MANAGEMENT PROCESS AND ORGANIZATIONAL BEHAVIOUR

(MPOB)

What is Strategic Planning?

Strategic planning is the art of creating specific business strategies, implementing them,
and evaluating the results of executing the plan, in regard to a company’s overall long-
term goals or desires. It is a concept that focuses on integrating various departments
(such as accounting and finance, marketing, and human resources) within a company to
accomplish its strategic goals. The term strategic planning is essentially synonymous
with strategic management.

The concept of strategic planning originally became popular in the 1950s and 1960s, and
enjoyed favor in the corporate world up until the 1980s, when it somewhat fell out of
favor. However, enthusiasm for strategic business planning was revived in the 1990s
and strategic planning remains relevant in modern business.

CFI’s Course on Corporate & Business Strategy is an elective course for the FMVA
Program.

Strategic Planning Process

The strategic planning process requires considerable thought and planning on the part
of a company’s upper-level management. Before settling on a plan of action and then
determining how to strategically implement it, executives may consider many possible
options. In the end, a company’s management will, hopefully, settle on a strategy that is
most likely to produce positive results (usually defined as improving the company’s
bottom line) and that can be executed in a cost-efficient manner with a high likelihood
of success, while avoiding undue financial risk.
The development and execution of strategic planning are typically viewed as consisting
of being performed in three critical steps:

1. Strategy Formulation

In the process of formulating a strategy, a company will first assess its current situation
by performing an internal and external audit. The purpose of this is to help identify the
organization’s strengths and weaknesses, as well as opportunities and threats (SWOT
Analysis). As a result of the analysis, managers decide on which plans or markets they
should focus on or abandon, how to best allocate the company’s resources, and whether
to take actions such as expanding operations through a joint venture or merger.

Business strategies have long-term effects on organizational success. Only upper

management executives are usually authorized to assign the resources necessary for
their implementation.

2. Strategy Implementation

After a strategy is formulated, the company needs to establish specific targets or goals
related to putting the strategy into action, and allocate resources for the strategy’s
execution. The success of the implementation stage is often determined by how good a
job upper management does in regard to clearly communicating the chosen strategy
throughout the company and getting all of its employees to “buy into” the desire to put
the strategy into action.

Effective strategy implementation involves developing a solid structure, or framework,

for implementing the strategy, maximizing the utilization of relevant resources, and
redirecting marketing efforts in line with the strategy’s goals and objectives.

3. Strategy Evaluation

Any savvy business person knows that success today does not guarantee success
tomorrow. As such, it is important for managers to evaluate the performance of a chosen
strategy after the implementation phase.

Strategy evaluation involves three crucial activities: reviewing the internal and external
factors affecting the implementation of the strategy, measuring performance, and taking
corrective steps to make the strategy more effective. For example, after implementing a
strategy to improve customer service, a company may discover that it needs to adopt a
new customer relationship management (CRM) software program in order to attain the
desired improvements in customer relations.

All three steps in strategic planning occur within three hierarchical levels: upper
management, middle management, and operational levels. Thus, it is imperative to
foster communication and interaction among employees and managers at all levels, so
as to help the firm to operate as a more functional and effective team.
AS PER PPT
TYPES

I. Strategic Plan
A strategic plan is a high-level overview of the entire business, its vision, objectives, and
value. This plan is the foundational basis of the organization and will dictate decisions in
the long-term. The scope of the plan can be two, three, five, or even ten years.

Managers at every level will turn to the strategic plan to guide their decisions. It will also
influence the culture within an organization and how it interacts with customers and the
media. Thus, the strategic plan must be forward looking, robust but flexible, with a keen
focus on accommodating future growth.
II. Tactical Plan
The tactical plan describes the tactics the organization plans to use to achieve the
ambitions outlined in the strategic plan. It is a short range (i.e. with a scope of less than
one year), low-level document that breaks down the broader mission statements into
smaller, actionable chunks. If the strategic plan is a response to “What?”, the tactical
plan responds to “How?”.

Creating tactical plans is usually handled by mid-level managers.

The tactical plan is a very flexible document; it can hold anything and everything
required to achieve the organization’s goals.

III. Operational Plan

The operational plan describes the day to day running of the company. The operational
plan charts out a roadmap to achieve the tactical goals within a realistic timeframe. This
plan is highly specific with an emphasis on short-term objectives. “Increase sales to 150
units/day”, or “hire 50 new employees” are both examples of operational plan
objectives.

Creating the operational plan is the responsibility of low-level managers and

supervisors.

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Benefits of Strategic Planning

The volatility of the business environment causes many firms to adopt reactive
strategies rather than proactive ones. However, reactive strategies are typically only
viable for the short-term, even though they may require spending a significant amount
of resources and time to execute. Strategic planning helps firms prepare proactively and
address issues with a more long-term view. They enable a company to initiate influence
instead of just responding to situations.

Among the primary benefits derived from strategic planning are the following:

1. Helps formulate better strategies using a logical, systematic approach

This is often the most important benefit. Some studies show that the strategic planning
process itself makes a significant contribution to improving a company’s overall
performance, regardless of the success of a specific strategy.

2. Enhanced communication between employers and employees

Communication is crucial to the success of the strategic planning process. It is initiated
through participation and dialogue among the managers and employees, which shows
their commitment to achieving organizational goals.

Strategic planning also helps managers and employees show commitment to the
organization’s goals. This is because they know what the company is doing and the
reasons behind it. Strategic planning makes organizational goals and objectives real,
and employees can more readily understand the relationship between their
performance, the company’s success, and compensation. As a result, both employees
and managers tend to become more innovative and creative, which fosters further
growth of the company.

3. Empowers individuals working in the organization

The increased dialogue and communication across all stages of the process strengthens
employees’ sense of effectiveness and importance in the company’s overall success. For
this reason, it is important for companies to decentralize the strategic planning process
by involving lower-level managers and employees throughout the organization. A good
example is that of the Walt Disney Co., which dissolved its separate strategic planning
department, in favor of assigning the planning roles to individual Disney business
divisions.

Wrap Up

An increasing number of companies use strategic planning to formulate and implement

effective decisions. While planning requires a significant amount of time, effort, and
money, a well-thought-out strategic plan efficiently fosters company growth, goal
achievement, and employee satisfaction.

Importance of Strategic Planning:

Strategic planning offers the following benefits:

1. Financial benefits:

Firms that make strategic plans have good sales, low costs, high EPS (earnings per
share) and high profits. Firms have financial benefits if they make strategic plans.
Companies like Reliance, Infosys, Tata, Wipro, Deloitte, etc. are the giants who report
good financial results as a result of sound strategic planning.
2. Guide to organisational activities:

Strategic planning guides members towards organisational goals. It unifies

organisational activities and efforts towards the long-term goals. It guides members to
become what they want to become and do what they want to do. It focuses on specific
goals making it clear for members to know the direction towards which they have to
move. Earning profits is less meaningful than earning a growth rate of 10% per year.

Paying high dividends is less meaningful than paying dividends at the rate of 40%.
Meeting society’s needs is less meaningful than providing free education to school
children of a specific community. Allocation of resources and attempts to meet the goals
is facilitated through clear specifications in strategic planning. It makes the objectives
operational and provides right direction to organisational activities.

3. Competitive advantage:

In the world of globalisation, firms which have competitive advantage (capacity to deal
with competitive forces) have better sales and financial performance. This is possible if
they foresee the future. Future can be predicted through strategic planning. It enables
managers to anticipate problems before they arise and solve them before they become
worse.

4. Minimise risk:

Strategic planning provides information to assess risk and frame strategies to minimise
risk and invest in safe business opportunities. Chances of making mistakes and choosing
wrong objectives and strategies, thus, get reduced.

Risk is inherent in every business and failure to anticipate risk through strategic
planning is almost sure to lead the business to failure unless otherwise proved by
chance. Lack of strategy, framing wrong strategies or ineffective implementation of
strategy cannot be afforded by business enterprises operating in the dynamic, changing
and risky environment.
5. Beneficial for companies with long gestation gap:

The time gap between investment decisions and income generation from those
investments is called gestation period. During this period, changes in technological or
political forces can affect implementation of decisions and plans may, therefore, fail.
Strategic planning discounts future and enables managers to face the threats and
opportunities. Huge capital investments in projects is followed by expected financial
returns.

6. Promotes motivation and innovation:

Strategic planning involves managers at top levels. They are not only committed to
objectives and strategies but also think of new ideas for implementation of strategies.
This promotes motivation and innovation. It also provides motivation to people at lower
levels when they know their efforts are contributing towards organisational goals.

Satisfied workforce is the strength of the organisation. It saves huge costs on reducing
absenteeism, labour turnover, role conflicts etc. It promotes discipline in the
organisation and enhances human resource effectiveness and also organisational
effectiveness.

7. Optimum utilisation of resources:

Strategic planning makes best use of resources to achieve maximum output. Resources
are scarce and strategic planning helps in their use in the areas where they are required
most.

General Robert E. Wood remarks, “Business is like war in one respect. If its grand
strategy is correct, any number of tactical errors can be made and yet the enterprise
proves successful.” Effective allocation of resources, scientific thinking, effective
organisation structure, co-ordination and integration of functional activities and
effective system of control, all contribute to successful strategic planning.
Limitations of Strategic Planning:

1. Lack of knowledge:

Strategic planning requires lot of knowledge, training and experience. Managers should
have high conceptual skills and abilities to make strategic plans. If they do not have the
knowledge and skill to prepare strategic plans, the desired results will not be achieved. It
will also result in huge financial losses for the organisation. This limitation can be
overcome by training managers to make strategic plans.

2. Interdependence of units:

If business units at different levels (corporate level, business level and functional level)
are not coordinated, it can create problems for effective implementation of strategic
plans.

3. Managerial perception:

In order to avoid developing risky objectives and strategies which they will not be able to
achieve, managers may land up framing sub-optimal goals and plans. Sometimes, short-
term commitments also defer making long-term strategies.

4. Financial considerations:

Strategic planning requires huge amount of time, money and energy. Managers may be
constrained by these considerations in making effective strategic plans. These
limitations are by and large, conceptual and can be overcome through rational,
systematic and scientific planning. Researchers have proved that companies which
make strategic plans outperform those which do not do so.
What is a Business Environment Analysis?
Business environment analysis definition entails the process of collecting and
analyzing the data and conditions outside of a business. A business environment
analysis is also commonly known as a marketing environment analysis and is typically
conducted and presented in the form of a report. There are many factors that can affect
the success of a business. External factors are the factors that are considered when
completing a business environmental analysis report. A business environment analysis
report usually targets issues, patterns, and factors that reside or exist outside the
influence of the manager of the business. These external factors include the general and
operating environments. In the general environment, aspects such as economic,
political, cultural, technological, natural, demographic, and international environments
play a critical role. The suppliers for the business, customers, competitors, and the
general public play an important role in the operating environments. These factors
affect a business and must be carefully analyzed so that they do not pose a threat to the
company and so that they can be exploited to serve the interests of the business.

Purpose of an External Environment Analysis

External environment analysis is essential to the business because it serves the
purpose of fostering conditions for the growth of the business. In simple terms,
completing a business environmental analysis report can help the business with future
growth. The external environment analysis studies how the external environment
creates an interplay with the business' survival, long-term, and short-term future and
operations and identifies ways in which the environment may be exploited to benefit the
company. In the external environment analysis, current and potential changes in the
immediate external environment are identified, categorized, and planned for to ensure
that they don't lead to the business's demise. In many ways, the external environment
analysis serves as a warning system to guide the company through changes in the
external environment.
Decision-making is a process of selecting the best course of action or plan from different
alternatives available. It is a means through which managers take action for solving the
problem. This is an integral part of the management system of the company which aims
at improving efficiency. Decision-making is the one through which managers are able to
take the right decisions at right time.

TYPES OF DECISIONS

Programmed And Non-Programmed Decisions

Programmed decisions are one that relates to the matters of routine type and problems
that are of repetitive nature. These decisions are taken following the specific standard
procedure for dealing with all such problems. Programmed decisions are basically taken
by management at the lower level. Such decision involves like purchasing raw materials
and spare parts, granting the leave to an employee, etc.

On the other hand, non-programmed decisions are meant for dealing with problems of
difficult nature and which can’t be solved easily. These decisions arise out of problems
that are not routine or daily occurring. There is no standard procedure for solving such
issues. Non-programmed decisions are very crucial for an organization and are taken by
upper-level management. Decisions at a higher level may include introducing new
products in the market, setting up a new branch of business, and many more.

Routine And Strategic Decisions

Routine decisions relate to the decisions which are taken on a routine basis for the daily
functioning of the business. These decisions can be taken quickly without much
evaluation, analysis, and in-depth study. Generally, higher management delegates
power to their subordinates for taking such decisions within the policy of business.

Whereas, strategic decisions are key decisions influencing the goals, objectives, and
other crucial policy matters of the organization. These decisions require proper analysis
and evaluation of distinct alternatives as they require an investment of funds. Strategic
decisions are taken by the top and middle-level management teams. These also
influence the routine decisions taken on a daily basis and hence require utmost care
before taking them.

Organizational And Personal Decisions

Organizational decisions are decisions that are taken by an individual as an executive in
his official capacity. These decisions are taken on the organization’s behalf and can be
delegated to subordinates.

Whereas, when decisions are taken by an executive in his personal capacity, not relating
to the organization then they are termed as personal decisions. Authority of taking
personal decisions cannot be delegated to subordinates.

Tactical (Policy) And Operational Decisions

Decisions that are concerned with distinct policy matters and the planning of business
are called policy decisions. These decisions have a long-term influence on the
performance of an organization. these decisions are taken by the top management team.
These decisions include decisions related to the volume of production, the channel of
production, location of business plants, etc.

Operational decisions related to daily operations and functioning of business enterprise.

These decisions make it possible to implement the plan and policies taken by managers
at the top level. Middle and low-level managers usually take these decisions.

Individual And Group Decisions

Decisions taken by a single individual in his official capacity are called individual
decisions. This decision type is more used by organizations that are smaller in size and
have an autocratic management style.

Group decisions, on the other hand, are taken collectively by the management and
employees of the business together. This group of individuals taking decisions are also
termed as a standing committee and only the pertinent matters are referred to this
committee. Group decisions mainly focus on involving a large number of individuals in
their process of decision-making. Decisions taken by the board of directors of the
company came in the category of group decisions.

Major And Minor Decisions

Major and minor is another important type of classification of decisions. Major

decisions relate to key aspects of business organization and are taken by top-level
managers. The decision to buying new factory premises is a major decision.

Minor decisions are taken by peoples at lower levels in business organizations and are of
less importance. Purchase of office stationery for daily use is a minor decision that can
be taken by the office superintendent.
What is Perfect Rationality?
Perfect rationality refers to the ability to generate or choose behavior that will bring maximum
success, given the situation and available information.
It constrains the ability of an agent to provide the maximum expectation of success while
considering the information that is available.
The knowledge-level analysis of artificial intelligence systems is dependent on the assumption of
perfect rationality.
It is used to establish an upper bound on the performance of a system, by understanding and
establishing the actions that a perfectly rational agent would do in an identical situation, with the
same knowledge available.
INTUITIVE DECISOAN MAKING

Intuitive decision making is the way people make decisions naturally, without the use of formal tools
and procedures.
Some talk about intuition as happening without any thought at all. Like “trusting your gut” or “using the
force” in a sixth sense kind of manner.

Our quickest intuitive decisions may sometimes look or feel that way. But it’s not quite all that’s going
on in our heads.

Getting a deeper understanding of intuitive decision making is essential to devising ways to improve it.
First, many personal and professional decisions need to be made relatively quickly. Formal decision
analysis methods far exceed the resource and time constraints.

Secondly, even when deep analysis is suitable, it builds and elaborates on human intuitive decision
processes. Ignoring the human element can set back the entire enterprise.

Fortunately, considerable research has been devoted to understanding intuitive decision making since
the 1970s and 1980s. The results provide important clues for training and development.

Jenny Phillips, Gary Klein and Winston Sieck examined ways we can improve intuitive decision making in
their paper, “Expertise in judgment and decision making: The case for training intuitive decision skills,”
which appeared as a chapter in the Blackwell Handbook of Judgment and Decision Making.

Their work was based on studies of experts who make life and death decisions as a normal part of their
routine.

Expertise and intuitive decision making

Gary Klein and colleagues at Klein Associates developed the “recognition-primed decision” model based
on observations and interviews with firefighters, tank platoon commanders, neonatal intensive care
nurses, and others who work in fast-paced, high-stakes jobs.

Their early studies are described in Klein’s book, Sources of Power: How People Make Decisions.
The general idea is that experts make most of their decisions by matching them to their past
experiences.

If they are in a familiar situation, the decision is automatic. They recognize a situation as being like ones
they’ve encountered before, and an option comes to mind. In this sense, the decision feels intuitive at
the “gut level.”

Thus, your intuitive decision making is often done by matching situations to relevant past experiences,
and quickly using them to draw conclusions.

Yet, this doesn’t necessarily mean the experts act without thinking. According to the model, they think
about the plausible results of taking the action to determine whether the option is workable or not. And
if it’s not, they come up with an alternative.

They rely on the principle of satisficing as described by Herbert Simon, an early cognitive scientist and
Nobel prize winner.

Hence, applying hypothetical thinking to evaluate options, and sequencing the evaluation process
efficiently are also essential aspects of intuitive decision making.

Finally, in real world critical decisions, the situation may often seem unusual or ambiguous. In these
cases, the skilled intuitive decision maker tries to figure out what’s going on.
PROCESS OF DECISION MAKING

STEP 1
DECISION SUPPORT SYSTEM

What Is a Decision Support System (DSS)?

A decision support system (DSS) is a computerized program used to support determinations, judgments,
and courses of action in an organization or a business. A DSS sifts through and analyzes massive
amounts of data, compiling comprehensive information that can be used to solve problems and in
decision-making.

Understanding a Decision Support System (DSS)

A decision support system gathers and analyzes data, synthesizing it to produce comprehensive
information reports. In this way, as an informational application, a DSS differs from an ordinary
operations application, whose function is just to collect data.

The DSS can either be completely computerized or powered by humans. In some cases, it may combine
both. The ideal systems analyze information and actually make decisions for the user. At the very least,
they allow human users to make more informed decisions at a quicker pace.

What Is a Decision Support System Used for?

In organizations, a decision support system (DSS) analyzes and synthesizes vast amounts of data to assist
in decision-making. With this information, it produces reports that may project revenue, sales, or
manage inventory. Through the integration of multiple variables, a DSS can produce a number of
different outcomes based on the company’s previous data and current inputs.

What Is an Example of a Decision Support System?

Many different industries, from medicine to agriculture, use decision support systems. To help diagnose
a patient, a medical clinician may use a computerized decision support system for diagnostics and
prescriptions. Combining clinician inputs and previous electronic health records, a decision support
system may assist a doctor in diagnosing a patient.

What Are the Benefits of a Decision Support System?

Broadly speaking, decision support systems help in making more informed decisions. Often used by
upper and mid-level management, decision support systems are used to make actionable decisions, or
produce multiple possible outcomes based on current and historical company data. At the same time,
decision support systems can be used to produce reports for customers that are easily digestible and
can be adjusted based on user specifications.
LINE, STAFF AND FUNCTIONAL – DO THIS TOPIC FROM PPT
ELEMENTS OF DELEGATION

Delegation of authority consists of three elements:-

1. Responsibility- Responsibility is the obligation of a subordinate to properly perform the assigned

duty. When a superior assigns a job to his subordinate it becomes the responsibility of the subordinate
to complete that job.

This means that the word responsibility comes into play only after the job has been assigned. Thus, to
assign job can be called to assign responsibility.

2. Authority- Authority means the power to take decisions. Decision can be related to the use of
resources, and to do or not to do something.

3. Accountability- Accountability means the answerability of the subordinate to his superior for his work
performance. In other words, when a superior assigns job / work or the responsibility to his
subordinates, simultaneously he gives authority to them which makes workers (subordinates)
accountable to their superior for the work- performance.
STEPS OF DELEGATION
ADVANTAGES