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Unit 3: Planning and Decision-making

State the meaning and importance of decision-making Notes
Discuss decision-making Process
Explain models of decision-making

Introduction

The necessity for planning arises because of the fact that business organisations have to operate,
survive and progress in a highly dynamic economy where change is the rule, not the exception.
The change may be sudden and extensive, or it may be slow and almost imperceptible. Some of
the important forces of change may be: changes in technology, changes in population and
income distribution, changes in the tastes of consumers, changes in competition, changes in
government policies etc. These changes often give rise to innumerable problems and throw
countless challenges. Most of these changes are thrust on managers thus, managers are forced to
adjust their activities in order to take full advantage of favourable developments or to minimise
the adverse effects of unfavourable ones.

Individuals in organisations make decisions. That is, they make choices from among two or
more alternatives. Decision-making is almost universally defined as choosing between
alternatives. Decision-making is a critical activity in the lives of managers. The decisions a
manager faces can range from very simple, routine matters for which the manager has an
established decision rule (programmed decisions) to new and complex decisions that require
creative solutions (non-programmed decisions).
According to Philip Marvin, "decision-making may be viewed as the process by which individuals
select a course of action from among alternatives to produce a desired result. It is a process made
up of four continuous interrelated phases: explorative, speculative, evaluative and selective."
Thus, decision-making is the process by which the decision-maker tries to jump over the obstacles
placed between his current position and the desired future position.

3.1 Planning: An Introduction

A plan is a forecast for accomplishment. It is a predetermined course of action. It is today’s
projection for tomorrow’s activity. In other words, to plan is to produce a scheme for future
action, to bring about specified results at a specified cost, in a specified period of time.
Management thinkers have defined the term, basically, in two ways:
1. Based on futurity: “Planning is a trap laid down to capture the future” (Allen). “Planning
is deciding in advance what is to be done in future” (Koontz). “Planning is informed
anticipation of future” (Haimann). “Planning is ‘anticipatory’ decision-making” (R.L. Ackoff).
2. As a thinking function: “Planning is a thinking process, an organised foresight, a vision
based on fact and experience that is required for intelligent action” (Alford and Beatty)
“Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.”
(Koontz and O’Donnell)
It is deciding in the present, what is to be done in future. It is the process of thinking before
doing. A plan is a specific, documented intention consisting of an objective and an action
statement. The objective portion is the end, and the action statement represents the means to that
end. Stated another way, objectives give management targets to shoot at, whereas action
statements provide the arrows for hitting the targets. Properly conceived plans tell what, where
and how something is to be done.

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