The Decision‐Making Process

Quite literally, organizations operate by people making decisions. A manager plans, organizes, staffs, leads, and controls her team by executing decisions. The effectiveness and quality of those decisions determine how successful a manager will be.

Managers are constantly called upon to make decisions in order to solve problems. Decision making and problem solving are ongoing processes of evaluating situations or problems, considering alternatives, making choices, and following them up with the necessary actions. Sometimes the decision‐making process is extremely short, and mental reflection is essentially instantaneous. In other situations, the process can drag on for weeks or even months. The entire decision‐making process is dependent upon the right information being available to the right people at the right times.

The decision‐making process involves the following steps:

1. Define the problem:

The first and the foremost step in the decision-making process are to define the real problem. A problem can be explained as a question for and appropriate solution. The manager should consider critical or strategic factors in defining the problem. These factors are, in fact, obstacles in the way of finding proper solution. These are also known as limiting factors.

For example, if a machine stops working due to non-availability of screw, screw is the limiting factor in this case. Similarly fuse is a limiting or critical factor in house lighting. While selecting alternative or probable solution to the problem, the more the decision-making takes into account those factors that are limiting or critical to the alternative solutions, the easier it becomes to take the best decision.

Other examples of critical or limiting factor may be materials, money, managerial skill, technical know-how, employee morale and customer demand, political situation and government regulations, etc.

2. Analysing the problem:

After defining the problem, the next important step is a systematic analysis of the available data. Sound decisions are based on proper collection, classification and analysis of facts and figures.

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There are three principles relating to the analysis and classification as explained below:

(i) The futurity of the decision. This means to what length of time, the decision will be applicable to a course of action.

(ii) The impact of decision on other functions and areas of the business.

(iii) The qualitative considerations which come into the picture.

3. Developing alternative solutions:

After defining and analysing the problem, the next step is to develop alternative solutions. The main aim of developing alternative solutions is to have the best possible decision out of the available alternative courses of action. In developing alternative solutions the manager comes across creative or original solutions to the problems.

In modern times, the techniques of operations research and computer applications are immensely helpful in the development of alternative courses of action.

4. Selecting the best type of alternative:

After developing various alternatives, the manager has to select the best alternative. It is not an easy task.

The following are the four important points to be kept in mind in selecting the best from various alternatives:

(a) Risk element involved in each course of action against the expected gain.

(b) Economy of effort involved in each alternative, i.e. securing desired results with the least efforts.

(d) Final selection of decision is also affected by the limited resources available at our disposal. Human resources are always limited. We must have right type of people to carry out our decisions. Their calibre , understanding, intelligence and skill will finally determine what they can and cannot do.

5. Implementation of the decision:

Under this step, a manager has to put the selected decision into action.

For proper and effective execution of the decision, three things are very important i.e.,

(a) Proper and effective communication of decisions to the subordinates. Decisions should be communicated in clear, concise and understandable manner.

(b) Acceptance of decision by the subordinates is important. Group participation and involvement of the employees will facilitate the smooth execution of decisions.

(c) Correct timing in the execution of decision minimizes the resistance to change. Almost every decision introduces a change and people are hesitant to accept a change. Implementation of the decision at the proper time plays an important role in the execution of the decision.

6. Follow up:

A follow up system ensures the achievement of the objectives. It is exercised through control. Simply stated it is concerned with the process of checking the proper implementation of decision. Follow up is indispensable so as to modify and improve upon the decisions at the earliest opportunity.

7. Monitoring and feedback:

Feedback provides the means of determining the effectiveness of the implemented decision. If possible, a mechanism should be built which would give periodic reports on the success of the implementation. In addition, the mechanisms should also serve as an instrument of “preventive maintenance”, so that the problems can be prevented before they occur.

According to Peter Drucker, the monitoring system should be such that the manager can go and look for himself for first hand information which is always better than the written reports or other second-hand sources. In many situations, however, computers are very successfully used in monitoring since the information retrieval process is very quick and accurate and in some instances the self-correcting is instantaneous.

NATURE AND TYPES OF MANAGERIAL DECISIONS

Nature of Managerial Decision-making:

The situations in which managers have to act differ according to the types of problems that must be

handled.

Programmed decisions are those made in routine, repetitive, well-structured situations through the use of

predetermined decision rules.

Many programmed decisions are derived from established practices and procedures or habit. Computers are

an ideal tool for dealing with several kinds of complex programmed decisions.

Most of the decisions made by first-line managers and many by middle managers are Programmed

decisions.

Non-programmed decisions are those for which predetermined decision rules are impractical because the

situations are novel and/or ill-structured.

Types of Problems and Decisions:

Managers will be faced with different types of problems and will use different types of decisions.

Well-structured problems are straightforward, familiar, and easily defined. In handling this

situation, a manager can use a programmed decision, which is a repetitive decision that can be

handled by a routine approach. There are three possible programmed decisions.

A procedure is a series of interrelated sequential steps that can be used to respond to a structured

problem.

A rule is an explicit statement that tells managers what they ought or ought not to do.

A policy is a guide that establishes parameters for making decisions rather than specifically stating

what should or should not be done

Poorly structured problems are new or unusual problems in which information is ambiguous or

incomplete. These problems are best handled by a non-programmed decision that is a unique

decision that requires a custom-made solution.

General Organizational Situations:

At the higher levels of the organization, managers are dealing with poorly structured problems and

using non-programmed decisions.

At lower levels, managers are dealing with well-structured problems by using programmed

decisions.

Since managers can make decisions on the basis of rationality, bounded rationality, or intuition, let us try to

understand them one by one:

Assumptions of Rationality.

Managerial decision making is assumed to be rational; that is, choices that is consistent and value

maximizing within specified constraints. The assumptions of rationality are summarized below.

These assumptions are problem clarity (the problem is clear and unambiguous); goal orientation (a

single, well-defined goal is to be achieved); known options (all alternatives and consequences are

known); clear preferences; constant preferences (preferences are constant and stable); no time or

cost constraints; and maximum pay off.

The assumption of rationality is that decisions are made in the best economic interests of the

organization, not in the manager's interests.

The assumptions of rationality can be met if: the manager is faced with a simple problem in which

goals are clear and alternatives limited, in which time pressures are minimal and the cost of finding

and evaluating alternatives is low, for which the organizational culture supports innovation and risk

taking, and in which outcomes are concrete and measurable.

Decision-Making under Certainty, Risk and Uncertainty

Decision-making under Certainty:
A condition of certainty exists when the decision-maker knows with reasonable certainty what the alternatives are, what conditions are associated with each alternative, and the outcome of each alternative. Under conditions of certainty, accurate, measurable, and reliable information on which to base decisions is available.
The cause and effect relationships are known and the future is highly predictable under conditions of certainty. Such conditions exist in case of routine and repetitive decisions concerning the day-to-day operations of the business.
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.
Modern Approaches to Decision-making under Uncertainty:
There are several modern techniques to improve the quality of decision-making under conditions of uncertainty.
The most important among these are:
(1) Risk analysis,
(2) Decision trees and
(3) preference theory.
Risk Analysis:
Managers who follow this approach analyze the size and nature of the risk involved in choosing a particular course of action.
For instance, while launching a new product, a manager has to carefully analyze each of the following variables the cost of launching the product, its production cost, the capital investment required, the price that can be set for the product, the potential market size and what percent of the total market it will represent.
Risk analysis involves quantitative and qualitative risk assessment, risk management and risk communication and provides managers with a better understanding of the risk and the benefits associated with a proposed course of action. The decision represents a trade-off between the risks and the benefits associated with a particular course of action under conditions of uncertainty.
Decision Trees:
These are considered to be one of the best ways to analyze a decision. A decision-tree approach involves a graphic representation of alternative courses of action and the possible outcomes and risks associated with each action.
By means of a “tree” diagram depicting the decision points, chance events and probabilities involved in various courses of action, this technique of decision-making allows the decision-maker to trace the optimum path or course of action.
Preference or Utility Theory:
This is another approach to decision-making under conditions of uncertainty. This approach is based on the notion that individual attitudes towards risk vary. Some individuals are willing to take only smaller risks (“risk averters”), while others are willing to take greater risks (“gamblers”). Statistical probabilities associated with the various courses of action are based on the assumption that decision-makers will follow them.
3For instance, if there were a 60 percent chance of a decision being right, it might seem reasonable that a person would take the risk. This may not be necessarily true as the individual might not wish to take the risk, since the chances of the decision being wrong are 40 percent. The attitudes towards risk vary with events, with people and positions.
Top-level managers usually take the largest amount of risk. However, the same managers who make a decision that risks millions of rupees of the company in a given program with a 75 percent chance of success are not likely to do the same with their own money.
Moreover, a manager willing to take a 75 percent risk in one situation may not be willing to do so in another. Similarly, a top executive might launch an advertising campaign having a 70 percent chance of success but might decide against investing in plant and machinery unless it involves a higher probability of success.
Though personal attitudes towards risk vary, two things are certain.
Firstly, attitudes towards risk vary with situations, i.e. some people are risk averters in some situations and gamblers in others.
Secondly, some people have a high aversion to risk, while others have a low aversion.

Most managers prefer to be risk averters to a certain extent, and may thus also forego opportunities. When the stakes are high, most managers tend to be risk averters; when the stakes are small, they tend to be gamblers.

Meaning and Concept of Planning

In simple words, planning is deciding in advance what is to be done, when where, how and by whom it is to be done. Planning bridges the gap from where we are to where we want to go. It includes the selection of objectives, policies, procedures and programs from among alternatives. A plan is a predetermined course of action to achieve a specified goal. It is an intellectual process characterized by thinking before doing. It is an attempt on the part of manager to anticipate the future in order to achieve better performance. Planning is the primary function of management.

NATURE / CHARACTERISTICS OF PLANNING

The main characteristics or nature of planning is given below:

1. Planning is an Intellectual Process

Planning is an intellectual process of thinking in advance. It is a process of deciding the future on the series of events to follow. Planning is a process where a number of steps are to be taken to decide the future course of action. Managers or executives have to consider various courses of action, achieve the desired goals, go in details of the pros and cons of every course of action and then finally decide what course of action may suit them best.

2. Planning Contributes to the Objectives

Planning contributes positively in attaining the objectives of the business enterprise. Since plans are there from the very first stage of operation, the management is able to handle every problem successfully. Plans try to set everything right. A purposeful, sound and effective planning process knows how and when to tackle a problem. This leads to success. Objectives thus are easily achieved.

3. Planning is a Primary Function of Management

Planning precedes other functions in the management process. Certainly, setting of goals to be achieved and lines of action to be followed precedes the organization, direction, supervision and control. No doubt, planning precedes other functions of management. It is primary requisite before other managerial functions step in. But all functions are inter-connected. It is mixed in all managerial functions but there too it gets precedence. It thus gets primary everywhere.

4. A continuous Process

Planning is a continuous process and a never ending activity of a manager in an enterprise based upon some assumptions which may or may not come true in the future. Therefore, the manager has to go on modifying revising and adjusting plans in the light of changing circumstances. According to George R. Terry, “Planning is a continuous process and there is no end to it. It involves continuous collection, evaluation and selection of data, and scientific investigation and analysis of the possible alternative courses of action and the selection of the best alternative.”

5. Planning Pervades Managerial Activities

From primary of planning follows pervasiveness of planning. It is the function of every managerial personnel. The character, nature and scope of planning may change from personnel to personnel but the planning as an action remains intact. According to Billy E. Goetz, “Plans cannot make an enterprise successful. Action is required, the enterprise must operate managerial planning seeks to achieve a consistent, coordinated structure of operations focused on desired trends. Without plans, action must become merely activity producing nothing but chaos.”

Principles of Planning

Management Planning Principles

Planning is a dynamic process, it is very essential for every organisation to achieve their ultimate goals, but, there are certain principles which are essential to be followed so as to formulate a sound plan. They are only guidelines in the formulation and implementation of plans. These principles of planning are as follows:

Principle of Contribution: The purpose of planning is to ensure the effective and efficient achievement of corporate objectives, in-fact, the basic criteria for the formulation of plans are to achieve the ultimate Objectives of the company. The accomplishment of the objectives always depends on the soundness of plans and the adequate amount of contribution of company towards the same.
Principle of Sound and Consistent Premising: Premises are the assumptions regarding the environmental forces like economic and market conditions, social, political, legal and cultural aspects, competitors actions, etc. These are prevalent during the period of the implementation of plans. Hence, Plans are made on the basis of premises accordingly, and the future of the company depends on the soundness of plans they make so as to face the state of premises.
Principle of Limiting factors : The limiting factors are the lack of motivated employees, shortage of trained personnel, shortage of capital funds, government policy of price regulation, etc. The company requires to monitor all these factors and need to tackle the same in an efficient way so as to make a smooth way for the achievement of its ultimate objectives.
Principle of Commitment: A commitment is required to carry-on the business that is established. The planning shall has to be in such a way that the product diversification should encompass the particular period during which entire investment on that product is recovered.
Principle of Coordinated Planning: Long and short-range plans should be coordinated with one another to form an integrated plan, this is possible only when latter are derived from the former. Implementation of the long-range plan is regarded as contributing to the implementation of the short-range plan. functional plans of the company too should contribute to all others plans i.e. implementation of one plan should contribute to all the other plans, this is possible only when all plans are consistent with one another and are viewed as parts of an integrated corporate plan.
Principle of Timing: Number of major and minor plans of the organisation should be arranged in a systematic manner. The plans should be arranged in a time hierarchy, initiation and completion of those plans should be clearly determined.
Principle of Efficiency: Cost of planning constitute human, physical and financial resources for their formulation and implementation as well. Minimizing the cost and achieving the efficient utilization of resources shall has to be the aim of the plans. Cost of plan formulation and implementation, in any case, should not exceed the organisations output's monetary value. Employee satisfaction and development, and social standing of the organisation are supposed to be considered while calculating the cost and benefits of plan.
Principle of Flexibility: Plans are supposed to be flexible to favour the organisation to cope-up with the unexpected environments. It is always required to keep in mind that future will be different in actuality. Hence companies, therefore, require to prepare contingency plans which may be put into operation in response to the situations.
Principle of Navigational Change: Since the environment is always not the same as predicted, plans should be reviewed periodically. This may require changes in strategies, objectives, policies and programmes of the organisation. The management should take all the necessary steps while reviewing the plans so that they efficiently achieve the ultimate goals of the organisation.
Principle of Acceptance: Plans should be understood and accepted by the employees, since the successful implementation of plans requires the willingness and cooperative efforts from them. Communication also plays a crucial role in gaining the employee understanding and acceptance of the plans by removing their doubts and misunderstanding about the plans also their apprehensions and anxieties about consequences of plans for achievement of their personal goal

Types Of Planning

Planning is the part of management concerned with creating procedures, rules and guidelines for achieving a stated objective. Planning is carried out at both the macro and micro level. Managers need to create broad objectives and mission statements as well as look after the day to day running of the company.
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Below, we take a look at the three types of plans in management and how they are used within an organizational framework:

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.
The crucial components of a strategic plan are:

1. Vision

Where does the organization want to be five years from now? How does it want to influence the world?
These are some of the questions you must ask when you delineate your organization’s vision. It’s okay if this vision is grandiose and idealistic. If there is any room to wax poetic within a plan, it is here. Holding ambitions to “make a dent in the Universe” (Apple/Steve Jobs) is acceptable, as is a more realistic vision to create the most “customer-centric company on Earth” (Amazon).
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2. Mission

The mission statement is a more realistic overview of the company’s aim and ambitions. Why does the company exist? What does it aim to achieve through its existence? A clothing company might want to “bring high street fashion to the masses”, while a non-profit might want to “eradicate polio”.

3. Values

“Inspire. Go above & beyond. Innovate. Exude passion. Stay humble. Make it fun”
These aren’t fragments from a motivational speech, but Fab.com’s values. Like Fab, each organization has its own values. These values will guide managers and influence the kind of employees you hire. There is no template to follow when jotting down the values. You can write a 1,000 page essay, or something as simple as Google’s “Don’t be Evil” – it’s all up to you.
As you can see, there are really no rules to writing the perfect strategic plan. This is an open-ended, living document that grows with the organization. You can write whatever you want in it, as long as it dictates the future of your organization.
For inspiration, just search for the value/mission/vision statement of your favorite companies on Google. Or, consider taking this course on business planning for average people.

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. That said, there are some components shared by most tactical plans:

1. Specific Goals with Fixed Deadlines

Suppose your organization’s aim is to become the largest shoe retailer in the city. The tactical plan will break down this broad ambition into smaller, actionable goals. The goal(s) should be highly specific and have fixed deadlines to spur action – expand to two stores within three months, grow at 25% per quarter, or increase revenues to $1mn within six months, and so on.

2. Budgets

The tactical plan should list budgetary requirements to achieve the aims specified in the strategic plan. This should include the budget for hiring personnel, marketing, sourcing, manufacturing, and running the day-to-day operations of the company. Listing the revenue outflow/inflow is also a recommended practice.

3. Resources

The tactical plan should list all the resources you can muster to achieve the organization’s aims. This should include human resources, IP, cash resources, etc. Again, being highly specific is encouraged.

4. Marketing, Funding, etc.

Finally, the tactical plan should list the organization’s immediate marketing, sourcing, funding, manufacturing, retailing, and PR strategy. Their scope should be aligned with the goals outlined above.
If you’re struggling to create a strong tactical plan, this course on drafting great business plans will point you in the right direction.

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.
Operational plans can be either single use, or ongoing, as described below:

1. Single Use Plans

These plans are created for events/activities with a single occurrence. This can be a one-time sales program, a marketing campaign, a recruitment drive, etc. Single use plans tend to be highly specific.

2. Ongoing Plans

These plans can be used in multiple settings on an ongoing basis. Ongoing plans can be of different types, such as:

Policy: A policy is a general document that dictates how managers should approach a problem. It influences decision making at the micro level. Specific plans on hiring employees, terminating contractors, etc. are examples of policies.
Rule: Rules are specific regulations according to which an organization functions. The rules are meant to be hard coded and should be enforced stringently. “No smoking within premises”, or “Employees must report by 9 a.m.”, are two examples of rules.
Procedure: A procedure describes a step-by-step process to accomplish a particular objective. For example: most organizations have detailed guidelines on hiring and training employees, or sourcing raw materials. These guidelines can be called procedures.

Ongoing plans are created on an ad-hoc basis but can be repeated and changed as required.

Operational plans align the company’s strategic plan with the actual day to day running of the company. This is where the macro meets the micro. Running a successful company requires paying an equal attention to now just the broad objectives, but also how the objectives are being met on an everyday basis, hence the need for such intricate planning.

Authority, Responsibility and Accountability In Management

Responsibility

Responsibility indicates the duty assigned to a position. The person holding the position has to perform the duty assigned. It is his responsibility. The term responsibility is often referred to as an obligation to perform a particular task assigned to a subordinate. In an organisation, responsibility is the duty as per the guidelines issued.

Definitions of Responsibility

According to Davis, "Responsibility is an obligation of individual to perform assigned duties to the best of his ability under the direction of his executive leader." In the words of Theo Haimann, "Responsibility is the obligation of a subordinate to perform the duty as required by his superior".

McFarland defines responsibility as "the duties and activities assigned to a position or an executive".

Characteristics of Responsibility

The essence of responsibility is the obligation of a subordinate to perform the duty assigned.
It always originates from the superior-subordinate relationship.
Normally, responsibility moves upwards, whereas authority flows downwards.
Responsibility is in the form of a continuing obligation.
Responsibility cannot be delegated.
The person accepting responsibility is accountable for the performance of assigned duties.
It is hard to conceive responsibility without authority.

Authority

Authority is the right or power assigned to an executive or a manager in order to achieve certain organizational objectives.
A manager will not be able to function efficiently without proper authority. Authority is the genesis of organizational framework. It is an essential accompaniment of the job of management. Without authority, a manager ceases to be a manager, because he cannot get his policies carried out through others. Authority is one of the founding stones of formal and informal organisations. An Organisation cannot survive without authority. It indicates the right and power of making decisions, giving orders and instructions to subordinates. Authority is delegated from above but must be accepted from below i.e. by the subordinates. In other words, authority flows downwards.

Definitions of Authority

According to Henri Fayol, "Authority is the right to give orders and the power to exact obedience."

According to Mooney and Reily, "Authority is the principle at the root of Organisation and so important that it is impossible to conceive of an Organisation at all unless some person or persons are in a position to require action of others."

Accountability

Every employee/manager is accountable for the job assigned to him. He is supposed to complete the job as per the expectations and inform his superior accordingly. Accountability is the liability created for the use of authority. It is the answerability for performance of the assigned duties.

Definition of Accountability

According, to McFarland, "accountability is the obligation of an individual to report formally to his superior about the work he has done to discharge the responsibility."

When authority is delegated to a subordinate, the person is accountable to the superior for performance in relation to assigned duties. If the subordinate does a poor job, the superior cannot evade the responsibility by stating that poor performance is the fault of the subordinate. A superior is normally responsible for all actions of groups under his supervision even if there are several layers down in the hierarchy. Simply stated, accountability means that the subordinate should explain the factors responsible for non-performance or lack of performance.

Authority, Responsibility and Accountability are Inter-related

They need proper consideration while introducing delegation of authority within an Organisation. In the process of delegation, the superior transfers his duties/responsibilities to his subordinate and also give necessary authority for performing the responsibilities assigned. At the same time, the superior is accountable for the performance of his subordinate.

Division of work

Division of work refers to the practice of dividing a job, task, assignment, or contract into smaller tasks. A division of work may also include a schedule or set of deadlines for the subtasks. Within large organizations, subtasks are often distributed to functional areas such as operations, finance, production, or marketing. They may also be assigned to individuals.
If we consider the work of building a bridge, we can divide the work into different tasks (such as designing the bridge, arranging money for building it, procuring raw materials etc.) with deadlines to finish each task so that subsequent dependent tasks can proceed to meet the overall deadline for the project. These tasks are then given to their functional areas of the organization responsible for building the bridge, such as finance department which will arrange money flow and the architects and engineers which will produce drawings.

In contrast to division of work, division of labour is the specialization of an individual workers' or organizations' skills, through education, training, and practice. This specialization may last throughout one's career or the life of an organization, and certainly spans many projects, tasks, or contracts that an organization or individual may engage in. In fact, a significant shift in a worker's skills (his specialization within a division of labour) is often referred to as a "career change". In contrast, a new division of work is generally initiated for each new project or contract in an organization and seldomly encompasses a worker's entire career or an organization's lifespan. Division of labour is often associated with industrial assembly lines. It may also include the organization of labour and skills within a town, city, business organization, country, or an economic region (like the European Union, or the NAFTA member states).

Span of Management

Definition: The Span of Management refers to the number of subordinates who can be managed efficiently by a superior. Simply, the manager having the group of subordinates who report him directly is called as the span of management.
The Span of Management has two implications:

Influences the complexities of the individual manager’s job
Determine the shape or configuration of the Organization

The span of management is related to the horizontal levels of the organization structure. There is a wide and a narrow span of management. With the wider span, there will be less hierarchical levels, and thus, the organizational structure would be flatter. Whereas, with the narrow span, the hierarchical levels increases, hence the organizational structure would be tall.

Both these organizational structures have their advantages and the disadvantages. But however the tall organizational structure imposes more challenges:

Since the span is narrow, which means less number of subordinates under one superior, requires more managers to be employed in the organization. Thus, it would be very expensive in terms of the salaries to be paid to each senior.
With more levels in the hierarchy, the communication suffers drastically. It takes a lot of time to reach the appropriate points, and hence the actions get delayed.
Lack of coordination and control because the operating staff is far away from the top management.

The major advantage of using this structure is that the cross communication gets facilitated, i.e., operative staff communicating with the top management. Also, the chance of promotion increases with the availability of several job positions.
In the case of a flatter organizational structure, where the span is wide leads to a more complex supervisory relationship between the manager and the subordinate. It will be very difficult for a superior to manage a large number of subordinates at a time and also may not listen to all efficiently.
However, the benefit of using the wider span of management is that the number of managers gets reduced in the hierarchy, and thus, the expense in terms of remuneration is saved. Also, the subordinates feel relaxed and develop their independent spirits in a free work environment, where the strict supervision is absent.

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Decentralization & Delegation

Why Decentralization?

In centralization, a limited amount of authority is delegated. In decentralization, a significant amount of authority is delegated to lower levels. Each form has its advantages and disadvantages and is affected by a number of factors, such as size of organization and the amount of geographic dispersion. If the organization is very large, diversified or geographically dispersed, the limitations of expertise and personal resources will generally lead to decentralization of authority to the heads of these different businesses. Innovative enterprises, where speed and adaptability to change are characteristics of the business, tend towards decentralization.

Why Delegate?

At a certain point, there are just too many facets to running a successful business to continue doing it alone. In an increasingly complex business environment, with all the trends affecting business today, such as globalization, the information technology explosion, strategic alliances, increased mergers and acquisitions, heightened competition, and higher expectations of nearly every customer, it just isn't possible to still be that one person in control of everything. Bringing in others to manage is an absolute necessity for survival now.

Owners and managers should concentrate on the activities they do that bring the most value to their organization. You must perform only "essential activities" that give the company its competitive advantage over other companies in the industry. Learn to do less and manage more.

The delegation task is in finding the right persons and giving them the right work. The sheer volume of management responsibilities necessitates delegation. Always drop unnecessary work altogether; concentrate only on the tasks that nobody else can do. Necessary tasks that can be done by others should be delegated.

How to Delegate?

Resist the temptation to keep tasks to yourself as a means of control or a demonstration of power. Be a leader rather than a mentor.

The first step is to recognize when it is time to delegate. Then determine what to delegate, how, and to whom.

To help you define and allot tasks, including your own, ask yourself three of Peter Drucker's questions:

· What am I doing that does not need to be done at all?

· What am I doing that can be done by somebody else?

· What am I doing that only I can do?

Delegating responsibilities to those you trust would free you to focus on what you are best at. Promoting from within is a valuable tool for retaining and motivating your people. However, if current employees don't have the skills your business needs, don't hesitate to hire someone who does. It often makes sense to search for someone who can immediately add value to your management team as well as transfer some of his or her skills to others in your organization.

The Secret of Successful Delegation

Explain the task, tell your people what should be done, but don't tell them how. "This is the secret of successful delegation. When you tell somebody exactly how you want a task carried out, it removes any creativity. It becomes completely boring, there is no challenge and they do not have to develop in any capacity whatsoever³".

Co-ordination

Co-ordination is the unification, integration, synchronization of the efforts of group members so as to provide unity of action in the pursuit of common goals. It is a hidden force which binds all the other functions of management. According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of common goals”. According to Charles Worth, “Co-ordination is the integration of several parts into an orderly hole to achieve the purpose of understanding”.

Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management. Co-ordination is the essence of management and is implicit and inherent in all functions of management.

A manager can be compared to an orchestra conductor since both of them have to create rhythm and unity in the activities of group members. Co-ordination is an integral element or ingredient of all the managerial functions as discussed below: -

Co-ordination through Planning - Planning facilitates co-ordination by integrating the various plans through mutual discussion, exchange of ideas. e.g. - co-ordination between finance budget and purchases budget.
Co-ordination through Organizing - Mooney considers co-ordination as the very essence of organizing. In fact when a manager groups and assigns various activities to subordinates, and when he creates department’s co-ordination uppermost in his mind.
Co-ordination through Staffing - A manager should bear in mind that the right no. of personnel in various positions with right type of education and skills are taken which will ensure right men on the right job.
Co-ordination through Directing - The purpose of giving orders, instructions & guidance to the subordinates is served only when there is a harmony between superiors & subordinates.

Co-ordination through Controlling - Manager ensures that there should be co-ordination between actual performance & standard performance to achieve organizational goals.

Formal organization

Formal organization is a fixed set of rules of intra-organization procedures and structures. As such, it is usually set out in writing, with a language of rules that ostensibly leave little discretion for interpretation. In some societies and in some organizations, such rules may be strictly followed; in others, they may be little more than an empty formalism.

To facilitate the accomplishment of the goals of the organization: In a formal organization, the work is delegated to each individual of the organization. He/She works towards the attainment of definite goals, which are in compliance with the goals of the organization.
To facilitate the co-ordination of various activities: The authority, responsibility, and accountability of individuals in the organization is very well defined. Hence, facilitating the co-ordination of various activities of the organization very effectively.
To aid the establishment of logical authority relationship: The responsibilities of the individuals in the organization are well defined. They have a definite place in the organization due to a well defined hierarchical structure which is inherent in any formal organization.
Permit the application of the concept of specialization and division of Labour. Division of work amongst individuals according to their capabilities helps in greater specializations and division of work.

Characteristics of a formal organization

Well defined rules and regulation
Determined objectives and policies
Status symbol
Limitation on the activities of the individual
Strict observance of the principle of co-ordination
Messages are communicated through scalar chain
It is to best attain the objectives of the enterprise.

Informal organization

The informal organization is the interlocking social structure that governs how people work together in practice. It is the aggregate of, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation or cluster of affiliations. It consists of a dynamic set of personal relationships, social networks, communities of common interest, and emotional sources of motivation. The informal organization evolves, and the complex social dynamics of its members also.

Tended effectively, the informal organization complements the more explicit structures, plans, and processes of the formal organization: it can accelerate and enhance responses to unanticipated events, foster innovation, enable people to solve problems that require collaboration across boundaries, and create footpaths showing where the formal organization may someday need to pave a way.

characteristics of the informal organization:

evolving constantly
grass roots
dynamic and responsive
excellent at motivation
requires insider knowledge to be seen
treats people as individuals like
flat and fluid
cohered by trust and reciprocity
difficult to pin down
collective decision making

essential for situations that change quickly or are not yet fully understood

What is the Importance of Directing in an Organisation?

Article shared by Samiksha S

Importance of directing in an organisation are as follows:

(1) It Initiates Action:

The employees are appointed up to the first three functions of management (planning, organising and staffing). But they cannot commence their job until they are not informed about what to do and how to do the manager performs this job through direction. Thus, it is evident that it is direction which initiates action in an organisation.

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(2) It Integrates Employees Efforts:

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Many employees work in an organisation. The activities of all are co-related. Success of an organisation is possible only when everybody does their job efficiently. If any one of employees in the employees- chain does not perform up to the mark, it adversely affects the performance of the remaining employees.

Thus, it is essential to establish coordination among all the activities. The manager establishes this coordination by supervising, providing good leadership, motivating and exchanging ideas with his subordinates. For example, an employee welcomes customers at a readymade garments showroom.

The second employee shows products to them, the third is engaged in packing, the fourth takes the payment and the fifth says goodbye to them. Customer will be satisfied when all the five employees perform their duties efficiently. If the employee whose job is to show the products does not behave properly with the customers, this will turn the effort of all other employees to be a mere waste.

(3) It is the Means of Motivation:

The objectives of an organisation can only be achieved by motivated employees. Motivated employees work with full dedication and with a feel of belongingness. Now the question is: how can the employees be motivated? The work of motivating employees can be accomplished through the Directing function of management.

For example, under directing function of management the problems of employees are curbed by the manager there and then. Also, he guides them in the right direction. In this manner, they deliver work performance of superior quality. They get both the appreciation and salary hike for their better work performance. As a result, they get motivated.

(4) It Facilitates Implementing Changes:

Often, the employees show resistance to change in their organisational structure. But with the changing demand of time, it needs to be implemented / enforced. Managers through the medium of Direction shapes the mindset of the employees in a manner that they willfully accept changes.

For example, if in an office typewriters are replaced with computers, then a typist who does not have the knowledge of computer will definitely show resistance to this change. The reason of this resistance is the fear of losing the job.

Manager through effective direction makes them a part of change process and acquaints them with the benefits of this change. He motivates them to learn modern technology.

He also takes them into confidence that they will be shifted to some other department job and this relaxes them from the fear of losing the job. As a result, the employees do not show resistance to any kind of change.

(5) It Creates Balance in the Organisation:

Sometimes there is a clash between individual and organisational objective. Directing helps to settle down these clashes and creates a balance in the organisation.

On the one hand, a person works in an organisation for the fulfillment of his objectives like higher salary, promotion, etc. On the other hand, the objectives of a company can be to earn higher profits, more market share etc. Managers, through direction, tell employees how they can fulfill their objectives while achieving organisational objectives.

For example, Libra Cosmetics Company Ltd. offers commission to its Sales Manager in addition to the fixed salary. To earn more commission he wants to make more and more sales. In this effort, he recommends for introducing the scheme of “Buy Two, Get One Free”- But higher officials, considering it to be a costly affair, reject the same.

This is a situation of clash between individual and organisational objective. Here rightful direction is needed.

The sales manager by playing the role of director suggests ways to sales representative as to how he can increase sales and thus settles down the clash which subsequently, establishes balance in the organisation. The sales manager can suggest more advertising, better services- after-sales, sales on credit, etc.

Bounded rationality

Bounded rationality is the idea that when individuals make decisions, their rationality is limited by the available information, the tractability of the decision problem, the cognitive limitations of their minds, and the time available to make the decision. Decision-makers in this view act as satisficers, seeking a satisfactory solution rather than an optimal one. Herbert A. Simon proposed bounded rationality as an alternative basis for the mathematical modeling of decision-making, as used in economics, political science and related disciplines. It complements "rationality as optimization", which views decision-making as a fully rational process of finding an optimal choice given the information available.^[1] Simon used the analogy of a pair of scissors, where one blade represents "cognitive limitations" of actual humans and the other the "structures of the environment", illustrating how minds compensate for limited resources by exploiting known structural regularity in the environment.^[1]

Some models of human behavior in the social sciences assume that humans can be reasonably approximated or described as "rational" entities (see for example rational choice theory, or Downs Political Agency Models).^[2] Many economics models assume that people are on average rational, and can in large enough quantities be approximated to act according to their preferences. The concept of bounded rationality revises this assumption to account for the fact that perfectly rational decisions are often not feasible in practice because of the intractability of natural decision problems and the finite computational resources available for making them.

Span of management/ span of control

Span of management means the number of people managed efficiently by a single officer in an organization. This is also called span of management, span of authority, span of supervision, span of authority, span of responsibility or levels of organization. This principle is based on the principle of relationship.

Span of control refers to the maximum numbers effectively supervised by a single individual. The number of members may be increased or decreased according to the nature of work done by the subordinate or the ability of the supervision. In the administration area, under one executive, nearly four of five subordinates may work. The span of control enables the smooth functioning of the organization.

The term ‘span’ literally means the space the between two supports of a structure, e.g. the space between two pillars of a bridge. The space between two pillars should be neither too large nor to small. If it is too large, the bridge may collapse and if is too small, it will enhance its cost. When this word is applied to management, it refers to the number of subordinates a manager or a supervisor can supervise, manage or control effectively and effectively.

Therefore, span of supervision refer to the optimum number of subordinates that a manager or supervisor can manage or control effectively.

Accordingly to Mr.Spriegal “ Span of control means the number of people reporting directly to an authority. The principle of span of control impulse that no single executive should have more people looking to him for guidance and leadership than he can reasonably be exacted to serve.’’

An organization is characterized by the presence of a number of levels and departments. But more the levels are created more will be the administrative cost due to additional staff required and more will be the difficulty to be encountered in communication and controlling.

This is basically the problem of deciding the number of subordinates to report directly to each manager. According to this principle there is a limit of the number of subordinates that each managers can effectively supervise.

Basically there are two types of span of management –

1. Narrow span of management – It leads to many level in heresy system in organization situation. Narrow span also effect employees moral adversely.

2. Wide span of management – Wide spans of management leads to flat organization in which manager have a developing skill and experience of knowledge.

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Programmed and non-programmed decisions:

Programmed decisions are concerned with the problems of repetitive nature or routine type matters.

A standard procedure is followed for tackling such problems. These decisions are taken generally by lower level managers. Decisions of this type may pertain to e.g. purchase of raw material, granting leave to an employee and supply of goods and implements to the employees, etc. Non-programmed decisions relate to difficult situations for which there is no easy solution.

These matters are very important for the organisation. For example, opening of a new branch of the organisation or a large number of employees absenting from the organisation or introducing new product in the market, etc., are the decisions which are normally taken at the higher level.

2. Routine and strategic decisions:

Routine decisions are related to the general functioning of the organisation. They do not require much evaluation and analysis and can be taken quickly. Ample powers are delegated to lower ranks to take these decisions within the broad policy structure of the organisation.

Strategic decisions are important which affect objectives, organisational goals and other important policy matters. These decisions usually involve huge investments or funds. These are non-repetitive in nature and are taken after careful analysis and evaluation of many alternatives. These decisions are taken at the higher level of management.

3. Tactical (Policy) and operational decisions:

Decisions pertaining to various policy matters of the organisation are policy decisions. These are taken by the top management and have long term impact on the functioning of the concern. For example, decisions regarding location of plant, volume of production and channels of distribution (Tactical) policies, etc. are policy decisions. Operating decisions relate to day-to-day functioning or operations of business. Middle and lower level managers take these decisions.

An example may be taken to distinguish these decisions. Decisions concerning payment of bonus to employees are a policy decision. On the other hand if bonus is to be given to the employees, ^r calculation of bonus in respect of each employee is an operating decision.

4. Organisational and personal decisions:

When an individual takes decision as an executive in the official capacity, it is known as organisational decision. If decision is taken by the executive in the personal capacity (thereby affecting his personal life), it is known as personal decision.

Sometimes these decisions may affect functioning of the organisation also. For example, if an executive leaves the organisation, it may affect the organisation. The authority of taking organizational decisions may be delegated, whereas personal decisions cannot be delegated.

5. Major and minor decisions:

Another classification of decisions is major and minor. Decision pertaining to purchase of new factory premises is a major decision. Major decisions are taken by top management. Purchase of office stationery is a minor decision which can be taken by office superintendent.

6. Individual and group decisions:

When the decision is taken by a single individual, it is known as individual decision. Usually routine type decisions are taken by individuals within the broad policy framework of the organisation. Group decisions are taken by group of individuals constituted in the form of a standing committee. Generally very important and pertinent matters for the organisation are referred to this committee. The main aim in taking group decisions is the involvement of maximum number of individuals in the process of decision- making.

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Fundamental Of Management (UNIT II)