PRINCIPLES OF

BUSINESS MANAGEMENT

Rashtrasant Tukdoji Maharaj Nagpur University

UNIT 1

Introduction - Nature, function,

definition and importance of
management, Definition, purpose
and scope of management,
Functions of a manager, Is
management a science or art?
Meaning

 Management is a set of
activities directed at an
organization’s resources with
the aim of achieving
organizational goals in an
efficient and effective manner
 Management in
Organizations

Planning
and decision Organizing
making
ts from the environment
man resources Goals attained
nancial resources • Efficiently
ysical resources • Effectively
ormation resources

Controlling Leading
The Business
Environment
 External environment: a set of forces and
conditions outside the organization that can
influence its performance
 Task environment: forces that have a high

potential of affecting the organization on a

immediate basis
 General environment: forces that typically

influence the organization’s external task

environment and through them, the
organization itself
 Internal environment: key factors and forces
inside the organization affecting its operation
 What is Management?

 It is a process
 A series of activities and operations, such as
planning, deciding, and evaluating
 Of assembling and using sets of resources
 Human, financial, material and information
 In a goal‑directed manner to accomplish tasks
 A purposeful activity
 In an organizational setting
 It is undertaken in organizations
 By people with different functions intentionally
structured and coordinated to achieve common
purposes
 Concept of
Management :-

1} Management as a discipline :- A field of

study having well defined concepts and
principles. This the knowledge which aids
the task of managing.
2} Management as a group of people : We
include all those personnel who perform
managerial functions.
3} Management as a Process :- A process can
be defined as systematic method of handing
Features of Management

 Organized Activities
 Existence of Objective
 Relationship among Resources
 Working with and Through People
 Decision Making
 Nature of Management

 Multidisciplinary –physiology,
physchology,economics etc
 Dynamic Nature of Principles –cause and
effect ,change with the environment.
 Relative not absolute Principles – According to org.
 Management Science or Art – It is both
 Management as a Profession -
 Universality of Management – Management is
universal but principles are not.
Mgmt Science or Art ?

Science Art
Advances by Knowledge Advances by
Practice
Proves Feels
Predicts Guesses
Defines Describes
Measures Opines
Impresses Expresses
Mechanized Creative
 Purpose & Scope of Mgmt

1. To increase efficiency
2. To Crystallize the Nature of
Management
3. To Carry on Researches
4. To Attain social Objective
To Increase Efficiency :-

 The established principles of

management provide managers
guidelines as to how they should work in
different situations. These principles
increase managerial efficiency.
 Management Principles are modified
according to situation in question.
To Crystallize the Nature of
Management :-

 Lack of Understanding of management

principles makes it difficult to analyze
the management job and to define the
exact scope of managerial function.
 According to Henry Fayol , it is necessary
to train and educate future managers
with management principles ,
rules ,methods and procedures.
To Carry on Researches :-

 .
 For a systematic theory to evolve it is necessary to carry
out empirical research. Given the nature of
interdisciplinary nature of management it is necessary
that management field is well integrated with other
disciplines.
To Attain Social Objectives

 Mgmt itself is a part of society , it takes

input from society and gives output to
society thus the standards of society
depends on the quality of management.
 Managerial Functions

Planning
ng
olli

Sta
nt r

f fin
Co

Coordination

g
Organizing
Directing
Management
Functions :-

 Henry Fayol :- Planning , Organizing ,

commanding , Coordinating, Controlling

 Koontz & O’Donnell :- Planning,

Organizing, Staffing, Leading (Directing),
controlling
Planning

 Planning involves
 Estimating future conditions and
circumstances
 Making decisions based on these
estimations about what work is to be done
 By the manager
 By all of those for whom she or he is
responsible
Organizing :-

 Organizing involves paying attention to

 The structure of relationships among
positions
 The people occupying those positions
 Linking that structure to the overall
strategic direction of the organization
Staffing

 Involves managing the various positions

created by the organizing process.
 It involves conducting Gap analysis
between existing and required
manpower.
 It involves selection ,training and
development, fixing remuneration and
appraising them periodically.
Directing (Leading)

 Directing is the process of influencing

other people to attain organizational
objectives
 Motivating others
 Interacting effectively in group and team
situations
 Communicating in support of others’ efforts
on behalf of achieving their work and
Controlling

 Regulating the work of those for whom a

manager is responsible which may
include
 Setting standards of performance in
advance
 Monitoring ongoing (real‑time) performance
 Assessing a completed performance
 Results of the control process
(evaluation) are fed back into the
The Management
Process
Planning and
Decision Making Organizing
Determining how
Setting the organiza-
best to group
tion’s goals and
activities and
deciding how best
resources
to achieve them

Controlling Leading
Monitoring Motivating members
and correcting of the organization
ongoing activities to work in the best
to facilitate goal interests of the
attainment organization
 Managerial Roles

 Interpersonal
Roles
 Figurehead
 Leader
 Liaison  Decisional Roles
 Informational Roles  Entrepreneurial
 Monitor  Disturbance Handler
 Disseminator  Resource Allocator
 Spokesperson  Negotiator
UNIT 1 Part-2

 Development of Management
Thought - Scientific management;
Contribution of Taylor, Fayol, Mary Follet,
Elton Mayo; Hawthorne experiments,
Contingency approach
 Development of Mgmt Thought
and Principles of Management
Management Thought Period

Early contribution Up to 1900th

Century
Scientific Management 1900-1930
Administrative/Operational Mgmt 1916-1940
Human Relation Approach 1930-1950
Social System Approach 1940-1950
Decision Theory Approach 1945-1965
Management Science Approach 1950-1960
Human Behavior Approach 1950-1970
System Approach 1960s onward
Contingency Approach 1970s onward
 Up to 19th Century
 Early Contribution :- Before the systematic study
of Management

The concept of organization and administration existed in Egypt in

1300 BC
Confucius suggested proper public administration and
admonitions to choose honest , unselfish and capable public
officer.
Kautilya offered sound principles of state of administration in 320
B.C.
Roman Catholic Church introduced the concept of staff personnel
in church administration.
In the field of business organization some stray contributions have
come from Robert Owen,James Watt , Charles Babbage and Henry
 Classical Management
Perspective

 Scientific Management
 Frederick Taylor
 The Gilbreths
 Henry Gantt
 Steps in Scientific
Management

1 2 3 4
Supervise employees
Develop a science Scientifically select Continue to plan
to make sure they
for each element of employees and then follow the prescribed the work, but use
the job to replace old train them to do the job workers to get the
methods for performing
rule-of-thumb methods as described in step 1 work done
their jobs
 Taylor & Scientific
Management
 Fredrick Winslow Taylor :- SM is concerned with knowing
exactly what you want men to do and then see in that
they do it in the best and cheapest way.
 He put the emphasis on solving managerial problem in
scientific way.
 He joined Midvale Company,USA as a worker and then
promoted to supervisor.
 After completion of ME degree he joined Bethlehem
Steel Company
 He carried experiments on how to increase efficiency.
 He published many papers and books and all his
contributions were compiled in his book “Scientific
Management”.
Principles of Scientific
Management

 Replacing Rule of Thumb with Science

 Harmony in Group Action
 Co-operation
 Maximum Output
 Development of Workers
 Replacing Rule of Thumb

 Organized knowledge should be applied which will

replace rule of thumb. While the use of SM denotes
precision in determining any aspect of work, rule of
thumb emphasizes estimation.

 In other words he emphasized on accuracy and

precision (e.g. differential piece rate system,
standardization in work) in conducting management
activities rather than relying on application which are
Harmony in Group Action

 Taylorhas emphasized that attempts should be

made in order to obtain harmony in group
rather than discord.

 Thereshould be mutual give and take ,

cooperation in and along group members that
they all contributes maximum.
Cooperation

 Cooperationbetween management and

workers can be developed through mutual
understanding and a change in thinking.

 Substitution of war for peace , hearty and

brotherly cooperation for containment and
strife , replacement of suspicious watchfulness
with mutual confidence. It is along with these
lines SM be developed.
Maximum Output

 SM involves continuous increase in

production and productivity.
 He loath the quarrel over production but
welcomed the quarrel over distribution.
 The management and workers should focus on
increasing the size of surplus until the size of
surplus is so huge that it is necessary to quarrel
over distribution.
 Development of Workers
 All workers should be developed to the
fullest possible extent for the prosperity
of their and company.
 Development of workers require scientific
selection and adequate training.
 Training and development should be
ongoing process so as to keep them fit
according to the requirements of new
methods of working.
The Classical Management
Perspective

 Administrative Management –
focuses on managing the total
organization
 Henry Fayol
 Lyndal Urwick
 Max Weber
Weber’s Theory of
Bureaucracy

 Division of labor
 Reliance on rules and regulations
 Hierarchy of authority
 Employment based on expertise
 Inflexible
 Rigid
 Impersonal
 Fayol’s Administrative
Management

Henry Falyol : - Father of Modern Operational

Management Theory Or Administrative
Management
Henry Falyol , French industrialist looked at the
problem of managing an organization from top
management view.
He used to the term “administration” instead on
management emphasizing that there is unity of
science of administration.
His first published book “Administration Industrielle
Generale .”
For him administration was common activity and
universally applicable.
 Fayol’s General
Management Principles

 Division of Work :- To take the advantage of

specialization
 Authority and Responsibility
 Discipline :-
 Unity of Command :- Person should get orders from
only one person.
 Unity of Direction :- Each group must have one head
and one plan.
 Subordination of Individual to General Interest :-
 Remuneration of Personnel :-Fair and maximum
 Centralization and decentralization :- importance of
subordinates. They should be proportionate.
 Scalar Chain :- Authority and Communication
 Order :- Right man in the right place.
 Equity :- Justice and Kindness
 Stability of Tenure :-There should be reasonable
security to job. No employee should be removed in
short span.
 Initiative :- Within the limits authority and discipline
managers should encourage their employee for
The Behavioral
Management
Perspective
 Placed much more emphasis on
individual attitudes and behaviors and
on group processes in organizations.
 Recognized the importance of
behavioral processes in organizations
 Hugo Munsterberg
 Mary Parker Follet
 Elton Mayo
Implication of Hawthorne
Studies

1.Social factors in output

2.Group Influence
3.Conflicts
4.Leadeership
5.Supervision
6.Communication
Contingency Approach or
Situational Approach

1) Management action is contingent on certain

outside system or subsystem as the case may
be.
2) Organizational action should be based on the
behavior of action outside the system so that
organization should be integrated with the
environment.
3) Because of specific organization-environment
relationship no action can be universal. It
varies from situation to situation.
 UNIT 2

Unit III: Management and

Administration - Management and
administration, Management as a
profession, Professionalism of
management in India, Management
ethics and management culture, Skills
required of manager, Classification of
skills, Methods of skills development.
Skills
and the
Manage
r
 Technical Skills – ability to accomplish or understand
tasks relevant to the organization
 Interpersonal Skills – ability to communicate
understand, and motivate other people, individually and
in groups
 Conceptual Skills – the ability to understand the the
big picture, ability to analyze and diagnose the overall
workings of the organization and its environment
 Diagnostic Skills – the ability to recognize the
symptoms of a problem then determine a way to fix it
 Communication Skills – ability to both effectively
convey ideas and information to others and to receive
ideas and information from others
 Decision-making Skills - the ability to correctly
recognize and define problems and opportunities and
then select appropriate courses of action
Importance of
Management Skills

 Technical Skills : Technical skills are

concerned with what is done. These pertains to
knowledge and proficiency in activities
involving methods and procedures. These
involves working with specific tools and
techniques.
 Interpersonal Skills or Human Skills :-
Human relation skills which involve working in
harmony , effectively as a team and on a
person to person basis. To motivate , to lead
people , to maintain congenial relations.
 Conceptual Skills :-refer to ability to see the
Ethics ---Some
Observations
 Managers in large companies usually act as
agents of the owners
 Implied obligation to act in best
interest of the owners or
shareholders
 Actions that benefit only
themselves are likely to be
unethical
 Ethics and strategy begin at the
top of the organization
Basic Approaches to Ethics

 Ethical dilemmas
 The choice between two competing but
arguably valid options
 Frameworks for ethical decision making
 Utilitarian approach
 Moral rights approach
 Universalism approach
 Justice approach
Basic Approaches to Ethics
Utilitarian Approach
 Focused on the consequences of an
action
 What is the “greatest good?”
 Different people may see the outcome
differently in terms of good or bad
Basic Approaches to Ethics
Moral Rights Approach
 Focused on an examination of the moral
standing of actions, independent of
their consequences
 Some actions are simply “right” or they
are “wrong”
 When two actions both have moral
standing, then the positive or negative
consequences of each will determine
which is the more ethical decision or
action
Basic Approaches to Ethics
Universal Approach
 “Do unto others as you would have
them do unto everyone, including
yourself.”
 Choose a course of action you believe can
apply to all people under all situations
 The issue of rights
 Rights stem from freedom and autonomy
 Actions that limit freedom and autonomy
generally lack moral justification
Basic Approaches to
Ethics Justice Approach
 How equitably are the costs and benefits of
actions distributed?
 Costs and benefits should be equitably distributed
 Rules should be impartially applied
 Those damaged because of inequity or
discrimination should be compensated
 Distributive justice
 Equitable distribution is based on performance
Moral Intensity in Ethical Decision
Making

 Moral intensity
 The degree to which people see an issue
as an ethical one

 Six components
 Magnitude of the  Temporal immediacy
consequences  Proximity
 Social consensus  Concentration of effect
 Probability of effect
Moral Intensity in Ethical Decision
Making

 Magnitude of the
consequences Ma
g
Co nitu
 Level of impact ns d e
eq
ue of th
anticipated nc e
es

 Impact is Moral
independent of Intensity

whether
consequences are
positive or negative

Adapted from Exhibit 5.2: Factors of Moral Intensity

Moral Intensity in Ethical Decision
Making

Consequences
 Social consensus

Social
 The extent to which M
ag
members of a C n
on itud
se e o
qu
society agree that an en f the
ce
s
act is either good or
Moral
bad Intensity
 Population diversity
weakens social
consensus

Adapted from Exhibit 5.2: Factors of Moral Intensity

Moral Intensity in Ethical Decision
Making

Consequences
Social
 Probability of effect
Ma
 How likely people g
Co nitu
ns d e a
ity
bil t
eq
ue of th ob ec
think the nc e
es
Pr f Eff
o

consequences are
Moral
 The higher the Intensity

probability of the
consequence, the
more intense the
sense of ethical
obligation

Adapted from Exhibit 5.2: Factors of Moral Intensity

Moral Intensity in Ethical Decision
Making

Consequences
Social
 Temporal
immediacy
Ma
g
Co nitu ity
ns d e a bil t
eq
ue of th ob ec
Pr f Eff
 Interval between the nc e
es o

time the action Moral

occurs and the Intensity
onset of its Te
Im mpo
consequences m e ra
di a l
cy
 The greater the time
interval, the less
intensity people
typically feel toward
the issue Adapted from Exhibit 5.2: Factors of Moral Intensity
Moral Intensity in Ethical Decision
Making

Consequences
Social
 Proximity
Ma
 The closeness the g
Co nitu ity
bil t
ns d e a
decision maker feels to eq
ue of th
nc e
ob ec
Pr f Eff
o
those affected es

 Closeness leads to Moral

Intensity
more consideration of
the consequences Te
Im mpo
m e ra
 Closeness increases di a l
cy

feeling that decision

Proximity
has ethical implications

Adapted from Exhibit 5.2: Factors of Moral Intensity

Moral Intensity in Ethical Decision
Making

Consequences
Social
 Concentration of
effect
Ma
g
Co nitu ity
ns d e a bil t
eq
ue of th ob ec
Pr f Eff
 Focus of effect on nc e
es o

only a few or Moral

disbursed across Intensity
many individuals tion Te
tr a Im mpo
en fect
Higher
m e ra
 nc
Co of E
f di a l
cy
concentration leads

Proximity
to feelings of
greater ethical
responsibility
Adapted from Exhibit 5.2: Factors of Moral Intensity
Making Ethical Decisions

 The manager
 The organization
 Code of ethical conduct
 Formalstatement outlining types
of inappropriate behavior addressing three
issues
 Being a good “organization citizen”
 Guiding employee behavior away from unlawful or
improper acts that could harm the organization
 Addressing directives to be good to
customers
Successfully Implementing Codes of
Ethics

Communication Training

Implementing
Code of Ethics

Reward and
Whistle-blowing
Recognition
Definition of Culture

 Culture
 Learned set of assumptions, values, and
behaviors
 Accepted as successful
 Passed on to new comers
 Culture begins when a group of people
faces a set of challenges
 Culture evolves and changes with time
Managerial Relevance of Culture

 Impact of Culture on Behavior

 How people observe and interpret the
business world around them
 Can lead to different beliefs about “right”
behaviors
 Subordinates who identify with the culture
of a unit or company are likely to try harder
to make it successful
Levels of Culture
 Artifacts: visible
manifestations of a
culture such as its art,
clothing, food,
 architecture, and
Values: enduring beliefs that
customs
specific conduct or end states
which are personally or
socially preferred to others
 Assumptions: the beliefs
about fundamental aspects of
life lying below the surface, but
supporting the culture
Adapted from Exhibit 4.2: Managing Within Cultural Contexts
Unit 3

Management Planning - Concept of

planning, objectives, Nature, Types of
plan, Stages involved in planning,
Characteristics of a good plan,
Importance, Limitations of planning,
Making planning effective, Strategic
planning in Indian Industry
Concept of Planning :-

 “Planning is the selection and relating of facts

and making and using assumptions regarding
the future in the visualization and formalization
of proposed activities believed necessary to
achieve desired result. ……….Terry
 Plan and Planning are different.
 Planning is an activity that constitutes a
process which incorporates various activities.
 Plan is commitment to a particular course of
action which is necessary to achieve goals.
 McFarland :- Planning may be broadly
defined as a concept of executive action
that embodies the skills of anticipating ,
influencing and controlling the nature
and direction of change…….I add further
,to attain objectives.
Features of Planning

 Planning is process rather than behavior at a

given point, which determines future course of
action.
 It requires forecasting of future situation.
 It involves selection of suitable course of
action.
 Planning is undertaken at all the levels of
organization. However its roles is higher at
higher level.
 Planning is flexible as the commitment is based
 The Integrated Systems Model

Inputs Processing Outputs

From the Transformation Into the
environment: process: environment
Human Technology Product
Material Operating systems Services
Financial Administrative Profit/loss
Information systems Employee behavior
Control systems Information

Feedback
 Planning a Pervasive Process :- Every
manager has a planning function to
perform. It a fundamental management
functions. It takes over again and again.
Importance of
Planning :-

 Primacy of Planning
 To offset uncertainty and Change
 To focus attention of objective
 To help in coordination
 To help in control
 To increase organizational effectiveness.
Steps in Planning /
Stages

 1) Perception of Opportunities
 2) Establishing Objectives
 3)Planning Premises
 4) Identification of Alternatives
 5)Evaluation of Alternatives
 6)Choise of Alternative
 7)Formulation of Support & derivative Plans
 8)Establishing Sequence of Activities
The Planning Process

Analyze environment
(forecasts, benchmarks, contingencies,
competitor analysis, scenarios)

Set objectives

Determine Assess
requirements resources

Develop action plans

Implement plans

Feedback Feedback
Monitor outcomes
Adapted from Exhibit 8.4: Planning Process
Types of Planning

 Corporate & Functional Planning :-

Coverage
 Strategic & Tactical/Operational :-
Contents
 Long Term & Short Term :- Time
 Proactive and Reactive :- Approach
 Formal and Informal :- Degree of
Formalization
Type of Plans

What is Plan ?
It is a commitment of resources to a
particular course of action believed
necessary to achieve specific goal.
Plans

Plans

Standing and Strategic , Tactical

Single use plan and Operational
Plan
 Types of Plans

Strategic Plans Tactical Plans Operational Plans

Time Typically 3-5 years Often focused on 1-2 Usually focused on the
years in the future next 12 months or less.
horizon
Scope Broadest,originating Rarely broader than a Narrower, usually cen-
with a focus on the strategic business unit tered on departments or
entire organization smaller units of the
organization
Complexity The most complex and Somewhat complex but The least complex,
general, because of the more specific, because because they usually
different industries and of the more limited focus on small
business potentially domain of application homogenous units
covered

Adapted from Exhibit 8.1: Types of Plans: Key Differences

 Types of Plans

Strategic Plans Tactical Plans Operational Plans

Impact Have the potential to Can affect specific Impact is usually

dramatically impact, businesses but restricted to specific
both positively and generally not the department or
negatively, the fortunes fortunes or survivability organization unit
and survival of the of the entire
organization organization
Interdependence High interdependence, Moderate interdepen- Low interdependence,
must take into account dence, must take into the plan may be linked to
the resources and account the resources higher-level tactical and
capabilities of the entire and capabilities of strategic plans but is less
organization and its several units within a interdependent with them
external environments business

Adapted from Exhibit 8.1: Types of Plans: Key Differences

Plans

Mission Statement

Strategic

Tactical

Operational
Plans Are Classified on Their
Scope

Strategic

Tactical
Plans become
more specific as Operational
they move
from strategic
to operational Contingency
Standing Plan :-

 These are the plans that provides

guidelines for future course of action and
are used over the long period of time
unless until changed.
e.g. :- Organizational mission and long
term objectives , strategies,
policies ,procedures and rules.
Single Use Plan

These are the plans relevant for a

specified period of time and after the
lapse of period those plans are
formulated again for the next specified
time.
Eg. Projects , budgets , quotas , targets
etc
Strategic Plans

 Major plans that defines the long term

course of action for an organization in
the light of environment. These include
determination of organizational
objectives for long term period , major
policies and strategies. Strategies are
implemented through both major and
minor operational plan.
Operational Plan

 These are plans that works in the

conformity of strategic plan i.e. to attain
objective of strategic planning process.
The actual course of actions.
 Major Operational Plan :- Projects ,
budgets
 Minor Operational Plan :- Quotas and
targets
Hierarchy of
Organizational Plans
Mission
Purpose

lan

Co
rp
Objectives

n
de

tri
or

bu
Strategies

tes
er
low

Policies
ve
er i

Procedures and Rules

d
lps

Programs and Projects

He

Budgets
Quotas and Targets
Characteristics of a good
plan

1) Linked to Long Term Objective

2) Direction of Action
3) Excellent Feedback
4) Consistent
5) Feasible
6) Simplicity
7) Flexible – Principles of Flexibility ,
principles of navigational change.
Limitations of planning

 1) Difficulty in Accurate Premising

 2)Problem of rapid change
 3)Internal inflexibilities
a) Psychological Inflexibilities b) policy and
procedural inflexibility c) Capital investment
 4)External Inflexibilities ( political climate ,
trade union, technological changes)
 5)Time and Cost Factor
 6) Failure of People in Planning
Making planning
effective

 Establishing Climate for Planning

 Initiative at Top Level
 Participation in Planning Process
 Communication of Planning Elements
 Integration of long term and Short term
plans
 An open system approach
UNIT 4

Decision Making - Concept,

characteristics of decisions, Types of
decisions, Steps Involved in decision
making, Importance of decision making,
Methods of decision making, Committee
Decision Making.
Decision making – the process of
recognizing a problem or opportunity and
creating a solution
Decision Making :

 A decision represents a judgment , a final

resolution of a conflict of needs , means or
goals and a commitment to action made in
face of uncertainty , complexity and even
irrationally.

 Decision making is a conscious human process

involving both individual and social
phenomenon based upon factual and value
premises which concludes with a choice of one
behavioral activity from among one or more
Influences on Effective
Decision Making

Decision Maker Problem

?
Characteristics Characteristics
Knowledge Unfamiliarity
Ability Ambiguity
Motivation Complexity
Instability

Decision Environment
Characteristics
Irreversibility
Significance
Accountability
Time and monetary
constraints
 Types of Decisions
 Programmed and Non-programmed
Decisions
 Strategic and Tactical Decisions

Programmed Decisions :- Routine and

repetitive and are made with the
framework of organizational policies and
rules which are well established in
advance. Eg.- Promotion of an employee ,
criteria is well set.
Non-Programmed :- Relevant for solving
Types of Decisions

Programmed Non-
Decision programmed
Decisions Decision
 Poorly defined or
 Simple/routine novel problem
problem  No alternative is
 High levels of clearly correct
certainty  Past decisions of
 Rules and little help
procedures  Gresham’s law of
 Standard planning
operating
procedures (SOP)
Decision-Maker Level and
Type of Decision

Top
Managers

Middle
Managers

Lower-Level
Managers

Non-programmed Decisions
Programmed Decisions
Adapted from Exhibit 9.4: Decision-Maker Level and Type of Decision
 Strategic Decision :- is a major choice of
actions concerning allocation of resources and
contribution to the achievement of organizational
objectives.
1)Major decision that affects whole or major part of
org that contributes directly to org’l objective.
2)Major departure from earlier ones concerning some
org’l practices e.g. change in product mix,
expansion of business, change in personnel policies
3)Normally a non-programmed decision.
4) Three elements a) A course of action or plan
known as action element b) A desired result or
objective to be achieved , result element. c) A
commitment , which directs some part of org to
undertake a course of action, make ppl responsible
and allocate them resources.
Tactical Decision : Operational decisional is
derived out of strategic decision. It related
to day to day working and is made in the
context of well set policies and procedures.
Example :- Purchase of raw material etc
1)Programeed 2) The outcome is short term
nature, affects small part of
organization.3)The authority for making
tactical decision can be delegated to lower
level management.
Evaluating Alternatives in the
Decision-Making Process

Are the alternative’s

Is the alternative Is the alternative Retain for further
Yes Yes consequences Yes
feasible? satisfactory? consideration
affordable?

No No No

Eliminate from Eliminate from Eliminate from

consideration consideration consideration

The Administrative Model

Important Behavioral Concepts

 Bounded rationality
 Satisficing
 Coalition
 Intuition
 Escalation of Commitment
 Risk Propensity
Characteristics of
Decision Making
 Individual Vs Group Decision Making
 Rationality involved in Decision Making
(Economic Man , Administrative Man)
 Creativity involved in Decision Making
 Decision making conditions (Certainty , Risk ,
Uncertainly)
 Quantitative techniques
 It is action orientated
 It is Goal Oriented
 It should entail efficiency in Implementation
Methods of Decision
Making
 Individual decision making :-1) Nature
of problem 2)Time availability 3)Quality
Decision 4)Climate of decision making 5)
Legal Requirement
 Group Decision Making :- 1)
Brainstorming 2) Nominal Group
Technique 3) Delphi Technique
4)Consensus Mapping
 Quantitative Techniques :- 1) Operation
Research 2)Decision Tree 3)Linear
Advantages Disadvantages
 More information &  The process takes
knowledge are longer, so it is more
available costly
 More alternatives are  Compromise decisions
likely to be generated due to indecisiveness
may emerge
 More acceptance of
the final decision is  One person may
likely dominate the group
 Enhanced  Groupthink may occur
communication of the
decision may result
 Better decisions
 Group Decision Making

Positive Aspects of Group Decision Making

 1) Pooling of Knowledge and information

 2)Satisfaction and Commitment

 3)Personal Development


4)More Risk Taking
Negative Aspects
 1) Time consuming and Costly

 2) Individual Domination

 3) Problem of responsibility

 4) Group Think
 Groupthi
nk
 A situation that occurs
when a group or
team’s desire for
consensus and
cohesiveness
overwhelms its desire
to reach the best
possible Studies (Vol.decision.
Source: Gregory Moorhead, Group &
Organizations 7, No. 4), pp.
429-444. Copyright © 1982 by Sage
Publications, Inc. Reprinted by permission
of Sage Publications, Inc.
 Illusions of invulnerability creating excessive optimism and
encouraging risk taking.
 Rationalizing warnings that might challenge the group's
assumptions.
 Unquestioned belief in the morality of the group, causing
members to ignore the consequences of their actions.
 Stereotyping those who are opposed to the group as weak,
evil, disfigured, impotent, or stupid.
 Direct pressure to conform placed on any member who
questions the group, couched in terms of "disloyalty".
 Self censorship of ideas that deviate from the apparent group
consensus.
 Illusions of unanimity among group members, silence is
viewed as agreement.
 Mindguards — self-appointed members who shield the group
from dissenting information
Preventing groupthink
 According to Irving Janis, decision making groups are not neces
sarily destined to groupthink. He devised seven ways of preve
nting groupthink (209-15):
 Leaders should assign each member the role of “critical evalua
tor”. This allows each member to freely air objections and dou
bts.
 Higher-ups should not express an opinion when assigning a tas
k to a group.
 The organization should set up several independent groups, w
orking on the same problem.
 All effective alternatives should be examined.
 Each member should discuss the group's ideas with trusted pe
ople outside of the group.
 The group should invite outside experts into meetings. Group
members should be allowed to discuss with and question the o
utside experts.
 At least one group member should be assigned the role of Devi
l's advocate. This should be a different person for each meetin
g.
Unit 4 part B

Organization - Concepts, Principle of

organization, Importance, Features of
good organization structure, Types of
Organization structure.
Concept of Organization

1) As Entity
2) As Group of People
3) As Structures
4) As Process
Principles of
Organization
 Classical Organization Theory
 Neo-Classical Organization
Theory
 Modern Organization Theory
1) System Approach
2) Contingency Approach
 Classical Organization Theory –
closed system
1) Division of Labor
2) Scalar and Functional Processes
a) Departmentation b) Coordination
of Hierarchy c) Unity of
Command
d) Delegation of Authority e) Line
and Staff Relationship
3) Structures
4) Span of Control
 Neo-Classical Theory –open system
1) Flat Structures
2) Decentralization
3) Informal Organization
 Modern Organization Theory
System Approach
1) Technical Subsystem 2)Social
Subsystem 3)Power subsystem
4)Managerial Subsystem

 Factors Affecting Organization Structure

1) Environment 2) Strategy 3)
Technology
4) Size 5) People
Organizational Structure &
Design
 Organizational structure
 The sum of ways an organization divides its labor
into distinct, coordinated tasks
 Organizational design
 Assessing the organization’s strategy and
environmental demands
 Determining the appropriate organizational
structure
Principles of Organizational
Structure

 Organizational charts
 Illustration of relationships
 Units
 Lines of authority among supervisors and subordinates
 Illustrated by use of labeled boxes and connecting lines
Integration
 Integration
 Facilitation of cooperation and interaction
of various parts of the organization
 Interdependence
 Pooled
 Sequential
 Reciprocal
Formalization

 Formalization
 the official and defined structures and
systems in decision making,
communication, and control in an
organization
 Line of authority
 Unity of command
 Span of control
Informalization
 Informal organization
 Unofficial but influential means of
 Communication
 Decision making
 Control
Centralization and
Decentralization
 Centralized organizations
 Restrict decision making to fewer
individuals, usually at the top of the
organization
 Decentralized organizations
 Tend to push decision-making authority
down to the lowest level possible
Features of Good
Organization structures :-
1) Simplicity
2) Flexibility
3) Clear line of authority
4) Application of Ultimate Responsibility
5) Proper delegation of authority
6) Minimum possible managerial levels
7) Principles of Unity of Direction and
Command
8) Proper Emphasis on Staff
9) Provision for Top Management
Types of Organization
Structures
 Tall Structure Organization
 Flat Structure Organization
 Functional Structure
 Product Structure
 Divisional Structure
 Territory /Regional Structure
 Customer Structure
 Matrix Structure
 Hybrid Structure
Functional Structure
Strengths
 Small to medium-sized Weaknesses
firms with limited product  Weak coordination across
diversification functional groups
 Specialization of  Restricted view of overall
functional knowledge organizational goals
 Less duplication of  Limits customer attention
functional resources  Slower response to market
 Facilitates coordination changes
within functional areas  Burdens chief executives
with decisions
Product Structure
Strengths Weaknesses
 More focus on products  Duplication and lack of
and customers economies of scale
 Easier to evaluate  Problems for customers
performance of the purchasing across multiple
product product groups
 Product responsiveness  Conflicts between product
to market changes group and corporate
 Less burden on the top objectives
executive in making  Conflict between product
operating decisions groups
Division Structure

Weaknesses
Strengths
 Most appropriate only for
 Reduced functional diversified, large
duplication companies with many
 Customer focus can products and product
increase families
 May inhibit cross-division
 Cross-product
coordination
coordination is eased
 Coordination difficulties
 Cross-regional between division and
coordination is often corporate objectives
eased
Customer Structure
Strengths Weaknesses
 In-depth understanding of  Duplication of functional
specific customers resources in each customer
unit
 Responsiveness to  Coordination between
changes in customer customer units and corporate
preferences and needs objectives
 Responsiveness to moves  Failure to leverage
by competitors to better technology or other strengths
serve customers in one unit across other units
Matrix Structure
Strengths Weaknesses
 Information flow  Complexity of performance
 Decision quality evaluations
 Suited to a changing and  Inhibited ability to respond to
complicated business changing conditions
environment  Diffused accountability
 Flexible use of human  Conflicts between differing
resources perspectives and objectives