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Business Laws and Management · Management Knowledge for Company Secretaries

Planning and Decision Making: Steps, Plans and MBO

Updated 11 October 2026 · Fact-checked

Planning is deciding in advance what to do, how, when and who will do it. Decision making is choosing the best option from alternatives. For the exam, learn the planning steps, standing and single-use plans, the MBO cycle, and the decision process in order, and match each term to its definition in MCQs.

Understand Planning and Decision Making

Planning means thinking ahead. You set a goal, then decide the path to reach it. It bridges where you are and where you want to be. It is the first function of management, because organising, staffing, directing and controlling all depend on it.

Plans come in different types. Standing plans are used again and again for repeated situations. Examples are policies, procedures, methods and rules. Single-use plans are made for one occasion and not reused. Examples are programmes, projects and budgets. A company's HR policy is standing. A plan to launch one new product in Pune is single-use.

Plans are also grouped by level and time: strategic and operational, long-term and short-term. Objectives sit above plans. An objective is the end result you want. A plan is the means to reach it. Good objectives are clear, measurable and tied to a time limit.

Management by Objectives (MBO) is a method where managers and subordinates agree on objectives together. Each person then works toward their own targets. Performance is reviewed against those targets at regular intervals. The idea is that people work better when they know what is expected and have helped set it.

Decision making is choosing one course of action from several. Decisions can be programmed (routine, covered by rules) or non-programmed (new, needing judgement). They can also be strategic, tactical or operational, and individual or group. A sound decision follows a process: identify the problem, collect information, list alternatives, evaluate them, choose one, act, and follow up.

Key formulas to remember

Steps in the planning process
Be aware of opportunity → Set objectives → Develop premises → Identify alternatives → Evaluate alternatives → Choose the best → Formulate supporting plans → Implement and follow up
Textbooks word and number these steps a little differently. Learn the order and the logic: objectives first, action last.
Standing plans
Policies, procedures, methods, rules
Reused for recurring situations.
Single-use plans
Programmes, projects, budgets
Made for one occasion or period. Not reused.
MBO cycle
Set objectives together → Plan action → Work and monitor → Review performance → Give feedback and reset objectives
Joint goal setting is the key feature.
Decision making process
Identify problem → Gather information → Develop alternatives → Evaluate → Select → Implement → Follow up
Follow-up checks whether the decision worked.
Types of decisions
Programmed vs non-programmed; strategic, tactical, operational; individual vs group
Programmed decisions are routine. Non-programmed ones are new and unstructured.

How to solve Planning and Decision Making questions

Questions on this topic ask you to define, classify, order steps or match examples. Use this method for both MCQs and written answers.

  1. 1Read the question and spot the keyword: plan, objective, MBO, decision, programmed, standing or single-use.
  2. 2Ask whether it is a definition, a classification, a sequence or an example.
  3. 3For a classification, test the example: repeated use means standing, one occasion means single-use.
  4. 4For a sequence, recall the order from the start: objectives or problem first, follow-up last.
  5. 5For MBO, look for joint goal setting, periodic review and feedback.
  6. 6In a written answer, define first, then list points, then add one short Indian example.
  7. 7Check the options or your points against the definition before you finalise.

Quickest way: Repeat-or-once test

When to use it: Use for MCQs that ask you to classify a plan or a decision.

  1. Ask: will this be used again and again? If yes, it is a standing plan (policy, procedure, method, rule).
  2. If it is for one occasion, it is single-use (programme, project, budget).
  3. For decisions, ask: is there a ready rule? If yes, it is programmed. If it is new, it is non-programmed.
  4. For step-order questions, pick the option that starts with objectives or problem identification and ends with follow-up.

Common mistakes in Planning and Decision Making

  • Calling a budget a standing plan.

    Budgets recur every year, so they seem repeated.

    Fix: A budget is made for a specific period and purpose. Treat it as single-use in exam answers.

  • Mixing up objectives and plans.

    Both deal with the future.

    Fix: Objective is the end result. Plan is the way to reach it.

  • Thinking MBO means the manager sets all targets.

    Students link objectives with top-down orders.

    Fix: MBO needs participation. Manager and subordinate agree on the goals together.

  • Putting 'select the best alternative' before 'evaluate alternatives'.

    Students rush to the result.

    Fix: Remember the order: develop, evaluate, then select.

  • Leaving out follow-up in the decision process.

    The decision feels finished once it is chosen.

    Fix: End every process answer with implementation and follow-up.

Worked examples

Example 1

Classify each as a standing plan or a single-use plan: (a) a company's rule that all purchases above ₹50,000 need two approvals; (b) a project to build a new warehouse in Nagpur.

Show the solution
  1. Check (a): the rule applies to every such purchase again and again.
  2. So (a) is a standing plan, specifically a rule.
  3. Check (b): the warehouse is built once for a specific purpose.
  4. So (b) is a single-use plan, specifically a project.

Answer: (a) is a standing plan (rule). (b) is a single-use plan (project).

Example 2

Explain how MBO works in a company where the sales head and a regional manager set targets for the year. (Written answer)

Show the solution
  1. Define: MBO is a method where manager and subordinate agree on objectives and measure performance against them.
  2. Step 1: The sales head and the regional manager discuss and fix targets together, for example a sales target and a customer-retention target for the year.
  3. Step 2: They agree on the action plan and the resources needed.
  4. Step 3: The regional manager works toward the targets. Progress is monitored at set intervals, such as every quarter.
  5. Step 4: Results are reviewed against the targets and feedback is given.
  6. Step 5: New objectives are set for the next period.
  7. Conclude: MBO improves clarity, motivation and accountability because targets are shared and measurable.

Answer: MBO is a cycle of joint goal setting, action planning, monitoring, review and feedback, repeated each period.

Exam tips

  • Expect MCQs that give an example and ask you to name the plan type. Practise the repeat-or-once test.
  • Learn the planning and decision steps in order. Sequence questions are common.
  • For MBO, remember three words: participation, measurable targets, review.
  • Paper 4 has no negative marking, so attempt every question. Eliminate options that break the order or definition, then guess.

Practice questions from Management Knowledge for Company Secretaries

Planning and Decision Making in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Planning and Decision Making: frequently asked questions

What are the steps in the planning process?

You start by being aware of an opportunity and setting objectives. Then you develop premises, identify and evaluate alternatives, choose the best one, make supporting plans, and implement with follow-up. Wording varies between books, so focus on the order.

What is the difference between standing and single-use plans?

Standing plans are used repeatedly for recurring situations, such as policies, procedures, methods and rules. Single-use plans are made for one occasion, such as programmes, projects and budgets.

What is Management by Objectives (MBO)?

MBO is a system where managers and subordinates set objectives together. Performance is then reviewed against those objectives at regular intervals, with feedback and new targets set.

What is the difference between programmed and non-programmed decisions?

Programmed decisions are routine and handled by set rules or procedures. Non-programmed decisions are new or unusual and need judgement because no ready rule exists.