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.
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