Organization structure is the result of organizing process. An organizational structure is the formal framework by which job tasks are divided, grouped, and coordinated. It is an established pattern of relationships among the components of the organization. It shows the vertical flow of responsibility, authority and accountability, and the main line of communication. When managers develop or change an organization's structure, they are engaged in organization design, a process that involves decision about five key elements which are described below.
(1) Work Specialization
Work specialization describes the degree to which tasks in an organization are divided into separate jobs. An entire job is not done by one individual but instead broken down into steps, and a different person completes each step. It creates simplified tasks that can learned and completed relatively quickly.
(2) Departmentalization
Once jobs have been divided through work specialization, they have to be grouped back together so that common tasks can be coordinated. The basic by which jobs are grouped together is called departmentalization. Every organization will have its own specific way of classifying and grouping work activities.
(3) Chain of Command
The chain of command is the formal channel that defines the authority, responsibility, and communication relationship from top to bottom in an organizational. It clarifies who reports to whom.
(4) Span of Control
Since the early days of industrialization, managers worried about the number of people and departments one could effectively handle. Span of control determines the number of levels and managers in an organization. The number of employees who report to a manager determines his span of control.
(5) Authority
Once managers establish a span of control, they must decide how much authority individuals should have to do their jobs. Authority is the right to make decisions. Authority can be centralized or decentralized. Centralization describes the degree to which decision making is concentrated at a single point in the organization.
Tuesday, April 20, 2010
APPROACHES TO ORGANIZATION
For a long time organizing has meant designing organization structures. There are a number of ways to describe organizational design as well as a number of ways to conceptualize the historical development of organizational design. However, approaches to organization can be presented in the form of classical approach, behavioral approach, and contingency approach.
(1) Classical Approach
The classical approach to organization design refers to ideas that were expressed in the early 1900s. These ideas propose that certain principles of organization should guide managers who are attempting to design organizational structure.
Under classical approach Max Weber's Bureaucracy Theory is considered to be very important. Bureaucracy was the ideal system wherein positions and tasks were clearly defined, division of labor was precise and clear, objectives were explicit, and a clear chain of command was maintained.
(2) Behavioral Approach
A second approach to organization design is the behavioral approach, which evolved from the human relations movement. The behavioral approach recognized the weakness and limitations of the mechanistic characteristics of classical approach. Behavioral approaches of organization design reflect the social and psychological implications of organizational life. Two behavioral models of organizing are :
(a) Socio-technical System
(b) Likert's System 4 Approach
(3) Contingency Approach
An alternative view, termed the contingency approach, is based on the situational factors. Situational factors play a role in determining the best organizing design for any particular circumstance. The researchers and practitioners who have contributed to the ideas of contingency design have suggested a number of factors or variable influence the design decision. Following are the factors that affects the Contingency Approach:
(a) Technology
Technology is the conversation processes used to transform inputs into outputs.There are three basic forms of technology:
(1) Unit or Small Batch Production
(2) Mass or Large Batch Production
(3) Process Production
(b) Environment
The environment approach is the latest and most widely accepted view of organization. It emphasizes that the structure of an organization is the function of the environment within which it operates.
(c) Organizational Size
The size of an organization affects its design. Organizational size is determined by the total number of full-time or full-time equivalent employees. A team of researchers at the University of Aston, England, yielded a number of basic generalizations.
(d) Organizational Life Cycle
Size of the organization is not always constant. Many organizations progress through a four-stage organizational life cycle. The first stage is the birth, second is the youth, third stage is midlife ans the final stage is characterized as maturity.
(1) Classical Approach
The classical approach to organization design refers to ideas that were expressed in the early 1900s. These ideas propose that certain principles of organization should guide managers who are attempting to design organizational structure.
Under classical approach Max Weber's Bureaucracy Theory is considered to be very important. Bureaucracy was the ideal system wherein positions and tasks were clearly defined, division of labor was precise and clear, objectives were explicit, and a clear chain of command was maintained.
(2) Behavioral Approach
A second approach to organization design is the behavioral approach, which evolved from the human relations movement. The behavioral approach recognized the weakness and limitations of the mechanistic characteristics of classical approach. Behavioral approaches of organization design reflect the social and psychological implications of organizational life. Two behavioral models of organizing are :
(a) Socio-technical System
(b) Likert's System 4 Approach
(3) Contingency Approach
An alternative view, termed the contingency approach, is based on the situational factors. Situational factors play a role in determining the best organizing design for any particular circumstance. The researchers and practitioners who have contributed to the ideas of contingency design have suggested a number of factors or variable influence the design decision. Following are the factors that affects the Contingency Approach:
(a) Technology
Technology is the conversation processes used to transform inputs into outputs.There are three basic forms of technology:
(1) Unit or Small Batch Production
(2) Mass or Large Batch Production
(3) Process Production
(b) Environment
The environment approach is the latest and most widely accepted view of organization. It emphasizes that the structure of an organization is the function of the environment within which it operates.
(c) Organizational Size
The size of an organization affects its design. Organizational size is determined by the total number of full-time or full-time equivalent employees. A team of researchers at the University of Aston, England, yielded a number of basic generalizations.
(d) Organizational Life Cycle
Size of the organization is not always constant. Many organizations progress through a four-stage organizational life cycle. The first stage is the birth, second is the youth, third stage is midlife ans the final stage is characterized as maturity.
Thursday, April 15, 2010
PRINCIPLES OF ORGANIZING
Organizing is one of the major functions of management. The success or failure of the organization depends upon sound and efficient organizational structure. Hence, there is a need to follow certain principles of organizing to formulate and develop sound and efficient organization. These principles are as follows.
(1) Unity of Objectives
The goals of the organization influence the organization structure. Hence, the goals and objectives must be clearly defined for the entire organization, for each department and even for each position in the organization structure. If there is contradiction among the various levels of objectives, then entire goals of the organization cannot be achieved. There must be unity of objectives so that all efforts can be concerned on the set goals.
(2)Specialization
The total task in an organization should be divided in such a manner that every person is confined to a single job. This leads to specialization. An employee repeatedly performing a specific single job becomes an expert in that job. The work assigned should be according to his abilities and aptitude. Then he can work with greater economy and efficiency.
(3) Span of Control
Span of control represents a numerical limit of subordinates to be supervised or controlled by a manager. As there is a limit to the number of subordinates that can be supervised effectively. However, the exact number of subordinates will vary depending upon the nature of job, competence of the manger, quality of subordinates etc.
(4) Exception
Each manager should make all decisions within the limitation of delegated authority. However, only exceptionally complex matters should be referred to the higher levels for their decision. This will enable the executives at higher levels to devote time to more important and crucial issue.
(5)Scalar Principle
This principle sometimes known as the ''chain of command''. It is unbroken line of authority from the top level to the bottom of an organization. It makes clear about who will work under whom. The chain of command (scalar chain) should be short and clear which makes decision making and communication more effective.
(6) Unity of Command
The principle of command suggests that an employee should have one and only one boss. Each subordinate should have only one superior whose command he has to be obey. Directions from several superiors may result in confusion, chaos, conflict.
(7) Delegation of Authority
Proper authority should be delegated at all levels of management. The authority delegated should be equal to responsibility so as to enable each manager to accomplish the task assigned to him.
(8) Responsibility
According to this principle, the responsibility of all employees should be made clear. The superior should not be allowed to avoid responsibility by delegating authority to his subordinates.
(9) Authority
Authority is the tool by which a manager is able to accomplish the desired goals. Hence, the authority of each manager should be clearly defined and it should be equal to responsibility. In the absence of adequate authority, responsibility leads to frustration and ineffective performance.
(10)Efficiency
The efficiency of an organization is measured through the ability of achieving the predetermined goals at minimum coat. The organization structure should enable accomplishment of organizational goals. Hence, it should ensure optimum utilization of all resources.
(11) Simplicity
The organizational structure should be simple with minimum numbers of levels so that each member can understand his duties and authority relationships. An organization with few levels in organization means difficulty of communication and coordination.
(12) Flexibility
The organization structure should be adaptable to changing environment and needs of the organization. For this organization structure should be flexible. It should permit replacement without dislocation and disruption of the basic design.
(13) Balance
The principle of balance should be followed while organizing structure. There should be a reasonable balance in the size of various departments and between centralization and decentralization.
(14) Unity of Direction
There should be one objectives and one plan for a group of activities having the same objectives. There should be one official for each group of the same activity. By this there will be unity of direction. This facilities verification and coordination of activities.
(1) Unity of Objectives
The goals of the organization influence the organization structure. Hence, the goals and objectives must be clearly defined for the entire organization, for each department and even for each position in the organization structure. If there is contradiction among the various levels of objectives, then entire goals of the organization cannot be achieved. There must be unity of objectives so that all efforts can be concerned on the set goals.
(2)Specialization
The total task in an organization should be divided in such a manner that every person is confined to a single job. This leads to specialization. An employee repeatedly performing a specific single job becomes an expert in that job. The work assigned should be according to his abilities and aptitude. Then he can work with greater economy and efficiency.
(3) Span of Control
Span of control represents a numerical limit of subordinates to be supervised or controlled by a manager. As there is a limit to the number of subordinates that can be supervised effectively. However, the exact number of subordinates will vary depending upon the nature of job, competence of the manger, quality of subordinates etc.
(4) Exception
Each manager should make all decisions within the limitation of delegated authority. However, only exceptionally complex matters should be referred to the higher levels for their decision. This will enable the executives at higher levels to devote time to more important and crucial issue.
(5)Scalar Principle
This principle sometimes known as the ''chain of command''. It is unbroken line of authority from the top level to the bottom of an organization. It makes clear about who will work under whom. The chain of command (scalar chain) should be short and clear which makes decision making and communication more effective.
(6) Unity of Command
The principle of command suggests that an employee should have one and only one boss. Each subordinate should have only one superior whose command he has to be obey. Directions from several superiors may result in confusion, chaos, conflict.
(7) Delegation of Authority
Proper authority should be delegated at all levels of management. The authority delegated should be equal to responsibility so as to enable each manager to accomplish the task assigned to him.
(8) Responsibility
According to this principle, the responsibility of all employees should be made clear. The superior should not be allowed to avoid responsibility by delegating authority to his subordinates.
(9) Authority
Authority is the tool by which a manager is able to accomplish the desired goals. Hence, the authority of each manager should be clearly defined and it should be equal to responsibility. In the absence of adequate authority, responsibility leads to frustration and ineffective performance.
(10)Efficiency
The efficiency of an organization is measured through the ability of achieving the predetermined goals at minimum coat. The organization structure should enable accomplishment of organizational goals. Hence, it should ensure optimum utilization of all resources.
(11) Simplicity
The organizational structure should be simple with minimum numbers of levels so that each member can understand his duties and authority relationships. An organization with few levels in organization means difficulty of communication and coordination.
(12) Flexibility
The organization structure should be adaptable to changing environment and needs of the organization. For this organization structure should be flexible. It should permit replacement without dislocation and disruption of the basic design.
(13) Balance
The principle of balance should be followed while organizing structure. There should be a reasonable balance in the size of various departments and between centralization and decentralization.
(14) Unity of Direction
There should be one objectives and one plan for a group of activities having the same objectives. There should be one official for each group of the same activity. By this there will be unity of direction. This facilities verification and coordination of activities.
SIGNIFICANCE OR IMPORTANCE OF ORGANIZING
A sound organizing facilitates administration, promotes specialization, encourages growth, and stimulates creativity. It can contribute to the success of an organization. Hence, the significance of organizing may be discussed as below:
(1) Efficient Administration: Organizing is an important and the only tool to achieve enterprise goals. A sound organizing helps the management in many ways. It defines various activities and their authority relationships in the organizational structure. It can avoid confusion and delays as well as duplication of work and overlapping of effort. It is the mechanism by which management directs, controls, and coordinates the various activities in the enterprise.
(2) Optimum Use of Human Resources: Sound organizing ensures that every individual is placed on the job for which he is best suited. Such matching of jobs and individuals helps in better use of human talent. It also provides the benefits or specialization, which results in economy of operations and reduction in costs.
(3) Growth and Diversification: A sound organizing contributes to the growth and diversification of the enterprise organization, management can multiply its strength and undertake more activities. That is why many small firms have growth and become big.
(4) Optimum Use of New Technology: A sound organizing is flexible. It has the capacity of absorbing changes in the environment. Hence,it provides for optimum use of technological improvements.
(5) Coordination and Communication: Organizing is an important means of creating coordination and communication among different departments of the enterprise. Different jobs and positions are welded together by structural relationship. It also specifies the channels of communication among different members of the enterprise.
(6) Training and Development: A sound organizing provides a good scope for the development of managerial ability through proper delegation of authority and decentralization. It provides responsibility, sufficient freedom to the supervision and creative thinking in different levels. By this practice, managers are trained, developed and tested for assuming greater responsibilities in the future.
(7) Productivity and Job Satisfaction: A sound organizing is based on democratic and participative management. Hence, the entire organizational environment is favorable for productivity and job satisfaction.
(1) Efficient Administration: Organizing is an important and the only tool to achieve enterprise goals. A sound organizing helps the management in many ways. It defines various activities and their authority relationships in the organizational structure. It can avoid confusion and delays as well as duplication of work and overlapping of effort. It is the mechanism by which management directs, controls, and coordinates the various activities in the enterprise.
(2) Optimum Use of Human Resources: Sound organizing ensures that every individual is placed on the job for which he is best suited. Such matching of jobs and individuals helps in better use of human talent. It also provides the benefits or specialization, which results in economy of operations and reduction in costs.
(3) Growth and Diversification: A sound organizing contributes to the growth and diversification of the enterprise organization, management can multiply its strength and undertake more activities. That is why many small firms have growth and become big.
(4) Optimum Use of New Technology: A sound organizing is flexible. It has the capacity of absorbing changes in the environment. Hence,it provides for optimum use of technological improvements.
(5) Coordination and Communication: Organizing is an important means of creating coordination and communication among different departments of the enterprise. Different jobs and positions are welded together by structural relationship. It also specifies the channels of communication among different members of the enterprise.
(6) Training and Development: A sound organizing provides a good scope for the development of managerial ability through proper delegation of authority and decentralization. It provides responsibility, sufficient freedom to the supervision and creative thinking in different levels. By this practice, managers are trained, developed and tested for assuming greater responsibilities in the future.
(7) Productivity and Job Satisfaction: A sound organizing is based on democratic and participative management. Hence, the entire organizational environment is favorable for productivity and job satisfaction.
MEANING AND CONCEPT OF ORGANIZING
The term organizing means different things to different people. It is used widely to mean a structure of relationship, a process, a group of people, and a function of management. Organizing is the basic function of management. By organizing, a manager achieves organizational goals. Organization as a process integrates and coordinates the efforts of human, financial, technology and other resources. As a group of people organizing contributes their efforts towards attainment of common goals.
Once a manager has set goals and developed a workable plan, the next management function is to organize people and other resources necessary to carry out the plan. The organizing function creates a structure of task and authority relationships. It also involves assigning activities, dividing work into specific jobs and tasks, and specifying who has the authority to accomplish certain tasks. Another major aspect of organizing is grouping activities into departments or some other logical subdivision. In essence organizing is the process of creating organizational structure that enables the organization to function effectively as a cohesive whole.
According to Griffin, ''Organizing involves determining how activities and resources are to be grouped''.
In the words of Robbins and Coulter,'' Organizing involves the process of determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made.
From the above discussion, it makes clear that organization involves: identification and grouping of work, defining responsibility, delegation of authority, establishment of structural relationships, and coordination of interrelated activities.
Organizing is the process of creating organizational structure. Organizing consists of five basic elements. These are work specialization, departmentalization, chain of command, span of control and authority.
Once a manager has set goals and developed a workable plan, the next management function is to organize people and other resources necessary to carry out the plan. The organizing function creates a structure of task and authority relationships. It also involves assigning activities, dividing work into specific jobs and tasks, and specifying who has the authority to accomplish certain tasks. Another major aspect of organizing is grouping activities into departments or some other logical subdivision. In essence organizing is the process of creating organizational structure that enables the organization to function effectively as a cohesive whole.
According to Griffin, ''Organizing involves determining how activities and resources are to be grouped''.
In the words of Robbins and Coulter,'' Organizing involves the process of determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made.
From the above discussion, it makes clear that organization involves: identification and grouping of work, defining responsibility, delegation of authority, establishment of structural relationships, and coordination of interrelated activities.
Organizing is the process of creating organizational structure. Organizing consists of five basic elements. These are work specialization, departmentalization, chain of command, span of control and authority.
Tuesday, April 13, 2010
QUANTITATIVE TECHNIQUES FOR DECISION MAKING
Decision making basically is problem solving. The increasing complexity of organization problem requires the discovering and applying of improved quantitative techniques/tools for the evaluation of decision alternatives. Every alternative solution has favorable as well as unfavorable consequences, which should be analyzed and compared against one another or against a decision criteria such as desired rate of return, sales volume, etc. A number of quantitative techniques have been developed to help the decision-maker in evaluating alternatives. The most commonly used quantitative techniques are discussed below:
(1) Operation Research
Operation research is the application of scientific or mathematical methods to the analysis and evaluation of alternative solution to a problem situation. It consists of bringing together available data on a specific problem, processing these data, and obtaining quantitative report of various potential courses of action. Mathematical models are then constructed. An operations research model is a simplified representation of a problem, incorporating only its crucial elements. Hence, decision-maker obtains data in choosing the solutions which best satisfies the goals.
(2)Payoff Matrix
A payoff matrix is a statistical tool of decision making. It provides a method of computing outcomes of alternatives available to decision-maker. A payoff matrix depicts the probable value of each of the decision alternatives and the probabilities of their occurrence. A probability is the degree of likelihood that a particular event will occur. Probabilities range in value from 0(Zero-no chance of occurrence) to 1.00(certain occurrence).
(3)Decision Tree
A decision tree is a graphic representation of the sequential decisions and events that constitute decision making. The graphical model consists of tree like structure with branches to represent the possible event combinations. Relative values for the predicted outcomes of each decision are evaluated and taken into account. The outcomes that has the highest desirable end value is the course to follows. From a decision point the decision tree links a number of possible actions and possible events by means of straight lines.
(4) Simulation
Simulation is the process of experimentation with a model of same real system or situation in order to gain understanding or solve a problem in the real world. A simulation model is usually applied to evaluate alternative actions and determine which action probably would be most effective in the real situation. It has been used for analyzing the effects of organizational change, waiting line problems, job-shop scheduling and model changes in assembly line operations.
(1) Operation Research
Operation research is the application of scientific or mathematical methods to the analysis and evaluation of alternative solution to a problem situation. It consists of bringing together available data on a specific problem, processing these data, and obtaining quantitative report of various potential courses of action. Mathematical models are then constructed. An operations research model is a simplified representation of a problem, incorporating only its crucial elements. Hence, decision-maker obtains data in choosing the solutions which best satisfies the goals.
(2)Payoff Matrix
A payoff matrix is a statistical tool of decision making. It provides a method of computing outcomes of alternatives available to decision-maker. A payoff matrix depicts the probable value of each of the decision alternatives and the probabilities of their occurrence. A probability is the degree of likelihood that a particular event will occur. Probabilities range in value from 0(Zero-no chance of occurrence) to 1.00(certain occurrence).
(3)Decision Tree
A decision tree is a graphic representation of the sequential decisions and events that constitute decision making. The graphical model consists of tree like structure with branches to represent the possible event combinations. Relative values for the predicted outcomes of each decision are evaluated and taken into account. The outcomes that has the highest desirable end value is the course to follows. From a decision point the decision tree links a number of possible actions and possible events by means of straight lines.
(4) Simulation
Simulation is the process of experimentation with a model of same real system or situation in order to gain understanding or solve a problem in the real world. A simulation model is usually applied to evaluate alternative actions and determine which action probably would be most effective in the real situation. It has been used for analyzing the effects of organizational change, waiting line problems, job-shop scheduling and model changes in assembly line operations.
Thursday, April 8, 2010
TECHNIQUES FOR IMPROVING GROUP DECISION MAKING
In large and complex organizations most of the basic and strategic decisions are made bu group of managers rather than individuals. It seems safe to say that in many instances group decision making in preferable than individual decision making. Decisions relating to the determination of organization goals, formulation of plans, strategies, and policies fall under this category. Group decision making has become more wide prevalent during the past few decades because organizational problems have become so complex which requires a variety of specialized and abilities that no one person can handle effectively. Following are some recent techniques for improving decision making:
(1) Brainstorming
In many situations, groups are expected to produce creative or imaginative solutions to organizational problems. In such instances brainstorming has often been found to enhance the creative output of the group. Brainstorming is a useful technique for generating ideas about possible causes of problems, and about potential solutions to problems, once they have been identified. The objectives of brainstorming is to generate lots of ideas on a particular subject.
(2) Delphi Technique
The Delphi technique is a systematic means to obtain consensus from a group or panel of experts. The panel does not meet as a committee to discuss, or debate. In this technique participants are asked to give their ideas, suggestions, and views on the decisional problem. All responses are transcribed into a single document. Then the results are sent back to the panel members and again their reactions to others views, ideas, and suggestions are collected. The names of the participants are kept anonymous. It helps to evoke each participants unbiased opinion by preventing the influences of group dynamics. A panel coordinator contacts each participant usually by a mail questionnaire.
(3) The Nominal Group Technique(NGT)
A manager who must take a decision about an important issue sometimes needs to know what alternatives are available and how people would react to them.A technique called the nominal group technique has been developed to fit this situation.Basically, NGT is structured group meeting that proceeds as follows: a group of individuals(7 to 10) sit round a table but do not speak to one another. The problem is presented to them, and they write their reactions, ideas, suggestions, and views on a sheet of paper. After this process is over, structured sharing of ideas takes place. Each person around the table presents his ideas. A person designated as recorder writes the ideas of various members on a blackboard. At the end of it, there is a list of ideas open for discussion.The next stage involves independent voting in which each participant selects priorities by ranking or voting. The final group decision is the pooled outcome of the individual vote.
(1) Brainstorming
In many situations, groups are expected to produce creative or imaginative solutions to organizational problems. In such instances brainstorming has often been found to enhance the creative output of the group. Brainstorming is a useful technique for generating ideas about possible causes of problems, and about potential solutions to problems, once they have been identified. The objectives of brainstorming is to generate lots of ideas on a particular subject.
(2) Delphi Technique
The Delphi technique is a systematic means to obtain consensus from a group or panel of experts. The panel does not meet as a committee to discuss, or debate. In this technique participants are asked to give their ideas, suggestions, and views on the decisional problem. All responses are transcribed into a single document. Then the results are sent back to the panel members and again their reactions to others views, ideas, and suggestions are collected. The names of the participants are kept anonymous. It helps to evoke each participants unbiased opinion by preventing the influences of group dynamics. A panel coordinator contacts each participant usually by a mail questionnaire.
(3) The Nominal Group Technique(NGT)
A manager who must take a decision about an important issue sometimes needs to know what alternatives are available and how people would react to them.A technique called the nominal group technique has been developed to fit this situation.Basically, NGT is structured group meeting that proceeds as follows: a group of individuals(7 to 10) sit round a table but do not speak to one another. The problem is presented to them, and they write their reactions, ideas, suggestions, and views on a sheet of paper. After this process is over, structured sharing of ideas takes place. Each person around the table presents his ideas. A person designated as recorder writes the ideas of various members on a blackboard. At the end of it, there is a list of ideas open for discussion.The next stage involves independent voting in which each participant selects priorities by ranking or voting. The final group decision is the pooled outcome of the individual vote.
ADVANTAGES AND DIS-ADVANTAGES OF GOOD DECISION MAKING
In most organizations today, important decisions are made by groups rather than by individuals. Group decisions result when several people contribute to a final decision. Group decision making is a collective way of making decisions. It is often used in complex and important situations. Group decision making offers several advantages over the individual decision. The advantages are as follows:
(1) Provide More Information: A group provides a more knowledge and information to the problems. It brings a diversity of experience and perspectives to the decision process.
(2) Generate More Alternatives: Groups have a greater amount and diversity of information than an individual. Hence, they are able to generate more alternatives that reflect their diverse perspectives.
(3) Quality of the Decision: The quality of the decision might be higher because of the combined wisdom of group members. Group members evaluate each others thinking, so major errors are likely to be avoided. Decisions tend to be more creative solutions to the problems.
(4) Increase Acceptance and Commitment: Group decision making is helpful in gaining acceptance and commitment. Participation increases acceptance and satisfaction. People who participate in making a decision will often be more committed to the implementation.
(5)Increase Legitimacy: The group decision making process is consistent with democratic ideals, and decisions made by groups may be perceived as more legitimate than decisions made unilaterally by one person.
Group decision making also has some notable disadvantages. They are as follows:
(1) Time Consuming and Costly: The group decision making process tends to be time consuming and costly. Putting a group together almost always take more time to reach a solution. The result may also be compromises that do not really solve the problem.
(2)Minority Domination: Members of the group are never perfectly equal. They may differ in rank, experience, and knowledge about the problems. This inequality creates the opportunity for one or more members to dominate others. There might be some personalities which may dominate the group.
(3) Pressure to Conform: In group decision making group pressure is present for conformity. Group members withhold may result in disruptive behaviors. It undermines critical thinking in the group and harms the quality of the decision.
(4) Ambiguous Responsibility: In an individual decision, it is clear who is responsible. But in a group decision, the responsibility of any single member is diluted.
(1) Provide More Information: A group provides a more knowledge and information to the problems. It brings a diversity of experience and perspectives to the decision process.
(2) Generate More Alternatives: Groups have a greater amount and diversity of information than an individual. Hence, they are able to generate more alternatives that reflect their diverse perspectives.
(3) Quality of the Decision: The quality of the decision might be higher because of the combined wisdom of group members. Group members evaluate each others thinking, so major errors are likely to be avoided. Decisions tend to be more creative solutions to the problems.
(4) Increase Acceptance and Commitment: Group decision making is helpful in gaining acceptance and commitment. Participation increases acceptance and satisfaction. People who participate in making a decision will often be more committed to the implementation.
(5)Increase Legitimacy: The group decision making process is consistent with democratic ideals, and decisions made by groups may be perceived as more legitimate than decisions made unilaterally by one person.
Group decision making also has some notable disadvantages. They are as follows:
(1) Time Consuming and Costly: The group decision making process tends to be time consuming and costly. Putting a group together almost always take more time to reach a solution. The result may also be compromises that do not really solve the problem.
(2)Minority Domination: Members of the group are never perfectly equal. They may differ in rank, experience, and knowledge about the problems. This inequality creates the opportunity for one or more members to dominate others. There might be some personalities which may dominate the group.
(3) Pressure to Conform: In group decision making group pressure is present for conformity. Group members withhold may result in disruptive behaviors. It undermines critical thinking in the group and harms the quality of the decision.
(4) Ambiguous Responsibility: In an individual decision, it is clear who is responsible. But in a group decision, the responsibility of any single member is diluted.
Wednesday, April 7, 2010
STEPS OR PROCESS OF DECISION MAKING
Managers have to make decisions whether they are simple or complex. Every decision is an outcome of a dynamic process, which is influenced by multiple forces. In order to make good decisions managers should follow a sequential set of steps. Various authors of management have described different steps in the process of decision making. According to Griffins the rational process of decision making follow the following six steps procedure.
(1) Recognize and Define the Decision Situation
The first step in the decision making process is to recognize that a decision is needed. The decision making process is initiated by the awareness of a problem. A manager must recognize the problem sufficient time and should define the problem precisely. The manager must develop a complete understanding of the problem, its causes and its relationships to other factors.
(2) Identifying Appropriate Alternatives
Once the decision situation has been effectively defined the second step is the identification of alternative courses of action. A problem can be solved in many ways. All possible ways should be identified. The decision maker should not jump on the first feasible alternative to solve the problem quickly. The manner must seek creative solutions and also recognize that various constraints often limit the alternatives.
(3) Evaluate Each Alternative
After the various alternatives are identified the next step is to analyze and evaluate each alternative. It is important to establish some common framework to evaluate each alternative to assure consistency and reliability. The manager must evaluate all the alternatives chosen one-by-one. The alternatives must be evaluate from each every sector.
(4) Select the Best Alternative
After evaluating all the alternatives, the manager must select a best alternative among all. Choosing the best alternative is the real crux of decision making. The best alternative is that which contributes maximum to the organizational goals. However, the manager selects the alternative that demonstrates the highest combined levels of feasibility, unsatisfactoriness,and affordable consequences.
(5) Implement the Selected Alternative
After selecting the best alternative the management takes necessary steps to implement it. Managers must also consider people's resistance to change when implementing change. They should anticipate potential resistance at various stages of the implementation process. Thus, all concerned parties should be well communicated and their full cooperation for the implementation should be obtained.
(6) Evaluate the Results and Follow-Up
The implementation of the decision should be constantly monitored and evaluated. Managers must determine the critical events to be measured, where and how they are to be measured, and how the measurements are to be evaluated. If the management feels that the decision taken is not yielding the desired results, necessary changes should be made in the decision or its implementation.
(1) Recognize and Define the Decision Situation
The first step in the decision making process is to recognize that a decision is needed. The decision making process is initiated by the awareness of a problem. A manager must recognize the problem sufficient time and should define the problem precisely. The manager must develop a complete understanding of the problem, its causes and its relationships to other factors.
(2) Identifying Appropriate Alternatives
Once the decision situation has been effectively defined the second step is the identification of alternative courses of action. A problem can be solved in many ways. All possible ways should be identified. The decision maker should not jump on the first feasible alternative to solve the problem quickly. The manner must seek creative solutions and also recognize that various constraints often limit the alternatives.
(3) Evaluate Each Alternative
After the various alternatives are identified the next step is to analyze and evaluate each alternative. It is important to establish some common framework to evaluate each alternative to assure consistency and reliability. The manager must evaluate all the alternatives chosen one-by-one. The alternatives must be evaluate from each every sector.
(4) Select the Best Alternative
After evaluating all the alternatives, the manager must select a best alternative among all. Choosing the best alternative is the real crux of decision making. The best alternative is that which contributes maximum to the organizational goals. However, the manager selects the alternative that demonstrates the highest combined levels of feasibility, unsatisfactoriness,and affordable consequences.
(5) Implement the Selected Alternative
After selecting the best alternative the management takes necessary steps to implement it. Managers must also consider people's resistance to change when implementing change. They should anticipate potential resistance at various stages of the implementation process. Thus, all concerned parties should be well communicated and their full cooperation for the implementation should be obtained.
(6) Evaluate the Results and Follow-Up
The implementation of the decision should be constantly monitored and evaluated. Managers must determine the critical events to be measured, where and how they are to be measured, and how the measurements are to be evaluated. If the management feels that the decision taken is not yielding the desired results, necessary changes should be made in the decision or its implementation.
METHODS OR TECHNIQUES FOR CRISIS HANDLING
Organizations operate in a dynamic environment. Environmental forces greatly affect organizations. Environmental change and complexity increases organization uncertainty. Environmental uncertainty and turbulence occur occasionally with no warning at all. Crisis is the result of environmental turbulence.
A crisis can be defined as an unexpected problem that will lead to chaos and disaster if not resolved quickly. It is an unplanned, non-recurring and dramatic situation. The effect of crisis can be devastating to an organization especially if managers are unprepared to deal with. Good planning can reduce the number of such unexpected crisis, but no amount of planning can completely eliminate the occurrence of critical situations.
The ability to handle crisis problems is essential if a manner is to progress up the organizational hierarchy. The first step in successful crisis handling is the rapid isolation and identification of the problems permeating the crisis situation. The second step is the need for quick action to respond to the crisis as follows:
(1) Prepare for crisis by collecting as much knowledge as possible about the crisis situation.
(2) Establish a network of reliable information sources and be prepared to use them whenever necessary.
(3) Obtain and analyze information quickly to confirm the crisis situation.
(4) Implement immediate action on those absolutely urgent aspects of the problem situation.
(5) Do not try to avoid responsibility. Face the problem directly even in the face of risk and incomplete knowledge.
(6) Always learn from experience-what can be done to prevent a recurrence in the future.
Managers must respond quickly to crisis situations. They require adequate delegation of authority to deal with. Organizations can constitute a crisis team deal with such crisis. Experts also can be called to handle organization crisis. Flexibility in organizational design is needed to handle crisis situation successfully.
A crisis can be defined as an unexpected problem that will lead to chaos and disaster if not resolved quickly. It is an unplanned, non-recurring and dramatic situation. The effect of crisis can be devastating to an organization especially if managers are unprepared to deal with. Good planning can reduce the number of such unexpected crisis, but no amount of planning can completely eliminate the occurrence of critical situations.
The ability to handle crisis problems is essential if a manner is to progress up the organizational hierarchy. The first step in successful crisis handling is the rapid isolation and identification of the problems permeating the crisis situation. The second step is the need for quick action to respond to the crisis as follows:
(1) Prepare for crisis by collecting as much knowledge as possible about the crisis situation.
(2) Establish a network of reliable information sources and be prepared to use them whenever necessary.
(3) Obtain and analyze information quickly to confirm the crisis situation.
(4) Implement immediate action on those absolutely urgent aspects of the problem situation.
(5) Do not try to avoid responsibility. Face the problem directly even in the face of risk and incomplete knowledge.
(6) Always learn from experience-what can be done to prevent a recurrence in the future.
Managers must respond quickly to crisis situations. They require adequate delegation of authority to deal with. Organizations can constitute a crisis team deal with such crisis. Experts also can be called to handle organization crisis. Flexibility in organizational design is needed to handle crisis situation successfully.
CONCEPT, TYPES AND PROBLEM SOLVING STRATEGIES
A problem is a discrepancy between ideal and actual condition. It is the process of identifying the gap between the desired situation and the actual situation, and initiating corrective action. The basic purpose of making a decision is to solve a problem. Decision making begins with the awareness that a problem exists. Identifying problems requires considerable skill. Managers may become aware of a problem by noticing one of the following indicators.
(1) Deviation form Past Performance: If performance figures are down, a problem almost surely exists. Common problem indicators are declining sales, increased employee turnover, and higher scrap rates.
(2) Deviation from the plan: When the result hoped to attain with a plan are not forthcoming, there is a problem. This type of problem occurs when future performance deviates from the plan.
(3) Criticism from outsiders: Managers sometimes become aware of problems by hearing complaints from individuals and group. These sources of criticism include customers, government regulations, and shareholders.
(4) Competitive threats: The presence of competition can create problems for an organization.
Types and Problems Solving Strategies
Managers will face different types of problems and make decisions to solve the problems as they do their jobs. Robbins and Coulter have classified problems into two types-well structured problems and poorly-structured problems.
(1) Well-Structured Problems: Well-Structured problems are straight forward. The goal of the decision maker is clear, the problem familiar, and information about the problem is easily defined. Such problems are routine and repetitive. They align closely with the assumptions of perfect rationality. The manager uses a programmed decision. Hence, procedure, rule or policy is used to solve well-structured problems.
(2) Poorly-Structured Problems: Many organizational situations involve poorly-structured problems. They are new, unusual, and the information is incomplete. When problems are poorly structured, managers must rely on non-programmed decision making which are unique and non-recurring. Poorly structured problems require a customers made response through non-programmed decision making.
(1) Deviation form Past Performance: If performance figures are down, a problem almost surely exists. Common problem indicators are declining sales, increased employee turnover, and higher scrap rates.
(2) Deviation from the plan: When the result hoped to attain with a plan are not forthcoming, there is a problem. This type of problem occurs when future performance deviates from the plan.
(3) Criticism from outsiders: Managers sometimes become aware of problems by hearing complaints from individuals and group. These sources of criticism include customers, government regulations, and shareholders.
(4) Competitive threats: The presence of competition can create problems for an organization.
Types and Problems Solving Strategies
Managers will face different types of problems and make decisions to solve the problems as they do their jobs. Robbins and Coulter have classified problems into two types-well structured problems and poorly-structured problems.
(1) Well-Structured Problems: Well-Structured problems are straight forward. The goal of the decision maker is clear, the problem familiar, and information about the problem is easily defined. Such problems are routine and repetitive. They align closely with the assumptions of perfect rationality. The manager uses a programmed decision. Hence, procedure, rule or policy is used to solve well-structured problems.
(2) Poorly-Structured Problems: Many organizational situations involve poorly-structured problems. They are new, unusual, and the information is incomplete. When problems are poorly structured, managers must rely on non-programmed decision making which are unique and non-recurring. Poorly structured problems require a customers made response through non-programmed decision making.
DECISION MAKING CONDITIONS
Everyday a manager has to make hundreds of decisions in the organization. Managers do not function in a theoretical world but they function within the reality that many thongs are not known. There are three conditions that managers may face as they make decisions. They are (1) Certainty, (2) Risk, and (3) Uncertainty.
(1) Certainty
A state of certainty exists only when the managers knows the available alternatives as well as the conditions and consequences of those actions. There is little ambiguity and relatively low possibility of making a bad decision. It assumes that manager has all the necessary information about the situation. Hence, decisions under certainty means a perfectly accurate decision will be made time after time. Of course, decision making under certainty is rare.
(2) Risk
A state of risk exists when the manager is aware of all the alternatives, but is unaware of their consequences. The decision under risk usually involves clear and precise goals and good information, but future outcomes of the alternatives are just not known to a degree of certainty. A risk situation requires the use of probability estimates. The ability to estimate may be due to experience, incomplete but reliable information, or intelligence. Statistical analysis can be applied to the calculation or probabilities for success or failure.
(3) Uncertainty
In today's complex environment most significant decisions are made under a state of uncertainty where there is no awareness of all the alternatives and also the outcomes,even for the known alternatives. To make effective decisions, managers must require as much relevant information as possible. Such decisions require creativity and the willingness to take a chance in the face of such uncertainties. In such situations, managers do not even have enough information to calculate probabilities and degrees of risk. So, statistical analysis is of no use. Hence, managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision making. Intuition, judgment, and experience always play major roles in the decision making process under conditions of uncertainty.
Hence, In conclusion, we can say that greater the amount of reliable information, the more likely the manager will make a good decision. Hence, manager should make sure that the right information is available at the right time.
(1) Certainty
A state of certainty exists only when the managers knows the available alternatives as well as the conditions and consequences of those actions. There is little ambiguity and relatively low possibility of making a bad decision. It assumes that manager has all the necessary information about the situation. Hence, decisions under certainty means a perfectly accurate decision will be made time after time. Of course, decision making under certainty is rare.
(2) Risk
A state of risk exists when the manager is aware of all the alternatives, but is unaware of their consequences. The decision under risk usually involves clear and precise goals and good information, but future outcomes of the alternatives are just not known to a degree of certainty. A risk situation requires the use of probability estimates. The ability to estimate may be due to experience, incomplete but reliable information, or intelligence. Statistical analysis can be applied to the calculation or probabilities for success or failure.
(3) Uncertainty
In today's complex environment most significant decisions are made under a state of uncertainty where there is no awareness of all the alternatives and also the outcomes,even for the known alternatives. To make effective decisions, managers must require as much relevant information as possible. Such decisions require creativity and the willingness to take a chance in the face of such uncertainties. In such situations, managers do not even have enough information to calculate probabilities and degrees of risk. So, statistical analysis is of no use. Hence, managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision making. Intuition, judgment, and experience always play major roles in the decision making process under conditions of uncertainty.
Hence, In conclusion, we can say that greater the amount of reliable information, the more likely the manager will make a good decision. Hence, manager should make sure that the right information is available at the right time.
Saturday, April 3, 2010
DECISION MAKING STYLES
Decision making style proposes people differ along two dimensions in the way they approach decision making. The first is an individuals way of thinking. Some people tend to be rational and logical and others tend to be creative and intuitive. The other dimension describes an individuals tolerance for ambiguity. Some people have a low tolerance for ambiguity and others have high level of ambiguity. Based on way of thinking and tolerance for ambiguity decision making styles can be of four types.
(1) Directive Style: Managers using directive style have low tolerance for ambiguity and are rational in their way of thinking. They are efficient and logical. They make fast decisions with minimal information and assessing few alternatives.
(2) Analytic Style: Managers with an analytic style have high tolerance for ambiguity than do directive type and are rational in their way of thinking. They need more information and consider more alternatives. They are characterized as careful decision makers with the ability to cope with unique situations.
(3) Conceptual Style: Managers with conceptual style have high tolerance for ambiguity and an intuitive way of thinking. They tend to be very broad to their outlook and consider many alternatives. They are at finding creative solutions to problems.
(4) Behavioral Style: Managers with behavioral style have low tolerance for ambiguity and an intuitive way of thinking. They work well with others. They are receptive to suggestions from others. They often use meetings to communicate although they try to avoid conflict. They want to be accepted by others.
Some managers will rely almost exclusively on their dominant style, while others are flexible and can shift their style depending on the situation. Some may take their time carefully weighing alternatives and considering riskier options whereas others may be more concerned about getting suggestions from others before making decisions. This doesn't make one approach better than the other. It is just their decision-making styles, which are different.
(1) Directive Style: Managers using directive style have low tolerance for ambiguity and are rational in their way of thinking. They are efficient and logical. They make fast decisions with minimal information and assessing few alternatives.
(2) Analytic Style: Managers with an analytic style have high tolerance for ambiguity than do directive type and are rational in their way of thinking. They need more information and consider more alternatives. They are characterized as careful decision makers with the ability to cope with unique situations.
(3) Conceptual Style: Managers with conceptual style have high tolerance for ambiguity and an intuitive way of thinking. They tend to be very broad to their outlook and consider many alternatives. They are at finding creative solutions to problems.
(4) Behavioral Style: Managers with behavioral style have low tolerance for ambiguity and an intuitive way of thinking. They work well with others. They are receptive to suggestions from others. They often use meetings to communicate although they try to avoid conflict. They want to be accepted by others.
Some managers will rely almost exclusively on their dominant style, while others are flexible and can shift their style depending on the situation. Some may take their time carefully weighing alternatives and considering riskier options whereas others may be more concerned about getting suggestions from others before making decisions. This doesn't make one approach better than the other. It is just their decision-making styles, which are different.
TYPES OF DECISION
Different problems require different type of decision making. Decisions are taken at various levels of management. Such decisions are of several types. They can be classified into the following categories:
(1) Programmed and Non-programmed Decisions
Programmed decisions are the decision managers make in response to repetitive and routine problems. If a particular situation occurs often, managers will develop a routine procedure or policy for handling it. Decisions are said to be programmed if they are repetitive and routine, and a definite procedure has been developed for determining when the decision should be made and what actions should be taken.
Non-programmed decisions are just reverse to programmed decisions. They are relatively unstructured and occur much less often. Decisions are termed non-programmed when they are made for novel, nonrecurring and unstructured problems. They often deal with complex issues that demand data gathering, forecasting, and strategic planning. Such a decision would involve issues of strategy, resource commitment, and long term investments.
(2) Organizational and Personal Decisions
If an executive takes any decision in his official capacity, that decision is called organizational decision. Such decisions affect the functioning of the organization directly. The authority for taking such decision is clearly defined in the organizational structure. Such authority can be delegated.
Personal decisions are decisions, which are taken by an individual in his personal capacity. Such decisions are concerned with him. They do not affect the organization directly but affect from the organization in his personal decision. The power to make personal decisions cannot be delegated.
(3) Individual and Group Decisions
Decisions can also be classified on the basis of persons involved in the decision making process. When an individual takes a decision, it is known as individual decision. Individual decisions are generally taken in small organization. Individual decisions are also taken in big organization if they are of routine nature.
When a number of persons collectively take the decision it is known as group decision such a decision taken by the Board of Directors, Committees, etc. Such decisions are generally taken in big organizations, which follow the participative style of management. Such group decisions are well balanced but they involve delay and make it difficult to fix responsibility of such decisions.
(1) Programmed and Non-programmed Decisions
Programmed decisions are the decision managers make in response to repetitive and routine problems. If a particular situation occurs often, managers will develop a routine procedure or policy for handling it. Decisions are said to be programmed if they are repetitive and routine, and a definite procedure has been developed for determining when the decision should be made and what actions should be taken.
Non-programmed decisions are just reverse to programmed decisions. They are relatively unstructured and occur much less often. Decisions are termed non-programmed when they are made for novel, nonrecurring and unstructured problems. They often deal with complex issues that demand data gathering, forecasting, and strategic planning. Such a decision would involve issues of strategy, resource commitment, and long term investments.
(2) Organizational and Personal Decisions
If an executive takes any decision in his official capacity, that decision is called organizational decision. Such decisions affect the functioning of the organization directly. The authority for taking such decision is clearly defined in the organizational structure. Such authority can be delegated.
Personal decisions are decisions, which are taken by an individual in his personal capacity. Such decisions are concerned with him. They do not affect the organization directly but affect from the organization in his personal decision. The power to make personal decisions cannot be delegated.
(3) Individual and Group Decisions
Decisions can also be classified on the basis of persons involved in the decision making process. When an individual takes a decision, it is known as individual decision. Individual decisions are generally taken in small organization. Individual decisions are also taken in big organization if they are of routine nature.
When a number of persons collectively take the decision it is known as group decision such a decision taken by the Board of Directors, Committees, etc. Such decisions are generally taken in big organizations, which follow the participative style of management. Such group decisions are well balanced but they involve delay and make it difficult to fix responsibility of such decisions.
Friday, April 2, 2010
APPROACHES TO DECISION-MAKING
The decision making process can be explained by three approaches. They are (1) rationality, (2) Bounded rationality, and (3) intuition.
(1) Rationality
Rationality is a prescriptive approach that tells managers how they should make decisions. Managerial decision making is assumed to be rational. Effective decision making requires a rational choice of a course of action. Rationality can be defined as the ability to follow a systematical, logical, thorough approach in decision making. A decision maker who is rational would be fully objective and logical. He would define a problem carefully and would have a clear and specific goal. The steps in the decision making process would consistently lead towards selecting the alternative that maximizes that goal.
(2) Bounded Rationality
Herbert A Simon was one of the first people to recognize that decisions are not always made with rationality and logic. His view of decision making now called administrative model. It is a normative approach, which describes how decisions are actually made. Managers are often faced with uncertainty and non-programmed decision making situation.
(3) Intuition
Our intuition can assist decision making, particularly when ther is not enough time for a more organized analysis. Intuition is the personal characterstics that influences decision making. Intuition is the ability to know when a problem or opportunity exists and to select the best course of action
(1) Rationality
Rationality is a prescriptive approach that tells managers how they should make decisions. Managerial decision making is assumed to be rational. Effective decision making requires a rational choice of a course of action. Rationality can be defined as the ability to follow a systematical, logical, thorough approach in decision making. A decision maker who is rational would be fully objective and logical. He would define a problem carefully and would have a clear and specific goal. The steps in the decision making process would consistently lead towards selecting the alternative that maximizes that goal.
(2) Bounded Rationality
Herbert A Simon was one of the first people to recognize that decisions are not always made with rationality and logic. His view of decision making now called administrative model. It is a normative approach, which describes how decisions are actually made. Managers are often faced with uncertainty and non-programmed decision making situation.
(3) Intuition
Our intuition can assist decision making, particularly when ther is not enough time for a more organized analysis. Intuition is the personal characterstics that influences decision making. Intuition is the ability to know when a problem or opportunity exists and to select the best course of action
Tuesday, March 30, 2010
IMPORTANCE OF DECISION-MAKING
Decision making is a mental process of selecting one best alternative for doing a work. Hence, the importance of decision making is everywhere. Recognizing the importance of decision making. H.Simon has called the process of managing as a decision making. In fact, management is always a decision making process. The following points indicate the importance of decision making in an organization.
(1) Indispensable Component
Decision making is an indispensable component of management process. It permeates all management functions and covers every part of the organization. Every manager is engaged in decision making for what is to be done, who will do it, how it is to be done, why it is to be done, and where it is to be done.
(2) Pervasive Function
Decision making is the pervasive function of managers aimed at achieving organizational goals. All managerial functions such as planning, organizing, leading, and controlling as well as all functional areas such as production, sales, marketing, and finance involve decision making. The function of decision making is performed by managers at all levels of managerial hierarchy. Thus, management is essentially a decision making process.
(3) Selecting the Best Alternative
A decision making is basically a choice making process. It is necessary in every organizational because there are many alternative courses of action to most situations. The decision maker evaluates various pros and cons of every alternative and selects the most acceptable alternative.
(4) Evaluation of Managerial Performance
Managers spend a great deal of their time in decision making. Making good decisions is not important but also essential to managerial success. The quality of the decisions is the yardstick of managers' effectiveness. Hence, managerial performance is evaluated on the basis of number and importance of good effective decisions.
(1) Indispensable Component
Decision making is an indispensable component of management process. It permeates all management functions and covers every part of the organization. Every manager is engaged in decision making for what is to be done, who will do it, how it is to be done, why it is to be done, and where it is to be done.
(2) Pervasive Function
Decision making is the pervasive function of managers aimed at achieving organizational goals. All managerial functions such as planning, organizing, leading, and controlling as well as all functional areas such as production, sales, marketing, and finance involve decision making. The function of decision making is performed by managers at all levels of managerial hierarchy. Thus, management is essentially a decision making process.
(3) Selecting the Best Alternative
A decision making is basically a choice making process. It is necessary in every organizational because there are many alternative courses of action to most situations. The decision maker evaluates various pros and cons of every alternative and selects the most acceptable alternative.
(4) Evaluation of Managerial Performance
Managers spend a great deal of their time in decision making. Making good decisions is not important but also essential to managerial success. The quality of the decisions is the yardstick of managers' effectiveness. Hence, managerial performance is evaluated on the basis of number and importance of good effective decisions.
MEANING AND NATURE OF DECISION-MAKING
Managers at all levels of organizations make decisions. A decision may be defined as a choice made from available alternatives. It represents a course of action about what must or must not be done. A decision is the product of decision making process. A decision occurs in response to problems or opportunities. It means to come to a conclusion of a problem.
Decision making is the act of making a choice. It can be defined as the process of selecting a course of action from among alternatives to achieve a desired goal or to solve a problem. Everyday a manager has to take hundreds of decisions consciously or unconsciously in the organizations. Managers must reach decisions about objectives and plans for their organizational units. They must decide how to direct, how to organize and how to control. The success of organization depends upon the ability to make good decisions and implement their decisions.
From the above description, the following nature and features of decision making emerge.
(1) It is a selective process in which only the best possible alternative out of available alternatives is chosen.
(2) It is a human and rational process involving the application of intellectual abilities to a great extent.
(3) Decision making is a dynamic process. It involves time dimensional and time lag.
(4) It is a goal-oriented process to achieve certain desired goals or objectives.
(5) Decision making implies freedom to the decision maker regarding the final choice.
(6) It is a continuous process. From the start of the day to the close, a manager has to take a number of decisions.
(7) Decisions may be positive for doing a thing or may be negative for not doing a thing.
Decision making is the act of making a choice. It can be defined as the process of selecting a course of action from among alternatives to achieve a desired goal or to solve a problem. Everyday a manager has to take hundreds of decisions consciously or unconsciously in the organizations. Managers must reach decisions about objectives and plans for their organizational units. They must decide how to direct, how to organize and how to control. The success of organization depends upon the ability to make good decisions and implement their decisions.
From the above description, the following nature and features of decision making emerge.
(1) It is a selective process in which only the best possible alternative out of available alternatives is chosen.
(2) It is a human and rational process involving the application of intellectual abilities to a great extent.
(3) Decision making is a dynamic process. It involves time dimensional and time lag.
(4) It is a goal-oriented process to achieve certain desired goals or objectives.
(5) Decision making implies freedom to the decision maker regarding the final choice.
(6) It is a continuous process. From the start of the day to the close, a manager has to take a number of decisions.
(7) Decisions may be positive for doing a thing or may be negative for not doing a thing.
Monday, March 29, 2010
QUANTITATIVE TOOLS FOR PLANNING
There are a number of quantitative tools that managers can use to enhance the efficiency and effectiveness of planning. The important quantitative tools and techniques for planning are as follows:
(1) Forecasting
Forecasting is an important part of organizational planning. Forecasting is the process of developing assumption about the future. It means estimating future on a systematic basis. Environmental scanning creates the foundation for forecasts, which are predictions of outcomes. Almost every manager makes forecasts of one thing or the other.
To carry out various kinds of forecasting, managers use several different techniques. Time series analysis and causal modeling are two common quantitative techniques.
a. Time-Series Analysis
b. Causal Modeling
(2) Linear Programming
Linear Programming is a procedure for calculating the optimal combination of resources and activities. It is appropriate when there is some objective to met within a set of constraints. It can be used to schedule production, select an optimal portfolio of investment or allocate sales representative to territories.
(3) Break even Analysis
Break even analysis is the procedure that estimates profit and loss figures for different levels of output. It also identifies the point of no profit or no loss. This technique can determine the specific impact on profit as a result of changes in cost, price, and volume. Production cost includes three types of costs: fixed costs, variable costs, and total costs.
(4) Simulations
The word simulate means to copy or to represent. A simulation is a model of a real-world situation that can be manipulated to discover how it functions. It is more useful in very complex situations characterized by diverse constraints and opportunities. The development of sophisticated simulation models may require the expertise of outside specialists or consultants.
(5) PERT
PERT is an acronym for Program Evaluation and Review Technique. A PERT is like a flow chart that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. The purpose of PERT is to develop network of activities and their interrelationships so as to highlight critical time intervals that affect the overall project.
(1) Forecasting
Forecasting is an important part of organizational planning. Forecasting is the process of developing assumption about the future. It means estimating future on a systematic basis. Environmental scanning creates the foundation for forecasts, which are predictions of outcomes. Almost every manager makes forecasts of one thing or the other.
To carry out various kinds of forecasting, managers use several different techniques. Time series analysis and causal modeling are two common quantitative techniques.
a. Time-Series Analysis
b. Causal Modeling
(2) Linear Programming
Linear Programming is a procedure for calculating the optimal combination of resources and activities. It is appropriate when there is some objective to met within a set of constraints. It can be used to schedule production, select an optimal portfolio of investment or allocate sales representative to territories.
(3) Break even Analysis
Break even analysis is the procedure that estimates profit and loss figures for different levels of output. It also identifies the point of no profit or no loss. This technique can determine the specific impact on profit as a result of changes in cost, price, and volume. Production cost includes three types of costs: fixed costs, variable costs, and total costs.
(4) Simulations
The word simulate means to copy or to represent. A simulation is a model of a real-world situation that can be manipulated to discover how it functions. It is more useful in very complex situations characterized by diverse constraints and opportunities. The development of sophisticated simulation models may require the expertise of outside specialists or consultants.
(5) PERT
PERT is an acronym for Program Evaluation and Review Technique. A PERT is like a flow chart that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. The purpose of PERT is to develop network of activities and their interrelationships so as to highlight critical time intervals that affect the overall project.
LIMITATIONS OF PLANNING
Planning plays an important role in directing the organizational activity. Despite of many benefits of panning, there are several limitations or disadvantages of planning. Some are inherent in planning process whereas others are associated with planning techniques and planners themselves. Some of them are as follows:
(1) Lack of Reliable Data: Planning is undertaken on the basis of certain assumptions in the future. The future is unpredictable and uncertain. Hence, future cannot be known accurately because reliable information and data are not available. If reliable data and information are not available for planning it is sure to lose much of it value.
(2) Rigidity: Planning implies strict adherence to predetermined policies, procedures, and programs. This restricts individuals freedom, initiative and desire for creativity. Business is by nature dynamic and the red-tapism created by detailed planning can prove disastrous for an organization.
(3) Time Consuming Process: Planning is a time consuming process. The various steps of planning may consume a lot of time. It is, therefore, unsuitable in those situations where sudden or immediate action is required to meet unexpected contingencies.
(4) Costly Process: Planning is also costly process. Money and effort have to be spent in collecting information, preparing estimates, forecasting and evaluation of alternatives. Services of experts may be necessary to select the best and most economical course of action for the organization. Planning cost may go on increasing if planning becomes more elaborate and formulated due to additional staff, time and proper work.
(5) Rapid Change: Rapid changes in technology, consumer tastes and fashions are further constraints to planning. In a complex and rapidly changing environment planning is more difficult as it adds new problems. In rapidly changing conditions planning activity taken in one period can not be relevant for another period.
(1) Lack of Reliable Data: Planning is undertaken on the basis of certain assumptions in the future. The future is unpredictable and uncertain. Hence, future cannot be known accurately because reliable information and data are not available. If reliable data and information are not available for planning it is sure to lose much of it value.
(2) Rigidity: Planning implies strict adherence to predetermined policies, procedures, and programs. This restricts individuals freedom, initiative and desire for creativity. Business is by nature dynamic and the red-tapism created by detailed planning can prove disastrous for an organization.
(3) Time Consuming Process: Planning is a time consuming process. The various steps of planning may consume a lot of time. It is, therefore, unsuitable in those situations where sudden or immediate action is required to meet unexpected contingencies.
(4) Costly Process: Planning is also costly process. Money and effort have to be spent in collecting information, preparing estimates, forecasting and evaluation of alternatives. Services of experts may be necessary to select the best and most economical course of action for the organization. Planning cost may go on increasing if planning becomes more elaborate and formulated due to additional staff, time and proper work.
(5) Rapid Change: Rapid changes in technology, consumer tastes and fashions are further constraints to planning. In a complex and rapidly changing environment planning is more difficult as it adds new problems. In rapidly changing conditions planning activity taken in one period can not be relevant for another period.
SWOT ANALYSIS
A strategic plan or mission for the future begins with an assessment of the current situation in which the organization exists. A systematic, thorough analysis requires attention to four things: strengths and weakness of the organization's resources(Internal environment) and opportunities and threats of the external environment. Such an analysis is known as SWOT ANALYSIS. SWOT is an acronym for Strength, Weakness, Opportunities, and Threats, which are described below:
1. Strengths
Organizational strengths are usually derived from its financial, human, and other resources that enable an organization to conceive and implement its strategies. Different strategies require different organizational strengths. A distinctive competence is a strength possessed by only a small number of competing organizations. Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performance.
2. Weaknesses
Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. In practice organizations have a difficult time focusing on weakness in part because organization members are often reluctant to admit that they may not posses all the skill and capabilities needed. Organizations that fail to recognize or overcome their weakness are likely to suffer competitive disadvantages.
3. Opportunities
The organization's external environment presents both threats and opportunities. Organizational opportunities are ares that may generate higher performance. It has the potential to increase the organization's strength.
4. Threats
Organizational threats are ares that make it difficult for an organization to perform at a higher level. It has the potential to hurt or even destroy an organization.
1. Strengths
Organizational strengths are usually derived from its financial, human, and other resources that enable an organization to conceive and implement its strategies. Different strategies require different organizational strengths. A distinctive competence is a strength possessed by only a small number of competing organizations. Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performance.
2. Weaknesses
Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. In practice organizations have a difficult time focusing on weakness in part because organization members are often reluctant to admit that they may not posses all the skill and capabilities needed. Organizations that fail to recognize or overcome their weakness are likely to suffer competitive disadvantages.
3. Opportunities
The organization's external environment presents both threats and opportunities. Organizational opportunities are ares that may generate higher performance. It has the potential to increase the organization's strength.
4. Threats
Organizational threats are ares that make it difficult for an organization to perform at a higher level. It has the potential to hurt or even destroy an organization.
ENVIRONMENTAL SCANNING
Scanning is generally defined as acquiring information. In the context of organizational planning environmental scanning involves monitoring changes and developments in the environment that have potential impact on the organization. It is essential for formulating plans. According to Azhar Kazmi '' The process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business is known as environmental scanning.
In essence, environmental scanning is the process of actively monitoring the environment through activities like such as observation and reading. Extensive environmental scanning is likely to reveal issues and concerns that could affect an organization's current or planned activities. Research has shown that companies with advanced environmental scanning systems increased their profits and revenue growth.
The task of environment scanning is normally given to executive management, although managers from all levels may be involved in this activity. Through scanning broad strategies, long term policies, plans of actions, and operating programs are formulated.
Environmental scanning is absolutely necessary for strategy formulation. As the environment is complex environmental scanning should be cautiously dealt. Various authors have mentioned the methods and techniques for environmental scanning variously. Jain(1981) has proposed following scanning methods:
1. Extrapolation Methods
2. Historical Analogy
3. Intuitive Reasoning
4. Scenario Building
5. Cross Impact Matrices
6. Morphological analysis
7. Network Methods
8. Missing Link Approach
9. Model Building
10. Delphi Techniques
In essence, environmental scanning is the process of actively monitoring the environment through activities like such as observation and reading. Extensive environmental scanning is likely to reveal issues and concerns that could affect an organization's current or planned activities. Research has shown that companies with advanced environmental scanning systems increased their profits and revenue growth.
The task of environment scanning is normally given to executive management, although managers from all levels may be involved in this activity. Through scanning broad strategies, long term policies, plans of actions, and operating programs are formulated.
Environmental scanning is absolutely necessary for strategy formulation. As the environment is complex environmental scanning should be cautiously dealt. Various authors have mentioned the methods and techniques for environmental scanning variously. Jain(1981) has proposed following scanning methods:
1. Extrapolation Methods
2. Historical Analogy
3. Intuitive Reasoning
4. Scenario Building
5. Cross Impact Matrices
6. Morphological analysis
7. Network Methods
8. Missing Link Approach
9. Model Building
10. Delphi Techniques
STRATEGIC PLANNING
Planning had all along been a part and parcel of the business activity. All organizations, irrespective of size, had been resorting to some kind of planning. But over time, the planing task was becoming increasingly complex. A variety of new factors entered the scene at various points of time, posing new challenges in running the organization. Uncertainty,instability, and changing environment became the rule rather than exception. This in turn made new demands on the planning front. This led to the evolution of strategic planning.
The term 'strategy' has been adapted from war and is used in business to reflect the broad overall mission and goals of an organization. It refers to organization's overall plan for dealing with and existing in its environment. A strategy is a unified, comprehensive and integrated plan designed to ensure that the basic goals of the organization are achieved. It's main purpose is to search sustainable competitive advantage for the organization.
Strategic planning refers to the formulation of basic long term organizational mission, purposes, and objectives; policies and programs to achieve them; and the methods needed to achieve organizational ends. It deals with the top management function of formulating the growth strategies of the organization.
Strategic planning is the process of examining the organization's environment, establishing a mission, setting desired goals and objectives, and developing an operating plan to achieve them. In high-performance organizations strategic planning never ends. Either the organization is formulating a new strategy or it's implementing an existing one, assessing progress, and revising processes as needed. The final outcomes of strategic planning are statements of vision, mission, strategy, and policy.
The term 'strategy' has been adapted from war and is used in business to reflect the broad overall mission and goals of an organization. It refers to organization's overall plan for dealing with and existing in its environment. A strategy is a unified, comprehensive and integrated plan designed to ensure that the basic goals of the organization are achieved. It's main purpose is to search sustainable competitive advantage for the organization.
Strategic planning refers to the formulation of basic long term organizational mission, purposes, and objectives; policies and programs to achieve them; and the methods needed to achieve organizational ends. It deals with the top management function of formulating the growth strategies of the organization.
Strategic planning is the process of examining the organization's environment, establishing a mission, setting desired goals and objectives, and developing an operating plan to achieve them. In high-performance organizations strategic planning never ends. Either the organization is formulating a new strategy or it's implementing an existing one, assessing progress, and revising processes as needed. The final outcomes of strategic planning are statements of vision, mission, strategy, and policy.
Saturday, March 27, 2010
STEPS IN PLANNING
Planning is a process and therefore it embraces a number of steps to be taken. In planning various facts are collected and analyzed and best out of all is chosen and adopted.Following are the steps which should be followed in procedures of planning.
(1) Awareness of Opportunities
Strictly, this is not the part of the planning as it precedes the actual planning process. However, an awareness of opportunities in the environment is important to reveal the strength and weakness of the organization and understand the problems. Setting realistic objectives depends upon this awareness.
(2) Setting Objectives or Goals
The second step is to set objectives/goals for the whole organization as well as for each department. Objectives must be specific and clear. They specify the expected results and emphasis is placed. They give direction for planning.
(3) Developing Planning Premises
Premises are planning assumptions about the environment in which the plan is to be carried out. Thhus, it is a forecast of sales volume, production cost, product line, competition, availability of labor, wage structure, tax rates and political and social conditions. Thus, planning premises are vital to the success of planning as they supply pertinent facts and information relating to future.
(4) Determining Alternative Courses
The fourth step is to search and identify the alternative courses of action. However, all the alternatives cannot be considered for detail analysis. Hence, the planner must usually make a preliminary examination to discover the most fruitful possibilities.
(5) Evaluating Alternative Courses
After identifying alternative courses the next step it to evaluate their strong and weak points with reference to cost, risk, profitability, capital requirement,etc.Hence, for a best plan all the alternatives should be evaluate deeply.
(6) Selecting a Best Alternative
After evaluating the various alternatives, the most suitable alternative is selected keeping in mind the organizational goals/objectives. Occasionally, an evaluation may disclose that two or more are advisable. This is the real point of decision making.
(7) Formulating Derivative Plans
When a best alternative is selected a basic plan is formulated. After this various plans are derived for each department and segments of the organization to support the basic plan.
(8) Budgeting the Plans
After plans are set, the final step is to prepare budgets for each derivative plan. The overall budgets of the organization represent the sum total of income and expenses. If done well budgets become an important standard against which planning progress can be measured.
(1) Awareness of Opportunities
Strictly, this is not the part of the planning as it precedes the actual planning process. However, an awareness of opportunities in the environment is important to reveal the strength and weakness of the organization and understand the problems. Setting realistic objectives depends upon this awareness.
(2) Setting Objectives or Goals
The second step is to set objectives/goals for the whole organization as well as for each department. Objectives must be specific and clear. They specify the expected results and emphasis is placed. They give direction for planning.
(3) Developing Planning Premises
Premises are planning assumptions about the environment in which the plan is to be carried out. Thhus, it is a forecast of sales volume, production cost, product line, competition, availability of labor, wage structure, tax rates and political and social conditions. Thus, planning premises are vital to the success of planning as they supply pertinent facts and information relating to future.
(4) Determining Alternative Courses
The fourth step is to search and identify the alternative courses of action. However, all the alternatives cannot be considered for detail analysis. Hence, the planner must usually make a preliminary examination to discover the most fruitful possibilities.
(5) Evaluating Alternative Courses
After identifying alternative courses the next step it to evaluate their strong and weak points with reference to cost, risk, profitability, capital requirement,etc.Hence, for a best plan all the alternatives should be evaluate deeply.
(6) Selecting a Best Alternative
After evaluating the various alternatives, the most suitable alternative is selected keeping in mind the organizational goals/objectives. Occasionally, an evaluation may disclose that two or more are advisable. This is the real point of decision making.
(7) Formulating Derivative Plans
When a best alternative is selected a basic plan is formulated. After this various plans are derived for each department and segments of the organization to support the basic plan.
(8) Budgeting the Plans
After plans are set, the final step is to prepare budgets for each derivative plan. The overall budgets of the organization represent the sum total of income and expenses. If done well budgets become an important standard against which planning progress can be measured.
PROCESS OF PLANNING
All organizations engage in planning activities, but no two organizations plan in exactly the same way. Following are the steps of planning process that many organizations attempt to follow:
(1) Assessing the Organization's Environment
A plan for the future begins with an assessment of the current situation in which the organization exists. A systematic, thorough analysis requires attention to four things: internal strengths and weakness, and external opportunities and threats. Such as analysis is often refereed to as SWOT analysis.
(2) Establishing Mission Statement
After assessing the environment, managers first establishment organization's mission. The organizational mission is a long term vision of what the organization is trying to become. It provides the reason for existence. The mission outlines the organization's purpose, premises, values, and directions. Mission statement answers the question ''what is the organization;s purpose?''for employees, customers, and other constituents. Hence, for effective organizations, the mission statement must be customer-focused, achievable, motivational, and specific.
(3) Goals and Plans
Once the mission statement is formalized, the planning process becomes a parallel flow of goals and plans. The mission statement sets the stage for strategic goals and strategic plans. Top management sets strategic goals. Thy focus on broad, general issues. Strategic goals are achieved through strategic plans. Strategic plans are general plans for allocation of resources, priorities, and necessary actions to reach strategic goals.
Strategic goals and plans serve as inputs for developing tactical goals and tactical plans. Tactical goals are set by middle managers. Their focus is on how to ope rationalize actions necessary to achieve the strategic goals.
(1) Assessing the Organization's Environment
A plan for the future begins with an assessment of the current situation in which the organization exists. A systematic, thorough analysis requires attention to four things: internal strengths and weakness, and external opportunities and threats. Such as analysis is often refereed to as SWOT analysis.
(2) Establishing Mission Statement
After assessing the environment, managers first establishment organization's mission. The organizational mission is a long term vision of what the organization is trying to become. It provides the reason for existence. The mission outlines the organization's purpose, premises, values, and directions. Mission statement answers the question ''what is the organization;s purpose?''for employees, customers, and other constituents. Hence, for effective organizations, the mission statement must be customer-focused, achievable, motivational, and specific.
(3) Goals and Plans
Once the mission statement is formalized, the planning process becomes a parallel flow of goals and plans. The mission statement sets the stage for strategic goals and strategic plans. Top management sets strategic goals. Thy focus on broad, general issues. Strategic goals are achieved through strategic plans. Strategic plans are general plans for allocation of resources, priorities, and necessary actions to reach strategic goals.
Strategic goals and plans serve as inputs for developing tactical goals and tactical plans. Tactical goals are set by middle managers. Their focus is on how to ope rationalize actions necessary to achieve the strategic goals.
Thursday, March 25, 2010
METHODS OF PLANNING
All organizations prepare plans. There is no choice whether to plan or not, but the choice lies in the way of planning. Therefore, managers should take precautions in formulating plans more effective so as to realize organizational goals in real terms. Organizations follow two methods of planning:
1. Top-down method
2. Participative method
(1) Top-Down Method: Traditionally planning was done entirely by top level managers who were often assisted by a formal planning department. Planning department consists of planning specialists whose sole responsibility was helping to write various organizational plans. The plans are reviewed and finalized by top managers. Plans developed by top-level managers flowed down through managerial hierarchy much like traditional goal setting. As they flowed down through the hierarchy, plans were tailored to the particular needs of each level.
However, this traditional top-down method of planning is still used by organization. It can be effective only if managers understand the importance of creating a workable, usable document that actually directs and guides organizational members. It should not be a document that looks impressive but is never used.
(2) Participative Method: Another method of planning is Participative Method, in which organizational members are involved in planning. It i true that top level managers must take initiative in planning and they must set strategic goals. But, it should not be considered only the job of the top managers to formulate plans and the subordinate managers to follow them.
In Participative method, plans are not handled down from one level to another. Managers at all levels must participate in the planning process. Plans are developed by organizational members at the various levels and in various work units to meet their specific needs. Top management reviews and managers we given opportunities to contribute to plan particular over which they have authority. This will lead to their commitment, loyality to planning and enthusiasm in implementing plans.
1. Top-down method
2. Participative method
(1) Top-Down Method: Traditionally planning was done entirely by top level managers who were often assisted by a formal planning department. Planning department consists of planning specialists whose sole responsibility was helping to write various organizational plans. The plans are reviewed and finalized by top managers. Plans developed by top-level managers flowed down through managerial hierarchy much like traditional goal setting. As they flowed down through the hierarchy, plans were tailored to the particular needs of each level.
However, this traditional top-down method of planning is still used by organization. It can be effective only if managers understand the importance of creating a workable, usable document that actually directs and guides organizational members. It should not be a document that looks impressive but is never used.
(2) Participative Method: Another method of planning is Participative Method, in which organizational members are involved in planning. It i true that top level managers must take initiative in planning and they must set strategic goals. But, it should not be considered only the job of the top managers to formulate plans and the subordinate managers to follow them.
In Participative method, plans are not handled down from one level to another. Managers at all levels must participate in the planning process. Plans are developed by organizational members at the various levels and in various work units to meet their specific needs. Top management reviews and managers we given opportunities to contribute to plan particular over which they have authority. This will lead to their commitment, loyality to planning and enthusiasm in implementing plans.
TYPES OF PLANNING
Planning begins with a goal or targeted outcome that the organization wishes to achieve. Although the basic process of planning is the same foe every manager, planning can take many forms and styles in practice. The forms and styles of planning are likely to vary from organization to organization. Plans can be classified in a number of ways such as:
1. Strategic Planning
2. Tactical Planning
3. Operational Planning
(1) Strategic Planning
Strategic planning is the overall planning of the organization. Organizations develop strategic plans for the attainment of strategic goals. More precisely, strategic plans is general plan outlining decisions of resource allocation, priorities, and action steps necessary to attain strategic goals. Top management and Board of Directors develop strategic plans. Strategic planning covers the long term and specifies actions to be taken from five to ten years in to the future. Managers that engage in strategic planning tend to work in a high state of uncertainty. The are required to make many assumptions about the threats and opportunities of the future. Due to long term uncertainty strategic planner needs large amount of information especially with regard to the future of the external environment.
(2) Tactical Planning
Tactical planning is developed for achieving tactical goals of the organization and to implement specific parts of a strategic plan. Tactical plans define the actions of major departments that are required in the execution of a strategic plan. Typically, they involve upper and middle level management to develop the tactical actions that are necessary. Compared to strategic plans, tactical plan cover a shorter time frame within the overall scope and timing as set by the strategic plan. Tactical planner deals with less uncertainty than the strategic planner does.
(3) Operational Planning
Operational planning is developed for lower management. Operational plans focus on operational goals to achieve tactical plans. They include how the resources of the organization will be used to help the organization achieve its goals. They identify the major activities required to achieve strategic goals. They cover rather short time frames and serve as the department manager's guide for the day to day operation. Typically, operational plans are stated in specific, quantitative terms related to normal departmental activities.
1. Strategic Planning
2. Tactical Planning
3. Operational Planning
(1) Strategic Planning
Strategic planning is the overall planning of the organization. Organizations develop strategic plans for the attainment of strategic goals. More precisely, strategic plans is general plan outlining decisions of resource allocation, priorities, and action steps necessary to attain strategic goals. Top management and Board of Directors develop strategic plans. Strategic planning covers the long term and specifies actions to be taken from five to ten years in to the future. Managers that engage in strategic planning tend to work in a high state of uncertainty. The are required to make many assumptions about the threats and opportunities of the future. Due to long term uncertainty strategic planner needs large amount of information especially with regard to the future of the external environment.
(2) Tactical Planning
Tactical planning is developed for achieving tactical goals of the organization and to implement specific parts of a strategic plan. Tactical plans define the actions of major departments that are required in the execution of a strategic plan. Typically, they involve upper and middle level management to develop the tactical actions that are necessary. Compared to strategic plans, tactical plan cover a shorter time frame within the overall scope and timing as set by the strategic plan. Tactical planner deals with less uncertainty than the strategic planner does.
(3) Operational Planning
Operational planning is developed for lower management. Operational plans focus on operational goals to achieve tactical plans. They include how the resources of the organization will be used to help the organization achieve its goals. They identify the major activities required to achieve strategic goals. They cover rather short time frames and serve as the department manager's guide for the day to day operation. Typically, operational plans are stated in specific, quantitative terms related to normal departmental activities.
NATURE OF PLANNING
Planning has following nature and characteristics:
(1) Primary Function
Planning is the primary function of management. It precede all other management functions. Without setting the goals to be achieved and line of action to be followed there is no meaning of organizing, leading or controlling the activities of an organization. In fact, all other functions of management largely depend upon planning. It sets all other functions into action. Hence, it is the primary function of management.
(2) Pervasiveness of Planning
Planning is a pervasive activity. Managers at all level of organization perform the planning function. However, nature and scope of planning may differ of various levels of management. Top management looks after strategic planning. The middle and lower management are concerned with administrative planning and operational planning respectively.
(3) Focus on Objectives
A plan must focus on accomplishing certain objectives/goals. It identifies the actions that would lead to the desired objectives quickly and economically. Planning cannot be thought of without objectives.
(4) Future Oriented
Planning is done for the future. It decides in the present what is to be done in future. It is based on forecasting and a plan is a synthesis of forecasts. Thus, planning is forward looking in nature.
(5) Selective Process
In order to achieve a set of objectives, there are a number of alternatives, which are available to an organization. Hence, planning is essentially a process of choosing among alternatives. It is concerned with decision-making relating to (a) what is to be done, (b) how it is to be done, (c) when it is to be done, and (d0 by whom it is to be done.
(6) Intellectual Process
Planning is a mental process, which involves creative thinking and imagination. Managers have to consider various courses of action, go in details the pros and cons of every courses of action and the then finally decide which course of action may suit them best. It is not mere guesswork but involves rational thinking. It requires mental ability to think before acting.
(7) Continuous Process
Planning is a continuous and never ending process of a manager in an organization. Process is a systematic way of doing things. The manager plans on the basis of some assumption, which may not come true in the future. Therefore, he has to go on modifying, revising and adjusting plans in the light of changing environment. A manager cannot plan once for all.
(8) Increases Efficiency
Planning aims to increase the efficiency of the organization at all levels. The guiding principle of a good plan is the maximum output and profit at the minimum cost. In planning, the manager evaluates the alternative on the basis of efficiency. Hence, the concept of efficiency is implicit in planning.
(1) Primary Function
Planning is the primary function of management. It precede all other management functions. Without setting the goals to be achieved and line of action to be followed there is no meaning of organizing, leading or controlling the activities of an organization. In fact, all other functions of management largely depend upon planning. It sets all other functions into action. Hence, it is the primary function of management.
(2) Pervasiveness of Planning
Planning is a pervasive activity. Managers at all level of organization perform the planning function. However, nature and scope of planning may differ of various levels of management. Top management looks after strategic planning. The middle and lower management are concerned with administrative planning and operational planning respectively.
(3) Focus on Objectives
A plan must focus on accomplishing certain objectives/goals. It identifies the actions that would lead to the desired objectives quickly and economically. Planning cannot be thought of without objectives.
(4) Future Oriented
Planning is done for the future. It decides in the present what is to be done in future. It is based on forecasting and a plan is a synthesis of forecasts. Thus, planning is forward looking in nature.
(5) Selective Process
In order to achieve a set of objectives, there are a number of alternatives, which are available to an organization. Hence, planning is essentially a process of choosing among alternatives. It is concerned with decision-making relating to (a) what is to be done, (b) how it is to be done, (c) when it is to be done, and (d0 by whom it is to be done.
(6) Intellectual Process
Planning is a mental process, which involves creative thinking and imagination. Managers have to consider various courses of action, go in details the pros and cons of every courses of action and the then finally decide which course of action may suit them best. It is not mere guesswork but involves rational thinking. It requires mental ability to think before acting.
(7) Continuous Process
Planning is a continuous and never ending process of a manager in an organization. Process is a systematic way of doing things. The manager plans on the basis of some assumption, which may not come true in the future. Therefore, he has to go on modifying, revising and adjusting plans in the light of changing environment. A manager cannot plan once for all.
(8) Increases Efficiency
Planning aims to increase the efficiency of the organization at all levels. The guiding principle of a good plan is the maximum output and profit at the minimum cost. In planning, the manager evaluates the alternative on the basis of efficiency. Hence, the concept of efficiency is implicit in planning.
Wednesday, March 24, 2010
CONCEPT OF PLANNING
Planning is the primary function of management. It means looking ahead and chalking out the future course out the future course of action. planning is concerned with deciding in advance what, when, where, why and how is to be done and who shall do it. Thus, planning is the process of setting goals and choosing the means to achieve those goals. It is also defined as the process of choosing among alternatives. It is thinking before doing. It is a preparatory step for the action that is to follow. Without plans managers cannot know how to organize people and resources effectively.
Simply, Planning is the process by which managers define goals and take necessary steps to ensure that these goals are achieved. Goals imply a desired future state. Planning arises from the recognition that some intervention is needed to bring about a change from the current or present state to some desired or alternative future state. The difference between the present level and the future state is commonly known as strategic gap. It requires time and preparation to bridge this gap.
Planning is a mental process which covers:1.assessment of the future; 2.determination of objectives in the light of future; 3.development of alternative courses of action to achieve such objectives; and 4.selection of the best course of action among these alternatives. Hence, it is blueprint for action. Without planning other functions become more activity producing nothing but chaos.
According to Stephen P. Robins,''Planning is deciding in advance about what to do, how to do it, when to do it, and who is to do it. It provides the ends to be achieved.'' In the words of Griffen, ''Planning means setting an organizational goals and deciding how best to achieve them.''
Simply, Planning is the process by which managers define goals and take necessary steps to ensure that these goals are achieved. Goals imply a desired future state. Planning arises from the recognition that some intervention is needed to bring about a change from the current or present state to some desired or alternative future state. The difference between the present level and the future state is commonly known as strategic gap. It requires time and preparation to bridge this gap.
Planning is a mental process which covers:1.assessment of the future; 2.determination of objectives in the light of future; 3.development of alternative courses of action to achieve such objectives; and 4.selection of the best course of action among these alternatives. Hence, it is blueprint for action. Without planning other functions become more activity producing nothing but chaos.
According to Stephen P. Robins,''Planning is deciding in advance about what to do, how to do it, when to do it, and who is to do it. It provides the ends to be achieved.'' In the words of Griffen, ''Planning means setting an organizational goals and deciding how best to achieve them.''
Monday, March 22, 2010
EMERGING BUSINESS ENVIRONMENT
In studying the business environment, it is desirable to be familiar with our own country's environment. The prevalent economic, socio-culture, political-legal, and technological environment affects the development of trade and industry as well as foreign investors. The elements of environment that affect the establishment and development of organization must also be considered.Hence, emerging business environment also can be divided into four parts:
(1) Economic Environment
The new economic policies and reforms have affected practically all the sectors of the economy. Major shifts have been made in industrial policy, trade policy, privatization policy, labor policy and policies relating to foreign investment. The economic environment consists of economic condition, trade and transmit policy, industrial policy, foreign investment, privatization policy, and fiscal and monetary policies. These elements are:-
(a) Economic Condition
(b) Trade and Transmit Policy
(c) Industrial Policy
(d) Privatization Policy
(e) Fiscal and Monetary Policies
(2) Socio-Culture Environment
Organizations exist in the society. Socio-culture environment is made of demographic, attitude and belief, religion, education, and language, which affect society's basic values, preferences and behaviors. They are influence the organizational decisions. Hence they are listed below:-
(a) Demographic
(b) Attitude and Beliefs
(c) Religion
(d) Education
(e) Language
(3) Political-Legal Environment
The political-legal environment contains those government regulations that define the rules by which business must operate. As mentioned earlier it is important to the manager because (1) it imposes certain legal constraints on the business organization,(2) it establishes a market atmosphere that may be pro-business or anti-business,and (3) it has the potential to provide the ability needed for long term business planning. Hence, the political-legal environment consists of trade policy, industrial policy, privatization policy, etc.Some of its type are listed below:-
(a) Constitution
(b) Political Parties
(c) Administrative Policies
(4) Technological Environment
The technological environment consists of those processes by which organization transforms inputs into outputs. The rapid changes in our society are obviously related to and somehow dependent upon the development of new techniques and new inventions. It provides the knowledge, systems, processes, equipment, and software that faciliate the organization's efficiency and effectiveness. Hence, the modern industrialization is the product of technological development. Its categories are:-
(a) Transfer of Technology
(b) Science and Technology
(1) Economic Environment
The new economic policies and reforms have affected practically all the sectors of the economy. Major shifts have been made in industrial policy, trade policy, privatization policy, labor policy and policies relating to foreign investment. The economic environment consists of economic condition, trade and transmit policy, industrial policy, foreign investment, privatization policy, and fiscal and monetary policies. These elements are:-
(a) Economic Condition
(b) Trade and Transmit Policy
(c) Industrial Policy
(d) Privatization Policy
(e) Fiscal and Monetary Policies
(2) Socio-Culture Environment
Organizations exist in the society. Socio-culture environment is made of demographic, attitude and belief, religion, education, and language, which affect society's basic values, preferences and behaviors. They are influence the organizational decisions. Hence they are listed below:-
(a) Demographic
(b) Attitude and Beliefs
(c) Religion
(d) Education
(e) Language
(3) Political-Legal Environment
The political-legal environment contains those government regulations that define the rules by which business must operate. As mentioned earlier it is important to the manager because (1) it imposes certain legal constraints on the business organization,(2) it establishes a market atmosphere that may be pro-business or anti-business,and (3) it has the potential to provide the ability needed for long term business planning. Hence, the political-legal environment consists of trade policy, industrial policy, privatization policy, etc.Some of its type are listed below:-
(a) Constitution
(b) Political Parties
(c) Administrative Policies
(4) Technological Environment
The technological environment consists of those processes by which organization transforms inputs into outputs. The rapid changes in our society are obviously related to and somehow dependent upon the development of new techniques and new inventions. It provides the knowledge, systems, processes, equipment, and software that faciliate the organization's efficiency and effectiveness. Hence, the modern industrialization is the product of technological development. Its categories are:-
(a) Transfer of Technology
(b) Science and Technology
Sunday, March 21, 2010
CONCEPT OF MANAGEMENT ETHICS
Ethics is an individual's beliefs concerning what is right or wrong, good or bad. It is important to note that ethics are relative not absolute. Ethical behavior is in the eye of the beholder that confirms to generally accepted social norms. Unethicl behavior, then, is behavior that does not conform to generally accepted social norms.
Managerial ethics are the standards of behavior that guide the condect and thinking of managers. They generally occur in the organizational context. Actions of peer managers and top managers as well as organization's culture all contribute to the ethical context of the organization. The importance of ethics increases in proportoirr to the consequences of the outcome of a decision or behavior. A a manager's actions become more consequential for others, the more important are the ethics of that managers. When attemping to decide what is right or wrong, managers can focus on (1)consequences, (2)duties, obligations and principles, and (3) integrity.
(1) Consequences: When attemping to decide what is right or wrong, people can sometimes focus on the consequences of their decision or action. If no one gets hurt, the decision is ethical. Focusing on the consequences, the decision maker is concerned with the utility of the decision.
(2) Duties, Obligation and Principles: Another approach to making an ethical decision is to examine one's duties in making that decision. It is based on universal principles such as honesty, fairness, justice and respect for person and property. Rights for privacy and safety are also important. If a given decision violates one of these universal principles, it is automatically unethical even if nobody gets hurt.
(3) Integrity: Another criterion for determining the ethics of behavior focuses on the character of the person involved in the decision or action. If the person in question has good character and genuine motivation and intentions, he or she is behaving ethically. The decision maker's environment or community helps define integrity.
Managerial ethics are the standards of behavior that guide the condect and thinking of managers. They generally occur in the organizational context. Actions of peer managers and top managers as well as organization's culture all contribute to the ethical context of the organization. The importance of ethics increases in proportoirr to the consequences of the outcome of a decision or behavior. A a manager's actions become more consequential for others, the more important are the ethics of that managers. When attemping to decide what is right or wrong, managers can focus on (1)consequences, (2)duties, obligations and principles, and (3) integrity.
(1) Consequences: When attemping to decide what is right or wrong, people can sometimes focus on the consequences of their decision or action. If no one gets hurt, the decision is ethical. Focusing on the consequences, the decision maker is concerned with the utility of the decision.
(2) Duties, Obligation and Principles: Another approach to making an ethical decision is to examine one's duties in making that decision. It is based on universal principles such as honesty, fairness, justice and respect for person and property. Rights for privacy and safety are also important. If a given decision violates one of these universal principles, it is automatically unethical even if nobody gets hurt.
(3) Integrity: Another criterion for determining the ethics of behavior focuses on the character of the person involved in the decision or action. If the person in question has good character and genuine motivation and intentions, he or she is behaving ethically. The decision maker's environment or community helps define integrity.
SOCIAL RESPONSIBILITY OF BUSINESS
Every business organization operates in the society. It uses society's resources and sells its production to the society and earns profit. Business and society are meant and exist for each other. Without the help of society business cannot be operated. It can exist only if it fulfills its responsibility towards the society in the socially acceptable manner. Hence, fulfilling the responsibility towards society is the social responsibility of business. The idea of social responsibility is that decision-makers are obligated to take actions, which protect and improve the welfare of society as a whole along with their own interests. Every organization must share his prosperity with those members of the society who have helped the business to prosper. The growing power of pressure groups has added importance to social responsibility aspect.
Social responsibility may be defined as the obligation of an organization to protect and enhance society within which the organization operates. Adolfe Berle has defined ''Social responsibility as the management's responsiveness to public consensus''.
There are two opposing views of social responsibility. On the one hand classical view believes that business has only one responsibility-to maximize profits for the shareholders. On the other hand is the socio-economic view, which holds that the responsibility goes beyond making profits to include protecting and improving society.
Social responsibility may be defined as the obligation of an organization to protect and enhance society within which the organization operates. Adolfe Berle has defined ''Social responsibility as the management's responsiveness to public consensus''.
There are two opposing views of social responsibility. On the one hand classical view believes that business has only one responsibility-to maximize profits for the shareholders. On the other hand is the socio-economic view, which holds that the responsibility goes beyond making profits to include protecting and improving society.
Friday, March 19, 2010
TYPES OF ENVIRONMENT-INTERNAL AND EXTERNAL
Every organization needs to be perceived as operating in an environment. Organizations are neither self-sufficient not self-contained. Rather they exchange resources with and dependent upon external environment. External environment can be defined as all the forces and conditions outside the organization that are relevant to its operation and influence the organization. Organizations take inputs(raw materials, money, labor and energy) from the external environment, transform them into products or services, and send back as output to the external environment. The other environment is internal which can be defined as all the forces and conditions within the organization that influences its behavior. Thus, environment can be broadly classified into (1) Internal environment, and (2) External environment.
(1) Internal Environment
Each business organization has an internal environment, which includes all the elements within the organization's boundaries. Strictly speaking they are part of the organization itself. The major components of the internal environment are :
a. Employees
b. Shareholders and Board of Directors
c. Culture
(2) External Environment
According to James Stoner, External environment can be defined as all elements outside an organization that are relevant to its operation. This environmental context becomes more clear if the external environment is further divided into two distinct segments:(1) general environment and (2) task environment.
(a) General Environment
The general environment consists of interrelated forces that can be categorized into four elements:
1. Economic Environment
2. Socio-Culture Environment
3. Political Legal Environment
4. Technological Environment
(b) Task Environment
The task environment puts indirect pressures on business management through the institutional processes of following elements:
1. Customers
2. Suppliers
3. Competitors
4. Financial Institution
5. Government
6. Media
(1) Internal Environment
Each business organization has an internal environment, which includes all the elements within the organization's boundaries. Strictly speaking they are part of the organization itself. The major components of the internal environment are :
a. Employees
b. Shareholders and Board of Directors
c. Culture
(2) External Environment
According to James Stoner, External environment can be defined as all elements outside an organization that are relevant to its operation. This environmental context becomes more clear if the external environment is further divided into two distinct segments:(1) general environment and (2) task environment.
(a) General Environment
The general environment consists of interrelated forces that can be categorized into four elements:
1. Economic Environment
2. Socio-Culture Environment
3. Political Legal Environment
4. Technological Environment
(b) Task Environment
The task environment puts indirect pressures on business management through the institutional processes of following elements:
1. Customers
2. Suppliers
3. Competitors
4. Financial Institution
5. Government
6. Media
CONCEPT OF BUSINESS MANAGEMENT
An organization is a part of society and the business environment has a direct relationship with the policy of the organization. The environment may impose several constraints on the organization as it has a tremendous impact and influence. The organization on the other hand, has very little control over its environment. Therefore, the success of an organization depends to a very large extent on its adaptability to the environment.
Business organizations are neither self-sufficient nor self-contained. They exchange resources with the outside environment and depend on it for their survival. They draw inputs such as raw materials, capital, labor, energy and information from the external environment. They transform inputs into products and services and supply as outputs to the external environment.
Generally, there are two sets of environment in business: internal and external environment, which influences the business policy of an organization. The internal environment is known as controllable factors because the organization has control over these factors. They consists of employees, shareholders and board of directors, and culture. Organization can modify or alter such factors to suit the environment.
The external environment is known as uncontrollable factors because such factors are largely beyond the control of the organization. They consist of economic, socio-culture, political legal,and technological environment. They are uncertain and complex.
The term 'business environment' generally refers to the external environment. It includes factors outside the organization, which can lead to opportunities or threats to the organization. Both internal as well as external environmental factors play an important role in influencing the outcomes of business organization.
Business organizations are neither self-sufficient nor self-contained. They exchange resources with the outside environment and depend on it for their survival. They draw inputs such as raw materials, capital, labor, energy and information from the external environment. They transform inputs into products and services and supply as outputs to the external environment.
Generally, there are two sets of environment in business: internal and external environment, which influences the business policy of an organization. The internal environment is known as controllable factors because the organization has control over these factors. They consists of employees, shareholders and board of directors, and culture. Organization can modify or alter such factors to suit the environment.
The external environment is known as uncontrollable factors because such factors are largely beyond the control of the organization. They consist of economic, socio-culture, political legal,and technological environment. They are uncertain and complex.
The term 'business environment' generally refers to the external environment. It includes factors outside the organization, which can lead to opportunities or threats to the organization. Both internal as well as external environmental factors play an important role in influencing the outcomes of business organization.
CONTINGENCY THEORY OF MANAGEMENT
Howard University professor Paul Lawrence and Jay Lorsch(1967) popularized the term Contingency Theory. The contingency theory was developed by managers, consultants, and researchers who tried to apply the theories and principles of the major schools to real life situation. It is based on the notion that the proper management technique in a given situation depends upon the nature and conditions of that situation. Hence, it is also called the situation approach.
Contingency theory recognizes that all the sub-systems of an organization and environment are interconnected and interrelated. By analyzing their interrelationships help management in finding solutions to specific situation. Different situations demand different solution. The basic idea of the contingency theory is that there is no best way to plan, organize or control. A technique that works in one situation will not necessarily work in all situations. There cannot be universal principles of management appropriate to all situations. The contingency theory seeks to match different situation with different management methods.
According to contingency theory, the correct management practice or managerial behavior in a particular situation and at a particular time depends on a many variables. It is the task of the manager through study and practice to develop a wide range of alternative management behaviors.
At present contingency theory is considered to be the practical approach of management. The major contribution of this theory to management reminds the manager that there is no one best way to do anything in the world of management.This theory seems to hold a great deal of promise for the future development of management theory and practice.
Contingency theory recognizes that all the sub-systems of an organization and environment are interconnected and interrelated. By analyzing their interrelationships help management in finding solutions to specific situation. Different situations demand different solution. The basic idea of the contingency theory is that there is no best way to plan, organize or control. A technique that works in one situation will not necessarily work in all situations. There cannot be universal principles of management appropriate to all situations. The contingency theory seeks to match different situation with different management methods.
According to contingency theory, the correct management practice or managerial behavior in a particular situation and at a particular time depends on a many variables. It is the task of the manager through study and practice to develop a wide range of alternative management behaviors.
At present contingency theory is considered to be the practical approach of management. The major contribution of this theory to management reminds the manager that there is no one best way to do anything in the world of management.This theory seems to hold a great deal of promise for the future development of management theory and practice.
Thursday, March 18, 2010
MANAGEMENT SCIENCE THEORY
Management Science Theory gives a quantitative basis for decision making. It specifically deals with the development of mathematical models to aid in decision making and problem solving. This theory holds that managing is a logical and rationale process, so it can be expressed in terms of mathematical models, Mathematical models are simplified representation of a system, process, or relationships. It is also called 'Operation Research', 'Mathematical School', or 'Quantitative Approach'.Management Science Theory uses quantitative techniques and mathematical models for managing decisions. The techniques commonly used for managerial decisions. The techniques commonly used for managerial decision-making include linear programming, critical path method, program evaluation review technique, games theory,queuing theory ana break-even analysis. This theory focuses on solving technical rather than human behavior problem. It is characterized by:
1.Primary focus on decision making
2.Based on economic decision theory
3.Use of formal mathematical models
4.Frequent use of computers.
The Management Science Theory has made significant contributions by applying the tools of mathematics to the solution of various complex problems of management. The exponents of this theory believe all the phases of management can be expressed in quantitative terms for analysis.It has developed quantitative tools in solving technical problems and forecasting.
1.Primary focus on decision making
2.Based on economic decision theory
3.Use of formal mathematical models
4.Frequent use of computers.
The Management Science Theory has made significant contributions by applying the tools of mathematics to the solution of various complex problems of management. The exponents of this theory believe all the phases of management can be expressed in quantitative terms for analysis.It has developed quantitative tools in solving technical problems and forecasting.
SYSTEM THEORY OF MANAGEMENT
In 1960, a new thought to management appeared which tried to unify the prior theories. This theory is commonly known as 'System Theory'. The System Theory of management owes to origin of the General System Theory developed by Ludwig Von Bertalanhy.
In simple terms a system is a group of interrelated and interdependent part working towards a comman goal. It is a combination of several parts forming a complex whole. System Theory views the organization as a unified, purposeful system composed of interelated parts. It tries to give the manager a way of looking the organization as a whole. System theory tells us that the activity of any part of an organization affects the activity of other parts.
For any organization, the number one objectives is survival. To faciliate survival, a system may be viewed as consisting o four basic elements- inputs, tranformation process, outputs, and feedback.
Inputs are ingredients required to initiate the transfrmation process. They include human, financial, material, and information resources. Transformation process appies technology, operating systems, administrative practices and control techniques in order to produce the output. The output may be products or services, the sale of which creates profits or losses. The action of one element in the model influences other parts of the model. The process also has by-product outputs such as employee behavior, enviromental pollution, and information. A feedback loop is used to return the resultant enviromental feedback to the system as input.
The main features of system theory of management are as follows:
1. Sub-systems
2. Open System
3. Synergy
4. Flow
5. System Boundry
6. Feedback
7. Entropy.
In simple terms a system is a group of interrelated and interdependent part working towards a comman goal. It is a combination of several parts forming a complex whole. System Theory views the organization as a unified, purposeful system composed of interelated parts. It tries to give the manager a way of looking the organization as a whole. System theory tells us that the activity of any part of an organization affects the activity of other parts.
For any organization, the number one objectives is survival. To faciliate survival, a system may be viewed as consisting o four basic elements- inputs, tranformation process, outputs, and feedback.
Inputs are ingredients required to initiate the transfrmation process. They include human, financial, material, and information resources. Transformation process appies technology, operating systems, administrative practices and control techniques in order to produce the output. The output may be products or services, the sale of which creates profits or losses. The action of one element in the model influences other parts of the model. The process also has by-product outputs such as employee behavior, enviromental pollution, and information. A feedback loop is used to return the resultant enviromental feedback to the system as input.
The main features of system theory of management are as follows:
1. Sub-systems
2. Open System
3. Synergy
4. Flow
5. System Boundry
6. Feedback
7. Entropy.
DECISIONS THEORY OF MANAGEMENT
The Decision Theory of management led by Herbart Simon looks management process as a decision making process. Decisions are made through rationale choice among different altenatives available. It is a choince making activity and choice determines our activity. Decision theories have expanded their area of theory building in the decision making process to the study of decisions, decision-maker, and the enviroment of decision-maker.
Whatever a manager does, he does through making decisions. Hence, decision making is central to managing. Simon developed the administrative model of decision making which describes how decisions are actually made. Managers are often faced with uncertainity and nonprogrammed decision making situation. Simon's decision model is based on two concepts (1) bounded rationality and (2) satisficing. The manager who seeks to take logical and rationale approach to decision can follow the following six steps:
1. Recognize and define the decision situation
2. Identify appropriate alternatives
3. Evaluate each alternative
4. Select the best alternative
5. Implement the alternative, and
6. Evaluate the results and follow up.
Whatever a manager does, he does through making decisions. Hence, decision making is central to managing. Simon developed the administrative model of decision making which describes how decisions are actually made. Managers are often faced with uncertainity and nonprogrammed decision making situation. Simon's decision model is based on two concepts (1) bounded rationality and (2) satisficing. The manager who seeks to take logical and rationale approach to decision can follow the following six steps:
1. Recognize and define the decision situation
2. Identify appropriate alternatives
3. Evaluate each alternative
4. Select the best alternative
5. Implement the alternative, and
6. Evaluate the results and follow up.
Wednesday, March 17, 2010
BEHAVIOR THEORY OF MANAGEMENT
The classical theories viewed the organization from a mechanistic point of view. They placed emphasis on the design and performance of work and the process of the management. They had either ignored or over-simplified the human factor. In contrast Behavioral Theory(Behavioral approach) evolved in recognition of the importance of human behavior in organizations.Generally, behavior theory(approach) to management has two branches. The first branch is Human relations and second branch is Behavioral science theory.
(1) Human Relations Theory
The term human relations refers to the manner in which managers interact with subordinates. To develop good human relations, followers of his approach believe managers must know why their subordinates behave as they do and what psychological and social factors influence them. Human relationsts modified the classical theory by emphasizing the fact that organization is a social system and the human factor is the most important element within it.The human relations movement grew out of a famous series of studies known as Hawthrone experiments.
(2) Behavior Science Theory
Mayo and his colleagues pioneered the use of the scientific method in their studies of people in the work enviroment. Later researchers more rigiously trained in the behavioral sciences used more sophisticated research methods and became know as 'behavioral scientist'. Generally, behavioral science theory is the study of observable and verifiable human behavior in organizations, using scientific procedures.It is largely inductive and problem centered,focusing on the issue of human behavior and drawing from relevant literature, especially from psyocology, sociology, and anthropology. It focuseson group behavior and group relationships.
(1) Human Relations Theory
The term human relations refers to the manner in which managers interact with subordinates. To develop good human relations, followers of his approach believe managers must know why their subordinates behave as they do and what psychological and social factors influence them. Human relationsts modified the classical theory by emphasizing the fact that organization is a social system and the human factor is the most important element within it.The human relations movement grew out of a famous series of studies known as Hawthrone experiments.
(2) Behavior Science Theory
Mayo and his colleagues pioneered the use of the scientific method in their studies of people in the work enviroment. Later researchers more rigiously trained in the behavioral sciences used more sophisticated research methods and became know as 'behavioral scientist'. Generally, behavioral science theory is the study of observable and verifiable human behavior in organizations, using scientific procedures.It is largely inductive and problem centered,focusing on the issue of human behavior and drawing from relevant literature, especially from psyocology, sociology, and anthropology. It focuseson group behavior and group relationships.
Monday, March 15, 2010
CLASSICAL THEORY OF MANAGEMENT
The classical theory includes three theories. Two theories-(a) The Scientific Management and (b) The Administrative Management Theory developed separately but at about the same time period.Another important classical theory is Bureaucratic theory.
(1) The Scientific Management Theory
Frederick Winslow Taylor (F.W.Taylor: 1856-1915) is widely known as Father of Scientific Management. Taylor joined Midvale Steel Company as a worker and later became supervisor there. Afterwards he joined Bethlehem Steel Company. After retirement, he worked as a consultant. At both companies, he experimented to increase the efficiency of men at work and developed a new philosophy known as 'Scientific Management''.
Fundamentally, the scientific management is an attitude and philosophy of discarding the old rule of thumb. It means scientific investigations should be under taken to solve problems of industrial management. Scientific investigations include research and experimentation, collection, and analysis of data and formulation of certain principles on the basis of such analysis.
(2) The Administrative Management Theory
Henry Foyal is considered to be the Father of Administrative Management theory. He focused on the development of broad administrative principles applicable to general and higher managerial levels. He was a French mining engineer and became managing director and successful industrialist. He took the functioning approach to management. In 1916 he published his famous book in French language 'Administration Industrielle Generale''which was translated into English in 1929 under the title 'General and Industrial Management'.
Fayol provided a broad analytical framework of the process of administration. He used the word 'administration' for 'management'. A contemporary of Taylor, Fayol for the first time attempted a systematic analysis of the overall management process.
(3) Bureaucratic Theory
Max Weber (1864-1920) propounded the bureaucratic theory of organization and management. He was a German sociologist and contemporary of Taylor and Fayol. Weber developed the bureaucratic model of organization, which is essentially a universal model of efficient management. Bureaucratic was defined as ideal system wherein positions and tasks were clearly defined, division of labor was precise and clear, objectives were explicit, and a clear chain of command was maintained. Weber viewed bureaucracy as ''the most efficient form or that could be used most effectively for complex organizations business, government, military, for example arising out of the needs of modern, society''.
(1) The Scientific Management Theory
Frederick Winslow Taylor (F.W.Taylor: 1856-1915) is widely known as Father of Scientific Management. Taylor joined Midvale Steel Company as a worker and later became supervisor there. Afterwards he joined Bethlehem Steel Company. After retirement, he worked as a consultant. At both companies, he experimented to increase the efficiency of men at work and developed a new philosophy known as 'Scientific Management''.
Fundamentally, the scientific management is an attitude and philosophy of discarding the old rule of thumb. It means scientific investigations should be under taken to solve problems of industrial management. Scientific investigations include research and experimentation, collection, and analysis of data and formulation of certain principles on the basis of such analysis.
(2) The Administrative Management Theory
Henry Foyal is considered to be the Father of Administrative Management theory. He focused on the development of broad administrative principles applicable to general and higher managerial levels. He was a French mining engineer and became managing director and successful industrialist. He took the functioning approach to management. In 1916 he published his famous book in French language 'Administration Industrielle Generale''which was translated into English in 1929 under the title 'General and Industrial Management'.
Fayol provided a broad analytical framework of the process of administration. He used the word 'administration' for 'management'. A contemporary of Taylor, Fayol for the first time attempted a systematic analysis of the overall management process.
(3) Bureaucratic Theory
Max Weber (1864-1920) propounded the bureaucratic theory of organization and management. He was a German sociologist and contemporary of Taylor and Fayol. Weber developed the bureaucratic model of organization, which is essentially a universal model of efficient management. Bureaucratic was defined as ideal system wherein positions and tasks were clearly defined, division of labor was precise and clear, objectives were explicit, and a clear chain of command was maintained. Weber viewed bureaucracy as ''the most efficient form or that could be used most effectively for complex organizations business, government, military, for example arising out of the needs of modern, society''.
EVOLUTION OF MANAGEMENT THOUGHT
Management as a systematic body of knowledge and a distinct discipline id the product of the twentieth century. However, the history of management practice is as old as human civilization, when the men started living in groups. For every human group requires management.
The real development of management thought has begun with the scientific management approach given by F.W.Taylor. Though some of the concepts have been developed by thinkers earlier to Taylor. Early management thoughts have come from Roman Catholic Church, military organizations, the Cameralists, a group of German and Austrian public administrators and intellectuals during sixteenth to eighteenth centuries. Their concepts of management were mostly related to specialization, selection of subordinates and their training, simplification of administration procedures, unity of doctrine etc.
In the later period, Charles Babbage, James Watt, and Robert Owen made contributions. Their contributions were limited mostly to the field of developing the concept to make resources more effective at the shop-floor level. These contributions were made bit by bit and in haphazard manned that could not stimulate management as a distinct discipline for further study. however, the various ideas stated by them have created awareness about managerial problems. By the end of the nineteenth century, a stage was set for the systematic study of management. F.W.Taylor made a beginning in this direction in the early part of the 20Th century. During five decades there has been enormous development of management thought.
Koontz was the first academician to classify the various approaches into the schools of management theory. The evolution of management thoughts can be classified into ''Six (school of) Management Theories''.
(1) The classical Theory
(2) The Human Relations and Behavioral Science Theory
(3) The Decision Theory
(4) The Management Science Theory
(5) The Systems Theory, and
(6) The Contingency Theory
The real development of management thought has begun with the scientific management approach given by F.W.Taylor. Though some of the concepts have been developed by thinkers earlier to Taylor. Early management thoughts have come from Roman Catholic Church, military organizations, the Cameralists, a group of German and Austrian public administrators and intellectuals during sixteenth to eighteenth centuries. Their concepts of management were mostly related to specialization, selection of subordinates and their training, simplification of administration procedures, unity of doctrine etc.
In the later period, Charles Babbage, James Watt, and Robert Owen made contributions. Their contributions were limited mostly to the field of developing the concept to make resources more effective at the shop-floor level. These contributions were made bit by bit and in haphazard manned that could not stimulate management as a distinct discipline for further study. however, the various ideas stated by them have created awareness about managerial problems. By the end of the nineteenth century, a stage was set for the systematic study of management. F.W.Taylor made a beginning in this direction in the early part of the 20Th century. During five decades there has been enormous development of management thought.
Koontz was the first academician to classify the various approaches into the schools of management theory. The evolution of management thoughts can be classified into ''Six (school of) Management Theories''.
(1) The classical Theory
(2) The Human Relations and Behavioral Science Theory
(3) The Decision Theory
(4) The Management Science Theory
(5) The Systems Theory, and
(6) The Contingency Theory
EMERGING CHALLENGES FOR MANAGEMENT
The challenge of managing in the managing world has made management an exciting profession. Some of the major emerging challenges that confront all managers today are as follows:
(1) Globalization of Business
One major challenge faced by all managers today is globalization. No longer can any organization regerdless of size or type ignore the globalization of business. Globalization implies free trade in products and services, offering a wide choice to customers across a boderless world. It experts continuos pressure on competing organizations to upgrade quality, reduce costs, and or develop new and superior products in terms of customers need and expectation.
(2) Information Technology
Today's managers must manage information technology(IT) and in e-business world. IT must be selected and implemented with the end user and work to be accomplished firmly in mined to be effective. The IT choices available to modern managers far exceed those that were available just a few years ago.
(3) Quality and Productivity
Another area of interest to emerge in recent years has been quality, productivity and their interrelationships. As Japanese manufacturers began beating out U.S. competitors in quality comparisons, Western managers soon began taking a more serious look at Total Quality Management(TQM).Hence, managers have become more cautions to increase the productivity of their employees.
(4) Ethics and Social Responsibility
The decision made by managers in organizations have a broad reach both inside and ouside the organizations. Thus, managers must be concerned with ethics, and social responsibility. Many organizations today are taking step to enhance the ethical standards of their managers and to avoid legal or public sentiment problems.
(5) Change
Managers also face more change today than ever before. It is important to keep in mind that any change in organication or enviroment may have effects extending beyong that area. Thus, managers face the challenge of managing change. They must be aware of factors contributing to change and impact on practice of management.
(1) Globalization of Business
One major challenge faced by all managers today is globalization. No longer can any organization regerdless of size or type ignore the globalization of business. Globalization implies free trade in products and services, offering a wide choice to customers across a boderless world. It experts continuos pressure on competing organizations to upgrade quality, reduce costs, and or develop new and superior products in terms of customers need and expectation.
(2) Information Technology
Today's managers must manage information technology(IT) and in e-business world. IT must be selected and implemented with the end user and work to be accomplished firmly in mined to be effective. The IT choices available to modern managers far exceed those that were available just a few years ago.
(3) Quality and Productivity
Another area of interest to emerge in recent years has been quality, productivity and their interrelationships. As Japanese manufacturers began beating out U.S. competitors in quality comparisons, Western managers soon began taking a more serious look at Total Quality Management(TQM).Hence, managers have become more cautions to increase the productivity of their employees.
(4) Ethics and Social Responsibility
The decision made by managers in organizations have a broad reach both inside and ouside the organizations. Thus, managers must be concerned with ethics, and social responsibility. Many organizations today are taking step to enhance the ethical standards of their managers and to avoid legal or public sentiment problems.
(5) Change
Managers also face more change today than ever before. It is important to keep in mind that any change in organication or enviroment may have effects extending beyong that area. Thus, managers face the challenge of managing change. They must be aware of factors contributing to change and impact on practice of management.
Sunday, March 14, 2010
MANARERIAL ROLES
Henry Minizberg conducted one of the most frequently cited studies of managerial roles. He observed and interviewed chief executives from different industries. A summary of his findings gives us a more complete picture of what managers actually do. Minizberg (1973) developed a model of ten related roles that he called the ''Managerial Role Constellation''. These ten roles can be grouped as interpersonal, informational, and decisional. These roles describe what managers actually do, whereas functions of managers had historically described what managers should do.
(1) Interpersonal Roles
These role focus on interpersonal relationships. They are related to the contacts and dealings with other people within or outside the organization to achieve certain goals. The interpersonal roles are:
(a) Figurehead: All managerial jobs require some duties that are symbolic or ceremonial in nature such as greeting and receiving visitors, taking visitors to the dinner, attending ribbon cutting ceremonies, and the like.
(b) Leader: The manager is also asked to serve as a leader. As a leader, every manager has to direct and coordinate the activities of subordinates. It also involves staffing, motivating, and controlling the activities to make sure that things are going according to plan.]
(c) Liaison: A third interpersonal role is serving as liaison both within and outside contacts. Within the organization, managers must interact with numerous other managers and individuals. They must maintain good relations with them. Managers often have interactions with important people outside the organizations such as the community, suppliers, and others to gain favor or information.
(2) Informational Role
This set of roles focuses for receiving and sending information. Through interpersonal contacts, managers build a network of contacts. It places the manager at a strategic point to gather and disseminate information. The informational roles are:
(a) Monitor: As monitors, managers gather information in order to be well informed. The formal and informal contacts developed in the liaison role are often useful here.
(b) Dissemanitor: Managers are also disseminators of information. In this respect, he transmits information directly to his subordinates who would otherwise have no access to it.
(c) Spokesperson: In the spokesperson role, manager represents the department to other people. He formally relays information to people outside the departments and outside the organization.
(3) Decisional Roles
Developing interpersonal relationships and gathering information are important but these activities are not ends in themselves. They serve as the basic inputs to the process of decision making. Thus, the third major area focuses of decisional roles of managers. The important decisional roles are:
(a) Entrepreneur Role: As entrepreneurs, managers are initiators, innovators, and designers. In this role, the manager constantly looks out for new ideas and seeks to improve his unit by adapting it to changing conditions in the environment.
(b) Disturbance Handler: In this role, the manager must take corrective action needed to resolve important unexpected disturbances. So he must handle utility service problems, strikes, natural disasters, etc. Usually the decisions must be made quickly which means that this role takes priority over other roles. The immediate goal is to bring stability in the organization.
(c) Resource Allocator: These are never enough resources including money, time, people, and equipment in the organization. In resource allocator role, the manager must allocate scarce resources where they are most needed to meet the organizational goals. He must decide who will get what . Therefore, it is one of the most critical of the manager's decisional roles.
(d) Negotiator: Finally, managers are negotiators. They enter into negotiators with other groups or organizations. Managers must bargain with other departments and individuals to obtain advantages for their own units. The negotiations may be over work, performance, objectives, resources, or anything influencing the departments. For example a manager might represent the organization to negotiate a trade union contract or a long-term relationship with a supplier. He can also mediate a dispute between two subordinates.
MANAGERIAL SKILLS
A skill is an individuals ability to translate knowledge into action. A manager must posses a wide variety of skills and abilities to carry out various management functions. Robert Karz (1974) has identified three basic kinds of skills necessary for successful managers. They are (1) Technical skills, (2) Human skills, and (3) Conceptual skills. However, at present diagnostic skills and digital skills are also prerequisites to managerial success.
(1) Technical Skills
Technical skills are the ability to use the procedures., techniques, and knowledge of a specialized field. For example, an accounting manager needs the basic technical sills of accounting profession. First line managers need a high degree of technical skills in order to supervise subordinates properly. The need for technical skill decrease as the manager moves up in the organizational hierarchy.
(2) Human Skills
Managers spend considerable time interacting with people both inside and outside the organization. Hence, managers need human skills. Human skills are the ability to work with, understand, and motivate other people. They are needed to get along with people and to get work done through people. Human skills include interpersonal skills such as communication, negotiation, bargaining, directing, leading, motivating, and conflict resolution. Human skills are very important at all level of management. The popularity of team based management has increased the necessity for interpersonal skills for all members of the organization. A manager who has good human skills is likely to be more successful than with poor human skills.
(3) Conceptual Skills
Conceptual skills represent the manager's ability to organize information to better understand and take a broad and farsighted view of the organization. They include the manager's ability to see the organization as a whole and understanding how different parts depend on one another, and a change in one part will impact the other parts. This allows them to think strategically to see 'big picture' and to make broad based decision that serve the overall organization. The importance of conceptual skills increases as the managers move up in the organizational hierarchy.
(4) Diagnostic Skills
Successful managers also possess diagnostic skills. These skills enable a manager to visualize the most appropriate response to a situation. A manager must diagnose and analyze a problem in the organization by studying in symptoms and then developing a solution. Much of the potential excitement in a manager's job centers on getting to the root of problem and recommending solutions. The importance of diagnostic skills increases as the manager is promoted to the higher level.
(5) Digital Skills
Managers who have digital skills have understanding of computers, telecommunication, and in particular, know how to use digital technology to perform many aspects of their jobs. These skills are important because using digital technology substantially increases a manager's productivity. Computers can perform in minutes tasks in financial analysis, human resource planning, and other areas that otherwise take hours, even days to complete. Thus, computer is an especially helpful tool for decision making. Software enables managers to manipulate data and perform 'what if scenarios, looking at the projected impact of different decision alternatives'.
Although the proceeding skills are all vital, the relative importance of each will vary according to the level of the manager in the organization. For example, first line managers generally need to depend more on their technical and human skills. These managers have greater contact with the work being done and the people doing the work. Digital skills are equally important at all level of management. Middle managers require a more even distribution of skills. Finally, conceptual and diagnostic skills are extremely critical to the top managers. Top management's primary responsibility is to make the key decisions that are executed or implemented at lower levels. This requires top managers see the big picture in order to identify opportunities in the environment and develop strategic plans to capitalize on these opportunities
(1) Technical Skills
Technical skills are the ability to use the procedures., techniques, and knowledge of a specialized field. For example, an accounting manager needs the basic technical sills of accounting profession. First line managers need a high degree of technical skills in order to supervise subordinates properly. The need for technical skill decrease as the manager moves up in the organizational hierarchy.
(2) Human Skills
Managers spend considerable time interacting with people both inside and outside the organization. Hence, managers need human skills. Human skills are the ability to work with, understand, and motivate other people. They are needed to get along with people and to get work done through people. Human skills include interpersonal skills such as communication, negotiation, bargaining, directing, leading, motivating, and conflict resolution. Human skills are very important at all level of management. The popularity of team based management has increased the necessity for interpersonal skills for all members of the organization. A manager who has good human skills is likely to be more successful than with poor human skills.
(3) Conceptual Skills
Conceptual skills represent the manager's ability to organize information to better understand and take a broad and farsighted view of the organization. They include the manager's ability to see the organization as a whole and understanding how different parts depend on one another, and a change in one part will impact the other parts. This allows them to think strategically to see 'big picture' and to make broad based decision that serve the overall organization. The importance of conceptual skills increases as the managers move up in the organizational hierarchy.
(4) Diagnostic Skills
Successful managers also possess diagnostic skills. These skills enable a manager to visualize the most appropriate response to a situation. A manager must diagnose and analyze a problem in the organization by studying in symptoms and then developing a solution. Much of the potential excitement in a manager's job centers on getting to the root of problem and recommending solutions. The importance of diagnostic skills increases as the manager is promoted to the higher level.
(5) Digital Skills
Managers who have digital skills have understanding of computers, telecommunication, and in particular, know how to use digital technology to perform many aspects of their jobs. These skills are important because using digital technology substantially increases a manager's productivity. Computers can perform in minutes tasks in financial analysis, human resource planning, and other areas that otherwise take hours, even days to complete. Thus, computer is an especially helpful tool for decision making. Software enables managers to manipulate data and perform 'what if scenarios, looking at the projected impact of different decision alternatives'.
Although the proceeding skills are all vital, the relative importance of each will vary according to the level of the manager in the organization. For example, first line managers generally need to depend more on their technical and human skills. These managers have greater contact with the work being done and the people doing the work. Digital skills are equally important at all level of management. Middle managers require a more even distribution of skills. Finally, conceptual and diagnostic skills are extremely critical to the top managers. Top management's primary responsibility is to make the key decisions that are executed or implemented at lower levels. This requires top managers see the big picture in order to identify opportunities in the environment and develop strategic plans to capitalize on these opportunities
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