sold in pricing the product based on its total cost plus mark-up
or how fast the company will recover their investment producing the product. Break-even point
means that the total cost of producing the product is equal to the revenue and there is no profit.

Operations Research
OR, involves the application of quantitative methods to decision making.
Commonly used OR techniques are linear programming, transportation, simulation, decision
tree and transportation.

Forecasting
Planning technique in decision making which foretell or predict future trends,
events or conditions from known data and to prepare for expected changes in business or
industry. Usually forecasting is based on the available data in the company specifically historical
data. It helps the managers to plan and decide what will be there estimates of what will be likely
in the future using those data. To make forecasting be successful managers should provide
reliable information as basis of predicting the future. The commonly used methods are survey
method which getting information to customers by distributing questionnaire or conducting
interviews. On this method the company will have the idea in the demand of their product, and
can also predict cost if there will be modification of the product. The trend method or time-
series analysis is another technique of forecasting. Under this method, the future is predicted
by projected trends using past data or information. This method brings relationship between
sales and time. The econometric model, which is based on statistical methods a historical
relationship between sales volume and number of independent variables in making predictions.
Econometric model employed commonly determining the economic aspects of changes in
government policies, regulatory conditions, interest rates, demographic changes, tax laws, wage
level, etc.

Scheduling
This is simply term used for planning time for various activities in an organization.
This is commonly used technique or tool in planning to monitor the progress of the different
activities, and if the organization is achieving or accomplishing what they planned, or to identify
any adjustment or decision to be made in achieving the set objectives. Commonly used is
Network Analysis are the Performance Evaluation Review Technique (PERT) and Critical Path
Method (CPM).

Management by Objectives
Peter Ducker used this term in 1954 and applied in to an approach to planning.
MBO is an approach to management designed to encourage initiative and prevent working at
cross-purposes, or indeed, for no purpose at all. It is ways helping the managers accomplish
their jobs within the framework of organization needs and resources. It is accomplishing the
objectives through cooperation of the manager and subordinate. It is setting the organization
objectives as personal objectives, that’s why MBO is Management by Walking (MBW), because
the managers sees that the organization objectives or plan will be accomplished by walking
through employees.

Watch this video: https://www.youtube.com/watch?v=QPlwL2xG9Is

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WHY MANAGERS FAIL IN PLANNING (Iñigo, 2015)

Among are the reasons for ineffective planning are the following:

1. Lack of real commitment in planning.

2. Interchanging planning studies with plans.
3. Failure to develop and implement sound strategies.
4. Lack of meaningful objectives and goals.
5. Tendency to underestimate the Importance of planning premises.
6. Failure to see the scope of plans.
7. Failure to see planning as rational process.
8. Too much reliance on experience.
9. Failure to use the principle of limiting factor.
10. Lack of top management support.
11. Lack of clear delegation.
12. Lack of adequate control techniques and information.

References:
Atienza, Rumel V., Transformative Organization Management, Rex Book Store, 2012.
Iñigo, Conrado E., Management for Filipinos: Principles and Application, 2015.
Schermerhorn, Jr., John R., Introduction to Management 11th Edition, 2012.
http://www.businessdictionary.com/definition/econometri-modeling.html Retrieved on
September 27, 2016.
https://www.youtube.com/watch?v=QPlwL2xG9Is Retrieved on August 31, 2017.

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