Skills Required in Planning
The skills required in planning include:
(i) Forecasting
(ii) Decision Making
(i) Forecasting:
Forecasting is the attempt to predict outcomes and future trends that can serve as the basis for planning, by making inferences from known facts. By relating past and present information or data, management should be able to anticipate the future environment.
In developing premises, aspects such as the kind of markets, volume of sales, prices, products, technical developments, costs, tax rates, dividend policies, and the social and political environment—as well as long-term trends—should be predicted with the help of forecasting.
Effective planning is aided by forecasting, as planning itself is a future-oriented course of action. Accordingly, we must assess the dynamism of both the internal and external environments. When managers assess alternatives, they try to forecast how events both within and outside the organization will affect each alternative and what the outcomes will be.
Forecasting Areas:
The significant areas of forecasting can be grouped into two categories: a) Forecasting for Economic and Sales Information
b) Forecasting Technological Change
a) Forecasting for Economic and Sales Information:
Due to the importance of predicting future economic and sales trends, our discussion of forecasting techniques will focus on these areas. We can use both qualitative and quantitative forecasting to predict future economic and sales information.
Qualitative Forecasting:
This is a judgment-based forecasting technique used when hard data are scarce or difficult to use. It involves the use of subjective judgments and rating schemes to transform qualitative information into quantitative estimates. Examples include the jury of executive opinion, market research, and surveys of expert opinion.
Quantitative Forecasting:
This technique is used when enough hard data exist to specify relationships between variables. It is applicable when there is sufficient “hard” or statistical data to specify relationships between key variables. Extrapolation forecasting, such as time-series analysis, uses past or current trends to project future events. For example, sales records from past years can be used to project future sales. This method disregards political considerations, competitor actions, and technological changes; it merely depends on past and current trends.
Quantitative forecasting can be used if information about the past and present exists, if this information can be specified numerically, and if it can be assumed that past patterns will continue. In contrast, inputs to qualitative forecasts are mainly the results of intuitive thinking, judgment, and accumulated knowledge. However, quantitative techniques are generally believed to be more accurate than qualitative ones.
b) Forecasting Technological Change:
The rapid pace of technological change has led many organizations to recognize the importance of predicting future technological developments. As managers, we must often ascertain what technological developments are likely to occur in order to prepare our organizations for change.
Unlike qualitative and quantitative forecasting, forecasting technological change anticipates that the future will be quite different from the past. Thus, it calls for deep investigation and continuous effort. To conclude, our forecasting should be accurate, up to date, applicable, and as cost-effective as possible.
(ii) Decision Making:
Decision making is defined as the process of selecting or choosing, based on certain criteria, the best course of action from a number of alternatives. Because managers are continually confronted with opportunities and problems, they must constantly analyze the effect of different decisions on their organizations and select the alternative that will move the firm toward its stated objectives.
Types of Decisions:
Several authors believe that there are two types of decisions: programmed and non-programmed decisions.
Programmed Decisions:
These are the kinds of decisions that managers face repeatedly. These decisions are “programmable” because a specific procedure can be developed to resolve them based on past experiences in similar situations.
- Once a standard procedure has been established, it can be used to handle all similar situations.
- They usually involve an organization’s everyday operational and administrative activities.
- They are primarily found at the middle and lower levels of management.
- Data used in making programmed decisions are usually complete and well-defined.
- Participants know the details and agree on how to resolve the problem.
Non-programmed Decisions:
These are used to solve non-recurring problems.
- No well-established procedure exists for handling them, primarily because managers lack prior experience.
- In contrast to programmed decisions, available data are usually incomplete.
- Non-programmed decisions are commonly found at the middle and top levels of management and are often related to an organization’s policy-making activities.
- Examples include decisions on whether to add a product to the existing product line, reorganize the company, or acquire another firm.
The Steps in the Decision-Making Process:
- Ascertain the Need for a Decision:
The decision-making process begins by identifying a problem that exists—that is, an unsatisfactory condition. - Establish Decision Criteria:
Once the need for a decision has been determined, it becomes necessary to establish the criteria, identifying the characteristics important in making the decision. - Allocate Weights to Criteria:
The identified criteria should be weighted based on their importance and arranged in order of priority. This is because some are more important than others, and we need to weigh each criterion to reflect its importance. - Develop Alternatives:
This involves developing a list of viable alternatives to deal with the stated problem. - Evaluate Alternatives:
Once the alternatives are listed, the decision maker must evaluate each one critically and identify its strengths and weaknesses against the established criteria and their weights. This involves considering both quantitative factors (e.g., time, costs) and qualitative or intangible factors (e.g., labor relations, technological risks, international political climate). - Select the Best Alternative:
After evaluating the alternatives, the next step is to select the best one that solves the problem. Factors such as risk, economy of effort, timing, and constraints should be adequately considered. - Put the Decision into Action:
After selecting the best alternative, it must be implemented. This requires communicating the decision to subordinates, gaining acceptance, and ensuring support and cooperation for effective action. The decision should be implemented at the proper time and in an effective manner to achieve the desired objectives.