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Assignment 1 Mgt101 Solution Reach

1 . Describe the four principal functions of planning, organizing, controlling and leading needed by managers . The four management functions are represented by the abbreviation POLC : ) 1 ( Planning-setting goals and deciding how to achieve them ) 2 ( Organizing--arranging tasks, people, and other resources to accomplish the work ) 3 ( Leading--motivating, directing, and otherwise Influencing people to work hard to achieve the organization's goals: and ) 4 ( controlling-monitoring performance, comparing it with goals, and taking corrective action as needed . 2 . Explain the importance of each function and how they interact for a manager in an organization . Planning is defined as setting goals and deciding how to achieve them. Your college was established for the purpose of educating students. And its present managers, or administrators. now must decide the best way to accomplish this. Which of several possible degree programs should be offered? Should the college be a residential or a commuter campus? What sort of students should


Lecture 1

Every human being has several needs and desires. But no individual can satisfy all his wants. Therefore, people work together to meet their mutual needs which they cannot fulfill individually. Moreover, man is a social being as he likes to live together with other people. It is by working and living together in organized groups and institutions that people satisfy their economic and social needs. As a result there are several types of groups, eg., family, school, government, army, a business firm, a cricket team and the like. Such formal groups can achieve their goals effectively only when the efforts of the people working in these groups are properly coordinated and controlled. The task of getting results through others by coordinating their efforts is known as management. Just as the mind coordinates and regulates all the activities of a person, management coordinates and regulates the activities of various members of an organization.

Some Definitions of management are:

  • Management is the art and science of organizing and directing human efforts applied to control the forces and utilize the materials of nature for the benefit of man. —American Society of Mechanical Engineers
  • To manage is to forecast and to plan, to organize to command, to coordinate and to control. —Henry Fayol

Therefore, Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal.

Management Key Concepts

  • Organizations: People working together and coordinating their actions to achieve specific goals.
  • Goal: A desired future condition that the organization seeks to achieve.
  • Management:The process of using organizational resources to achieve the organization’s goals by…
    • Planning, Organizing, Leading, and Controlling

Additional Key Concepts

  • Resources are organizational assets and  include:
    • People,
    • Machinery,
    • Raw materials,
    • Information, skills,
    • Financial capital.
  • Managers are the people responsible for supervising the use of an organization’s resources to meet its goals.


Lecture 2

Scope of management

Management is guiding human and physical resources into dynamic organizational units which attain their objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering service.

Management is a multipurpose organ that manages a business and manages Managers and manages workers and work in:

  • Production Management
  • Marketing Management
  • Financial Management
  • Personnel Management

Management process

Management as a process has the following implications:

(i) Social Process: Management involves interactions among people. Goals can be achieved only when relations between people are productive. Human factor is the most important part of the management.

(ii) Integrated Process: Management brings human, physical and financial resources together to put into effort. Management also integrates human efforts so as to maintain harmony among them.

(iii) Continuous Process: Management involves continuous identifying and solving problems. It is repeated every now and then till the goal is achieved.

(iv) Interactive process: Managerial functions are contained within each other. For example, when a manager prepares plans, he is also laying down standards for control.

Management Levels

Organizations often have 3 levels of managers:

  • First-line Managers:  responsible for day-to-day operation. They supervise the people performing the activities required to make the good or service.
  • Middle Managers: Supervise first-line managers. They are also responsible to find the best way to use departmental resources to achieve goals.
  • Top Managers: Responsible for the performance of all departments and have cross-departmental responsibility. They establish organizational goals and monitor middle managers.

Managerial Skills

There are three skill sets that managers need to perform effectively.

1. Conceptual skills: the ability to analyze and diagnose a situation and find the cause and effect.
2. Human skills: the ability to understand, alter, lead, and control people’s behavior.
3. Technical skills: the job-specific knowledge required to perform a task. Common examples include marketing, accounting, and manufacturing.

All three skills are enhanced through formal training, reading, and practice.

Managerial Roles

Roles are directed inside as well as outside the organization. There are 3 broad role categories:

  1. 1.      Interpersonal Roles

Roles managers assume to coordinate and interact with employees and provide direction to the organization.


  1. 2.      Informational Roles

Associated with the tasks needed to obtain and transmit information for management of the organization.

  1. 3.      Decisional Roles

Associated with the methods managers use to plan strategy and utilize resources to achieve goals.

Management Trends

  • Empowerment:expand the tasks and responsibilities of workers.
    • Supervisors might be empowered to make some resource allocation decisions.
  • Self-managed teams:give a group of employees’ responsibility for supervising their own actions.
    • The team can monitor its members and the quality of the work performed.

 Management Challenges

·         Increasing number of global organizations.

·         Building competitive advantage through superior efficiency, quality, innovation, and responsiveness.

·         Increasing performance while remaining ethical managers.

·         Managing an increasingly diverse work force.

·         Using new technologies.




Lecture 3


Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of a total input.


Efficiency in general describes the extent to which time or effort is well used for the intended task or purpose.


Effectiveness is the capability of producing a desired result.

In general, efficiency is a measurable concept, quantitatively determined by the ratio of output to input. “Effectiveness“, is a relatively vague, non-quantitative concept, mainly concerned with achieving objectives.

Administration and Management

There has been a controversy on the use of these two terms-management and administration. Many experts make no distinction between administration and management and use them as synonyms. Several American writers consider them as two distinct functions.  Three points of view are explained below.

(i)                 Administration is different from management:

According to this view point, administration is a higher level activity while management is a lower level function. Administration is a determinative function concerned with the determination of objectives and policies while management is an executive function involving the implementation of policies and direction of efforts for the achievement of objectives. This view is held largely by American experts on management. Administration involves decision-making and policy formulation while management is concerned with the execution of policies and supervision of work. Administration is superior to management as the latter has only a peripheral role in determination of objectives and policies.

(ii)               Administration is a part of management:

According to the European School of thought, management is a wider term including administration and organization. Management is the generic term for the total process of executive control involving responsibility for effective planning and guidance of operations of an enterprise. Administration is that part of management which is concerned with the installation and carrying out of the procedures by which the program is laid down and communicated and the progress of activities is regulated and checked against plans.  Administration is only an implementing agency while management is determinative. Thus, the European viewpoint is exactly opposite to the American opinion.

(iii)             Administration and management are one:

Many writers like Henri Fayol make no distinction between management and administration. According to Newman, Management or administration is “the guidance, leadership and control of the efforts of a group of individuals towards some common goals”. According to Fayol, all undertakings require the same functions and all must observe the same principles.

There is one common science which can be applied equally well to public and private affairs. Therefore, the distinction between administration and management is superfluous or academic. In actual practice, the two terms are used interchangeably.

In order to resolve the terminological conflict between administration and management, we may classify management into:

(i) Administrative management; and

(ii) Operative management.


To understand the basic nature of management, it must be analysed in terms of art and science, in relation to administration, and as a profession, in terms of managerial skills and style of managers.

Management is Combination of Art and Science

Management knowledge exhibits characteristics of both art and science, the two not mutually exclusive but supplementary. Every discipline of art is always backed by science which is basic knowledge of that art. Similarly, every discipline of science is complete only when it is used in practice for solving various kinds of problems faced by human beings in an organisation or in other fields of social life which is more related to an art.

Management as a Science

Science means a systematic body of knowledge pertaining to a specific field of study. It contains general principles and facts which explains a phenomenon. These principles establish cause-and-effect relationship between two or more factors. These principles and theories help to explain past events and may be used to predict the outcome of actions.

Management as an Art

Art implies the application of knowledge and skills to bring about the desired results. The essential elements of arts are:

(i) Practical knowledge

(ii) Personal skill

(iii) Result oriented approach

(iv) Creativity

(v) Improvement through continuous practice.



Classtest-1: 20 minutes: Marks 15

Lecture 4

The Principles of Management

Management principles are statements of fundamental truth. These principles serve as guidelines for decisions and actions of managers. They are derived through observation and analysis of events which managers have to face in practice.

Henri Fayol developed 14 Principles of management:

1. Division of Work – The specialization of the workforce according to the skills of a person , creating specific personal and professional development within the labor force and therefore increasing productivity; leads to specialization which increases the efficiency of labor. By separating a small part of work, the workers speed and accuracy in its performance increases. This principle is applicable to both technical as well as managerial work.

2. Authority and Responsibility– The issue of commands followed by responsibility for their consequences. Authority means the right of a superior to give order to his subordinates; responsibility means obligation for performance. This principle suggests that there must be parity between authority and responsibility.. They are co-existent and go together, and are two sides of the same coin.

3. Discipline- Discipline refers to obedience, proper conduct in relation to others, respect of authority, etc. It is essential for the smooth functioning of all organizations.

4. Unity of Command – This principle states that every subordinate should receive orders and be accountable to one and only one superior. If an employee receives orders from more than one superior, it is likely to create confusion and conflict. Unity of Command also makes it easier to fix responsibility for mistakes.

5. Unity of Direction – All those working in the same line of activity must understand and pursue the same objectives. All related activities should be put under one group, there should be one plan of action for them, and they should be under the control of one manager. It seeks to ensure unity of action, focusing of efforts and coordination of strength.

6. Subordination of Individual Interest: The management must put aside personal considerations and put company objectives first. Therefore the interests of goals of the organization must prevail over the personal interests of individuals.

7. Remuneration – Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly influences productivity. The quantum and methods of remuneration payable should be fair, reasonable and rewarding of effort.

8. The Degree of Centralization – The amount of power wielded with the central management depends on company size. Centralization implies the concentration of decision making authority at the top management. Sharing of authority with lower levels is called decentralization. The organization should strive to achieve a proper balance.

9. Scalar Chain – Scalar Chain refers to the chain of superiors ranging from top management to the lowest rank. The principle suggests that there should be a clear line of authority from top to bottom linking all managers at all levels. It is considered a chain of command. It involves a concept called a “gang plank” using which a subordinate may contact a superior or his superior in case of an emergency, defying the hierarchy of control. However the immediate superiors must be informed about the matter

10. Order – Social order ensures the fluid operation of a company through authoritative procedure. Material order ensures safety and efficiency in the workplace.

11. Equity – Employees must be treated kindly, and justice must be enacted to ensure a just workplace. Managers should be fair and impartial when dealing with employees.

12. Stability of Tenure of Personnel – The period of service should not be too short and employees should not be moved from positions frequently. An employee cannot render useful service if he is removed before he becomes accustomed to the work assigned to him.

13. Initiative – Using the initiative of employees can add strength and new ideas to an organization. Initiative on the part of employees is a source of strength for the organization because it provides new and better ideas. Employees are likely to take greater interest in the functioning of the organization.

14. Esprit de Corps – This refers to the need of managers to ensure and develop morale in the workplace; individually and communally. Team spirit helps develop an atmosphere of mutual trust and understanding.

These can be used to initiate and aid the processes of change, organization, decision making, skill management and the overall view of the management function.











Lecture 5

Definition of planning

Planning in organizations and public policy is both the organizational process of creating and maintaining a plan; and the psychological process of thinking about the activities required to create a desired goal on some scale. As such, it is a fundamental property of intelligent behavior. This thought process is essential to the creation and refinement of a plan, or integration of it with other plans, that is, it combines forecasting of developments with the preparation of scenarios of how to react to them. An important, albeit often ignored aspect of planning, is the relationship it holds with forecasting. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like.

The term is also used for describing the formal procedures used in such an endeavor, such as the creation of documents, diagrams, or meetings to discuss the important issues to be addressed, the objectives to be met, and the strategy to be followed. Beyond this, planning has a different meaning depending on the political or economic context in which it is used.

Two attitudes to planning need to be held in tension: on the one hand we need to be prepared for what may lie ahead, which may mean contingencies and flexible processes. On the other hand, our future is shaped by consequences of our own planning and actions.

The counterpart to planning is spontaneous order.

 Kinds of plan

It is convenient to think of four kinds of plans:

  1. Project. These are plans of limited duration that produce pre-defined deliverables.
  2. Tactical / Operation. These plans manage the ongoing, daily activities of functions and services. They may initiate new directions designed to “push or pull” a person or organization in a new direction.
  3. Strategic. These plans lay out long range plans and directions that help an organization achieve its long term goals.
  4. Transformational. When organizations change, sometimes they must make major leaps to new levels of production or service. Sometimes their mission and vision change and they must make fundamental changes in long range plans, policies, procedures, and culture.

It is also important to point out that planning and controlling are inseparable. Any attempt to control without plans is meaningless, since there is no way for people to tell whether they are going where they want to go (the result of the task of control) unless they first know where they want to go (part of the task of planning) thus furnishes the standards of control.


Controlling: Comparing plans with results

No Undesirable deviation from     Plan













Figure: Close Relationships of Planning & Controlling


In short we can concluded that planning is the blue print of future courses of action which designed to achieved the predetermine goal and used as a benchmark for controlling process

Steps in Planning

Planning – a result-oriented process – can be summarized in 3 easy steps:

1. Choosing a destination

2. Evaluating alternative routes and

3. Deciding the specific course of your plan.


Ethics and ethical behavior are the essential parts of healthy management. From a management perspective, behaving ethically is an integral part of long – term career success. Wide access to information and more business opportunities than in the past makes ethics a need in modern business world.

Why behave Ethically

From the point of view of internal customer:

  • Improves the atmosphere at work and helps motivating the employees
  • Ethic behavior of management sets a good example to the employees
  • Evokes a sense of pride for the company and improves its image in the eyes of the employees

From the point of view of external customer:

  • Improves the public image of the company adds to the overall development of ethical behavior in the society

Corporate social responsibility

Corporate social responsibility (CSR) is a form of corporateself-regulation integrated into a business model.

Why be responsible

Human resources

CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. CSR has been found to encourage customer orientation among frontline employees.

Risk management

Managing risk is a central part of many corporate strategies. Building a genuine culture of ‘doing the right thing’ within a corporation can offset these risks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.

License to operate

Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously as good corporate citizens with respect to labor standards and impacts on the environment.

Q. You are going to be made a plan, as a Manager of large size organization, what steps would you consider?

The practical steps listed below that a manager should consider in making any plan are of general application. In practice, however, one must study the feasibility of possible courses of action at each stage.

  • Being Aware of opportunities
  • Establishing Objectives
  • Developing Premises
  • Determining Alternative Courses
  • Evaluating Alternative Courses
  • Selecting a Course
  • Formulating Derivative Plans
  • Quantifying Plans by Budgeting

Being Aware of opportunities:

All managers should take a preliminary look at possible future  opportunities and see them clearly and completely, know where their company stands in light of its strengths and weaknesses, understand what problems it has to solve and why, and know what it can expect to gain. Setting realistic objectives depends on this awareness. Planning requires a realistic diagnosis of the opportunity situation.

Establishing Objectives:

The second step in planning is to establish objectives for the entire enterprise and then for each subordinate work unit. This is to be done for the long term as well as for the short range. Objectives specify the expected results and indicate the end points of what is to be done, where the primary emphasis is to be placed, and what is to be accomplished by the network of strategies, policies, procedures, rules, budgets, and programs. Developing Premises:

Premises are assumptions about the environment in which the plan is to be carried out. It is important for all the managers involved in planning to agree on the premises. In fact, the major principle of planning premises is this: the more thoroughly individuals charged with planning understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be.





Steps in Planning

Determining Alternative Courses:

The fourth step in planning is to search for and examine alternative courses of action, especially those not immediately apparent. There is seldom a plan for which reasonable alternatives do not exist, and quite often an alternative that is not obvious proves to be the best.

Evaluating Alternative Courses:

After seeking out alternative courses and examining their strong and weak points, the next step is to evaluate the alternatives by weighing them in light of premises and goals. One course may appear to be the most profitable but may require a large cash outlay and have a slow payback; another may look less profitable but may involve less risk; still another may better suit the company’s long-range objectives.

Selecting a Course:

This is the point at which the plan is adopted–the real point of decision making. Occasionally, an analysis and evaluation of alternative courses will disclose that two or more are advisable, and the manager may decide to follow several courses rather than the one best course.

Formulating Derivative Plans:

When a decision is made, planning is seldom complete, and a seventh step is indicated. Derivative plans are almost invariably required to support the basic plan.

Quantifying Plans by Budgeting:

After decisions are made and plans are set, the final step in giving them meaning, as was indicated in the discussion on types of plans, is to quantify them by converting them into budgets. The overall budget of an enterprise represents the sum total of income and expenses, with resultant profit or surplus, and the budgets of major balance sheet items such as cash and capital expenditures.

Q. Feature of Strategies Planning

Strategy is defined as the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals.

Features of Strategic plans: The following are some of the most important characteristics of strategic plans:

l. They are long-term in nature and place an organization within its external environment.

2. They are comprehensive and cover wide range of organization activities.

3. They integrate guide and control organizational activities for the immediate and long-range future.

4. They set the boundaries for managerial decision making. Since strategic plans are the primary documents of an organization all managerial decisions are required to be consistent with its goals. Strategic plans, thus, set forth the long—term objectives, intermediate objectives and main purpose or basic role of an organization

Q The Strategic Planning Process

The Strategic Planning Process: It covers several steps, starting from the initial examination of the current state of affairs, through the preparation of a plan and down to the final checks on how the plan is affecting daily performance. These steps are discussed below:

Step-1: Planning Awareness: The first step in developing a strategic plan is to take stock of the existing situation: an organizations’ current mission, its goals, structure, strategy and performance; the values and expectations of the major, stake-holders and power brokers of the organization and the environment in which the organization exists and operates.

Step-2: Formulating goals: The second step for management to develop a strategic plan is to clearly spell out what an organization wants to achieve in the future. Formulating goals demands from managers’ necessary affirmation and verification of reasons or justification of the organization’s existence, the definition of its mission or purpose, and establish strategic objectives.













Step-3: Analyzing the external environment:  Scanning or assessing the environment is the process of collecting information from the external environment about factors having the ability to exert influence on the organization. The assessment of environment is done on economic, social, political, legal, demographic, and geographic counts

The main purpose of an environmental assessment is to identify opportunities and threats to the organization so that man can develop a strategy to face them.


Step-4: Analyzing internal environment (or own organization resources): The analysis of internal environment or the organization’s resources from within identifies its present strengths and weaknesses by examining its internal resources. Audit and evaluation should undertake in matters of research and development, production operation, procurement, marketing, products and services. Such other import internal factors as human resources and financial resources, the image the company, the organization’s culture and structure and relations with customers should also be assessed.

Step-5: Identifying strategic opportunities and threats: Management identifies their opportunities to achieve their goals, on the one hand, and the threats that could hamper and halt them. Both these factors must be considered for effective strategic planning. In short, managers should use all the information provided by their scanning of both sides of the environment in the course of strategic planning that are likely to affect their organization in the future.

Step-6: Performing gap analysis: Gap analysis identifies the expected gaps between where managers want the organization to go and where it will actually go if they maintain the current strategy. Gap analysis helps to point out areas in which an organization is likely to succeed, but its real value lies in identifying the limitations of the present strategy and pointing out the areas requiring change. Thus gap analysis helps determine the causes of the gaps and, most importantly, makes managers concerned about the issues to be seriously addressed in designing a new strategy—the core issue of step seven.

Step-7: Developing alternative strategies: At this step of the strategic planning process, managers are faced with the question of or whether a new strategy is required and, if so, what kind of strategy it will be.


The nature and extent of gaps exercise considerable influence on the complexity of the process. Sometimes only minor adjustments in existing goals and strategies are required.


Finally various alternatives have to be carefully considered and evaluated before the choice is made. Strategic choices must be examined in the light of the risks involved in a particular situation.

Step-8: Implementing strategy: However good a strategic may be, it can not fully utilize its potential unless it is implemented at each level of the organisation. A corporate level strategy must appropriate strategic plans for each unit of business.

Step-9: Measuring and controlling progress: At the step, managers must evaluate the effectiveness of the strategy being pursued. Necessary checking should be done by management to see where it conforms to the strategy that they designed in step seven and is achieving the goals that they set forth in step two.














Lecture 6

Definition of MBO

Management by objectives (MBO) is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization.

MBO Process

Stage 1. Collectively fixing objectives

The superior and subordinate managers collectively fix the objectives. The objectives are fixed for the Key Result Areas (KRAs). KRAs are those areas which are very important for the long-term success of the organization. For e.g. R & D, Production, Finance, Marketing, etc. Definite and measurable objectives should be fixed for each KRA. The time limit for achieving the objectives should also be fixed. The objectives should be achieved by the subordinate manager. For e.g. The objective for the marketing managers may be to increase the sales of product XYZ by 50% for the year 2010-2011.

Stage 2. Collectively making a plan

After fixing the objective, the superior and subordinate managers make an action plan. This plan will be used by the subordinate manager to achieve the objective.

Stage 3. Subordinates implements the plan

The subordinate manager implements the plan. That is, he puts the plan to action. He makes optimum use of the resources. If required, he takes guidance from the superior managers.

Stage 4. Collectively monitoring performance

This is the final stage in the MBO process. Here, the subordinate monitors (evaluates or measures) his own performance. He compares his performance with the planned targets (objectives). If there are any deviations, then the superior and subordinates managers fix new objectives. In this stage, the superior acts like a coach and guide. He does not act like a judge.


Unique features and advantages of the MBO process

Some of the important features and advantages of MBO are:

  1. Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment.
  2. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates help to maintain harmonious relationships within the organization and also to solve many problems.
  3. Clarity of goals
  4. Subordinates tend to have a higher commitment to objectives they set for themselves than those imposed on them by another person.
  5. Managers can ensure that objectives of the subordinates are linked to the organization’s objectives.

Domains and levels

Objectives can be set in all domains of activities (production, marketing, services, sales, R&D, human resources, finance, information systems etc.). Some objectives are collective, for a whole department or the whole company, others can be individualized.


Objectives need quantifying and monitoring. Reliable management information systems are needed to establish relevant objectives and monitor their “reach ratio” in an objective way. Pay incentives (bonuses) are often linked to results in reaching the objectives.


There are several limitations to the assumptive base underlying the impact of managing by objectives, including:

1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2. It underemphasizes the importance of the environment or context in which the goals are set.

3. Companies evaluated their employees by comparing them with the “ideal” employee. Trait appraisal only looks at what employees should be, not at what they should do.

Arguments against

MBO has its detractors. A lack of understanding of systems commonly results in the misapplication of objectives.  Additionally, Deming stated that setting production targets will encourage resources to meet those targets through whatever means necessary, which usually results in poor quality.


Classtest-2: 20 minutes: Marks 15

Lecture 7

Decision Making: Meaning and Definition

Decision making may be viewed as the process of selecting a course of action from among several alternatives in order to accomplish a desired result. The purpose of decision making is to direct human behavior and commitment towards a future goal. It involves committing the organization and its resources to a particular choice of course of action thought to be sufficient and capable of achieving some predetermined objective.


Managers at all levels in the organization make decisions and solve problems. In fact, decision making is the process of reducing the gap between the existing situation and the desired situation through solving problems and making use of opportunities. A decision is conclusion reached after consideration: it occurs when one option is selected, to the exclusion of others-it is rendering of judgment.

Some Definitions of Decision making:


  • Decision Making is the selection based on certain criteria from two or more alternatives.
  • Decision Making takes place in adopting the objectives and choosing the means and again when a change in the situation creates a necessity for adjustments.
  • Decision making is defined as the selection of a course of action among alternatives; it is the care of planning.

 Decision-Making Stages

Developed by B. Aubrey Fisher, there are four stages that should be involved in all group decision making.

  • Orientation stage– This phase is where members meet for the first time and start to get to know each other.
  • Conflict stage– Once group members become familiar with each other, disputes, little fights and arguments occur. Group members eventually work it out.
  • Emergence stage– The group begins to clear up vague opinions by talking about them.
  • Reinforcement stage– Members finally make a decision, while justifying themselves that it was the right decision.

Steps In Decision Making Process

Six steps in the decision making process with diagram are discussed below.





1. Defining and Analyzing the real problem

The manager should first find out what is the real problem. The problem may be due to bad relations between management and employees, decrease in sales, increase in cost, etc. After finding out the true problem manager must analyze it carefully. He should find out the cause and effect of the problem.

2. Developing Alternative Solutions

After defining and analyzing the real problem, the manager should develop (make) alternative (different) solutions for solving the problem. Only realistic solutions should be considered. Group participation and computers should be used for developing alternative solutions.

3. Evaluating the Alternative Solutions

The manager should carefully evaluate the merits and demerits of each alternative solution. He should compare the cost of each solution. He should compare the risks involved. He should also compare the feasibility of each solution. He should find out which solution will be accepted by the employees.

4. Selecting the best Solution

After evaluating all the solutions, the manager should select the best solution. He should select a solution which is less costly and less risky. He should select a solution which is most feasible and which is accepted by the employees. In short, the manager should select a solution which has the most merits and least demerits. The best solution is called the “Decision“.

5. Implementing the Decision

After making the decision, the manager should implement it. That is, he should put the decision into action. He should communicate the decision to the employees. He should persuade the employees to accept the decision. This can be done by involving them in the decision making process. Then the manager should provide the employees with all the resources, which are required for implementing the decision. He should also motivate them to implement the decision.


6. Follow Up

After implementing the decision, the manager must do follow up. That is, he must get the feedback about the decision. He should find out whether the decision was effective or not. This is done by comparing the decision with the action, finding out the deviations (differences) and taking essential steps to remove these deviations. So, follow-up is just like the control function. It helps to improve the quality of future decisions.

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

The decision-making process involves the following steps:

  1. Define the problem.
  2. Identify limiting factors.
  3. Develop potential alternatives.
  4. Analyze the alternatives.
  5. Select the best alternative.
  6. Implement the decision.
  7. Establish a control and evaluation system.

Define the problem

The decision-making process begins when a manager identifies the real problem. The accurate definition of the problem affects all the steps that follow; if the problem is inaccurately defined, every step in the decision-making process will be based on an incorrect starting point. One way that a manager can help determine the true problem in a situation is by identifying the problem separately from its symptoms.

The most obviously troubling situations found in an organization can usually be identified as symptoms of underlying problems. (See Table 1 for some examples of symptoms.) These symptoms all indicate that something is wrong with an organization, but they don’t identify root causes. A successful manager doesn’t just attack symptoms; he works to uncover the factors that cause these symptoms.

TABLE 1Symptoms and Their Real Causes


SymptomsUnderlying Problem
Low profits and/or declining salesPoor market research
High costsPoor design process; poorly trained employees
Low moraleLack of communication between management and subordinates
High employee turnoverRate of pay too low; job design not suitable
High rate of absenteeismEmployees believe that they are not valued

Identify limiting factors

All managers want to make the best decisions. To do so, managers need to have the ideal resources — information, time, personnel, equipment, and supplies — and identify any limiting factors. Realistically, managers operate in an environment that normally doesn’t provide ideal resources. For example, they may lack the proper budget or may not have the most accurate information or any extra time. So, they must choose to satisfice — to make the best decision possible with the information, resources, and time available.

Develop potential alternatives

Time pressures frequently cause a manager to move forward after considering only the first or most obvious answers. However, successful problem solving requires thorough examination of the challenge, and a quick answer may not result in a permanent solution. Thus, a manager should think through and investigate several alternative solutions to a single problem before making a quick decision.

One of the best known methods for developing alternatives is through brainstorming, where a group works together to generate ideas and alternative solutions. The assumption behind brainstorming is that the group dynamic stimulates thinking — one person’s ideas, no matter how outrageous, can generate ideas from the others in the group. Ideally, this spawning of ideas is contagious, and before long, lots of suggestions and ideas flow. Brainstorming usually requires 30 minutes to an hour. The following specific rules should be followed during brainstorming sessions:

  • Concentrate on the problem at hand. This rule keeps the discussion very specific and avoids the group’s tendency to address the events leading up to the current problem.
  • Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there are no bad ideas. Encouragement of the group to freely offer all thoughts on the subject is important. Participants should be encouraged to present ideas no matter how ridiculous they seem, because such ideas may spark a creative thought on the part of someone else.
  • Refrain from allowing members to evaluate others’ ideas on the spot. All judgments should be deferred until all thoughts are presented, and the group concurs on the best ideas.

Although brainstorming is the most common technique to develop alternative solutions, managers can use several other ways to help develop solutions. Here are some examples:

  • Nominal group technique. This method involves the use of a highly structured meeting, complete with an agenda, and restricts discussion or interpersonal communication during the decision-making process. This technique is useful because it ensures that every group member has equal input in the decision-making process. It also avoids some of the pitfalls, such as pressure to conform, group dominance, hostility, and conflict, that can plague a more interactive, spontaneous, unstructured forum such as brainstorming.
  • Delphi technique. With this technique, participants never meet, but a group leader uses written questionnaires to conduct the decision making.

No matter what technique is used, group decision making has clear advantages and disadvantages when compared with individual decision making. The following are among the advantages:

  • Groups provide a broader perspective.
  • Employees are more likely to be satisfied and to support the final decision.
  • Opportunities for discussion help to answer questions and reduce uncertainties for the decision makers.

These points are among the disadvantages:

  • This method can be more time-consuming than one individual making the decision on his own.
  • The decision reached could be a compromise rather than the optimal solution.
  • Individuals become guilty of groupthink — the tendency of members of a group to conform to the prevailing opinions of the group.
  • Groups may have difficulty performing tasks because the group, rather than a single individual, makes the decision, resulting in confusion when it comes time to implement and evaluate the decision.

The results of dozens of individual-versus-group performance studies indicate that groups not only tend to make better decisions than a person acting alone, but also that groups tend to inspire star performers to even higher levels of productivity.

So, are two (or more) heads better than one? The answer depends on several factors, such as the nature of the task, the abilities of the group members, and the form of interaction. Because a manager often has a choice between making a decision independently or including others in the decision making, she needs to understand the advantages and disadvantages of group decision making.

Analyze the alternatives

The purpose of this step is to decide the relative merits of each idea. Managers must identify the advantages and disadvantages of each alternative solution before making a final decision.

Evaluating the alternatives can be done in numerous ways. Here are a few possibilities:

  • Determine the pros and cons of each alternative.
  • Perform a cost-benefit analysis for each alternative.
  • Weight each factor important in the decision, ranking each alternative relative to its ability to meet each factor, and then multiply by a probability factor to provide a final value for each alternative.

Regardless of the method used, a manager needs to evaluate each alternative in terms of its

  • Feasibility — Can it be done?
  • Effectiveness — How well does it resolve the problem situation?
  • Consequences — What will be its costs (financial and nonfinancial) to the organization?

Select the best alternative

After a manager has analyzed all the alternatives, she must decide on the best one. The best alternative is the one that produces the most advantages and the fewest serious disadvantages. Sometimes, the selection process can be fairly straightforward, such as the alternative with the most pros and fewest cons. Other times, the optimal solution is a combination of several alternatives.

Sometimes, though, the best alternative may not be obvious. That’s when a manager must decide which alternative is the most feasible and effective, coupled with which carries the lowest costs to the organization. (See the preceding section.) Probability estimates, where analysis of each alternative’s chances of success takes place, often come into play at this point in the decision-making process. In those cases, a manager simply selects the alternative with the highest probability of success.

Implement the decision

Managers are paid to make decisions, but they are also paid to get results from these decisions. Positive results must follow decisions. Everyone involved with the decision must know his or her role in ensuring a successful outcome. To make certain that employees understand their roles, managers must thoughtfully devise programs, procedures, rules, or policies to help aid them in the problem-solving process.

Establish a control and evaluation system

Ongoing actions need to be monitored. An evaluation system should provide feedback on how well the decision is being implemented, what the results are, and what adjustments are necessary to get the results that were intended when the solution was chosen.

In order for a manager to evaluate his decision, he needs to gather information to determine its effectiveness. Was the original problem resolved? If not, is he closer to the desired situation than he was at the beginning of the decision-making process?

If a manager’s plan hasn’t resolved the problem, he needs to figure out what went wrong. A manager may accomplish this by asking the following questions:

  • Was the wrong alternative selected? If so, one of the other alternatives generated in the decision-making process may be a wiser choice.
  • Was the correct alternative selected, but implemented improperly? If so, a manager should focus attention solely on the implementation step to ensure that the chosen alternative is implemented successfully.




Lecture 8

Definition of Organization

An organization is a social group which distributes tasks for a collective goal. Two or more people working together to achieve something (that often cannot be accomplished alone). Shared

Organizational structures

The study of organizations includes a focus on optimizing organizational structure. According to management science, most human organizations fall roughly into four types:

Pyramids or hierarchies

A hierarchy exemplifies an arrangement with a leader who leads other individual members of the organization. This arrangement is often associated with bureaucracy.

Committees or juries

These consist of a group of peers who decide as a group, perhaps by voting.

Matrix organization

This organizational type assigns each worker two bosses in two different hierarchies. One hierarchy is “functional” and assures that each type of expert in the organization is well-trained, and measured by a boss who is super-expert in the same field. As an example, a company might have an individual with overall responsibility for Products X and Y, and another individual with overall responsibility for Engineering, Quality Control etc. Therefore, subordinates responsible for quality control of project X will have two reporting lines.


This organization has intense competition. Bad parts of the organization starve. Good ones get more work. Everybody is paid for what they actually do, and runs a tiny business that has to show a profit, or they are fired. Companies who utilize this organization type reflect a rather one-sided view of what goes on in ecology. It is also the case that a natural ecosystem has a natural border – ecoregions do not in general compete with one another in any way, but are very autonomous.

Organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed and its goals can be met. When a work group is very small and face-to-face communication is frequent, formal structure may be unnecessary, but in a larger organization decisions have to be made about the delegation of various tasks. Thus, procedures are established that assign responsibilities for various functions. It is these decisions that determine the organizational structure.

In an organization of any size or complexity, employees’ responsibilities typically are defined by what they do, who they report to, and for managers, who reports to them. Over time these definitions are assigned to positions in the organization rather than to specific individuals. The relationships among these positions are illustrated graphically in an organizational chart (see Figures 1a and 1b). The best organizational structure for any organization depends on many factors including the work it does; its size in terms of employees, revenue, and the geographic dispersion of its facilities; and the range of its businesses (the degree to which it is diversified across markets).

There are multiple structural variations that organizations can take on, but there are a few basic principles that apply and a small number of common patterns. The following sections explain these patterns and provide the historical context from which some of them arose. The first section addresses organizational structure in the twentieth century. The second section provides additional details of traditional, vertically-arranged organizational structures. This is followed by descriptions of several alternate organizational structures including those arranged by product, function, and geographical or product markets. Next is a discussion of combination structures, or matrix organizations. The discussion concludes by addressing emerging and potential future organizational structures.


Understanding the historical context from which some of today’s organizational structures have developed helps to explain why some structures are the way they are. For instance, why are the old, but still operational steel mills such as U.S. Steel and Bethlehem Steel structured using vertical hierarchies? Why are newer steel mini-mills such as Chaparral Steel structured more horizontally, capitalizing on the innovativeness of their employees? Part of the reason, as this section discusses, is that organizational structure has a certain inertia—the idea borrowed from physics and chemistry that something in motion tends to continue on that same path. Changing an organization’s structure is a daunting managerial task, and the immensity of such a project is at least partly responsible for why organizational structures change infrequently.

At the beginning of the twentieth century the United States business sector was thriving. Industry was shifting from job-shop manufacturing to mass production, and thinkers like Frederick Taylor in the United States and Henri Fayol in France studied the new systems and developed principles to determine how to structure organizations for the greatest efficiency and productivity, which in their view was very much like a machine. Even before this, German sociologist and engineer Max Weber had concluded that when societies embrace capitalism, bureaucracy is the inevitable result. Yet, because his writings were not translated into English until 1949, Weber’s work had little influence on American management practice until the middle of the twentieth century.

Management thought during this period was influenced by Weber’s ideas of bureaucracy, where power is ascribed to positions rather than to the individuals holding those positions. It also was influenced by Taylor’s scientific management, or the “one best way” to accomplish a task using scientifically-determined studies of time and motion. Also influential were Fayol’s ideas of invoking unity within the chain-of-command, authority, discipline, task specialization, and other aspects of organizational power and job separation. This created the context for vertically-structured organizations characterized by distinct job classifications and top-down authority structures, or what became known as the traditional or classical organizational structure.

Job specialization, a hierarchical reporting structure through a tightly-knit chain-of-command, and the subordination of individual interests to the superordinate goals of the organization combined to result in organizations arranged by functional departments with order and discipline maintained by rules, regulations, and standard operating procedures. This classical view, or bureaucratic structure, of organizations was the dominant pattern as small organizations grew increasingly larger during the economic boom that occurred from the 1900s until the Great Depression of the 1930s. Henry Ford’s plants were typical of this


Figure 1a  :Organizational Structure

growth, as the emerging Ford Motor Company grew into the largest U.S. automaker by the 1920s.

The Great Depression temporarily stifled U.S. economic growth, but organizations that survived emerged with their vertically-oriented, bureaucratic structures intact as public attention shifted to World War II. Postwar rebuilding reignited economic growth, powering organizations that survived the Great Depression toward increasing size in terms of sales revenue, employees, and geographic dispersion. Along with increasing growth, however, came increasing complexity. Problems in U.S. business structures became apparent and new ideas began to appear. Studies of employee motivation raised questions about the traditional model. The “one best way” to do a job gradually disappeared as the dominant logic. It was replaced by concerns that traditional organizational structures might prevent, rather than help, promote creativity and innovation—both of which were necessary as the century wore on and pressures to compete globally mounted.


While the previous section explained the emergence of the traditional organizational structure, this section provides additional detail regarding how this affected the practice of management. The structure of every organization is unique in some respects, but all organizational structures develop or are consciously designed to enable the organization to accomplish its work. Typically, the structure of an organization evolves as the organization grows and changes over time.

Researchers generally identify four basic decisions that managers have to make as they develop an organizational structure, although they may not be explicitly aware of these decisions. First, the organization’s work must be divided into specific jobs. This is referred to as the division of labor. Second, unless the organization is very small, the jobs must be grouped in some way, which is called departmentalization. Third, the number of people and jobs that are to be grouped together must be decided. This is related to the number of people that are to be managed by one person, or the span of control—the number of employees reporting to a single manager. Fourth, the way decision-making authority is to be distributed must be determined.

In making each of these design decisions, a range of choices are possible. At one end of the spectrum, jobs are highly specialized with employees performing a narrow range of activities, while at the other end of the spectrum employees perform a variety of tasks. In


Figure 1b : Organizational Structure

traditional bureaucratic structures, there is a tendency to increase task specialization as the organization grows larger. In grouping jobs into departments, the manager must decide the basis on which to group them. The most common basis, at least until the last few decades, was by function. For example, all accounting jobs in the organization can be grouped into an accounting department, all engineers can be grouped into an engineering department, and so on. The size of the groupings also can range from small to large depending on the number of people the managers supervise. The degree to which authority is distributed throughout the organization can vary as well, but traditionally structured organizations typically vest final decision-making authority by those highest in the vertically structured hierarchy. Even as pressures to include employees in decision-making increased during the 1950s and 1960s, final decisions usually were made by top management. The traditional model of organizational structure is thus characterized by high job specialization, functional departments, narrow spans of control, and centralized authority. Such a structure has been referred to as traditional, classical, bureaucratic, formal, mechanistic, or command and control. A structure formed by choices at the opposite end of the spectrum for each design decision is called unstructured, informal, or organic.

The traditional model of organizational structure is easily represented in a graphical form by an organizational chart. It is a hierarchical or pyramidal structure with a president or other executive at the top, a small number of vice presidents or senior managers under the president, and several layers of management below this, with the majority of employees at the bottom of the pyramid. The number of management layers depends largely on the size of the organization. The jobs in the traditional organizational structure usually are grouped by function into departments such as accounting, sales, human resources, and so. Figures 1a and 1b illustrate such an organization grouped by functional areas of operations, marketing and finance.


As noted in the previous section, many organizations group jobs in various ways in different parts of the organization, but the basis that is used at the highest level plays a fundamental role in shaping the organization. There are four commonly used bases.


Every organization of a given type must perform certain jobs in order do its work. For example, key functions of a manufacturing company include production, purchasing, marketing, accounting, and personnel. The functions of a hospital include surgery, psychiatry, nursing, housekeeping, and billing. Using such functions as the basis for structuring the organization may, in some instances, have the advantage of efficiency. Grouping jobs that require the same knowledge, skills, and resources allows them to be done efficiently and promotes the development of greater expertise. A disadvantage of functional groupings is that people with the same skills and knowledge may develop a narrow departmental focus and have difficulty appreciating any other view of what is important to the organization; in this case, organizational goals may be sacrificed in favor of departmental goals. In addition, coordination of work across functional boundaries can become a difficult management challenge, especially as the organization grows in size and spreads to multiple geographical locations.


Organizations that are spread over a wide area may find advantages in organizing along geographic lines so that all the activities performed in a region are managed together. In a large organization, simple physical separation makes centralized coordination more difficult. Also, important characteristics of a region may make it advantageous to promote a local focus. For example, marketing a product in Western Europe may have different requirements than marketing the same product in Southeast Asia. Companies that market products globally sometimes adopt a geographic structure. In addition, experience gained in a regional division is often excellent training for management at higher levels.


Large, diversified companies are often organized according to product. All the activities necessary to produce and market a product or group of similar products are grouped together. In such an arrangement, the top manager of the product group typically has considerable autonomy over the operation. The advantage of this type of structure is that the personnel in the group can focus on the particular needs of their product line and become experts in its development, production, and distribution. A disadvantage, at least in terms of larger organizations, is the duplication of resources. Each product group requires most of the functional areas such as finance, marketing, production, and other functions. The top leadership of the organization must decide how much redundancy it can afford.


An organization may find it advantageous to organize according to the types of customers it serves. For example, a distribution company that sells to consumers, government clients, large businesses, and small businesses may decide to base its primary divisions on these different markets. Its personnel can then become proficient in meeting the needs of these different customers. In the same way, an organization that provides services such as accounting or consulting may group its personnel according to these types of customers. Figure 2 depicts an organization grouped by customers and markets.


Figure 2
Customer/Market Organization


Figure 3
Matrix Structure


Some organizations find that none of the afore-mentioned structures meet their needs. One approach that attempts to overcome the inadequacies is the matrix structure, which is the combination of two or more different structures. Functional departmentalization commonly is combined with product groups on a project basis. For example, a product group wants to develop a new addition to its line; for this project, it obtains personnel from functional departments such as research, engineering, production, and marketing. These personnel then work under the manager of the product group for the duration of the project, which can vary greatly. These personnel are responsible to two managers (as shown in Figure 3).

One advantage of a matrix structure is that it facilitates the use of highly specialized staff and equipment. Rather than duplicating functions as would be done in a simple product department structure, resources are shared as needed. In some cases, highly specialized staff may divide their time among more than one project. In addition, maintaining functional departments promotes functional expertise, while at the same time working in project groups with experts from other functions fosters cross-fertilization of ideas.

The disadvantages of a matrix organization arise from the dual reporting structure. The organization’s top management must take particular care to establish proper procedures for the development of projects and to keep communication channels clear so that potential conflicts do not arise and hinder organizational functioning. In theory at least, top management is responsible for arbitrating such conflicts, but in practice power struggles between the functional and product manager can prevent successful implementation of matrix structural arrangements. Besides the product/function matrix, other bases can be related in a matrix. Large multinational corporations that use a matrix structure most commonly combine product groups with geographic units. Product managers have global responsibility for the development, manufacturing, and distribution of their own product or service line, while managers of geographic regions have responsibility for the success of the business in their regions.


As corporations become very large they often restructure as a means of revitalizing the organization. Growth of a business often is accompanied by a growth in bureaucracy, as positions are created to facilitate developing needs or opportunities. Continued changes in the organization or in the external business environment may make this bureaucracy a hindrance rather than a help, not simply because of the size or complexity of the organization but also because of a sluggish bureaucratic way of thinking. One approach to encourage new ways of thinking and acting is to reorganize parts of the company into largely autonomous groups,


Figure 4
SBU Structure

called strategic business units (SBUs). Such units generally are set up like separate companies, with full profit and loss responsibility invested in the top management of the unit—often the president of the unit and/or a senior vice president of the larger corporation. This manager is responsible to the top management of the corporation. This arrangement can be seen as taking any of the aforementioned departmentalization schemes one step further. The SBUs might be based on product lines, geographic markets, or other differentiating factors. Figure 4 depicts SBUs organized by geographic area.


Except for the matrix organization, all the structures described above focus on the vertical organization; that is, who reports to whom, who has responsibility and authority for what parts of the organization, and so on. Such vertical integration is sometimes necessary, but may be a hindrance in rapidly changing environments. A detailed organizational chart of a large corporation structured on the traditional model would show many layers of managers; decision making flows vertically up and down the layers, but mostly downward. In general terms, this is an issue of interdependence.

In any organization, the different people and functions do not operate completely independently. To a greater or lesser degree, all parts of the organization need each other. Important developments in organizational design in the last few decades of the twentieth century and the early part of the twenty-first century have been attempts to understand the nature of interdependence and improve the functioning of organizations in respect to this factor. One approach is to flatten the organization, to develop the horizontal connections and de-emphasize vertical reporting relationships. At times, this involves simply eliminating layers of middle management. For example, some Japanese companies—even very large manufacturing firms—have only four levels of management: top management, plant management, department management, and section management. Some U.S. companies also have drastically reduced the number of managers as part of a downsizing strategy; not just to reduce salary expense, but also to streamline the organization in order to improve communication and decision making.

In a virtual sense, technology is another means of flattening the organization. The use of computer networks and software designed to facilitate group work within an organization can speed communications and decision making. Even more effective is the use of intranets to make company information readily accessible throughout the organization. The rapid rise of such technology has made virtual organizations and boundarlyless organizations possible, where managers, technicians, suppliers, distributors, and customers connect digitally rather than physically.

A different perspective on the issue of interdependence can be seen by comparing the organic model of organization with the mechanistic model. The traditional, mechanistic structure is characterized as highly complex because of its emphasis on job specialization, highly formalized emphasis on definite procedures and protocols, and centralized authority and accountability. Yet, despite the advantages of coordination that these structures present, they may hinder tasks that are interdependent. In contrast, the organic model of organization is relatively simple because it de-emphasizes job specialization, is relatively informal, and decentralizes authority. Decision-making and goal-setting processes are shared at all levels, and communication ideally flows more freely throughout the organization.

A common way that modern business organizations move toward the organic model is by the implementation of various kinds of teams. Some organizations establish self-directed work teams as the basic production group. Examples include production cells in a manufacturing firm or customer service teams in an insurance company. At other organizational levels, cross-functional teams may be established, either on an ad hoc basis (e.g., for problem solving) or on a permanent basis as the regular means of conducting the organization’s work. Aid Association for Lutherans is a large insurance organization that has adopted the self-directed work team approach. Part of the impetus toward the organic model is the belief that this kind of structure is more effective for employee motivation. Various studies have suggested that steps such as expanding the scope of jobs, involving workers in problem solving and planning, and fostering open communications bring greater job satisfaction and better performance.

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