Decision making is an essential part of planning. Decision making and problem solving are used in all management functions, although usually they are considered a part of the planning phase. A discussion of the origins of management science leads into one on modeling, the five-step process of management science, and the process of engineering problem solving.
Decision-making is an integral part of modern management. Essentially, Rational or sound decision making is taken as primary function of management. Every manager takes hundreds and hundreds of decisions subconsciously or consciously making it as the key component in the role of a manager. Decisions play important roles as they determine both organizational and managerial activities. A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals. Decision making process is continuous and indispensable component of managing any organization or business activities. Decisions are made to sustain the activities of all business activities and organizational functioning.
Relation to Planning
Managerial decision making is the process of making a conscious choice between two or more rational alternatives in order to select the one that will produce the most desirable consequences (benefits) relative to unwanted consequences (costs). If there is only one alternative, there is nothing to decide.
If planning is truly “deciding in advance what to do, how to do it, when to do it, and who is to do it”, then decision making is an essential part of planning. Decision making is also required in designing and staffing an organization, developing methods of motivating subordinates, and identifying corrective actions in the control process. However, it is conventionally studied as part of the planning function, and it is discussed here.
Occasions for Decision
The occasions for decision originate in three distinct fields:
- From authoritative communications from superiors
- From cases referred for decision by subordinates
- From cases originating in the initiative of the executive concerned.
TYPES OF DECISIONS
PROGRAMMED DECISIONS
Programmed decisions are routine and repetitive, and the organization typically develops specific ways to handle them. A programmed decision might involve determining how products will be arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard arrangement decisions are typically made according to established management guidelines.
NON PROGRAMMED DECISIONS
Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision.
Decision Making under Certainty
Decision making under certainty implies that we are certain of the future state of nature (or we assume that we are). (In our model, this means that the probability p of future N is 1.0, and all other futures have zero probability.) The solution, naturally, is to choose the alternative A that gives us the most favorable outcome O. Although this may seem like a trivial exercise, there are many problems that are so complex that sophisticated mathematical techniques are needed to find the best solution.
FUNCTIONS OF MANAGEMENT- DIRECTION (Communication, Supervision, Motivation, Leadership)
Directing is concerned with instructing, guiding, supervising and inspiring people in the organisation to achieve its objectives. It is the process of telling people what to do and seeing that they do it in the best possible manner.
Elements in Directing: The four essential elements in Directing are:
- Communication
- Supervision
- Motivation
- Leadership
COMMUNICATION
Communication is a basic organizational function, which refers to the process by which a person (known as sender) transmits information or messages to another person (known as receiver). The purpose of communication in organisations is to convey orders, instructions, or information so as to bring desired changes in the performance and other attitude of employees. In an organisation, supervisors transmit information to subordinates. Proper communication results in clarity and securing the cooperation of subordinates. Faulty communication may create problems due to misunderstanding between the superior and subordinates. The subordinates must correctly understand the message conveyed to them.
Communication Cycle
Sender—> Message—>Encoding—>Channel/Medium—>Transmission of message—> Receiving & Decoding—>Response & feedback—> Receiver
Classification of Communication:-
On the basis of Organizational Structure:
Formal and Informal Communication
The path through which information flows is called channel of communication. In every organisation we have both formal and informal channels. The paths of communication which are based on relationship established formally by management are the formal channels.
For example, The Collector of the district communicates a decision to the SDM who may then issue orders or instructions to the Tahsildaar.
Communication, which takes place on the basis of informal or social relations among staff, is called informal communication.
For example, any sharing of information between a police inspector and an accountant, as they happen to be friends or so. Mostly informal channels are used due to friendly interaction of members of an organisation. In fact, it may be purely personal or related to organizational matters.
On the basis of Direction
Upward: When employees make any request, appeal, report, suggest or communicate ideas to the superior, the flow of communication is upward i.e., from bottom to top. For instance, when a typist drops a suggestion in the suggestion box, or a foreman reports breakdown of machinery to the factory manager, the flow of communication is upward. Upward communication encourages employees to participate actively in the operations of their department. They get encouraged and their sense of responsibility increases when they are heard by their supervisors about problems affecting the jobs.
Downward: When communication is made from superiors down the hierarchy it is called a downward communication. For instance, when superiors issue orders and instructions to subordinates, it is known as downward communication. When the General Manager orders supervisors to work overtime, the flow of communication is downward i.e., from top to bottom. Similarly, communication of work assignments, notices, requests for performance, etc. through bulletin boards, memos, reports, speeches, meetings, etc, are all forms of downward communication.
Horizontal: Communication can also be amongst members at the same level in the organisation. For instance, production manager may communicate the production plan to the sales manager. This is known as horizontal flow of communication. Here, the communications among people of the same rank and status. Such communication facilitates coordination of activities that are interdependent.
Diagonal: when communication is not made between people who are in the same department nor at the same level of organizational hierarchy, it is called diagonal communication. For example, cost accountant may request for reports from sales representatives not the sales manager for the purpose of distribution cost analysis. This type of communication does take place under special circumstances.
On the basis of Mode of Expression
Verbal and Non-verbal Communication: On the basis of the mode used, communication may be verbal or non-verbal. While communicating, managers may talk to their subordinates either face to face or on telephone or they may send letters, issue notices, or memos. These are all verbal communication. Thus, the verbal modes of communication may be oral and written. Face to face communication, as in interviews, meetings and seminars, are examples of oral communication. Issuing orders and instructions on telephone or through an inter-communication system is also oral communication.
The written modes of communication include letters, circulars, notices and memos. Sometimes verbal communication is supported by non-verbal communication such as facial expressions and body gestures. For example – wave of hand, a smile or a frown etc. This is also termed as the gestural communication
SUPERVISION
It is the duty of the manager to see that they perform the work as per instructions. Managers play the role of supervisors and ensure that the work is done as per the instructions and the plans. Supervisors clarify all instructions and guide employees to work as a team in co-operation with others. Though supervision is required at all levels of management, it is of great importance at the operational level i.e., at the level of first line supervisor.
Managers at this level devote maximum time in supervising the work of subordinates. Though the top or middle level managers also supervise the work of their subordinate managers, but it is the first line supervisors who are in direct and constant touch with operatives i.e., workers in the factory and clerical staff in the office. Thus, they are directly responsible for getting the work done through most of the employees in an organisation.
Functions of a Supervisor
A supervisor works at the lowest level of management like all other managers he performs the functions of planning, organizing, directing and controlling with respect to his own subordinates and department. A major part of his time is devoted in directing and controlling the activities of his subordinates. He also coordinates the activities of his subordinates by integrating the same with the activities of other departments of the enterprise. Besides he performs certain special functions which have been described below:
Link between Top Management and Workers: A supervisor works as a link between managers working at higher levels and workers. He conveys the decision of the higher level managers to the workers and also communicates the performance of the workers to the higher level management through different performance reports. He also communicates the grievances, feelings of demands etc. of the workers to the higher level management.
Creating Ideal Atmosphere: Being an important link between the operatives and the management a supervisor is expected to create an ideal atmosphere for work in the organisation by correctly communicating the ideas, wishes and decisions of the higher level management to the workers
Guiding the Workers: For obtaining best results the supervisor assigns jobs to the workers keeping in mind their ability and aptitude for work.He makes them available the necessary tools and equipments, raw materials etc. for proper execution of the jobs. He also guides the worker properly to ensure that the job is done with perfection and accuracy.
Quality Output: A supervisor has to ensure quality output through constant watch on the performance of workers. He ensures that the performance of the worker takes place as per the plans. This results into study flow of output.
Feedback: A supervisor keeps on watching the performance of his subordinates and identifies their strengths and weaknesses. He gives the feedback about this to the workers with the object to further improve the performance of the workers in future.
Suggest Training Programmes: A supervisor identifies the areas in which the workers require training and accordingly suggests training programmes that should be organised for them.
Motivation is one of the important elements of directing. It is a force that inspires a person at work to intensify his willingness to use the best of his capability for achievement of specified objectives. It may be in the form of incentives like financial (such as bonus, commission etc.) or, non-financial (such as appreciation, growth etc.), or it could be positive or negative. Basically, motivations directed towards goals and prompt people to act.
The importance of motivation lies in converting this ability to work into willingness to work. Performance depends on ability as well as willingness; and willingness depends on motivation. Thus, motivation is a key element in directing people to do the job.
Each employee has some needs of his own that he wants to fulfil. While directing, it is essential to ensure that any of the unfulfilled need of the individual is being taken care of.
Maslow’s Hierarchy of Needs
According to Maslow, an individual has many needs and their order can be determined. If a person satisfies his first need, then he thinks about his next need. After satisfying the second need, he tries to satisfy third need and so on. So needs are the motivators. Maslow has given hierarchy of needs in the following ways:-
Physiological Needs: These needs include need for food, shelter and clothing.
Safety and Security Needs: Once physiological needs are fulfilled then the people start thinking about their safety. Safety needs include need for physical safety and economic safety. Physical safety means safety from accidents, disease etc. Economic safety refers to safety of livelihood.
Social Needs: Man is a social animal. He wants to live in the society honorably. Therefore, he wants friends and relatives with whom he can share his joys and sorrows. Social needs include need for love, affection, friendship etc.
- Esteem Needs: These are the need for respect and recognition. Esteem needs are also known as Ego needs.
Self Actualization Needs: Self actualization needs are concerned with becoming what a person is capable of becoming. These needs include need for growth, self-fulfillment etc.
Financial and Non-financial Hierarchy Theory
Monetary / Financial incentives are directly related with money. Non-financial incentives are not directly related with money. Following are the financial incentives:
Pay and Allowances: Salary is the basic monetary incentive of every employee. Salary includes basic pay, dearness allowance etc.
Bonus: Bonus means the payment to employees in addition to their regular remuneration. Bonus is provided in the form of cash, free trips to resorts or foreign countries etc.
Commission: In sales department, sales persons get commission on the basis of their sales. Retirement Benefit: Every employee is concerned about his future after retirement. Some retirement benefits are Provident fund, Pension, Gratuity etc.
Perquisites: Rent free accommodation, car allowance, facility of a servant etc.are called as perquisites.
Non-financial Incentives: Besides the financial incentives there is certain non financial incentive that motivates the employees. The important non-financial incentive is given below:
Career Advancement Opportunity: Appropriate skill development programmes will encourage employees to show improved performance.
Status: Status means the rank of a person in an organisation. The rank is linked with authority, responsibility and other extra benefits. Everybody has a wish to be in high rank. Therefore an employee can be motivated by placing him in higher rank.
Employee Recognition Programmes: Every employee wants to be considered as an important part of the organisation. Work of an organisation should be distributed in such a way that every employee feels that his work is yield and he is capable to do that work. This motivates the worker and he works hard and in a responsible manner.
Employee Participation: It means involving employee in decision making especially when decisions are related to workers.
Organisation Climate: It means the relationship between superior and subordinates. Employees can put their best if healthy climate exist in an organisation. It is important to remember that the needs and desires of people change. Once their basic needs are satisfied, other needs arise. Managers have thus, to understand the needs and desires of subordinates and decide how to motivate them. The knowledge of the different types of need enables a manager to adopt different ways to motivate individuals depending upon which need is unsatisfied for the individual. For example, a person whose physiological needs are not fulfilled may be motivated to work with a promise of increase in pay, whereas another person may be motivated if he is given a very challenging job to perform regardless of the pay.
LEADERSHIP
Leadership is the process, which influences the people and inspires them to willingly accomplish the organizational objectives. The main purpose of managerial leadership is to gets willing cooperation of the work group to achieve the goals.
Leadership is the ability to persuade and motivate others to work in desired way for achieving the goals. Thus, a person who is able to influence others and make them follow his instructions is called a leader.
Leadership and Management are two separate concepts.
Leadership exists in both formal and informal organization but Management operates in formal organization.
Leadership Styles: Autocratic or Authoritarian Style: 2 types
Pure autocrative or negative Leader: Dictator & makes all decisions by himself.
Benevolent autocrat or Positive Leader: Reward power to influence subordinate and welfare of subordinates.
Participative Leaders: Decentralize authority; such leaders involve subordinates in decision-making process.
Free-rein or Laissez – faire Style: Leaders uses his power very little, gives high degree of freedom to his subordinates in their operation. Aids subordinates in performing their job.
Paternalistic Leadership: It is authoritarian by Nature. Heavily work-centred but has consideration for subordinates.
Leadership Qualities: – In order to be successful, a leader must possess certain qualities. A good leader should be professionally competent, intelligent, analytical and he/she should have a sense of fair play, including honesty, sincerity, integrity, and sense of responsibility. He must possess initiative, perseverance, be diligent and realistic in his outlook. He must also be able to communicate his subordinates effectively. Human relation skills are must for any leader. Earlier, it was believed that the success or effectiveness of a leader depends upon his personal traits or characteristics, like physical appearance, intelligence, self-confidence, alertness, and initiative.
FUNCTIONS OF MANAGEMENT – ORGANIZING
Organizing is the process of identification and grouping of activities, assigning duties and delegating authority to the managers, allocating necessary resources and establishing coordination among individuals and department of an organization with a view to attain its objectives.
PROCESS OF ORGANIZING
The process of organizing consists of the following steps –
Identification of activities: Every enterprise is created with a specific purpose. Based on this, the activities involved can be identified. For example, in a manufacturing firm, producing goods and selling them are the major activities in addition to routine activities like, paying salary to employees; raising loans from outside, paying taxes to the government etc. and these activities vary when the organisation is a service concern or a trading firm.
Grouping of activities: Once activities are identified, then they need to be grouped. They are grouped in different ways. The activities which are similar in nature can be grouped as one and a separate department can be created. For example – activities undertaken before sale of a product, during the sale of the product and after the sale of the product can be grouped under the functions of a marketing department. Normally, all activities of a manufacturing unit can be grouped into major functions like purchasing, production, marketing, accounting and finance, etc. and each function can be subdivided into various specific jobs. Assignment of Responsibilities: Having completed the exercise of identifying, grouping and classifying all activities into specific jobs, they can be assigned to individuals to take care of.
Granting authority: On the basis of responsibilities given to specific individuals, they are also to be given the necessary authority to ensure effective performance.
Establishing relationship: This is a very important job of management as everybody in the organisation should know as to who he/she is to report, thereby establishing a structure of relationships. By doing so, relationships become clear and delegation is facilitated.
ORGANIZATION STRUCTURE
Organization structure is a network of formal authority relationships among people within which behavior and activities of people are regulated for the accomplishment of organizational objectives.
Forms of Organizational Structure
Line Organization
Pure Line: – Activities at a particular level are same, every employee performs by & large the same type of work.
Departmental Line: – Whole work divided into functional Departments. Each Department works as a self-sufficient unit under the supervision & direction of a department manager who himself work under the immediate boss
Line and Staff Organization
It is one that has line managers with direct vertical relationships between different levels in the organization in addition to the specialist responsible for advising and assisting the line managers.
Functional Organization
According to this, Line authority is channelized through the staff specialists. In such an organizational structure, Line authority runs through many functional experts who have authority to issue orders in their respective areas of specialization.
Project Organization
It is a temporary structure designed to accomplish a specific task or project with the help of specialists drawn from different functional departments within the organization.
Matrix OR Grid Organization
It is permanent Organizational Structure designed to accomplish specific project or result by using teams of specialists drawn from different functional departments within the organization. It is a combination of project organization and functional organization.
Committee Organization
It is a group of 2 or more appointed, nominated or elected persons to consider, discuss decide, recommend or report on some issue or matter assigned to it.
Informal & Formal Organization
Formal organisation refers to the officially established pattern of relationships among departments, divisions and individuals to achieve well-defined goals and is a consciously designed structure of roles.
Informal organisations on the other hand, refers to relationship between individuals in the organisation based on personal attitudes, likes and dislikes and originates to meet their social and emotional needs and develops spontaneously.
Delegation
The active process of entrustment of a part of work or responsibility and authority to another and the creation of accountability for performance is known as delegation. Thus, there are three elements of delegation as follows-
Assignment of Responsibility: This is also known as entrustment of duties. Duties can be divided into two parts: one part that the individual can perform himself and the other part that he can assign to his subordinates to perform.
Granting Authority: Authority refers to the official powers and position required to carry on any task. When duties are assigned to subordinates then the required authority must also be conferred to him
Creating Accountability: The delegate is fully answerable to his superior for performance of the task assigned to him. Thus, the superior ensures performance through accountability by his subordinate.
Decentralization
Decentralization refers to a systematic effort to delegate authority at all levels of management and in all departments. This shifts the power of decision making to lower level under a well considered plan.
Decentralization has number of benefits. Firstly, it reduces the workload of the top level management. Secondly, it motivates the employees and gives them more autonomy. It promotes initiative and creativity. It also helps employees to take quick and appropriate decisions. In this process, the top management is freed from the routine jobs and it enables them to concentrate on crucial areas and plan for growth.
Distinction between Delegations and Decentralization
Decentralization is not same as delegation. The points of differences are –
While delegation is the process of assigning responsibility and authority and thereby creating accountability; decentralization is the ultimate outcome of planned delegation.
Delegation of authority takes place between the manager and his subordinates while decentralization involves the entire organisation, and is between top management and divisions/departments.
Delegation is done to speed up the work and is essential in trace; while decentralization is optional and is usually done in large scale organisations.
In case of delegation the responsibility and authority delegated may be withdrawn by the delegator; which is not so easy in case of decentralization.