PLANNING AND

DECISION-MAKING
Essentials of Planning and Decision-Making

Planning

The most fundamental and basic of all management

function
Includes a rational approach in selecting and
achieving goals and objectives and deciding on the
actions to achieve them.
It involves looking ahead and preparing for the
future. Thus, nothing can be done without a plan.

Close Relationship of
Planning and Controlling

Planning and Controlling are inseparable.

They

are the Siamese Twins of Management.

New Plans

Controlling:
Planning

Implementation
of plans

Figure 1:
Close Relationship of Planning and Controlling

Comparing
plans with
results

Corrective action

No undesirable
deviation from
plans

Close Relationship of
Planning and Controlling

Any attempt to control without plans is

meaningless, since there is no way for people to tell
whether they are going where they want to go
(the result of the task of control) unless they first
know where they want to go (part of the task of
planning).
Plans thus furnish the standards of control.

The Planning Period

Short-run planning covers a period of 6 to 12
months.
Intermediate-range plans are from 1 to 5 years
Long-term planning may range from 5, 10 to
even 20 years.

How long should the planning period be?

The length of the period for which an enterprise
plan vary on
the type of the enterprise
the kind of industry
the production cycle
the quality of managerial practice
and many other factors in the decision

Types of Plans
1.
2.
3.
4.
5.

6.
7.
8.
9.

Visions
Missions or Purposes
Goals or Objectives
Strategies
Policies
Procedures
Rules
Programs
Budgets

Types of Plans
1.

Vision

A picture of the state of the desired outcome in

the future usually in the long term from current
time.
It answers the question where do we want to
go? or what do we want to become?
It may be a plan or a goal. Like objectives a
vision statement should be specific, measurable,
attainable, realistic and time-bound.

Developing a Vision

Begins with thinking strategically

About the firms future makeup;
Forming vision of firms future in 5-10 years
Task is to:
Inject sense of purpose into firms activities;
Provide LONG-TERM DIRECTION;
Give the firm STRONG IDENTITY;
Decide WHO we are, WHAT we do, & WHERE we are
headed

VISION STATEMENTS
FAMOUS COMPANIES

MAPUA

shall be a global center of excellence in

education by providing instructions that are
current in content and state-of-the-art in
delivery; by engaging in cutting-edge, highimpact research; and by aggressively taking
on present-day global concerns

NESTLE

create trustworthy products, systems and

services that contribute to improving the quality
of consumers lives
-

Werner Bauer
Chief Technology Officer, Nestl S.A.
Innovation, Technology and Research & Development

NIKE

"To bring inspiration and innovation to every

athlete* in the world"
* If you have a body, you are an athlete.

AMAZON.COM

To be earths most customer centric company;

to build a place where people can come to
find and discover anything they might want to
buy online

APPLE

Apple is committed to bringing the best

personal computing experience to students,
educators, creative professionals and
consumers around the world through its
innovative hardware, software and Internet
offerings.

METROBANK

To be the best bank for all stakeholders

from its customers to the community

ST. LUKES HOSPITAL

The great purpose for which this hospital was

begunthe helping of suffering humanity back
to health and life.
Rt. Rev. James B. Funsten,
Bishop, Episcopal Diocese of Idaho, 1906

TOYOTA

To sustain profitable growth by providing the

best customer experience and dealer support

JOLLIBEE

To serve great tasting food, bringing the joy

of eating to everyone

MICROSOFT

To create experiences that combine the magic

of software with the power of Internet services
across a world of devices

GLOBE TELECOM

Commitment to "enriching lives through ease

and relevance"

DISNEYLAND

To be the happiest place on earth

Types of Plans
2.

Purposes or Missions

Identifies the basic purpose or function or tasks of the organization

or any part of it.
In every social system, enterprises have a basic function or task
assigned to them by society.
For example,
business - production and distribution of goods and services
state highway department - design, building, and operation of a
system of state highways
courts - interpretation of laws and their application
university - teaching, research, and providing services to the
community

MISSION STATEMENTS
FAMOUS COMPANIES

COCA-COLA

To refresh the world...

To inspire moments of optimism and
happiness...
To create value and make a difference.

DELL

To be the most successful computer company in

the world at delivering the best customer
experience in markets we serve

FACEBOOK

To give people the power to share and make

the world more open and connected

MC DONALDS

Be our customers' favorite place and way to

eat"

NOKIA

Connecting people

STARBUCKS

To inspire and nurture the human spirit one

person, one cup and one neighborhood at a
time

GOOGLE

To organize the worlds information and make

it universally accessible and useful

MAPUA

The Institute, using the most effective and

efficient means, provides its students with
highly relevant professional and advanced
education in preparation for and furtherance
of global practice

Types of Plans
3.

Goals or Objectives

Represent not only the end point of planning, but

also the end toward which organizing,
directing/leading, and controlling are aimed.

TYPES OF OBJECTIVES NEEDED by an

Organization:

1.

Financial Objectives
Outcomes that relate to improving firms financial
performance

SPECIFIC FINANCIAL CORPORATE

OBJECTIVES

McCORMICK & COMPANY

Improve returns from each of our existing operating groups.
Achieve a 20% return on equity.
Achieve net sales growth rate of 10% per year.
Maintain an average earnings per share growth rate of 15%
per year.

SPECIFIC FINACIAL CORPORATE

OBJECTIVES

QUAKER OATS COMPANY

To achieve return on equity at 20% or above, real earnings
growth averaging 5% or better over time, be a leading
marketer of strong consumer brands, and improve the
profitability of low-return businesses or divest them.

TYPES OF OBJECTIVES NEEDED by an

Organization:

2.

Strategic Objectives
Outcomes that will result in greater competitiveness &
stronger long-term market position

SPECIFIC STRATEGIC CORPORATE

OBJECTIVES

NIKE
Protect & improve Nikes position as the number one athletic
brand in America.
Build a strong momentum in growing fitness market.
Intensify the companys effort to develop products that
customers need and want.

SPECIFIC STRATEGIC CORPORATE

OBJECTIVES

ATLAS CORPORATION
To become a low-cost, medium-size gold producer, producing
in excess of 125,000 ounces of gold a year and building gold
reserves of 1,500,000

Types of Plans
4.

Strategies
Defined as the determination of the basic longterm objectives of an enterprise
The art of using organizational resources to
reach the goals defined.
Consists of competitive moves & business
approaches to produce successful performance

Types of Plans

Strategies are managements game plan for:

Running the business

Strengthening firms competitive position
Satisfying customers
Achieving performance targets

Examples:

Improving the market standing

Increasing productivity goals
Product innovation
Systems development

nking strategically: Three big strategic

uestions

Where are we now?

Where do we want to go?
ow will we get there?

A strategy without metrics is just a wish. And metrics

that are not aligned with strategy are a waste of time.

Types of Plans
5.

Policies

General statements or understandings that guide or

channel thinking in decision making.
They help decide issues before they become
problems.
Behavioral guidelines that set boundaries on
what managers can and cannot do; provide
criteria to follow in order to implement
operational objectives.

Sample Attendance Policy: No-Fault Point System

The goal of this attendance policy is to reward good attendance and
eliminate people with poor attendance. It uses a point system, and does
not excuse or unexcuse absences.
In a no fault attendance system, absences are recorded thus:
Each absence = 1 point (no multi-day occurrences)
Each late in (tardy) or early out = 1/2 point
Each no-show for work = 2 points
Each return with no prior call = 1 point
Each absence-free quarter eliminates all points and rewards the
employee with a day off with pay.
Each employee starts fresh, with no points, each year.
Progressive disciplinary action accompanies a no-fault attendance
system. If an employee earns:
7 points = verbal warning
8 points = written warning
9 points = 3 day suspension
10 points = termination

Types of Plans
6.

Procedures

Establish a chronological sequences of required actions in

handling future activities;

Details of the exact manner in which certain activities must

be accomplished;

Procedures are guides to action; therefore they are more

specific than policies. Policies define a broad field whose
area is determined and limited by the objectives of the
enterprise. Procedures show the sequence of concrete acts.

Example:
Policy statement: The customer is always right
In a department store, the procedure might be to send a
complaining customer to the supervisor, then to the
department manager and finally to the adjustment office.
Whatever decision these various managers make will be
within the broad guideline of thinking that the customer is
right. Although the managers might not believe in a
particular instance that the customer is justified, the
complaint will be handled according to a prescribed
procedure from the policy of the store.

Sample Procedure for Hiring New Employees

1.Determine the need for a new or replacement position.
2.Develop and prioritize the key requirements needed from the position and
the special qualifications, traits, characteristics, and experience looked for in a
candidate. With HR department assistance, develop the job description and
salary range for the position.
3.Advertise or post the job opportunities in the bulletin board, company
website, print media, etc.
4.Send an all-company email to notify staff that a position has been posted
and that the company is open for hiring employees.
5.Interested candidates shall fill out the Position Application. Schedule an
interview for candidates, with the hiring supervisor, the manager of the hiring
supervisor or a customer of the position and HR. (In all cases, tell the
candidates the timelines you anticipate the interview process will take.)
6.Hold the interviews with each interviewer clear about their role in the
interview process. Interviewers shall fill out the Job Candidate Evaluation
Form.
7.If no candidates are selected for the position, make certain to clearly
communicate with the applicants that they were not selected. If a candidate is
selected for the position, prepare a written job offer that includes the new job
description and salary.

Types of Plans
7.

Rules
Spell out specific required actions or nonactions.
Usually the simplest type of plan.
The essence of rule is that it reflects a
managerial decision that a certain action must
or must not be taken.
Rules are different from policies in that policies
are meant to guide decision making by marking
off areas in which managers can use their
discretion, while rules allow no discretion in their
application.

Sample of Simple Rules

NO

Eating
Drinking
Smoking

No littering

Classroom Rules:
1. Everyone deserves respect.
2. Come to class prepared.
3. Do your best.
4. Have a winning attitude.
5. Have fun and learn!

Types of Plans
8.

Programs
A complex of goal, 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;
They are ordinarily supported by budgets.

Sample Program: Emergency Action Program

Sample Program: Emergency Action Program

Sample Program: Emergency Action Program

Sample Program: Emergency Action Program

Sample Program: Emergency Action Program

Sample Program: Emergency Action Program

Types of Plans
9.

Budgets

A statement of expected results expressed in numerical terms; may

be called a quantified plan. The financial operating budget is
often called a profit plan.

May be expressed in financial terms - in terms of labor-hours, units of

product, or machine-hours; or in any other numerically measurable
terms.

Budgets are also control devices. However, making a budget is clearly

planning. The budget is the fundamental planning instrument in many
companies.

The budget is necessary for control, but it cannot serve as a sensible

standard of control unless it reflects plans.

Examples of Budgets

Business start-up budget includes a list of all necessary

purchases including tangible assets (for example,
equipment, inventory) and services (for example,
remodeling, insurance), (working capital), sources and
collateral
Corporate budget - a finished budget for the short-term
future, typically one year
Government budget - a summary or plan of the intended
revenues and expenditures of that government
Personal or family budget - all sources of income (inflows)
are identified and expenses (outflows) are planned with the
intent of matching outflows to inflows (making ends meet)

Steps in Planning
Being Aware of Opportunities

1.

All managers should:

Take at preliminary look at possible future opportunities
and see them clearly and completely.
Know where their company stands in the light of its
strengths and weaknesses.
Understand what problems it has to solve and why.
Know what it can expect to gain.
Planning requires a realistic diagnosis of the opportunity
situation.

Steps in Planning
2.

Establishing Objectives

To be done for the long-term as well as for the short

range.

Objective specify the expected results and indicate

the end points of what is to be done, where the
primary emphasis is to be placed, and what is to be
accomplished.

Objectives must be SMART.

Steps in Planning
3.

Developing Premises

Establish, circulate, and obtain agreement to

utilize critical planning premises such as
forecasts, applicable basic policies, and existing
company plans.
Premises are assumptions about the environment in
which the plan is to be carried out.

Steps in Planning
4.

Determining Alternative Courses

Search for and examine alternative courses of

action, especially those not apparent.
The more common problem is not finding
alternatives but reducing the number of
alternatives so that the most promising may be
analyzed.
Even with mathematical techniques and the
computer, there is limit of the number of
alternatives that can be thoroughly examined.

Steps in Planning
5.

Evaluating Alternative Courses

Evaluate the alternatives by weighing them
in the light of premises and goals.

Steps in Planning
6.

Selecting a Course

This is the point at which the plan is adopted the

real point of decision making.

Occasionally, an analysis and evaluation of

alternative courses will disclose that two or more
are advisable, and the manager may decide to
follow several courses rather than the one best
course.

Steps in Planning
7.

Formulating Derivative Plans

When a decision is made, planning is
seldom complete, and a seventh step is
indicated.

Derivative or action plans are almost

invariably required to support the basic
plan.

Steps in Planning
8.

Quantifying Plans by Budgeting

Quantify decisions and plan by converting them into

budgets.
The overall budget of an enterprise represents the sum
total of income and expenses, with resultant profit or
surplus, and the budgets of major balance sheet items
such as cash and capital expenditures.
If done well, budgets become a means of adding
various plans and set important standards against which
planning progress can be measured.

Steps in Planning
Being aware of
opportunities
In light of:

The market

Competition

What customer want

Our strengths

Our weaknesses

Setting objectives or goals

Where we want to be and
what we want to accomplish
and when.

Considering planning
premises
In what environment internal
or external will our plans
operate?

Identifying alternatives
What are the most promising
alternatives to accomplishing
our objectives?

Figure 2.0
Steps in Planning

Comparing alternatives in
light of goals
Which alternative will give us
the best chance of meeting
our goals at the lowest cost
and highest profit?

Choosing an alternative
Selecting the course of action
we will pursue.

Formulating supporting
plans
Such as plans to:

Buy equipment

Buy materials

Hire and train workers

Develop a new product

Quantifying plans by
making budgets
Developing such budgets as:

Volume and price of sales

Operating expenses
necessary for plans

Expenditures for capital

equipment

PLANNING TOOLS &

TECHNIQUES
1.
2.

3.
4.

5.
6.

7.

Gantt Chart
Pert-CPM Chart
Systems Flowchart
Cause & Effect Diagram
Process Maps
SWOT Analysis
TOWS Matrix

Gantt Chart
first project planning and control technique to emerge
during 1940s in response to the need to manage
complex defense projects and systems better
a tool for planning and scheduling an Analyst
performance during a systems project and for machine
supplies delivery during the installation phase of a
project
shows the anticipated completion times for various
project activities as bars plotted against time on the
horizontal axis

Gantt Chart Work Schedule

Gantt Chart Project Development

Program Evaluation & Review Technique (PERT) /

Critical Path Method (CPM) Charts
a planning and control tool that graphically portrays the
optimum way to attain some predetermined objective,
generally in terms of time
presents a graphic illustration of a project as a network
diagram consisting of numbered nodes (either circles
or rectangles) representing events, or milestones in the
project linked by labeled vectors (directional lines)
representing tasks in the project. The direction of the
arrows on the lines indicates the sequence of tasks.

PERT/CPM Chart PC Card

Systems Flowchart
explains how a system works using a diagram.
The diagram shows the flow of data through a
system.
The different shaped symbols used are:
Start/end of
the process

Decision

Operation
Connector

Deployment
Flowchart

New Product
Development

Cause and Effect Diagram

also known as fishbone diagram, developed
by Ishikawa in the early 1950s
method consists of defining an occurrence of a
typically undesirable event or problem (effect)
and then identifying contributing factors
(causes)

Cause & Effect Diagram

Cause & Effect Diagram

Process Map
visually depicts the sequence of events to build a
product or produce an outcome
shows all the process associated activities, including
volumes of input and output, approvals, exceptions,
and cross-functional hand-offs.
the basic goal is to provide a unifying vision of business
processes so that participating organizations and
individuals can have an understanding of their specific
role in the overall system

Process
Mapping

SWOT Analysis

a strategic planning method used to evaluate the

Strengths, Weaknesses, Opportunities, and Threats
involved in a project or in a business venture
involves specifying the objective of the business
venture or project and identifying the internal and
external factors that are favorable and unfavorable
to achieve that objective
A SWOT analysis must first start with defining a
desired end state or objective and may be
incorporated into the strategic planning model

SWOT Analysis

Strengths - characteristics of the business or team that

give it an advantage over others in the industry.
Weaknesses - characteristics that place the firm at a
disadvantage relative to others.
Opportunities - external chances to make greater
sales or profits in the environment.
Threats - external elements in the environment that
could cause trouble for the business.

An Illustration: The Procter & Gamble Company

Profile
The Procter & Gamble Company (P&G) boasts boatloads of
brands. The world's #1 maker of household products courts
market share and billion-dollar names. It's divided into three
global units: health and well being, beauty, and household
care. The company also makes pet food and water filters and
produces a soap opera. Some two-dozen of P&G's brands are
billion-dollar sellers, including Fusion, Always/Whisper, Braun,
Bounty, Charmin, Crest, Downy/Lenor, Gillette, Iams, Olay, Pampers,
Pantene, Pringles, Tide, and Wella, among others. P&G shed its
coffee brands in late 2008. Being the acquisitive type, with Clairol
and Wella as notable conquests, P&G's biggest buy in company
history was Gillette in late 2005.

Procter & Gamble SWOT Analysis:

STRENGTHS
New Management
Gross Margin 15 Times the Industry Average
One of the best marketers in the world
Diversified brand portfolio: more than 300 brands with more than
79 billion in Revenue
Tightly integrated with the largest retailers in the US and around
the world
Product innovation
Talented management
Distribute to 80 Countries
Distribution channels all over the world
New Billion Dollar brands

WEAKNESSESS
Top Brands Losing Market Share
Health and Beauty Women Only
Lagging behind in online media presence & leadership
Missing opportunity: Refuses to manufacture private label products
for its retail customers
Slow Process Heavy Culture
Weak brands (Duracell, Iam, Braun, Pringles)
Views Product Performance only

OPPORTUNITIES
Health and Beauty for Men
Doubling Environmental Goals for 2012
Adding Value for the Conspiracy
Utilizing online social networks
Going Green/Eco Friendly
Capitalizing on online media
Continue to divest brands that don't align with the company's
long-term goals (i.e., Folgers)
Emerging markets
New acquisition opportunities
Selling directly to consumers
Design for better product experience

THREATS
Substitute brands that have a cheaper price
Private label growth
Slowdown in consumer spending in the US & globally
Key competitors expanding their product portfolios through
acquisitions
Increase in raw material price
Commodity cost and currency exchange rate placed tremendous
pressure on the business

The TOWS Matrix: A Modern Tool for

Analysis of the Situation

The TOWS Matrix has been introduced for analyzing

the competitive situation of the company that leads to
the development of the four distinct sets of strategic
alternatives.
The TOWS Matrix has a wider scope and a different
emphasis from the business portfolio matrix and SWOT
analysis.
The TOWS Matrix is a conceptual framework for a
systematic analysis that facilitates matching of the
external threats and opportunities with the internal
weaknesses and strengths of the organization.

The TOWS Matrix: A Modern Tool for

Analysis of the Situation
Internal strengths (S)
e.g., strengths in management,
operations, finance, marketing,
research and development,
engineering.

Internal weaknesses (W)

e.g., weaknesses in areas shown
in the strengths box.

External opportunities (O)

(consider risks also) e.g., current
and future economic conditions;
political and social changes; new
products, services, and
technology.

SO strategy: Maxi-Maxi
Potentially the most successful
strategy, utilizing the
organizations strengths to take
advantage of opportunities.

WO strategy: Mini-Maxi
e.g., development strategy to
overcome weaknesses in order to
take advantage of opportunities.

External threats (T)

e.g., energy shortage,
competition, and areas similar to
those shown in the
opportunities box above.

ST strategy: Maxi-Mini
Use of strengths to cope with
threats or to avoid with threats.

WT strategy: Mini-Mini
e.g., retrenchment, liquidation, or
joint venture to minimize both
weaknesses and threats.

Internal
factors
External
factors

Decision Making

It is defined as the selection of a course of action

from among alternatives; it is at the core of planning.
A plan cannot be said to exist unless a decisiona
commitment of resources, direction, or reputationhas
been made.
Managers sometime see decision making as their
central job because they must constantly choose what
is to be done, who is to do it, and when, where, and
occasionally even how it will be done.

Managerial Functions and the

Organizational Hierarchy

Four-step Decision Making Model

Step 1

Step 2

Identify the need for a

decision (for example:
based on vision, problem,
or opportunity

Develop alternative
responses to choose from
(possible courses of
actions)

Step 4

Step 3

Implement chosen
alternative

Choose appropriate
alternative
(based on situation)

Considerations in Making Decisions

1. Consider limiting factors - something that stand in the way of
accomplishing a desired objective.
The principle of the limiting factor states that by
recognizing and overcoming those factors that stand
critically in the way of a goal, the best alternative course
of action can be selected.
2. In evaluation of alternatives, several methodologies and
applications and analysis may be applied. These include:

Advantages/ Disadvantages

Strengths/ Weaknesses

Cost-Benefit Analysis (C.B.A.)

Decision Trees

Considerations in Making Decisions

3.

In choosing appropriate alternative, three approaches

may be used:
Bases for selecting from among alternative courses of action

Experimentation

Reliance on the
past

How to select from

among
alternatives?

Research and
analysis

Choice made

Decision Making under Certainty,

Uncertainty, and Risk
1. Certainty

In a situation involving certainty, people are reasonably sure about what will
happen when they make a decision. The information is reliable and is considered
to be reliable, and the cause and effect relationships are known.

2. Uncertainty

In a situation of uncertainty, people have only a meager database, they do not

know whether or not the data are reliable, and they very unsure about whether
or not the situation may change.

3. Risk

In a situation with risks, factual information may exist, but it may be incomplete.
To improve decision making, one may estimate the objective probability of an
outcome (by using for example, mathematical models) and the subjective
probability (based on judgment and experience).

Contingency Planning

Contingency plans set out in advance how managers

will respond to possible future events that could
disrupt the organizations existing plans.
Plans that managers hope will never need to be
implemented.
One thing to consider is to monitor the potential
sources of crises. Crises events that have a major
effect on the ability of an organizations members to
carry on their daily tasks are the most intense type
of contingency (i.e. earthquake, flood, computer virus,
strikes).

Contingency Planning
To limit the impact of such a crisis, managers can:
1. Perform preventive work to avoid or minimize the
effect of crisis.
2. Prepare for a crisis by assembling information and
defining responsibilities and procedures that will
be helpful in a time of crisis.
3. Make a timely response to a crisis.
References : Management - A Global Perspective by Weihrich and Koontz 11th Edition
Management by Dyck and Neubert