1.

Management
Meaning:
Management is an important factor for the success of any organized activity. Today
management basically concern with changes and challenges, and it is difficult to
manage.

Management is an art of getting things done through others. Management is to

plan, organize, direct and control the resources of the organization for obtaining
common objectives or goals. It is related with resources like material, money,
machinery, methods, manufacturing and marketing. Management principles are
universal in nature.

Management is necessary for all types of organization, such as public sector, private
sector, govt department, hotel, hospital, hostels, educational institutes, require
management for several growth and expansion.

Definitions:
1) According to Taylor:
"Management is the art of knowing what you want to do and then seeing that it is done
in the best and cheapest way”.

2) According to Lawrence:
"Management is the accomplishment of results through the efforts of other people”.

3) According to Henry Fayol:

“To manage is to forecast and to plan, to organize, to co-ordinate and to control”

1.2 Importance Of Management

1. Management is goal oriented:-
Management is concern with achievement of specific goals. It is always directed
towards achievement of objectives. The success of management is measured by the
extent to which objectives are achieved.

2. Management is associated with group efforts:

The business comes into existence with certain objectives which are to be achieved by
a group and not by one person alone. Management gets things done by, with and
through the efforts of group members. It co-ordinates th activities and actions of its
members towards a common goal

3. Management is Intangible
It is an unseen force, its presence can be evidence by the result of its efforts up to date
order but they generally remain unnoticed, Where as mismanagement is Quickly
noticed

4 .Management is an activity and not a person or group of person:

Management is not people or not a certain class but it is the activity, it is the process
of planning, organizing directing and controlling to achieve the objectives of the
organization

5. Management is situational
Management does not advice best way of doing things Effective management is always
situational A manager has to apply principles, approaches and techniques of
management after taking into consideration the existing situations

6.Management is universal
Most of the principles and techniques of management are universal in nature They can
be applied to govemment organization mistary, educational institutes religious
institutes etc. They provide working guidelines which can be adopted according to
situations

1.2. The need, scope and process of Management

Scope For Management:-
Although it is difficult to precisely define the scope of management, the following areas
are included in it:

1. Subject matter of management: Planning, organizing, directing, coordinating and

controlling are the activities included in the subject matter of management.

2. Functional areas of management: These are as follows:

• Financial management includes accounting, budgetary control, quality control,

financial planning and managing the overall finances of an organization.

• Personnel management includes recruitment, training, transfer promotion, demotion,

retirement, termination, labour-welfare and social security industrial relations.

• Purchasing management includes inviting tenders for raw materials, placing orders,
entering into contracts and materials control.

• Production management includes production planning, production control techniques,

quality control and inspection and time and motion studies.

• Maintenance management involves proper care and maintenance of the buildings,

plant and machinery

3. Management is an inter-disciplinary approach:

For the correct implementation of management, it is important to have knowledge of
commerce, economics, sociology, psychology and mathematics.

4. Universal application: The principles of management can be applied to all types of

organizations irrespective of the nature of tasks that they perform.

5. Essentials of management:

Three essentials of management are as follows:

• Scientific method

• Dealing with uncertainties

• Human relations

• Quantitative technique
6. Modern management is an agent of change: The management techniques can
be modified by proper research and development to improve the performance of an
organization

Need For Management

Management is an essential component of all social organizations and is to be found
everywhere as a distinct, separate and dominant activity. The importance of
management cannot be overemphasized. The significance of „management‟ may be
outlined in the following paragraphs:

1. To meet the challenges of change: In recent years, the challenge of change has
become intense and critical. Only scientific management can overcome the
complexities of modern business.

2. For effective utilization of the Seven Ms: There are seven Ms in business: men,
materials, money, machines, methods, markets and management.Management stands
at the top of all these Ms. It determines and controls all other factors of business.

3. For the development of resources: Good management procures good business by

creating vital dynamic and life-giving force in the organization.

4. Management directs the organization: Just as the mind directs and controls the
body to fulfil its desires, similarly management directs and controls the organizations
to achieve the desired goal.

5. Integrate various interests: There are various interest groups that put pressure
over other groups for maximum share in the total output. Management balances these
pressures and integrates the various interests.

6. Management provides stability: In the modern organization, management

provides stability by changing and modifying the resources in accordance with the
changing environment of the society.

7. Management provides innovation: Management provides new ideas, imagination

and vision to the organization and is necessary for better and greater performance.

8. Management provides coordination and establishes team spirit: Management

coordinates the activities of the different departments in an enterprise and establishes
team spirit amongst the personnel.
9. To tackle business problems: Goods management serves as a friend, philosopher
and guide in tackling business problems. It provides a tool for doing a task in the best
possible manner.

10. A tool of personality development: Management is necessary not only for

productivity, but also for improvement in the efficiency of mankind. Management helps
improve the personality of people and therefore attempts to raise their efficiency and
productivity

Management as a Process
As a process, management refers to a series of inter-related functions. It is the
process by which management creates, operates and directs purposive organization
through systematic, coordinated and co-operated human efforts, according to George
R. Terry, “Management is a distinct process consisting of planning, organizing,
actuating and controlling, performed to determine and accomplish stated objective by
the use of human beings and other resources”. As a process, management consists of
three aspects:

1. Management is a social process - Since human factor is most important among

the other factors, therefore management is concerned with developing
relationship among people. It is the duty of management to make interaction
between people - productive and useful for obtaining organizational goals.
2. Management is an integrating process - Management undertakes the job of
bringing together human physical and financial resources so as to achieve
organizational purpose. Therefore, is an important function to bring harmony
between various factors.
3. Management is a continuous process - It is a never ending process. It is
concerned with constantly identifying the problem and solving them by taking
adequate steps. It is an on-going process

1.3 Levels Of Management/Managerial Hierarchy

Level of management refers to the categories or layers of managerial positions in an
organization. The level of management determines the amount of authority and status
of the person occupying the position at that level.

 Top Level Management or senior management

 Middle Level Management
 Lower Level Management such as supervisors or team-leaders

1. Top-level management
  Require an extensive knowledge of management roles and skills.
 They have to be very aware of external factors such as markets.
 Their decisions are generally of a long-term nature
 Their decisions are made using analytic, directive, conceptual and/or
behavioral/participative processes
 They are responsible for strategic decisions.
 They have to chalk out the plan and see that plan may be effective in the future.
 They are executive in nature.

These includes board of Directors, CEO‟s they comprise small groups but are
responsible for overall management they formulate plans, decide objectives &
communicate to middle level management.

2.Middle -Level of Management

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They
devote more time to organizational and directional functions. In small organization,
there is only one layer of middle level of management but in big enterprises, there may
be senior and junior middle level management. Their role can be emphasized as +

 They execute the plans of the organization in accordance with the policies and
directives of the top management.
 They make plans for the sub-units of the organization.
 They participate in employment & training of lower level management.
 They interpret and explain policies from top level management to lower level.
 They are responsible for coordinating the activities within the division or
department
 It also sends important reports and other important data to top level
management.
 They evaluate performance of junior managers.
 They are also responsible for inspiring lower level managers towards better
performance.

3.Lower -Level of Management

Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose work
has to be largely with personal oversight and direction of operative employees”. In other
words, they are concerned with direction and controlling function of management. Their
activities include +

 Assigning of jobs and tasks to various workers.

 They guide and instruct workers for day to day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in
the organization.
 They communicate workers problems, suggestions, and recommendatory
appeals etc to the higher level and higher level goals and objectives to the
workers. They help to solve the grievances of the workers.
 They supervise & guide the sub-ordinates.
 They are responsible for providing training to the workers.
 They arrange necessary materials, machines, tools etc for getting the things
done.
 They prepare periodical reports about the performance of the workers.
 They ensure discipline in the enterprise.
 They motivate workers.
 They are the image builders of the enterprise because they are in direct contact
with the workers.

1.4 Managerial functions: Planning, Organizing,

Staffing Directing, Controlling

Management has been described as a social process involving responsibility for

economical and effective planning & regulation of operation of an enterprise in the
fulfillment of given purposes. It is a dynamic process consisting of various elements
and activities. These activities are different from operative functions like marketing,
finance, purchase etc. Rather these activities are common to each and every manger
irrespective of his level or status.

Different experts have classified functions of management. According to George &

Jerry, “There are four fundamental functions of management i.e. planning, organizing,
actuating and controlling”.

According to Henry Fayol, “To manage is to forecast and plan, to organize, to command,
& to control”. Whereas Luther Gullick has given a keyword ‟POSDCORB‟ where P
stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-
ordination, R for reporting & B for Budgeting.
But the most widely accepted are functions of management given by KOONTZ and
O‟DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management

but practically these functions are overlapping in nature i.e. they are highly
inseparable. Each function blends into the other & each affects the performance of
others.

1. Planning
It is the basic function of management. It deals with chalking out a future course
of action & deciding in advance the most appropriate course of actions for
achievement of pre-determined goals.

According to KOONTZ, “Planning is deciding in advance - what to do, when to do

& how to do. It bridges the gap from where we are & where we want to be”. A
plan is a future course of actions. It is an exercise in problem solving & decision
making.

Planning is determination of courses of action to achieve desired goals. Thus,

planning is a systematic thinking about ways & means for accomplishment of
pre-determined goals. Planning is necessary to ensure proper utilization of
human & non-human resources. It is all pervasive, it is an intellectual activity
and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing
It is the process of bringing together physical, financial and human resources
and developing productive relationship amongst them for achievement of
organizational goals.
 According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and
personnel‟s”. To organize a business involves determining & providing human
and non-human resources to the organizational structure. Organizing as a
process involves:

 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing
It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to
advancement of technology, increase in size of business, complexity of human
behavior etc.

The main purpose o staffing is to put right man on right job i.e. square pegs in
square holes and round pegs in round holes. According to Kootz & O‟Donell,
“Managerial function of staffing involves manning the organization structure
through proper and effective selection, appraisal & development of personnel to
fill the roles designed un the structure”. Staffing involves:

 Manpower Planning (estimating man power in terms of searching,

choose the person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.
4. Directing
It is that part of managerial function which actuates the organizational methods
to work efficiently for achievement of organizational purposes. It is considered
life-spark of the enterprise which sets it in motion the action of people because
planning, organizing and staffing are the mere preparations for doing the work.

Direction is that inert-personnel aspect of management which deals directly

with influencing, guiding, supervising, motivating sub-ordinate for the
achievement of organizational goals. Direction has following elements:

 Supervision
 Motivation
 Leadership
  Communication

Supervision- implies overseeing the work of subordinates by their superiors. It

is the act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with

zeal to work. Positive, negative, monetary, non-monetary incentives may be
used for this purpose.

Leadership- may be defined as a process by which manager guides and

influences the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc

from one person to another. It is a bridge of understanding.

5. Controlling
It implies measurement of accomplishment against the standards and
correction of deviation if any to ensure achievement of organizational goals. The
purpose of controlling is to ensure that everything occurs in conformities with
the standards. An efficient system of control helps to predict deviations before
they actually occur.

According to Theo Haimann, “Controlling is the process of checking whether or

not proper progress is being made towards the objectives and goals and acting
if necessary, to correct any deviation”.

According to Koontz & O‟Donell “Controlling is the measurement & correction of

performance activities of subordinates in order to make sure that the enterprise
objectives and plans desired to obtain them as being accomplished”. Therefore
controlling has following steps:

Establishment of standard performance.

a. Measurement of actual performance.

b. Comparison of actual performance with the standards and finding out
deviation if any.
c. Corrective action.

1.5 Types of managers & its Skill: Functional,

Specialize, Generalize
Top-Level Managers
 As you would expect, top-level managers (or top managers) are the “bosses” of
the organization.
 They have titles such as chief executive officer (CEO), chief operations officer
(COO), chief marketing officer (CMO), chief technology officer (CTO), and chief
financial officer (CFO).
 A new executive position known as the chief compliance officer (CCO) is
showing up on many organizational charts in response to the demands of the
government to comply with complex rules and regulations.
 Depending on the size and type of organization, executive vice presidents and
division heads would also be part of the top management team.
 The relative importance of these positions varies according to the type of
organization they head.
 For example, in a pharmaceutical firm, the CCO may report directly to the CEO
or to the board of directors.
 Top managers are ultimately responsible for the long-term success of the
organization. They set long-term goals and define strategies to achieve them.
 They pay careful attention to the external environment of the organization: the
economy, proposals for laws that would affect profits, stakeholder demands,
and consumer and public relations.
 They will make the decisions that affect the whole company such as financial
investments, mergers and acquisitions, partnerships and strategic alliances,
and changes to the brand or product line of the organization.

Middle Managers
 Middle managers have titles like department head, director, and chief
supervisor. They are links between the top managers and the first-line
managers and have one or two levels below them.
 Middle managers receive broad strategic plans from top managers and turn
them into operational blueprints with specific objectives and programs for first-
line managers.
 They also encourage, support, and foster talented employees within the
organization. An important function of middle managers is providing leadership,
both in implementing top manager directives and in enabling first-line
managers to support teams and effectively report both positive performances
and obstacles to meeting objectives.

First-Line Managers
 First-line managers are the entry level of management, the individuals “on the
line” and in the closest contact with the workers.
  They are directly responsible for making sure that organizational objectives and
plans are implemented effectively.
 They may be called assistant managers, shift managers, foremen, section
chiefs, or office managers.
 First-line managers are focused almost exclusively on the internal issues of the
organization and are the first to see problems with the operation of the
business, such as untrained labor, poor quality materials, machinery
breakdowns, or new procedures that slow down production. It is essential that
they communicate regularly with middle management.

Team Leaders
 A team leader is a special kind of manager who may be appointed to manage a
particular task or activity. The team leader reports to a first-line or middle
manager.
 Responsibilities of the team leader include developing timelines, making specific
work assignments, providing needed training to team members, communicating
clear instructions, and generally ensuring that the team is operating at peak
efficiency
 . Once the task is complete, the team leader position may be eliminated and a
new team may be formed to complete a different task.

MANAGERIAL SKILLS
1.Conceptual skills:-
Conceptual skills are the abilities to think about the creative terms understand and
visualize the future, to organize and translate observation into ideas & concepts.
Conceptual skills are essential to identify and diagnose the problems. This will helpful
in determining the goals.

2.Analytical Skills:- [Decision making]

Analytical skills mean ability to work out a complex problem or situation into
component. Analytical skills are required for solving problems and decision making.
This is als helpful for evaluation of performance and arriving at judgment.

3.Human relation Skills:

Human relation skills represent the ability to understand the behavior of people, their
problems, their needs, working conditions and motivation to people. These skills are
essential in directing the people and for better co ordination.

4.Administrative Skills:
It involves the implementation of plan and use of available resources to get the desired
output that is profit and to regularize a performance in orderly manner. It is also
helpful in co-ordination of activities.

5.Technical Skills:
These skills are essential for first line managers. He requires knowledge of a job,
ability to apply the methods and techniques of job. He is responsible for providing
technical guidance and instructions to subordinates. Convewter Shiller

1.6 Social responsibility of management

is defined as the obligation and commitment of the corporate sectors to take steps for
protecting and improving society‟s welfare along with protecting their own interest.
The company‟s must have social responsibility because of the following reasons:

 Social Responsibility can be defined as the obligation of management towards

the society and others concerned.
 Reason for Social Responsibilities: Business enterprises are creatures of
society and should respond to the demands of society.
 If the management does not react to changes in social demands, the society
will either force them to do so through laws or will not permit the enterprise
to survive

Social responsibility management works on the purpose of:

 Social responsibility is about listening and learning about the people and the
environment from which it will apply.
 Being constructive means listening to complaints, coming from both inside
and outside of the organization, and being willing to act on those complaints.
 Starting charity foundations, offering academic scholarships, donating
resources, being generous, and caring about what is important to others to
win over customers, employees, and society.
 Helping others realize their true potential is what business should be about
and when people see that, you will be attracting more customers and keeping
the ones you already have.
 Every business enterprise is a organ of society and its activities have impact
on the social scene.
 Therefore, it is important for management to consider whether their policies
and actions are likely to promote the public good, advances the basic values
of society, and constitute to its stability, strength and harmony.

2. Nature & Development of Management

Thought
2.1 Historical Perspective
 The recorded use of organised management dates back to 5000 B.C. when the
agricultural revolution had taken place.
 These agricultural civilizations existed in India, China and Egypt According to
Peter Drucker these irrigation civilizations "were not only one of the great ages
of technology, but it represented also mankind„s most productive age of social
and political innovation".
 As the villages grew and civilizations evolved, the managers too grew and
evolved. They became the priests, the kings, the ministers holding power and
wealth in the society.
 Written documents found in the Sumerian civilization which flourished some
5000 years ago, contains evidence of management control practices. As early as
4000 B.C., the Egyptians were aware of the importance of planning, organising
and controlling.
 The huge pyramids of Egypt stand a mute testimony to the managerial and
organizational abilities of the ancient Egyptian civilization. One pyramid required
1,00,000 men working for 20 years, covering 13 acres, using 2.3 million blocks,
each weighing an average of 2.5 tons.
 To produce such a monument required proper planning, work allocation,
organising, directing, controlling and decision making. In the Grecian civilization
we find the origin of the Scientific Method in the famous Socratic discourses.
 The Romans who built a vast empire extending from Britain in the west to Syria
in the east ruled it for many years only because of their superior and advanced
managerial abilities.
 In ancient India Kautilya wrote his Arthashastra in about 321 B.C. the major
theme of which was political, social and economic management of the State.
 The study of administration of the cities of Mohenjodaro and Harappa of the
ancient Aryans in 2000 B. C., Buddha's order and the Sangha in 530 B. C.,
provide evidence about the use of the principles of management.
 During the 13th and 14th centuries AD the large trading houses of Italy needed a
means of keeping records of their business transactions.
 To satisfy their needs Luca Pacioli published a treatise in 1494 describing the
Double Entry System of Book-keeping for the first time.
 Management thought is an evolutionary concept. New theories and principles
were suggested along with new developments in the business field.
 The new thoughts supplemented the existing thoughts and theories. This is how
developments are taking place continuously in regard to management
thoughts/theories.
 Management thinkers and thinkers from other fields such as Principles of
Management HM 104 Uttarakhand Open University 13 economics, psychology,
sociology and mathematics have also made their contribution in the evolution of
management thought.

2.2 EVOLUTION OF MANAGEMENT THOUGHT

This evolution of management thought can be studied in the following broad
stages:
The Classical Theory of Management (Classical Approach): It includes the
following three streams of thought: (i) Bureaucracy, (ii) Scientific Management;
and (iii) Administrative Management

A. The Neo-classical theory of Management: It includes the following two

streams:
(i) Human Relations Approach
(ii) Behavioral Sciences Approach. B.

The Modern Theory of Management: It includes the following three streams of

thought:
(i) Quantitative Approach to Management (Operations Research);
(ii) Systems Approach to Management and
(iii) Contingency Approach to Management. It is rather difficult to state the
exact period of each stage in the evolution of management thought.
Experts, in general, agree with the following period for each thought/school.
a. Classical School/thought: 1900 to 1930. b. Neo-classical School/thought:

1930 to 1960. c. Modern School/thought: 1960 onwards. The development of

management thought is the result of contributions made by pioneering
management thinkers and experts from other social sciences such as
economics and psychology.

Scientific Management
The theory of scientific management was propounded by Frederick W.
Taylor. He is regarded as the “Father of Scientific Management”. His
management thought is the subject matter of two books: Shop Management
and Principles of Scientific Management which were published in 1903 and
1911 respectively. He laid emphasis on the following factors for enhancing the
productivity of the workers:
 Science, not rule of thumb;
 Harmony, not discord;
 Co-operation, not individualism;
 Maximum output, in place of restricted output;
 The development of each man to his greatest efficiency and prosperity.

Meaning of Scientific Management:

The concept of scientific management implies that one should have a
complete knowledge of what is to be done and how it is to be done. Thus,
when we go by this approach, we apply scientific techniques in the
managerial activities such as recruitment, selection and training of the
employees as well as resolving the various industrial issues.

In the words of F. W. Taylor, scientific management is “knowing exactly what

you want men to do and seeing that they do it in the best and the cheapest
way.” Thus, the scientific management implies the application of two-fold
techniques:
 The discovery of the best method of performing a particular work.
 The best method for meeting a given situation.

Features of Scientific Management: Let us discuss the

characteristics of scientific management in brief:
 It is a systematic, analytical and objective approach to tackle industrial
problems;
 It makes use of scientific techniques in methods of work, recruitment,
selection and training of employees; Page 23 of 210
 It strives to discover the best method of doing a work at the minimal cost.
 It replaces the traditional methods of the rule of thumb and hit or miss
approaches with scientific techniques.
 It tends to bring a complete revolution in the thought process of the
management as well as employees.
 It lays emphasis on all the factors of production, men, material and
technology.
 It attempts to develop every man to his greatest efficiency and prosperity.

Objectives of Scientific Management:

The theory of scientific management has certain objectives, which we shall

discuss below:
 1. To accelerate the rate of productivity by making use of standardized tools,
equipment and methods.
2. To improve the quality of the product by research, quality control and continuously
monitoring and inspection.
3. To reduce the cost of production of system planning and regulation and
implementing various cost control techniques.
4. To avoid the wastages in the use of resources, time and the techniques of
production.
5. To adopt scientific selection and training procedure so as to place the right person
on the right job.
6. To set up a sound system for the payment of wages to the employees so as to
ensure maximum efficiency.
7. To ensure that the goods are provided to the consumers at reasonable prices
throughout.

Principles of scientific management

Taylor conducted various experiments at the work place to find out how
human beings could be made more efficient by standardization the work. The following
are the features of scientific management.

1. Separation of planning and doing:

Taylor suggests the separation of planning from actual doing.
Taylor says that supervisor should be done the planning
The workers only concentrate on doing the work

2. Functional foremanship:
Taylor developed a theory called functional foremanship based on specialization of
functions.
In this system eight foreman were involved to direct and control the activities of the
workers

3. Job analysis:
Every job that requires minimihi movements and less cost and least time is the best
way of doing the job This can be determined by motion, time and fatigue study

a)Time study:
The movement which takes minimum time is the best one. This helps in firms the fair
work for a period

b) Motion study:
Taylor suggested that eliminating wasteful movements and performing only
necessary movements,
(c)Fatigue study
Employees are both physical as well as mental fatigue easily. Fatigue study indicates
the amount and frequency of rest required in completing the job. Taylor suggests a fair
day's work requiring certain movements and periods to complete it.

4.Standardization:
Standards must be maintained in respect a instruments and tools, period of work,
amount of work, working conditions, cost of production etc. Normally these standards
will be fixed in advance on the basis of various experiments

5. Scientific selection and training:

Taylor has suggested that workers should be selected on scientifically
A worker should be physically and technically most suitable
A fter selection should be given on the training of workers which makes them more
efficient and effective

6. Financial incentives:
Financial incentives can motivate the workers to put in their maximum efforts.
According to this scheme a worker who completes the normal work gets wages at
higher rate.Who does not complete gets at a lower rate.
Taylor has suggested that wages should be based on individual performance and not
on the position which he occupies.

7. Economy:
Scientific management enhances profit and economy
The economy and profit can ape well as by eliminating the wastages achieved by
making the resources more productive as

8. Mental Revolution:
Scientific management is based on co-operation between management and workers
Co-operation enhances the effective managerial activities
Mutual conflict should be replaced by munal co-operation which is beneficial to both

Henry Fayol's Contribution

Henry Fayol, a French industrialist concentrated on that administrative aspect of
scientific management His contributions and concentrated in his famous book" The
general and industrial administration" Fayol's famous book into two parts. The first is
concemed with the theory of administration in which Fayol divided the total industrial
activities into six
categories which are given below:

1. Technical (Production, Manufacture)

2. Commercial (Buying, Selling, Exchange)

3. Financial (Search for and optimum use of capital)

4. Security (Protection of property and person)

5. Accounting (Balance sheets, Cost statistics)

Criticism of Scientific Management

Taylor's scientific management was criticized not only by the workers and managers
but also by the psychologists and the general public. The main grounds of criticism are
given below

1. The use of the word 'Scientific before 'Management was objected because what is
actually meant by scientific management is nothing but a scientific approach to
management

2. Taylor advocated the concept of functional foremanship to bring about specialization

in the organisation. But this is not feasible in practice as a worker can't carry out
instructions from eight foremen

3. Scientific management is production-centered as it concentrates too much on the

technical aspects of work and undermines the human factor in industry

4. Scientific Management ignores social and psychological needs of workers as it

treats them as extension of machines devoid of any feelings and emotions.

5. Trade unionists regarded the principles of scientific management as the means to

exploit labour because the wages of the workers were not increased in direct
proportion to productivity increases.
14 Principles of Management of Henri Fayol
The 14 Management Principles from Henri Fayol (1841-1925) are:

1. Division of Work

Dividing the full work of the organization among individuals and creating
departments is called the division of work.

Division of work leads to specialization, and specialization helps to increases efficiency

and efficiency which results in improvements in the productivity and profitability of the
organization.

2. Balancing Authority and Responsibility

Authority must be equal to Responsibility.According to Henri Fayol, there should be

a balance between Authority (Power) and Responsibility (Duties). The right to give
orders should not be considered without reference to responsibility.If the authority is
more than responsibility then chances are that a manager may misuse it. If
responsibility is more than authority then he may feel frustrated.

3. Discipline

Outward mark of respect in accordance with formal or informal agreements between a

firm and its employees.Discipline means respect for the rules and regulations of the
organization. Discipline may be Self-discipline, or it may be Enforced discipline.No
slacking or bending of rules, not allowed in any organization. The works must respect
the rules that run the organization. To establish discipline, good supervision and
impartial judgment are needed.

4. Unity of Command

According to this principle, a subordinate (employee) must have and receive orders
from only one superior (boss or manager).

To put it another way, a subordinate must report to only one superior. It helps in
preventing dual subordination. This decreases the possibilities of “Dual subordination”
which creates a problem is a function of managers.
5. Unity of Direction

One head and one plan for a group of activities with the same objective. All activities
which have the same objective must be directed by one manager, and he must use one
plan.This is called the Unity of Direction.For example, all marketing activities such as
advertising, sales promotion, pricing policy, etc., must be directed by only one
manager.He must use only one plan for all the marketing activities.

Unity of direction means activities aimed at the same objective should be organized so
that there are one plan and one person in charge.

6. Subordination of Individual Interests to the General Interest

The interest of one individual or one group should not prevail over the general good.
The individual interest should be given less importance, while the general interest
should be given the most importance.

If not, the organization will collapse. The interest of the organizational goal should not
be sabotaged by the interest of an individual or on the group.

7. Remuneration

Remuneration is the price for services received. Pay should be fair to both the
employee and the firm.

If an organization wants efficient employees and best performance, then it should have
a good remuneration policy.

This policy should give maximum satisfaction to both employers and employees. It
should include both financial and non-financial incentives.

Compensation should be based on a systematic attempt to reward good performance.

8. Centralization

It is always present to a greater or lesser extent, depending on the size of the

company and the quality of its managers. In centralization, the authority is
concentrated only in a few hands.

However, in decentralization, the authority is distributed to all the levels of

management. No organization can be completely centralized or decentralized.
If there is complete centralization, then the subordinates will have no authority
(power) to carry out their responsibility (duties). Similarly, if there is complete
decentralization, then the superior will have no authority to control the organization.

Therefore, there should be a balance between centralization and decentralization.

The degree to which centralization or decentralization should be adopted depends on

the specific organization, but managers should retain final responsibility but should
give subordinates enough authority to do the tasks successfully.

9. Scalar Chain

The chain of command, sometimes called the scalar chain, is the formal line of
authority, communication, and responsibility within an organization.

The chain of command is usually depicted on an organizational chart, which identifies

the superior and subordinate relationships in the organizational structure.

Or it is the line of authority from top to bottom of the organization. This chain
implements the unity-of-command principle and allows the orderly flow of
information.

Under the unity of command principle, the instructions flow downward along the chain
of command and accountability flows upward.

More clear-cut the chain of command, the more effective the decision-making process
and the greater the efficiency.

10. Order

A place for everything and everything in its place‟ the right man in the right place.
There should be an Order for material/things and people in the organization.

Order for things is called Material Order and order for people is called „Social Order‟.
Material Order refers to “a place for everything and everything in its place.”

Social Order refers to the selection of the “right man in the right place”.

There must be an orderly placement of the resources such as Men and Women, Money,
Materials, etc. Human and material resources must be in the right place at the right
time. Misplacement will lead to misuse and disorder.
11. Equity

While dealing with the employees a manager should use kindliness and justice
towards employees equally. Equity is a combination of kindness and justice.

It creates loyalty and devotion in the employees toward the organization. The equity
principle suggests that the managers must be kind as well as equally fair to the
subordinates.

12. Stability of Tenure of Personnel

Although it could take a lot of time, Employees need to be given fair enough time to
settle into their jobs. An employee needs time to learn his job and to become efficient.

The employees should have job security because instability leads to inefficiency.
Successful firms usually had a stable group of employees.

13. Initiative

Without limits of authority and discipline, all levels of staff should be encouraged to
show initiative. Management should encourage initiative.

That is, they should encourage the employees to make their own plans and to execute
these plans. This is because an initiative gives satisfaction to the employees and brings
success to the organization.

It allows the subordinates to think out a plan and do what it takes to make it happen.

14. Esprit De Corps

Esprit de Corps means “Team Spirit”. Therefore, the management should create unity,
co-operation, and team-spirit among the employees.

They should avoid dividing and rule policy. Harmony, cohesion among personnel. It‟s a
great source of strength in the organization. It is a quality in every successful
business.

These principles are guidelines for every management function. The manager must act
according to the 14 principles of management; in order to reach the goal and create a
surplus.
 Contributions of Peter Drucker to Management

Some of the major contributions of Peter Drucker are as follows:

1. Nature of Management

2. Management Functions

3. Organisation Structure

4. Federalism

5. Management by Objectives

6. Organizational Changes.

Among the contemporary management thinkers, Peter Drucker outshines all. He has

varied experience and background which include psychology, sociology, law, and

journalism. Through his consultancy assignments, he has developed solutions to

number of managerial problems. Therefore, his contributions cover various

approaches of management

1. Nature of Management:
Drucker is against bureaucratic management and has emphasised management with
creative and innovative characteristics.

The basic objective of management is to read towards innovation. The concept of

innovation is quite broad.

It may include development of new ideas, combining of old and new ideas, adaptation
of ideas from other fields or even to act as a catalyst and encouraging others to carry
out innovation.

He has treated management as a discipline as well as profession. As a discipline,

management has its own tools, skills, techniques and approaches. However,
management is more a practice rather than a science. Thus, Drucker may be placed in
‟empirical school of management‟.
2. Management Functions:
According to Drucker, management is the organ of its institution. It has no functions in

itself, and no existence in itself. He sees management through its tasks. Accordingly,

there are three basic functions of a manager which he must perform to enable the
institution to make its contribution for:

(i) the specific purpose and mission of the institution whether business, hospital or
university;

(ii) making work productive and the worker achieving; and

(iii) managing social impacts and social responsibilities.

3. Organisation Structure:
Drucker has decried bureaucratic structure because of its too many dysfunctional

effects. Therefore, it should be replaced. He has emphasised three basic

characteristics of an effective organisation structure.

These are:
(i) Enterprise should be organised for performance;

(ii) it should contain the least possible number of managerial levels;

(iii) it must make possible the training and testing of tomorrow‟s top managers*
responsibility to a manager while still he is young.

He has identified three basic aspects in organising activity analysis, decision analysis,
and relation analysis. An activity analysis shows what work has to be performed, what
kind of work should be put together, and what emphasis is to be given to each activity
in the organisation structure.

4. Federalism:
Drucker has advocated the concept of federalism. Federalism refers to centralised

control in decentralised structure Decentralised structure goes far beyond the

delegation of authority. It creates a new constitution and new ordering principle. He

has emphasised the close links between the decisions adopted by the top management
on the one hand and by the autonomous unit on the other

These are as follows:

(i) It sets the top management free to devote itself to its proper functions;

(ii) It defines the functions and responsibilities of the operating people;

(iii) It creates a yardstick to measure their success and effectiveness in operating jobs;
and

(iv) It helps to resolve the problem of continuity through giving the managers of

various units education in top management problems and functions while in an

operating position.

5. Management by Objectives:
Management by objectives (MBO) is regarded as one of the important contributions of

Drucker to the discipline of management. He introduced this concept in 1954. MBO has

further been modified by Schleh which has been termed as management by results‟.

MBO includes method of planning, setting standards, performance appraisal, and

motivation.
6. Organizational Changes:
Drucker has visualised rapid changes in the society because of rapid technological

development. Though he is not resistant to change, he feels concerned for the rapid

changes and their impact on human life. Normally, some changes can be absorbed by
the organisation but not the rapid changes.

2.3 System approach-with reference to

management, organization and MIS
The system approach is based on the generalization that all things are inter-related
and inter-dependent with one another. A system is made up of related and dependent
elements that form a unique system. A system is simply an assemblage of things to
forming a single unit.

One of the most significant characteristics is that it consists of a subsystem hierarchy.

These are the components that form the main device, and so on. For instance, it is
possible to view the world as a system in which different national economies are sub-
systems.

System approach as planning, Organizing and Controlling in MIS

System approach in planning:

Planning is an essential feature of management. Planning involves deciding what needs
to be done, who needs to do it, when to do it, and how to do it in advance. Two phases
are part of the preparation process:

 Developing the strategic.

 Formulating the steps which are necessary to accomplish the plan, timing and expense.

System Approach in Organizing:

Organizing is important for managers because it leads to successful group action. It
also helps to keep people working together. The following points are shows about the
System Approach in Organizing -
The good structure of the organization as outlined in the policies and procedure.

 Informal organizing.
 The individual as a device
 The method of organizational contact.
 The power chain.
 The functional method.
 The system for management process.

System Approach in Controlling

Controlling is necessary because the outcome of the desire needs to be achieved. The
most popular approach consists of a three-step procedure*

Setting a performance standard requires the quality of performance we need.

Quantitative or qualitative maybe these parameters.

Performance assessment against this standard is important to assess performance

against standards once a standard has been developed.

Deviation Control-we understand that the first comparison of the norm with real
results is made to calculate the deviation.

Systems Approach features

i. A system consists of elements that interact. It is a set of interrelated and inter-
dependent components organized in a way that generates a cohesive whole.
ii. In their inter-relationships, rather than in isolation from each other, the
different subsystems should be examined.
iii. There is a boundary in an organizational structure that defines which parts are
internal and which are external.
iv. In a vacuum, there is no device. It receives data, materials and energy as inputs
from other systems. Inside a system, these inputs undergo a phase of
transformation and exit the system as an output to other systems.
v. As it is sensitive to its environment, an organization is a dynamic structure. In
his climate, he is vulnerable to change.
2.4 Contingency Approach

 Contingency or situational approach is an important addition to the paradigm of

modern management theory and approach. In one way, this is an extension of
systems approach.

 The basic idea of contingency approach is that there cannot be a particular

management action which will be suitable for all situations. Rather, an
appropriate action is one which is designed on the basis of external
environment and internal states and needs.

 Contingency theorists suggest that systems approach does not adequately

spell-out the precise relationship between organisation and its environment.

 Contingency approach tries to fill this gap by suggesting what should be done in
response to an event in the environment.

 Contingency Approach is also known as Situational Theory. This theory is of the

opinion that there is no prescribed managerial action or organisational design
which is suitable for all organisations. Instead managerial actions and
organisational design depend on the situation.

 An appropriate action is one with appropriate internal states and processes of

organisation contingent upon external environment and internal needs.

 The contingency theory takes-off from the systems theory and utilises it in
tackling specific situations. It relates each situation, comprising the goals of the
organisation, demands of its members, its environments of different.

 categories, and so on to the organisation's structure, process, and policies. Thus

one situation may call for a mechanistic type of organisation, another
organismic type. For dealing with complex projects a matrix type of organisation
may be more helpful.
 For better motivation of employees in a global enterprise a highly decentralised
organisation may be more effective.

 The authorities who are associated with contingency approach are P.R.
Lawrence, J.W. Lorsch and Woodward. The systems theory could not spell out
the relationship between the organisation and environment components.

 Contingency theory is based on the systems view of the organisation. It is

action-oriented and directed towards the application and implementation of
system concepts. It focuses on external dynamics but systems approach
Features of Contingency Approach

The features of contingency viewpoint are as follows:

1) The most important feature of the contingency theory is that it is situation-specific.

Instead of giving one blanket solution for all kinds of situations it emphasises that the
overall approach of each organisation is contingent upon its own situation - internal
and external.

2) It is action-oriented. It is ultimately directed towards suggesting organisational

design and managerial action appropriate to each situation.

3) It is comprehensive because it takes account of a wide range of variables, including

those comprising the

different sub-systems.

4) It is flexible. As environments change, the theory suggests that organisational

design and policy should also change gradually in order to conform to the changing
environment. In this respect it is not an ad hoc device but a long-range strategy.

5) It is more pro-active than reactive. It does not merely emphasise changes in

organisational structure and process according to situational changes but also insists
on steps to shape the proximate environment in favour of the organisation It provides
clues to them.
 3. Decision making

Introduction:
 The decision making is an important job of a manager. Every day he has to
decide about doing or not doing a particular thing. A decision is the selection
from among alternatives. “
 It is a solution selected after examining several alternatives chosen because the
decider foresees that the course of action he selects will be more than the
others to further is goals and will be accompanied by the fewest possible
objectionable consequences.”
 It is the selection of one course of the action from two or more alternative
course of action. Definition: Page 108 of 210 “A decision is an act of choice
wherein an executive forms a conclusion about what must be done in a given
situation.
 A decision represents a course of behavior chosen from a number of possible
alternatives.” - Mac Farland “Decision making is the selection based on some
criteria from two or more possible alternatives.” - George Terry

 A decision is an act of selection or choice of one action from several

alternatives.
 Decision-making can be defined as the process of selecting a right and effective
course of action from two or more alternatives for the purpose of achieving a
desired result. Decision-making is the essence of management

Different management scholars have defined Decision making as

follows:
George Terry
Decision making is the selection based on some criteria from two or more alternatives.

Heinz Weihrick and Harold Koontz

Decision making is defined as the selection of a course of action among alternatives, it
is the care of planning.
Louis Allen
Decision making is the work a manager performs to arrive at conclusion and judgemet.

Characteristics of Decision Making

making may be clearly understood by its following characteristics features:

 Decision making is an intellectual process, which involves imagination, reasonin

g, evaluation and Judgement.
 It is a selection process in which best or most suitable course of action is finaliz
ed from among several available alternatives. Such selected alternative provid
es utmost help in the achievement of organizational goals. The problems for wh
ich there is only one selection are most decision problems.
 Decision making is a goal oriented process. Decisions are made to attain certain
goals. A decision is rated good to be extent it helps in the accomplishment of o
bjectives.
 It is a focal point at which plans, policies, objectives, procedures, etc., are transl
ated into concrete actions.
 Decision making is a continuous process persuading all organizational activity, a
t all levels and in the whole universe. It is a systematic process and an interacti
ve activity.
 Decision making involves commitment of resources, direction or reputation of th
e enterprise.
 Decision making is always related to place, situation and time. It may be decisio
n not act in the given circumstances.
 After decision making it is necessary and significant to communicate its results
(decisions) for their successful execution.
 The effectiveness of decision‐making process is enhanced by participation.

Elements of Decision Making

There are following elements in decision making:

 The decision maker. •

 The decision problem or goal.
 Attitudes, values and personal goals of the decision maker.
 Assumption with regard to future events and things.
 The environment in which decision is to be made.
 Available known alternatives and their estimated or imagined outcomes.
 Analytical results in the whole perspective.
  The constraints.
 The act of selection or choice.
 Timing of decision.
 Proper communication of decision for its effective execution

Importance of decision‐making
1.Implementation of managerial function:
 Without decisionmaking different managerial function such as planning, organiz
ing, directing, controlling, staffing can‟t be conducted.
 In other words, when an employee does, s/he does the work through decisionm
aking function.
 Therefore, we can say that decision is important element to implement the man
agerial function.

2.Pervasiveness of decision‐making:
 the decision is made in all managerial activities and in all functions of the organ
ization.
 It must be taken by all staff.
 Without decision‐making any kinds of function is not possible. So it is pervasive.

3. Evaluation of managerial performance:

 Decisions can evaluate managerial performance.
 When decision is correct it is understood that the manager is qualified, able and
efficient.
 When the decision is wrong, it is understood that the manager is disqualified. S
o decision‐making evaluate the managerial performance.

4. Helpful in planning and policies:

 Any policy or plan is established through decision making. Without decision ma
king, no plans and policies are performed.
 In the process of making plans, appropriate decisions must be made from so m
any alternatives.
 Therefore, decision making is an important process which is helpful in planning
5.Selecting the best alternatives:
 Decision making is the process of selecting the best alternatives.
 It is necessary in every organization because there are many alternatives.
 So decision makers evaluate various advantages and disadvantages of every al
ternative and select the best alternative.
6. Successful; operation of business:
 Every individual, departments and organization make the decisions.
 In this competitive world; organization can exist when the correct and ap
propriate decisions are made.
 Therefore, correct decisions help in successful operation of business

Principles of Decision Making:.

If certain principles are followed for decision-making, such multidimensional reactions
can mostly be overcome.

These principles are stated as follows:

1. Subject-matter of Decision-making:
 Decisional matters or problems may be divided into groups consisting of
programmed and non-programmed problems.
 Programmed problems, being of routine nature, repetitive and well-founded, are
easily definable and, as such, require simple and easy solution.
 Decision arrived in such programmed problems has, thus, a continuing effect.
But in non-programmed problems, there is no continuing effect because they
are non-repetitive, non-routine, and novel.
2. Organizational Structure:
 The organizational structure, having an important bearing on decision-making,
should be readily understood.
 If the organizational structure is rigid and highly centralized, decision-making
authority will remain confined to the top management level.
 This may result in delayed and confused decision and create suspicion among
the employees.
 On the contrary, if the organizational structure provides scope for adequate
delegation and decentralization of authority, decision-making will be flexible
and the decision-making authority will be close to the operating centers.
 In such a situation, decision-making will be prompt and expected to be more
effective and acceptable.

3. Analysis of the Objectives and Policies:

 Proper analysis of the objectives and policies is needed for decision-making.
 The clear definition of objectives and policies is the basis that guides the
direction of decision-making.
 Without this basis, decision-making will be aimless and unproductive.

4. Analytical Study of the Alternatives:

 For decision-making, analytical study of all possible alternatives of a problem with
their merits and demerits is essential.
 This is necessary to make out a correct selection of decision from among the
alternatives.

5. Proper Communication System:

 Effective decision-making demands a machinery for proper communication of
information to all responsibility centers in the organization.
 Unless this structure is built up, ignorance of decision or ill-informed decision
will result in misunderstanding and loose co-ordination.

6. Sufficient Time:
 Effective decision-making requires sufficient time. It is a matter of common
experience that it is usually helpful to think over various ideas and possibilities
of a problem for the purpose of identifying and evaluating it properly.
 But in no case a decision can be delayed for an indefinite period, rather it
should be completed well in advance of the scheduled dates.
7. Study of the Impact of a Decision:
 Decision is intended to be carried out for the realization of the objectives of the
organization. A decision in any particular area may react adversely in other
areas of the organization.
 As all business activities are inter-related and require co-ordination, it is
necessary that a study and analysis of the impact of any decision should
precede its application.

8. Participation of the Decision-maker:

 The decision-maker should not only be an observer while others will perform as
per his decision.
 He should also participate in completing the work for which decision was taken
by him.
 This experience will help him in decision-making in future.
 The principle of participation in work of the decision-maker will enable him to
understand whether the decision taken is practical and also guide him in
forthcoming decisional matters.

9. Flexibility of Mind:
 This is essential in decision-making, because decisions cannot satisfy
everybody.
 Rigid mental set-up of the decision-maker may upset the decisions. The flexible
mental disposition of the decision-maker enables him to change the decision
and win over the co-operation of all the diverse groups.

10. Consideration of the Chain of Actions:

 There is a chain relationship in all the activities of any organization. Different
activities are tied up in a chain sequence.
 Any decision to change a particular work brings change in other related works
also.
 Similarly, decision-making also proceeds following the chain of action in
different activities.
 Therefore, before taking a decision one should consider the chain relationship
among different activities.

Decision Making Under Various Conditions:

There is a certain risk involved in decision making and the conditions vary from
certainty to complete uncertainty. The strategy of taking decisions under different
conditions can vary.
The condition under which decisions are taken as follows-:

1. Certainty
 Under the condition of certainty, people are reasonably sure about what will
happen when they take a decision.
 The required information is available and it is resalable and the cause and
relationship are known.
 The manager makes decisions under such situation at different times with
the same results.
 Under such situation is a deterministic model is used, in which all factors
are assumed to be exact with the chance playing on role.
2. Risk
 Most of the business decisions are taken under risk conditions.
 The available information does not answer overall questions about the outcome
of decisions.
 A manager has to develop the estimates of the likelihood of the various states
of events occurring.
 The estimates may be on past experience, other available information.
 in order to improve decision making under these conditions, one may estimate
the objective probabilities of an outcome by using the various statistical tools,
for.eg. Mathematical models.
 On the other hand based on judgment and experience may be used. There is the
number of tools which helps the manager in taking decisions under such
conditions.

3.Uncertainty
 The decision making under uncertainty is difficult preposition.
 In an uncertain situation, people have only a meager database and they
do not know whether the data they have is reliable or not.
 They cannot evaluate the interactions of the different variables. For
example: If a company wants to enter a foreign market.

Types of Decision Making:

1. Programmed Decisions-
 The programmed decisions are of routine nature. These are for solving day to
day and routine problems and are repetitive in nature.
  The rules and procedure are described for taking these decisions. These
decisions remain consistent for a relatively longer period of time and over many
situations.
 These decisions are made for solving both simple and complex problems. The
decisions are of routine nature requiring no judgment.

2. Non -Programmed Decisions +

 Non-programmed decisions are related to problems which are unique and no
repetitive. These are for solving non repetitive or unique problems.
 Every decision will have to be taken separately by analyzing and evaluating each
problem and every decision is different and there is no consistency such
decisions are for solving complex problem and these decisions are judgment in
each case.

3. Strategic Decisions:
 These decisions are important ones for the firm, usually taken by the
higher authorities of the firm (basically the higher and the middle).
 They revolve around the policies and protocols of the firms.

4. Routine Decisions:
 As the name suggests, they are taken in the daily operational activities of the
organization which is in the routine.
 Such decisions do not require an in-depth study as it follows the same pattern
and difficulty level of getting solved.

4. Organizational Decisions:
 The decisions taken by the head or the executive for the organization on behalf
of everyone but is for everyone is referred to as organizational decisions
 . It is considered for the betterment of the firm. These are the ones that are
delegated.

5. Personal Decisions:
 These decisions are taken by the leaders or executive for their benefit which is
not for everyone. Certainly, these cannot be delegated.
 These are literal personal decisions for self, which are one of the most essential
types of decision making.
 6.Individual Decisions:
 The decisions taken by an individual for official purpose is referred to as an
individual decision.
 Small organizations that are usually taken care of by one person rely on
such decisions.
 In this type of decision, the owner or the executive does not take anyone‟s
advice as the firm that they are operating is small with fewer people.
 7.Group Decisions:
 The decisions taken by a group of people for the welfare of a firm is known as
group decisions.
 These decisions are carried out by the members of the board and investors of
the top-level management and this is a common thing for large scale industries.
 It is huge and democratic and all aspects are to be considered vital for
consideration.

Decision Making Process

 Step 1: Identify the decision + Define the problem and determine if a decision is
required.

 Step 2: Gather relevant information + This step involves gathering internal and
external data. Gather internal information with self-assessment and consider your
motivations. Capture external information colleagues, online, books, and other
resources.

 Step 3: Identify the alternatives + Identify and list all possible courses of action as
they arise.

 Step 4: Weigh the evidence + Visualize the possible consequences of taking each
course of action, drawing on your information and emotions. Consider if the
situation in Step 1 would be addressed or solved with each alternative. Rank your
possible decisions based upon your value system.

 Step 5: Choose among alternatives + Select the best course of action to take. It may
even be a combination of other options.

 Step 6: Take action + Implement your decision.

 Step 7: Review your decision and its consequences - Last, evaluate the results of
your decision and determine if it addressed the issue identified in Step 1.
 Decision Making Techniques and Tools

Marginal Analysis

 Marginal analysis helps organizations allocate resources to increase

profitability and benefits and reduce costs.
 An example from indeed.com is if a company has the budget to hire an
employee, a marginal analysis may show that hiring that person provides a net
marginal benefit because the ability to produce more products outweighs the
increase in labor costs.

SWOT Diagram

This tool helps a manager study a situation in four quadrants:

 Strengths: Where does the organization excel compared to its competition?

Consider the internal and external strengths.
 Weaknesses: What could the organization improve?
 Opportunities: How can the organization leverage its strengths to create new
avenues for success. How could addressing a specific weakness provide a
unique opportunity?
 Threats: Determine what obstacles prevent the organization from achieving its
goals.

Decision Matrix

A decision matrix can provide clarity when dealing with different choices and variables.
It is like a pros/cons list, but decision-makers can place a level of importance on each
factor. According to Dashboards, to build a decision matrix:

 List your decision alternatives as rows

 List relevant factors as columns
 Establish a consistent scale to assess the value of each combination of
alternatives and factors
  Determine how important each factor is in choosing a final decision and assign
weights accordingly
 Multiply your original ratings by the weighted rankings
 Add up the factors under each decision alternative
 The highest-scoring option wins

Pareto Analysis

 The Pareto Principle helps identify changes that will be the most effective for an
organization.
 It‟s based on the principle that 20 percent of factors frequently contribute to 80
percent of the organization‟s growth.
 For example, suppose 80 percent of an organization‟s sales came from 20
percent of its customers.
 A business can use the Pareto Principle by identifying the characteristics of that
20 percent customer group and finding more like them
 By identifying which small changes have the most significant impact, an
organization can better prioritize its decisions and energies.

Differences between Individual and Group

Decisions
Difference # Individual Decisions:

 Decisions are taken by a single individual.

 Individual decisions are less costly.
 They are based on limited information gathered by managers.
 Individual decisions are taken in situations of crisis or emergency.
 They do not involve moral commitment on the part of members to accept and
implement them.
 Individual decisions do not affect morale or job satisfaction of employees.
 They introduce one‐man control.
 Individual decisions do not promote interaction amongst superiors and
subordinates.
 Decisions are usually based on clear policy guidelines.
  Though decisions are based on individual thinking, they are high‐quality if the
individual has expertise and experience in making such decisions.
 Individual decisions are usually taken in competitive business situations where
people are not open to suggestions.

Difference # Group Decisions:

 Decisions are taken by a group of persons.

 Group decisions are costly in terms of time and money.
 They are based on extensive information collected by members of the group.
 Group decisions are taken when there is sufficient time to make decisions.
 Group decisions are easier to implement as group members feel committed to
them.
 Group decisions positively affect morale and job satisfaction of employees.
 They introduce self‐control.
 They promote superior‐subordinate interaction and healthy relationships
amongst them.
 Group decisions are taken when the problem requires creativity and expert
knowledge of a group.
 It usually results in high‐quality decisions as they are based on extensive
brainstorming. They provide the benefit of synergy.
 Group decisions are usually taken in supportive business situations where
group members encourage problem‐solving together.

Herbert Simon on Decision Making

 Herbert Simon‟s most valued contribution to administrative thought is his focus
on decision making.
 He proposed a new concept of administration which is based upon purely
factual statements in Administrative science.
 That is why he calls traditional concept of Administration as proverbs & myths.
His concept of decision making becomes the core of administrative action.
 Decision making is synonymous with management. He calls decision making as
the heart of the organisation. „Decision making is the‟ Vocabulary of
administrative theory which should be derived from logic & psychology of
human choice.
 According to Simon, an organisation is a structure created for decision making.
Decisions are made at all the levels of organisation.
 Every decision may affect less or more members within the organisation. Each
decision, is based upon number of premises.
 The task of „deciding‟ pervades the entire administrative organisation, quite as
much as does the task of „doing‟ + indeed, it is integrally tied up with the latter.

Three stages in the decision making process :

 Simon divides the decision making process into three phases +

i) The first phase, he calls, intelligence activity. The head of the organisation
tries to understand organisational environment in which decisions have to be
taken. Intelligence activity is finding occasions to take decisions.
 ii) The second phase, he calls, is design activity. A head of the organisation tries
to identify all possible options before making a final decision. This involves time
& energy of the head to think over the best possible alternative.
 iii) The third phase, he calls, is choice activity. Fianlly a head chooses one of the
selected options, which becomes adecision.
 Though these three stages are described by Simon, he says that these phases
may appear to be simple & one precedes the other, in practice, the sequence is
more complex, than what it appears to be.
 These three phases are wheels within wheels. These three phases are closely
related to the problem solving + what is the problem, what are the atternatives
& which alternative is the best? Decision making is thus, a choice between
alternative plans of action & choice in turn, involves facts & values.
 To him, every decision consists of a logical combination of fact &
value propositions.
 A fact is a statement of reality indicating the existing deed or action. Whereas a
value is an expression of preference.
 He insists upon making analysis of ethical & factual statements that
remain present in a „decision‟. Every decision, thus is a mixture of fact & value.
 On the basis of this premises, Simon views organisation as a „hierarchy of
decisions‟ + „a complex network of decision processes.‟ Every decision involves
the selection of a goal & a behaviour relevant to it, till the final aim is reached.
 Thus decision making involves close interrelationship between facts & values. In
order to achieve a balance between facts & values, Simon proposes that every
decision has to have rationality. Every decision must be rational.
Rationality in Decision Making
 Simon spoke on the dynamics of decision on a different plane + the plane of
rationality. He emphasises upon being rational in decision making.
 Rationality is defined in terms of „appropriateness for the accomplishment of
specific goals.‟ He focussed on the rational part of decision. Every decision is a
combination of reason (rationality) &
emotion.
 Simon gives importance to reason rather than emotion. A head faces number of
constraints while making decision.
 It is because, while taking a decision, a head has to think, of all
possible consequences, affecting political culture & values of society.
He explains rationality in terms of means + end construct. „If appropriate means
are adopted to reach desired ends, the decision is rational.‟
 In brief, rationality is making „an administrative man.‟ Simon is aware that,
reaching rationality itself is a difficult process, due to number of factors
involved in it. So he has suggested different types of rationality.
 A Decision may be +
a) Objectively rational, where preference is given to values.
b) Subjectively rational, where decision maximises attainment relative to
knowledge of the subject.
c) Consciously rational where adjustment between means & end is made.
d) deliberately rational where adjustment is deliberately made.
e) Organisationally rational where it reaches organisational goals.
 f) Personally rational, where decision reaches individual goals.
Simon never agreed to the concept of total rationalty. It is because no individual
behaviour can be totally rational or totally irrational.
 Simon therefore, described human behaviour in an organisation as, „intendedly
rational‟ Complete or total rationality is not possible because of +
a) incomplete knowledge of the problem, alternatives & consequences. Simon
called it as „bounded rationality‟
 b) individuals cannot be completely standardised, having, as they do, multiple,
even unranked, preferences.
So Simon calls rationality in terms of satisfying which involves the choice of
course of action which is „satisfactory‟ or at least good enough.
 Simon was also aware about the limitations of the concept of rationality. The
following features stand in the way of rational decision making +
i) Multiplicity of problems, goals & policy commitments.
ii) inadequate information about the variety of acceptable goals.
iii) the personal limitation of a decision maker, in capacity, commitment & goals.
iv) Structural difficulties within organisation.