Principles of Management
Module 4
Decision Making and Planning
Contents
4.1 Introduction
4.2 Concept of Decision Making
4.3 Concept of Planning
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4.1 Introduction – Decision Making
• Decision-making is an integral part of modern management.
• Cognitive process which is Continuous and indispensable component of
managing any organization
• Involves selecting the most appropriate course of action among all
available alternatives
• Identifying a problem and finding out a
solution to that problem
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4.1 Introduction - Planning
• Forecasting
• Determines the ways to fulfil the objectives defined in the decision-
making process
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4.2 Concept of decision Making
Problem-solving technique in which a viable
solution is identified
Done in the stipulated time period
Efficient decision making involves [Link]
• Determining the objectives of making
a particular decision,
• Developing alternative actions and
• Making the final decision if the
alternative actions
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4.2.1 Decision-Making Process
Source - [Link]/wm-
organizationalbehavior/chapter/the-
decision-making-process/
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4.2.2 Decision-Making Approach
• Peter Drucker in 1954 introduced the decision-making approach
called as Management by Objective (MBO)
• Approach that helps to focus on SMART goals
• Helps to achieve the best alternative from the available options.
• The expansion of SMART is given as follows:
S: Specific M: Measurable A: Agreeable
R: Realistic T: Timely
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4.2.2 Decision-Making Approach (Continued)
➢ Four main steps in MBO
• Setting up goals
• Developing plans
• Monitoring the performance
• Appraising the performance
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4.2.3 Nature of Decisions
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4.2.4 Types of Decisions
1. Irreversible decisions 5. Experimental decisions
2. Reversible decisions 6. Authoritative decisions
3. Delayed decisions 7. Facilitative decisions
4. Quick decisions
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4.2.5 Decision-Making Models
Rational Model : Thinking/ cognition. Uses the thought process to find out the
best possible alternative for achieving outputs.
Bounded rationality model: Emphasizes the fact that the time to make
any decision is limited.
Recommended as a substitute of mathematical modelling of decision
making
Contingency model: Approach that a single
solution is not feasible for solving all problems.
Emphasizes that micro and macro factors of an
organization need to be considered while
making decisions.
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4.2.6 Factors influencing Decision Making
• Past experience
• Cognitive biases
• Individual differences
• Performance evaluation
• Time Constraint
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4.3 Concept of Planning
• According to Megginson, to have an organization
that looks forward to the future and tries to stay alive
and prosper in a challenging world, there must be
active, vigorous, continuous, and creative planning.
• Involves making a plan, which should be realistic and feasible
• Designed to ensure that organizational goals
• SMART
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4.3.1 Nature of Planning
• Intellectual process
• Focuses on objectives
• Pervades all managerial activities
• Selection process [Link]
• Directed towards improvement
• Flexible and continuous process
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4.3.2 Importance of Planning
• Making objectives clear
• Keeping the organization on the right path
• Reducing risks and uncertainty
• Improving efficiency of operations
• Making the basis for control
• Facilitating decision making
• Maintaining effective coordination
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4.3.3 Limitations of Planning
• Involves high cost, time and energy
• Binds managers that restricts the independence
• Presents limited scope
• Affected by external factors such as
social, economic, and political factors.
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4.3.4 Planning Process
[Link] 17
4.3.5 Reasons for failure of Planning
• Improper preparation
• Unclear goals and objectives
• Lack of support from the top
management
• Poor communication
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