Unit – 2 | unit 2 planning

IMF

Unit – 2

Planning

Q1) What is Planning?

A1) Planning is the fundamental management function, which involves deciding beforehand, what is to be done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which lays down an organization’s objectives and develops various courses of action, by which the organization can achieve those objectives. It chalks out exactly, how to attain a specific goal.

Planning is nothing but thinking before the action takes place. It helps us to take a peep into the future and decide in advance the way to deal with the situations, which we are going to encounter in future. It involves logical thinking and rational decision making.

Q2) Explain the characteristics of planning.

A2) Characteristics of Planning

Managerial function: Planning is a first and foremost managerial function provides the base for other functions of the management, i.e., organizing, staffing, directing and controlling, as they are performed within the periphery of the plans made.

Goal oriented: It focuses on defining the goals of the organization, identifying alternative courses of action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.

Pervasive: It is pervasive in the sense that it is present in all the segments and is required at all the levels of the organization. Although the scope of planning varies at different levels and departments.

Continuous Process: Plans are made for a specific term, say for a month, quarter, year and so on. Once that period is over, new plans are drawn, considering the organization’s present and future requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed and followed by another plan.

Intellectual Process: It is a mental exercise at it involves the application of mind, to think, forecast, imagine intelligently and innovate etc.

Futuristic: In the process of planning, we take a sneak peek of the future. It encompasses looking into the future, to analyze and predict it so that the organization can face future challenges effectively.

Decision making: Decisions are made regarding the choice of alternative courses of action that can be undertaken to reach the goal. The alternative chosen should be best among all, with the least number of the negative and highest number of positive outcomes.

Q3) What are the different elements of planning?

A3) Elements of Planning

A process of planning comprises of various elements such as mission, objectives, policies, procedures, budget, programme and strategies. All of these are explained in detail in points given below: –

Mission

Mission is the first component of planning that determines the fundamental purpose of every business organization. It basically tells for what purpose the business enterprise is carrying out is activities or what it wants to achieve. Mission of any organization denotes the direction in which it needs to make efforts for accomplishing their targets.

A mission statement clearly states the products and customer of business. This statement may be either in a written form or implicit from functioning of organization. It also reflects the beliefs and values of corporation and one can easily get to know the attitude of organization towards its workforce through it. Mission statement is used by distinct stakeholders of business for their relevant purposes.

Objectives

Objectives simply refers to the position which an organization is willing to attain. They are the end results of business and are also denoted as targets or goals. Setting of goals is starting point for planning as well as other management functions of business. Every business has distinct types of objectives that may be either individualistic and collective, general or specific in terms of their scope and long-term or short-term as per their time period. Objectives should be laid down by management team effectively and precisely by considering the mission and values of business. Managers must ensure that objects for each activity must be compatible with one another.

Policies

Policies are key component of a successful plan which basically guides the decision making of business enterprise. They put limits on scope of every decision and manages basic leadership process for every operation of organization. Policies are formulated for distinct activities of business such as production, sales, human resource, etc. by managers. It must be ensured by management team that policies are not too much rigid that they are imposing excessive limits on functioning. They must be changed from time to time in accordance with the circumstances and challenges for better functioning of business organization.

Procedures

Procedures are the guidelines that directs the actions of managers and employees of an organization. They clearly demonstrate the manner for doing something. Procedure comprises of step-by step methods and also includes rules which regulate actions. It must be ensured by procedure of planning those procedures are concrete and practical. Procedures should be flexible and not too rigid as it makes the process of planning quite difficult.

Budget

Budgets refer to the plans that portray the expected results in numerical terms. It needs to be created by a business that expects to achieve something. A business will decide its objectives only by deciding its budget. A technique of budgeting is needed for most of the decisions, targets, and activities. For example, an income budget will reveal the financial profits and results of a business enterprise.

Programme

Programme relates to the outline of the broad objective of business enterprise. It represents a sequence of procedures, series, and policies that need to be implemented by the organization. Programme of a business enterprise describes series of necessary efforts that are systematic and have an order of priorities. These efforts are a must for the achievement of business objectives. Programmes are of two types that are short-term programmes and long-term programmes. Short-term programmes are like training programmes, sales promotion programmes and market research programmes. Long-term programmes include programmes concerned with raising efficiency of supervisors, expansion of institution, modernization, office renovation etc.

Strategies

Strategies relate to a minute plan of action that focuses on attaining specific requirements. Effective strategy implementation assists in reaching out to the requisite goals. The process of strategizing depends upon the mission and values of the organization. Strategies are very effective and implemented by organizations to meet the challenges posed by their competitors in the market. Internal strategies and external strategies are two types of strategies that are formulated by the management team.

Q4) What are the types of planning?

A4) Corporate, Operational, Functional and Proactive Planning!

I. Corporate Planning:

The term corporate planning denotes planning activities for the whole enterprise.

The basic focus of corporate planning is to determine the long-term objectives of the organization as an entire. Then to get plans to attain these objectives taking into mind the likely changes within the external environment (macro level). Corporate planning is usually carried out at the top level of management.

“Corporate planning includes the setting of objectives, organizing the work, people and systems to enable those objectives to be attained, motivating through the planning process and thru the plans, measuring performance then controlling progress of the plan and developing people through better decision making, clearer objectives, more involvement and awareness of progress.” —David Hussey

Hussey has given a broad definition of corporate planning. It covers various functions of management besides defining planning. Corporate planning is that the total planning activities in the organization and not the entire management functions.

“Corporate Planning is the continuous process of creating present risk-taking decisions systematically and with the greatest knowledge of their futurity; organizing systematically the efforts needed to carry out these decisions, and measuring expectations through organized, systematic feedback.” —Peter Drucker

The corporate planning activities are carrying out at the top level. They’re important for the success of the whole organization. The highest management is liable for the formulation of such plans and is prepared according to the inputs that are given to them either from the environment or the lower levels in the organizational hierarchy. The plans are generally long term and are broad based.

The corporate planning is of two types:

i. Strategic Planning

ii. Operational Planning

Strategic Planning consists of the method of developing strategies to reach a defined objective. It sets the long-term direction of the organization during which it wants to proceed in future. according to Anthony it is often defined as the “process of selecting the objectives of the organization, on changes on these objectives and on the policies that are to control the acquisition, use and disposition of these resources.”

An assessment of available resources is made at the top and then things are planned for a period of time of up to 10 years. It basically deals with the entire assessment of the organization, strengths capabilities and weaknesses and an objective evaluation of environment is formed for future pursuits.

Examples of strategic planning in an organization may be; planned growth rate in sales, diversification of business into new lines, sort of products to be offered then on. Strategic planning also involves the analysis of various environmental factors specifically with reference to how organization relates to its environment.

The strategic planning may be carried out serial of steps that include the

1. Specifying Missions and Objectives.

2. Elaborate Environmental Scanning.

3. Strategy Formulation.

4. Strategy Implementation

5. Evaluation and Control

Strategic planning is of prime importance for any organization as they might specify the other decisions that require to be taken.

II. Operational or Tactical Planning:

Operational planning, is also called tactical or short-term planning, usually, covers one year approximately. Operational planning involves the conversion of strategic plans into detailed and specific action plans. These plans are designed to sustain the organization in its products Operational planning is done at the middle or lower level of management Operational planning are often defined as follows:

“Operational planning is that the process of deciding, the most effective use of the resources already allocated and to develop an impact mechanism to assure effective implementation of the actions so that organizational objectives are achieved.”

An Operational plan is an annual work plan:

It narrates short term business strategies; it explains how a strategic plan will be put into operation (or what portion of a strategic plan will be put into operation (or what portion of a strategic plan are addressed) during a given operational period (fiscal year).

These plans are to support strategic plans whenever some difficulty is faced in its implementation. Any changes in internal organization or external environment need to be met through tactical plans.

For examples, there's sudden change in prices of products, difficulty in procuring raw materials, unexpected moves by competitors; tactical plans will help in meeting such unforeseen situations. The success of tactical plan depends upon the speed and adaptability with which management acts to fulfill sudden situation.

Operational planning is concerned with the efficient use of resources already allocated and with the development of a control mechanism to make sure efficient implementation of the action in order that business objectives are attained.

III. Functional Planning:

The planning that's made to make sure smooth working of the organization taking into account the needs of each and every department. the aim of functional planning is to market standardized management practices for corporate functions within the department’s decentralized corporate management structure.

The following three basic activities need to be carried out in functional planning:

(1) Functional Guidance:

Managers must be told and guided what they must be doing to properly manage corporate functions within the enterprise.

(2) Goal Setting:

Certain quantifiable goals need to be set that would measure the effectiveness of the functional planning. Goals should be meaningful, achievable and measureable.

(3) Functional Assessments:

Functional assessment wraps up the functional planning process. Here the Comparison is formed between the goal setting and therefore the goal achievement. The functional assessment should have the subsequent characteristics:

(i) Substantiation:

Managers who are accountable for corporate functions must explain how resources and activities devoted to their function provide support to the achievement of the corporate priorities and functional targets.

(ii) Measure of Success.

Managers accountable for corporate functions must quantifiably measure the success in meeting goals identified in their functional guidance.

(iii) Foresight:

Managers should be in a position to identify developing gaps and risks faced in their respective functional areas, alongside recommendations to refill those gaps and risks.

iv. Proactive and Reactive Planning:

Classification of planning into proactive and reactive is based on the organization’s response to environmental dynamics. Planning is an open system approach and is affected by environmental factors which keep it up changing continuously. However, organizations response to those changes differs. based on these responses, planning could also be either proactive or reactive.

Proactive Planning:

It is based on the anticipation of the future outcomes and state of affairs that might affect the working of the organization. Such a planning has got to be broad based, highly flexible and creative by nature.

The organization that favours this type of planning often anticipates the future and takes necessary steps before the happening of the events. In India, companies like Reliance Industries, Hindustan Lever etc., have adopted this approach and their rate of growth has been much faster than others.

Reactive Planning:

As the name suggests, this type of planning isn't in the anticipation of the future but becomes active only the matter is confronted or has already occurred. this is merely the corrective action that's taken. This approach of planning is beneficial in an environment which is fairly stable over a long period of time.

v. Formal and Informal Planning:

Formal Planning exists in the formal hierarchy of the organization and is usually carried out in the stepwise process. it's according to the pre expressed policies and the rules of the organization. This type of planning is completed at a large scale and relies on the logical thinking. the planning process that's adopted is documented, and regular.

Informal Planning is typically carried out in very small organizations where the formal organization structure may or might not exist. The planning is typically intuitive in nature and is short termed. Since the environment for smaller organizations isn't complex, they do reasonably well with informal planning process.

vi. Automated Planning:

Automated planning and scheduling may be a branch of AI that concerns the realization of strategies or action sequences, typically for execution by intelligent agents, autonomous robots and unmanned vehicles. This sort of designing is generally found within the technologically advanced organizations.

Q5) Explain the process of planning.

A5) Process of Planning

1. Perception of Opportunities: Perception of chances isn't carefully a portion of the arranging cycle. In any case, this consciousness of chances in the outside climate just as inside the association is the genuine beginning stage for arranging. It is essential to investigate conceivable future chances and see them plainly and totally.

2. Establishing Objectives: This is the second step in the arranging cycle. The major authoritative and unit destinations are set in this stage. This is to be accomplished for the long haul just as for the short reach. Objective determine the normal outcomes and show the end purposes of what can anyone do, the essential accentuation is to be set and what is to be cultivated by the different kinds of plans.

3. Planning Premises: After assurance of hierarchical destinations, the subsequent stage is setting up arranging premises that is the conditions under which arranging exercises will be attempted. Arranging premises are arranging suspicions the normal ecological and interior conditions.

4. Identification of Alternatives: The fourth step in arranging is to distinguish the other options. Different options can be recognized dependent on the hierarchical destinations and arranging premises. The idea of different choices recommends that a specific target can be accomplished through different activities.

5. Evaluation of Alternatives: The different elective strategy should be investigated in the light of premises and objectives. There are different methods accessible to assess choices. The assessment is to be done in the light of different variables. Model, money inflow and outpouring, chances, restricted assets, expected compensation back and so onward, the options should give us the most obvious opportunity with regards to meeting our objectives at the least expense and most noteworthy benefit.

6. Choice of Alternative Plans: This is the genuine purpose of management. An investigation and assessment of elective courses will reveal that at least two. Which is appropriate and advantageous and fit one is chosen.

7. Formulation of Supporting Plan: After planning the fundamental arrangement, different plans are determined in order to help the principle plan. In an association there can be different subsidiary plans like making arrangements for purchasing gear, purchasing crude materials, enlisting and preparing individual, growing new item and so forth these subsidiary plans are figured out of the essential or fundamental arrangement and perpetually needed to help the essential arrangement.

8. Establishing Sequence of Activities: After detailing essential and subordinate plans, the arrangement of exercises is resolved so those plans are placed without hesitation. After choices are made and arrangements are set, spending plans for different periods and divisions can be set up to give designs more solid importance for execution.

Q6) What is MBO?

A6) Management by Objectives (MBO) is a strategic approach to enhance the performance of an organization. It is a process where the goals of the organization are defined and conveyed by the management to the members of the organization with the intention to achieve each objective.

An important step in the MBO approach is the monitoring and evaluation of the performance and progress of each employee against the established objectives. Ideally, if the employees themselves are involved in setting goals and deciding their course of action, they are more likely to fulfill their obligations.

Q7) Explain the process of MBO.

A7) Steps in Management by Objectives Process

1. Define organization goals

Setting objectives is not only critical to the success of any company, but it also serves a variety of purposes. It needs to include several different types of managers in setting goals. The objectives set by the supervisors are provisional, based on an interpretation and evaluation of what the company can and should achieve within a specified time.

2. Define employee objectives

Once the employees are briefed about the general objectives, plan, and the strategies to follow, the managers can start working with their subordinates on establishing their personal objectives. This will be a one-on-one discussion where the subordinates will let the managers know about their targets and which goals they can accomplish within a specific time and with what resources. They can then share some tentative thoughts about which goals the organization or department can find feasible.

3. Continuous monitoring performance and progress

Though the management by objectives approach is necessary for increasing the effectiveness of managers, it is equally essential for monitoring the performance and progress of each employee in the organization.

4. Performance evaluation

Within the MBO framework, the performance review is achieved by the participation of the managers concerned.

5. Providing feedback

In the management by objectives approach, the most essential step is the continuous feedback on the results and objectives, as it enables the employees to track and make corrections to their actions. The ongoing feedback is complemented by frequent formal evaluation meetings in which superiors and subordinates may discuss progress towards objectives, leading to more feedback.

6. Performance appraisal

Performance reviews are a routine review of the success of employees within MBO organizations.

Q8) Write the advantages and disadvantages of MBO.

A8) Benefits of Management by Objectives

Management by objectives helps employees appreciate their on-the-job roles and responsibilities.

The Key Result Areas (KRAs) planned are specific to each employee, depending on their interest, educational qualification, and specialization.

The MBO approach usually results in better teamwork and communication.

It provides the employees with a clear understanding of what is expected of them. The supervisors set goals for every member of the team, and every employee is provided with a list of unique tasks.

Every employee is assigned unique goals. Hence, each employee feels indispensable to the organization and eventually develops a sense of loyalty to the organization.

Managers help ensure that subordinates’ goals are related to the objectives of the organization.

Limitations of Management by Objectives

Management by objectives often ignores the organization’s existing ethos and working conditions.

More emphasis is given on goals and targets. The managers put constant pressure on the employees to accomplish their goals and forget about the use of MBO for involvement, willingness to contribute, and growth of management.

The managers sometimes over-emphasize the target setting, as compared to operational issues, as a generator of success.

The MBO approach does not emphasize the significance of the context wherein the goals are set. The context encompasses everything from resource availability and efficiency to relative buy-in from the leadership and stakeholders.

Finally, there is a tendency for many managers to see management by objectives as a total system that can handle all management issues once installed. The overdependence may impose problems on the MBO system that it is not prepared to tackle, and that frustrates any potentially positive effects on the issues it is supposed to deal with.

Q9) What is MBE?

A9) It is a system of identification and communication that signals the manager as to when and where his attention is needed. The main object of this system is to enable the manager to identify and isolate the problems that call for decision and action, and avoid or ignore or pay less attention to less critical problems which better be handled by his subordinates.

Under this system the manager should receive only condensed, summarized and invariable comparative reports covering all the elements, and he should have all the exceptions to the past averages or standards pointed out, both the specially good and the specially bad exceptions.

This gives him a full view of the progress in a few minutes of time. Thus, by using the experience in a systematic way (i.e., having the knowledge of past attainments), a careful analysis is made with reference to existing records and standards of performances.

Q10) Write the advantages and disadvantages of MBE.

A10) Advantages of Management by Exception:

1. It saves time. Manager attends to real problems at a particular point of time.

2. Concentrated efforts are possible, as this system enables the manager to decide when and where he should pay his attention. It identifies crisis and critical problems.

3. Lesser number of decisions is required to be taken, which enables the manager to go into detail.

4. This enables to increase span of control and increase the activities for a manager.

5. Use of past trends, history and available data can be made fully.

6. It alarms the management about the good opportunities as well as difficulties.

7. Qualitative and quantitative yardsticks are provided for judging the current position.

8. It prevents management from over managing.

Limitations of Management by Exception:

Management by exception is not a solution to all management problems; it has its limitations as well.

Some of them are:

1. It requires a comprehensive observing and reporting system.

2. It increases paper work.

3. The system is silent till the problem becomes critical.

4. Some important factors, like human behaviour, are difficult to measure.

Q11) Write an exhaustive note on planning premises.

A11) The process of planning is based upon estimates and predictions of the future. Though past guides the plans in present, plans achieve the goals in the future. Therefore, the forecast of future events leads to efficient plans. Since future events are not known accurately, the assumption is made about these events.

These events may be known conditions (even changes in the tax laws as announced in the budget) or anticipated events which may or may not happen (entry of a competitor in the same market with the same product).

Though these assumptions are primarily based on scientific analysis and models, managers also use their intuition and judgment to make assumptions about future events. By identifying the factors (assumptions) that affect plans is called premising and the methods used for making premises are called forecasting.

The done forecast or the assumptions about the future which provide a base for planning in present are known as planning premises. This is the expectation or forecasts made for achieving the goals.

Types of Planning Premises

1. Internal and External Premises

Internal Premises come from the business itself. It includes the skills of the labor force, investment policies of the company, management style, sales forecasts, etc.

External Premises come from the external environment. That is economic, technological, social, political and even cultural environment. External premises cannot be controlled by the business.

2. Controllable, Semi-controllable and Uncontrollable Premises

Controllable Premises are fully controlled by the management. They include factors like materials, machines, and money.

Semi-controllable Premises are partly controllable. They include marketing strategy.

Uncontrollable Premises as the name suggests are those over which the management has absolutely no control. Take for example weather conditions, consumer behavior, natural disasters, wars, etc.

Q12) Explain the decision-making process.

A12) More than everything else, the capacity to make sound, convenient choices separate a fruitful director from a non-effective. It is the obligation of chiefs to settle on excellent choices that are acknowledged and executed in an ideal style. By all accounts the choices should be firm, guessed, unforeseen, adaptable, improved, affecting, intuitional, non-critical, objective, operational one. One of the main elements of a director is to take choices. Whatever an administrator does, he does through management.

Decision Making Process

Identify the decision: The initial phase in creation the correct choice is perceiving the issue or opportunity and choosing to address it. Decide why this choice will have any kind of effect to your clients or individual representatives.

Gather information: Next, it's an ideal opportunity to accumulate data so you can settle on a choice dependent on realities and information. This requires making a worth judgment, figuring out what data is applicable to the current choice, alongside how you can get it

Identify Alternatives: Once you have an away from of the issue, it's an ideal opportunity to distinguish the different arrangements available to you. All things considered, you have various alternatives with regards to settling on your choice, so it is essential to concoct a scope of choices.

Weight of evidence: In this progression, you should assess for attainability, agreeableness and allure to realize which option is ideal. It very well might be useful to search out a confided in second feeling to increase another viewpoint on the current issue.

Choose among alternatives: When it's an ideal opportunity to settle on your choice, be certain that you comprehend the dangers associated with your picked course. You may likewise pick a mix of options since you completely handle all significant data and expected dangers.

Take action: Next, you should make an arrangement for execution. This includes recognizing what assets are required and picking up help from workers and partners.

Review decision: A frequently ignored yet significant advance in the decision-making cycle is assessing your choice for adequacy. Ask yourself what you progressed admirably and what can be improved next time.

Q13) What is decision making under risk and uncertainty?

A13) Decision-making under Risk:

When a manager lacks perfect information or whenever an information asymmetry exists, risk arises. Under a state of risk, the decision maker has incomplete information about available alternatives but has a good idea of the probability of outcomes for each alternative.

While making decisions under a state of risk, managers must determine the probability associated with each alternative on the basis of the available information and his experience.

Decision-making under Uncertainty:

Most significant decisions made in today’s complex environment are formulated under a state of uncertainty. Conditions of uncertainty exist when the future environment is unpredictable and everything is in a state of flux. The decision-maker is not aware of all available alternatives, the risks associated with each, and the consequences of each alternative or their probabilities.

The manager does not possess complete information about the alternatives and whatever information is available, may not be completely reliable. In the face of such uncertainty, managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision-making. They have to depend upon their judgment and experience for making decisions.

Q14) Explain participative decision making.

A14) Participation of workers in decision-making process has resulted in successful value creation in many organizations. Though the extent to which employees should participate in organizational decision making is still a matter of debate. Some say that workers’ union should participate with management as equal partners while some believe in restricted or bounded participation, that is, participation of employees or workers to a limited extent. However, there are a number of ways through which employees can participate in decision-making process of any organization.

Participation at the Board Level: Representation of employees at the board level is known as industrial democracy. This can play an important role in protecting the interests of employees. The representative can put all the problems and issues of the employees in front of management and guide the board members to invest in employee benefit schemes.

Participation through Ownership: The other way of ensuring workers’ participation in organizational decision making is making them shareholders of the company. Inducing them to buy equity shares, advancing loans, giving financial assistance to enable them to buy equity shares are some of the ways to keep them involved in decision-making.

Participation through Collective Bargaining: This refers to the participation of workers through collective agreements and by deciding and following certain rules and regulations. This is considered as an ideal way to ensure employee participation in managerial processes. It should be well controlled otherwise each party tries to take an advantage of the other.

Participation through Suggestion Schemes: Encouraging your employees to come up with unique ideas can work wonders especially on matters such as cost cutting, waste management, safety measures, reward system, etc. Developing a full-fledged procedure can add value to the organizational functions and create a healthy environment and work culture. For instance, Satyam is known to have introduced an amazing country-wide suggestion scheme, the Idea Junction. It receives over 5,000 ideas per year from its employees and company accepts almost one-fifth of them.

Participation through Complete Control: This is called the system of self management where workers union acts as management. Through elected boards, they acquire full control of the management. In this style, workers directly deal with all aspects of management or industrial issues through their representatives.

Participation through Job Enrichment: Expanding the job content and adding additional motivators and rewards to the existing job profile is a fine way to keep workers involved in managerial decision-making. Job enrichment offers freedom to employees to exploit their wisdom and use their judgment while handling day-to-day business problems.

Participation through Quality Circles: A quality circle is a group of five to ten people who are experts in a particular work area. They meet regularly to identify, analyze and solve the problems arising in their area of operation. Anyone, from the organization, who is an expert of that particular field, can become its member. It is an ideal way to identify the problem areas and work upon them to improve working conditions of the organization.

Employees can participate in organizational decision making through various processes mentioned above. However, there are other ways such as financial participation, Total Quality Management, participation through empowered teams and joint committees and councils through which they can contribute their share in making the organizations a better place to work.

Q15) Explain creative decision making.

A15) If a decision maker is going to produce novel alternatives when solving a problem, then he or she is going to need a little creativity to help the process along. Creativity allows the decision maker to more fully appraise and understand the problem . . . sometimes in ways others can’t see it.

Decorative image Creativity is the ability to link or combine ideas in novel ways, and their unique alternatives have to be considered useful to others. Creativity is also known as divergent or lateral thinking. Lateral thinking moves away from the linear approach that’s advocated in rational decision making. Some researchers feel that employee and manager creativity is the hallmark of an organization’s success—that solving old organizational issues in new ways creates organizational effectiveness.

If creativity is the key to organizational effectiveness, then how do we get some of that? Is there a way that organizations can foster creativity for the benefit of decision making?

First, it’s important to note the characteristics of creative people, so we can understand what we’re aiming for in our creative environment. Creative decision makers seem to have an ability to sift through the massive amounts of information that can be reviewed when making a decision, and decide what information is and isn’t relevant. Still, they listen to all sources to understand where problems are emerging. And when they’re ready, they present a solution that’s bold and well informed. They don’t rely on the rational decision-making model, they rely on something more than that. Five characteristics that creative leaders seem to have in common:

Perseverance in the face of obstacles and adversity

Willingness to take risks

Willingness to grow and openness to experience

Tolerance of ambiguity

Effective use of analogy to apply a known situation to an unknown situation

Organizationally (and individually) speaking, there are certain factors that, when they exist, tend to point to a more creative atmosphere.

Questioning attitude. Organizations that don’t invite the questioning of values, assumptions or norms are not likely to be very creative. Organizations need to continually question the long-held beliefs of their industry if they’re going to stay ahead of the curve and come up with creative ways to bring services and products to their customers.

Culture. Our traditional values are sometimes at odds with the creative solutions we might come up with to solve organizational problems. If an organization’s culture puts too much emphasis on tradition, they’re likely to stifle creativity around problem solving.

Leadership. Similar to culture, leaders who are bound to traditional characteristics of the leader-follower relationship, who don’t promote questioning attitudes or invite their employees to challenge the status quo, will not do much to foster a creative environment.

Attitude toward risk. Finally, employees who are afraid to try something new will never put their creative solutions into action! Just as one of the characteristics of a creative leader is a willingness to take risks, so must employees feel comfortable doing so in an organization.

Overall, creativity is likely to flourish in an environment that’s open and encourages participation. Keeping everyone on an even playing field, with no organizational encouragement for an “us versus them” type of environment will increase dialogue and keep ideas flowing.

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