UNIT II

FUNCTIONS OF MANAGEMENT ; Planning – Organizing – Staffing – Directing – Controlling –

Coordinating – Communication – Types, Process and Barriers – Decision Making – Concepts, Process,
Techniques and Tools
PLANNING:
• Planning is said to be the first and foremost functions of management
• The role played by planning is very vital in today’s competitive scenario
• Planning is decision making
• Planning is thinking in advance what to do, when to do, how to do, where to do and it is to be done
by whom
• Planning reflects authority and decision making
• All levels of management play a vital role in contributing to the successful implementation of
planning process.
Planning is the management function anticipating the future and conscious determination of a future
course of action to achieve the desired results.
Planning consists of both problems –solving and decision-making.
Major components parts of planning:
1. Initial (or basic) planning: Which is concerned with the determination of the objectives.
2. Subsequent (or route) planning: which is concerned with best alternative course of action.
3. Final (or operational) planning: wherein, the planner would analyze the technical, financial,
personnel and other aspects involved in implementing the pre-selected course of planning.
Meaning of planning:
Planning is a method or technique of looking ahead. It is a deliberate conscious search used to formulate
the design and orderly sequence of actions through which it is expected to reach the objectives.
Nature of planning:
I. Constitutional features:
1. Planning is goal-oriented:
• Planning has no meaning unless it contributes in some positive way to the achievement of
desired goals. All plans emanate from objectives.
• The goals may be implicit or explicit but well-defined goals are essential for efficient planning.
2. Planning is reference in future:
• All planning is done for future; and in the context of future conditions.
• While planning, the planner has to do a forecasting of the relevant economic, social, political
and technological condition; within framework of which the plan will have to operate.
• Forecasting is the heart of planning.
3. Planning is primary function:
• All other functions of management are designed to attain the goals set under planning.
• Planning provides the basis for efficient organizing, staffing, directing and controlling,
4. Planning involves choice:
• Planning is basically a problem of decision-making or choosing among alternative course of
action.
• Planning are decisions made after evaluation of alternative course of action.
5. Planning is intellectual process:
• Planning is a mental process involving imagination, foresight and sound judgment.
• It requires a mental disposition of thinking before doing and acting in the light of facts, rather
than guesses
II. Operational Features:
6. Planning is all pervasive:
• Planning is the function of each and every manager irrespective of the level and area of his/her
operation.
• Planning is an essential ingredient in management at all executive levels.
• Managers at the top level prepare long-term plan for the company as whole, middle level
managers formulate departmental and functional plans for medium term. At the lowest level,
managers prepare operating and short-term plans.
7. Planning is both- long-range and short-range
• Long-range planning usually covers a period ranging from 3 to 5 or 7 years, while plans for a
period of upto 1 year (or even 2 years) are regarded as short-range plans.
8. Planning is continuous:
• Planning is an on-going and dynamic exercise.
 • As the assumptions and events on which plans are based change, old plans have
to be revised or new ones have to be prepared.
III. Desirable features:
9. Planning is actionable:
• An ideal requirement of planning is that is must be actionable.
• A plan is not just a ‘paper-plan’ which either is not capable of implementation or is never put
into practice, for any reasons whatsoever.
10. Planning is flexible:
• A plan is capable of modification, revision or readjustment, future; when some of those future
environmental factors change on which the plan is based.
11. Planning is an integrated system:
• Ie. Various departmental plans, the plans of superiors and subordinates and the long-range and
short-range plans- all must be harmonized and fitted into an integrated structure of planning.
12. Planning is efficient:
• The usual commercial ‘cost-benefit formula’ is employed in the context of planning also-for
judging how far and to what extent, is a plan efficient or otherwise.
IMPORTANCE OF PLANNING:
1. Planning offsets future uncertainty and change:
• A business concern has to work in an environment which is uncertain and ever-changing.
• Planning helps the manager in carving out the future course of action and this brings a higher
degree of certainty.
2. It tackles increasing complexity in modern business:
• To run a modern business undertaking, there is need for large number of people with different
specialization and complex machines.
3. It helps in co-ordination:
• Planning is the best stage for the integration of diverse forces at work.
• Sound planning interrelate all the activities and resources of an organization.
• The activities and efforts of various departments and division can be harmonized with the help
of an overall plan.
4. Encourage innovation and creativity
• Innovation and creativity are prerequisites to continuous growth and steady prosperity of
business.
• Planning is forward looking and it enables an enterprise to cope with technological and other
developments.
• Planning requires continuous monitoring of environment for new ideas and developments.
5. It facilities unity of action.
• Under planning, policies, procedure and programmes are predetermined and every decision and
action should within the framework of predetermined policies and procedures.
6. It helps in avoiding business failure:
• As planning involves the selection of vest objectives, unity of action, co-ordination of activities,
economy in operation and offsetting of futures uncertainty and change, there is a great
possibility of avoiding business failures.
7. Guides decision-making:
• Planned targets serve as the criteria for the evaluation of different alternatives so that the best
course of action may be chosen.
• By predicting future, planning helps in taking future-oriented decisions.
• In the absence of plans there is no sound basis for making future-oriented decisions.
8. Improves competitive strength:
• The enterprises which adopt planning will have a competitive edge over other enterprises which
do not have planning.
• Planning enables the enterprise to discovers new opportunities and thereby shape its own future
9. Facilitates control
• Planning provides the basis for control. Plans serve as standards for the evaluation of
performance.
• Sound planning enables management to control the events rather than be controlled by them.
STEPS IN PLANNING (OR PROCESS OR HOW TO MAKE A PLAN?)
• Plans are made in all types of enterprises- business and non- business.
• Plans are made at all levels of management –from the highest to the lowest.
1. Being watchful:
• It could be referred to as a pre-step in planning or a desirable pre-condition for making a
successful plan.
• The management must, accordingly, initiate the planning process at the most opportune
moments expecting gains through the adage ‘well-begun is half done’.
2. Awareness of opportunities and problems:
• The first step in planning is the awareness of the unexploited business opportunities or the
problem to be provided for in future.
3. Collecting and analyzing information:
• The next step is to gather adequate information and data relating to the planning to be made
and analyze it to find out the cause-effect relationship between the various factors.
4. Setting objectives:
• Analysis and interpretation of data facilitate in determining the enterprise objectives.
• Objectives must be specific and clear and should indicate the end result of planning activity.
5. Determining planning premises and constraints:
• Before plans are prepared the assumptions and condition underlying them must be clearly
defined.
• These assumptions are called planning premises and they can be identified through accurate
forecasting of likely future events.
• Three types of planning premises:
i. Controllable premises: These are under the control of management ( eg. Policies,
objectives, and resources of the enterprise).
ii. Semi-Controllable premises: these are partially under the management control (e.g.
trade union)
iii. Non-Controllable premises: it refers to the external forces (e.g govt policy, political
situation etc.).
6. Finding out the alternative course of action:
• After establishing the objectives and the planning premises, the alternative plans are developed.
• For every plan there are a number of alternative and hence, all possible alternatives to work out
a plan for achieving the desired objectives should be found out for their evaluation.
• Cost, risk and resources associated with different alternatives should also be considered.
Imagination and foresight are required to generate and evaluated policy alternatives.
7. Evaluation of alternatives and selection:
• A critical evaluation of alternatives involves going into the plus and minus points of each
alternative; and to find out the net worth of each alternative-in terms of its contribution to the
objectives of the plan.
• It is to evaluate all possible alternatives with reference to cost, speed, quality, etc., and select
the best course of action.
8. Selection of the ‘best’ alternatives:
• The management while selecting the best alternative might base decision on one or more of the
following bases:
a) Experience: the management might base its final selection of the best alternative, on its experience.
In fact, experienced manager knows what types of alternatives he adopted in the past; and with what
implications and consequences.
b) Experimentation: in terms, of experiments with the ‘best’ alternative; and analyses the outcome of
the experiment, before finalizing the decision.
9. Formulation of derivative plans:
• A major plan, usually calls for a number of derivative plans; plans derived from the main plan.
Derivative plans might also be called –supporting or minor or secondary plans.
• A plan e.g relating to the installation of a new plant for manufacturing a new product might call
for the following derivative plans:-
i. A plan for ‘design’ and manufacturing of the new product.
ii. Plans of recruitment, selection and training of personnel for operating the plant.
iii. A plan for the repairs and maintenance of the plant.
iv. A plan for advertising the product to be produced by the plant, etc.
9. Implementation of the plan:
• The step, which gives a finishing touch to the planning process, is concerned with the
implementation of the plan, which implies ‘putting the plan into action’.
10. Follow-up action:
 •Though the planning process comes to a close with the implementation of the plan; yet a
desirable step, which yet remains to be taken, relates to the follow-up action on the
implementation of the plan.
• ‘Follow-up action’ implies watching the consequences (both good and bad)- economic, social
psychological etc.
PLANNING LEVELS

TOP STRATEGIC PLANS

MANAGEMENT -------------------------- long-range
Objective plans
Long –range plans
Policies

MIDDLE ADMINISTRATIVE PLANS medium-

MANAGEMENT ------------------------------------ range
Organization plans
Motivation
Managerial control

LOW OPERATIONAL PLANS short-

MANAGEMENT ----------------------------------- range
Rules plan
Method
Procedure

TOP LEVEL MANAGEMENT:

• It is concerned with the strategic of courses of action, programme, policies, procedures and
standards that will determine the procurement, use and disposition of these resources.
MIDDLE LEVEL MANAGEMENT:
Examples: Research and Development, Marketing, Manufacturing, finance etc.
LOWER LEVEL MANAGEMENT
Example: plans for finished goods inventories to meet current market demands, plans to accelerate
research projects which are behind schedule.
TYPES OF PLANNING:
In the process of planning several specific plans are prepared which may broadly be classified into two
categories: Standing and Single -Use plans
.
PLANS PLAN
STANDING PLAN SINGLE USE PLANS

Mission Programmes

Objectives Project

Policies Schedules

Strategies Budgets
Methods
Procedure Standards
Rules

I. STANDING PLAN:
Standing plan or multi-use plans are the recurring plans and they are used repeatedly in
situation of a similar nature. A standing plan is a standing guide to recurring problem and it is used
again and again. It is also called long- term plans.
1. Mission:
• The ‘mission’ as a type of plan explains the most fundamental purpose of an enterprise.
• For example
i. The mission of the government of a country might be eradication of poverty.
 ii. The mission of a manufacturing enterprise might be producing high quality goods for the
common men of society at the most affordable price and so on.
2. Objectives:
• Objectives provide a sense of direction to the thinking process of the planner; and to the action
process of the operators of the plan
• Objectives must be formulated keeping in view-
i. The mission of the enterprise, and
ii. The resources and limitation of the enterprise.
• Objectives are known by different names, e.g goals, aims, purpose, mission, targets,
etc.
• Kinds of objectives:
1. Market standing 2. Innovation 3. Productivity
4. Physical and financial resources 5. Profitability
6. Manager performance and development`
7. Worker performance and attitude and 8. Public responsibility
MANAGEMENT BY OBJECTIVES: (MBO)
• The philosophy of management by objectives (MBO) was highlighted in 1954 by Peter F.
Drucker who stressed upon the need for “ management by objectives and self-control”.
• MBO may be defined as a process in which a manager and his subordinates jointly decide the
targets and results to be achieved keeping in view the overall objectives of the organization,
jointly identify the Key Results Areas (KRA) periodically evaluate the actual results in terms
of results agreed upon in advance.
Steps in MBO process:
MBO is also known as ‘Management By Results’ because results are to be evaluated in terms of
objectives.
1. Preliminary setting of objectives at the top management level.
• Top management usually gives a start to launching of scheme of MBO; by identifying the
fundamental objectives of the enterprise as a guide to superiors and subordinates
throughout the organization for setting their own objectives.
• They constitute the basic and long-term ends towards which the activities of all departments
and individuals are directed.
• The objectives that are set also indicate the measures for achieving the objectives.
2. Unit sub-goals
• Once the corporate objectives are formulated, the short-terms goals for each organizational unit
e.g., division, department or branch are established.
• Such unit goals reflect what is expected of each unit.
3. Individual targets.
• After the corporate and unit goals are set up the next step is to fix performance targets for each
individual manager at various level of the organization.
• Superiors and subordinates throughout the enterprise determine their individual objectives-
through a process of mutual consultation. Such setting of individual objectives is the core
aspects of MBO.
4. Matching goals with resources.
• To make MBO scheme realistic, goals of individuals are compared to the resources available
for their implementation.
• This helps the organization in allocating the resources in an economical way.
5. Recycling objectives.
• Recycling objectives under MBO is done to take care of the interconnection among related
objectives.
• Every manager calls periodical meetings of his subordinates to discuss their performance and
to jointly identify the steps to be taken for improvements in future.
6. Performance of appraisal
• At the end of the year, a detailed discussion between a manager and his subordinate takes place
in which results of the unit are evaluated and the targets reviewed.
Merits and demerits of MBO:
Merits:
1. Better managing.
• MBO helps in better managing the organization. If forces management to think of planning for
results.
 • Objectives also force managers to think how these can be achieved and what resources would
require.
2. Clarity in organization.
• MBO tends to force clarification in organization roles and structures.
3. Commitment
• MBO elicits commitment performance. If the objectives are set by people who are responsible for
achieving them, they have a sense of feeling that they are achieving their own objectives.
4. Helps in Appraisal
• MBO provides the measurement criteria to judge where one stands. So that corrective actions. If
required, can be taken well in time.
Demerits:
1. Failure to teach the philosophy.
• MBO seems to be easy on its face, but there is much to be understood and appreciated by
managers.
2. Problem of goal setting
• Truly verifiable goals are difficult to set MBO requires verifiable goals. For example, quantified
goal setting for staff people is quite difficult.
3. Emphasis on short-run goals:
• In most of the organizations practicing MBO, there is a tendency to emphasis short-run goals.
4. Inflexibility:
• Sometimes MBO presents the danger of inflexibility in the organization.
5. Wastage of time:
• MBO involves a wastage of a lot of valuable time of managers in joint consultations; and they
left with little time for efficiently discharging their

ORGANIZATION
Meaning of organization.
The word “organization” originates from the work “organism” which means a structure with its parts
so integrated that their relation to each other is governed by their relation to be whole.
The two important ingredients are:
1. The parts consist of human and physical resources. E.g., 5M and
2. As for relationships, these mean relationships
i. Between one individual and another
ii. Between an individual and his group
iii. Between one group and another
iv. Between individual and the physical resources to be used by them to perform their work or
activities.
Definition:
Mcfarland has characterized organisaiton as “ an identifiable group of people contributing their efforts
toward the attainment of goals.
Koontz and O’Donnell. “ Organization involves the grouping of activities necessary to accomplish
goals and plans, the assignment of these activities to appropriate departments and the provision for
authority delegation and co-ordination”.
Mooney and Railey “ Organisation is the form of every human association for the attainment of a
common purpose”.
As a function of management, organizing is a process; broadly consisting of the following steps:
1.Determination of the total workload and division of work:
• The very first step in the process of organizing is to make a determination of all the activities
of all the activities which are necessary to be undertaken for the attainment of the enterprise
objectives.
• Fayol divided business activities into technical, commercial, financial, , security, accounting
and managerial.
2.Grouping and sub-grouping of activities i.e creation of Departmentation.
• The various activities identified under the first step are then classified into appropriate
Departmentation and divisions according to similarities and common purpose. Such grouping
of activities is known as ‘Departmentation’.
• Each department may be further divided into section to create a logical structure.
3. Assignment of duties.
 • The individual departments are then allotted to different positions and individuals. The duties
of every individual are defined on the basis of his ability and aptitude.
• Every individual is made responsible for the specific job assigned to him. In this way, duties
are assigned to specific individuals.
4.Delegation of authority:
• Once the duties and responsibilities of every individual have been fixed, he must be given the
authority necessary to carry out the duties assigned to him.
• A chain of command is created from top to bottom through successive delegations of authority.
Key elements of Organization Process: on the basis of the preceding discussion, the organisation
process may be said consist of the following three key elements:
1. DEPARTMENTATION
2. DELEGATION, and
3. DECENTRALIZATION
PRINCIPLE OF ORGANISATION OR FEATURES OR ORGANISATION:
1.Unity of objective: an organisation and every part of it should be directed towards the
accomplishment of common objectives. It implies the existence of formulated and understood
objectives.
2. Efficiency: an organisation is efficient if is able to accomplish predetermined objective at minimum
possible cost.
3. Division of work: the activities of the enterprise should be so divided and grouped that there is the
most efficient breakdown of tasks.
4. Span of control: no executive should be required to supervise more subordinates than he can
effectively manage. The number of employees a manager can directly supervise.
5. Scalar principle: Authority and responsibility should be in a clear unbroken line from the highest
executive to the lowest executive.
6. Delegation: authority should be delegated to the lowest possible level, consistent with necessary
control so that coordination and decision-making can take place as close as possible to the point of
action.
7. Functional definition: the duties and authority-relationships of different individual must be clearly
defined so that there is, no confusion or overlapping.
8. Correspondence: authority and must be coterminous and co-extensive.
9. Unity of command: each person should receive orders from only on superior and be accountable
him.
10.Unity of direction: there must be one head and one plan for a group of activities towards the same
objectives.
11. Balance: the various parts of an organisation should be kept in balance and none of the functions
should be given undue emphasis at the cost of others.
12. Exception principles: every manager should take all decisions within the scope of his authority and
only matters beyond the scope of his authority should be referred to higher levels of management.
13. Coordination: the purpose of organizing is to secure unity of effort.
14. Flexibility: the organisation must be free from complicated procedures and red tape.
15. Continuity: the organisation should be so structured as to have continuity of operations.
Arrangements must be made to enable people to gain experience in positions of increasing diversity
and responsibility.
CONCEPT OF FORMAL AND INFORMAL ORGANIZATION:
Formal Organisation:
“ The formal organisation is a system of well-defined jobs, each bearing a definite measures of
authority, responsibility and accountability”. - louis A.Allen
It is a deliberately designed structure of roles; which is built by management through
assigning a matching role to each one of the groups for facilitating individuals- to best attain the
objectives of the enterprise.
Informal Organisation:
Informal organisation is a social group of individuals which comes into existence
automatically –as a result of the operation, and interaction of certain socio-psychological factors, among
persons who are working in various capacities within the four wall of the formal organisation.
“ Informal organisation is the network of personal and social relationships not established or required
by formal organisation”. - Keith Davis
One most outstanding and popular example of informal organisation is a labour union.

ADVANTAGES AND LIMITATIONS OF INFORMAL ORGANISATION:

Advantages:
I. Advantages from the viewpoint of management
1. More productivity and production:
• By winning the co-operation of informal groups and their leaders, management is assured of
more productivity on the part of workers leading to higher production.
2. Communication feedback
• Through the forum of informal organizations, management could get the reaction of the
employees of the organisation i.e. the communication feedback, on the communications
transmitted by it.
3. Innovative and creativity encouraged.
• Informal groups and their leaders might often come out with suggestions or recommendations
for the betterment of organizational functioning.
• If, even some of such suggestions are accepted and implemented by the management; the same
acts as a spur to innovation and creativity on the part of the members of informal groups.
4. A more humanistic formal organisation
• The emergence, activities and growth of informal organizations lead to the development of
‘human-touch’ which makes the formal organizations more humanistic or prevents
dehumanization of the personnel.

II. Advantages from the viewpoint of the members

1. Solution to work-problem:
• Informal groups provide a forum for discussion wherein members can discuss their work-
related problems with senior and expert members of the group.
2. Management made alert and responsible
• The fact of the existence of informal organizations and the fear of their likely actions makes
management more alert and responsible- while designing its plans, policies and actions.
3.Bulwark against management
• Informal groups, especially labour unions, act as a bulwark of employees-against the
undesirable practices and actions of management.
4. Doing away emotional tensions
• Informal groups, by providing a forum of entertainment, gossips etc. help members do away
with their emotional tensions- caused by personal affairs and family circumstances.

Limitations:
I. Limitations from the viewpoint of management
1. Spread of rumours
• The grapevine communication carries with itself, a natural possibility of spreading rumours
which might injure the interests and intentions of management.
2. Less than optimum production.
• Actions and activities of informal organizations lead to a wastage of the productive time of
members. There is also some amount of time wasted in gossips indulged in by the members.
3. Problem of indiscipline
• Informal organizations my-a-times invite and encourage rash and reckless behaviour on the part
of members. This creates long-run problems of indiscipline for the organisation and
management.

II. Limitation from the viewpoint of members

1. Political domination of informal groups
• They mould the functioning of informal organizations to serve their own petty selfish political
interests injuring the interests of members badly.
2. Loss of self-entity
• A vast majority of the members of informal groups-specially less educated, unskilled and semi-
skilled-seek pleasure in being blind followers of the leaders of these groups.

Formal organization Informal organisation

 1. Origin
It is a deliberate or intentional creation by It is a ‘self-generating process’. It comes into
management done for purpose of achieving the existence; due to the operation of certain socio-
objectives of the enterprise. psychological factors.
2. Objectives
Its different departments have specific It does not have any specific objectives evolved
objectives which are developed through through planning etc.
definite planning and decision-making
process.
3. Functioning There is no such rules and procedure of
To pre-planned rules, polices, procedures and functioning.
programmes.
4.Authority-responsibility relationships There are no such specific authority and
There are clear-cut and properly defined, responsibility relationships. It represents a
authority and responsibility relationship which natural-social structure-never depicted on a
are usually shown through organizational chart.
chart.
5. Leadership Leaders are those who are popularly accepted by
Every group manager, is a leader; by virtue all or a majority of the group-to act as leaders of
of, his official status and authority. the group.
-Personal power.
6. Communication system -
There is well –planned system of It is of a grapevine nature i.e it might spread
communication routed through the scalar- from any person to any person, in any manner
chain. and in any direction.
7. Stability
It is most stable It is least stable.
8. Political domination
At least on the face of it, is away form political In a large number of cases are politically
domination. dominated.

TYPES OF ORGANISATION:
I. Line Organisation.
• This is the oldest type of organisation. Under it, the persons having the greater decision-making
authority are placed at the top and those having the least decision-making authority at the
bottom.
• It consists of direct vertical relationships.
• It does not make provision for staff specialists.
• Operation of this system is simple
• Existence of superior-subordinated relationship
• The boss gives instructions directly to his subordinates.
• Superior at each level makes decisions within the scope of him authority.

Shareholders
Authority
Flow Directors

M.D

Production Finance Marketing Personnel

Manager Manager Manager Manager

Works accounting advertising Training

Manager officer section section

Workers clerk salesman HR executive

Line Authority
Advantages of line organisation
1. Simplicity:
• It is the simplest and the oldest type of organisation.
• It is easy to establish and operate.
• It is also easy to explain the workers.
2. Flexibility
• As each executive has full authority and responsibility for his job, required changes can be
made quickly and easily.
• The adjustments in the organization can be easily made to suit the changing conditions.
3. Quick decision:
• Managers can take decisions quickly and act promptly as no staff officers are to be consulted
and there is adequate authority at every level.
4. Unified control:
• There is unity of command and control according to which an employee can be given orders by
one superior only.
• All activities affecting a department are under the control of one executive.
5. Fixed responsibility:
• Every person knows from whom he gets orders and to whom he is accountable.
• Every executive can be held fully responsible for the actions of his subordinates.
6. Effective discipline:
• Singleness of responsibility and control ensures strong discipline among the employees.
7. Economy:
• It less expensive in terms of overhead costs, as there are no staff specialists.
8. Speed action:
• Because of a clear division of authority and responsibility, as also unity of command and
control, decisions can be made and executed promptly.
Limitation of line organization:
1. Overburdening:
• Key executives are overloaded with administrative work.
• Top executives have to be ‘superman’ to effectively control diverse activities.
• As the business grows in size, executives find it impossible to cope with their duties in the
absence of staff assistance.
2. Instability:
• The success and survival of the enterprise depends upon a few individuals. There is little scope
for expansion of business beyond their capabilities.
• Loss of key executives may put the future of the concern in jeopardy.
3. Lack of specialization:
• There is no scope for specialization as one individual cannot be expert in all function.
• Lack of specialization and over dependence on subordinates lower efficiency of operation.
4. Autocratic control:
• As each department is under the complete control of one executive, there is danger of
authoritarian. There is possibility of favouritism.
5. Delayed communication:
• Subordinates hesitate to offer suggestions and to criticize a wrong decision taken by the
superior.

II. LINE AND STAFF ORGANISATION:

Line authority:
• Responsibility for proper performance of work is not delegated. But authority can be delegated
and the term “line” is used to indicate the “line of authority”.
Staff authority:
• “Staff” is a stick carried in the hand for support.
• “Staff authority” means authority to support the line authority.
• Staff authority denotes a non-executive relationship where personnel with expertise provide
assistance to the line management, but only in an advisory capacity.
Advantages of Line and Staff Organisation:
1. Discipline:
• Unity of command is maintained, as staff is not given executive authority.
2. Expert advice:
• Line executives, and through them the enterprise as a whole, benefit a great deal from the expert
advice and guidance provided by the staff officers.
3. Balance decisions:
• With information and advice provided by staff specialists, line executes can take better and
more sound decisions.
4. Relief to line executives:
• The staff officers look after the detailed analysis of each important managerial activity which
is a big relief to the line officers.
Disadvantages of line and staff organisaiton:
1.Conflicts:
• Staff may undermine line authority while line may ignore staff. This may lead to friction
between them.
2. Advice ignored:
• As the staff officers lack authority to put their recommendation into practice, the line executives
may ignore their advice.
3. Expensive:
• It is expensive in terms of overheads as two separate sets of personnel are required.
4. Conflict between line and staff:
• The allocation of responsibility between line and staff may not be very clear.
• Staff advice may be confused with line authority creating confusion and disorder.

Line and Staff authority:

Line authority Staff authority
1.It refers to those positions and elements of 1. It refers to those elements which have
the organisation, which have the responsibility and authority for providing for
responsibility and authority, and are providing advice and service to line in
accountable for accomplishment of primary attainment of objectives.
objectives
2.line elements provide decision authority 2. Staff elements facilities the decision
and a central means for the flow of process by bringing expert and specialized
communication through scalar chain of knowledge..
authority.
3.line managers make the salient decisions 3.staff officials advise and counsel.
by exercising command authority.
Example: production manager in an industrial concern is a line manager, since he is directly
responsible for achieving certain production targets. But an industrial engineer is a staff man as
he gives advice to all production methods and quality control techniques.

CONFLICT BETWEEN LINE AND STAFF.

The major source of line and staff conflict is the difference in their viewpoints and perception.
Conflicts arise when any of them fails to appreciate the view of the other. When a conflict between line
and staff arises both the parties try to explain the causes of conflict in terms behaviour of the other.
The viewpoints of both line and staff on this conflict are given below.
a) The line viewpoint: the line managers have the following to say about the staff people.
1. Staff authority undermines line authority and interferes in the work of line managers.
2. Staff authorities are not acquainted with the practical problems of the enterprise, as they are
only academics.
3. As staff officers are specialists only in a specific area, they cannot see the whole picture
objectively.
4. Advice given by the staff is not always sound. Advice is only theoretical and unrealistic.
5. Staffs take credit if the programme (as per the advice of the staff) is successful and blame the
line if it is not successful.
b) The staff viewpoint: staff authorities have the following complaints against line officers:
1. Line officers do not make proper use of advice given by itself.
2. Line officers reject the advice without giving reasons.
3. Line officers are slow to accept new ideas and they resist change.
4. Staff authorities feel that they do not have authority to get their ideas implemented.
Improving Line and Staff Relationship:
1. The limits of authority of both line and staff should be prescribed clearly.
2. Staff authority should be restricted to a purely advisory role.
3. Line officers should give due consideration to staff advice. They should state reasons in case
they cannot accept the advice.
4. Line should value the special skills of staff and similarly the staff should try to appreciate the
difficulties in implementing new ideas.
5. The advice of staff should be realistic and practicable.
6. Both line and staff should try to understand can other’s responsibilities and difficulties and try
to co-operate with each other for the achievement of enterprise objectives.
III. FUNCTIONAL ORGANISATION

• Functional organisation is a common structure where departments are organised based on

specialised functions or tasks.
• For example, there might be separate departments for marketing, finance, operations, human
resources, and so on.
• Each department is headed by a functional manager who has expertise in that particular area.
• This structure allows for the efficient utilisation of specialised skills and knowledge, as
employees within each department can focus on their areas of expertise.
• It also enables clear career paths within each function. Specialists operate here with
considerable independence.
 • However, functional organisations can create silos, where departments become inwardly
focused, and communication and collaboration between departments may be limited.
Coordination across functions can also be challenging.
Merits of functional organization:
The following are the merits of functional organization.
1. Benefit of Specialization: This system provides ample opportunities for minute specialization
to its maximum extent.
2. Expertise Knowledge: This system can be entrusted with higher efficiency as knowledge of the
experts in the field are involved extensively used. Workers are assisted by experts’ instructions.
3. Division of Work: The whole work process is segregated into functions, and the specialists in
the field take care of it. Hence, there is no work burden to executives. The executives perform only
a few functions. Mental and manual labors are also separated and so both jobs can be performed
with higher degree of efficiency in an organization.
4. Scope for Training: This system also provides opportunity for appropriate training to inspectors
and supervisors. This aspect automatically brings flexibility into the organization.
5. Scope for Expansion: Expansion of the enterprise without any dislocation or loss of efficiency
is possible.
6. Mass Production: Since specialization is the back bone of the system, the large scale production
can be undertaken with minimum costs.
Demerits of Functional Organization:
1. Absence of Unity of Command: The workers have to obey the instructions of many foremen.
No individual can work best under two masters. Then how can one serve under many masters.
Hence, there is no unity of command and the resultants are conflicts and chaos.
2. Lack of Co-ordination: Without unity of command, co-ordination can not be achieved to the
peak level. This system has the effect of destroying co-ordination in the organization, particularly
at lower levels..
3. Difficulty in Fixing Responsibility:
Since there is no unity of command, fixing of responsibility is a practical impossibility. Thus, this
system upsets the very basis of organization which aims at fixing of responsibility.
4. Chances for Indiscipline: Maintaining of discipline is a difficult task because each worker is
subject to work under eight bosses. Indiscipline at all levels has the effect of lowering the employees
morale.
5. High Clerical Costs: This system also increases the amount of clerical work which ultimately
results in the increase in the amount of overhead expenses. Hence, it is uneconomical.
6. Absence of Initiative: Workers, being always spoon fed with technical knowledge, shall lose
initiative and become a group of mere automation. The supervisors shall also lose their drive and
initiative. Hence, even the routine work shall become complicated.
IV. COMMITTEE ORGANISATION
“A committee is a group of people who meet by plan to discuss or make a decision for a
particular subject”.
A committee means a group of persons formed for a stated purpose. It may be a standing
committee, or convened for a special purpose.
There may be executive committee, finance committee, audit committee, bonus committee,
grievance committee, etc.
Characteristics:
1. A committee is a group of person. There should be at least two persons and no limitation on the
maximum.
2. A committee is charge with dealing with dealing specific problems and it cannot go in for
actions in all spheres of activities.
3. A committee may be constituted at any level of organisation.
4. Members of committee have authority to go into details of the problems.

TYPES OF COMMITTEE:
1. STANDING OR AD HOC COMMITTEE:
• Standing: it exists continuously for indefinite period.
• Ad hoc committee: it is constituted for a specific purpose or to solve a specific problem.
2. DECISION-MAKING COMMITTEE.
• It is one which is charged with the responsibility of making and executing its decisions.

3. LINE AND STAFF COMMITTEE.

• Line committee: it is responsible for controlling coordinating a specific business function
having executive authority over the subordinates within a formal chain of command.
• Staff committee: only acts in an advisory capacity, having no authority to impalement its
decisions.
4. FORMAL AND INFORMAL COMMITTEE:
• Formal: it is duly constituted by organizational rules, regulations with specific authority.
• Informal: it is not as per any policies or rules of the organisation, and it has no formal authority
as such.
Advantages of committee organisation:
1. Pooling of knowledge and experience.
2. Facility of coordination
3. Motivation through participation
4. Easy communication
5. A tool of management development
6. Consolidation of authority.
Disadvantages of committee organisation:
1. High cost
2. Slowness in decisions
3. Dividend responsibility
4. Misuse of committee.

V. MATRIX ORGANISATION:
• When an enterprise undertakes a large number of small projects; a matrix organisaiton is more
suitable. A matrix organisation is characterized by two major features:
i.It undertakes a large number of small projects;
ii.There is a dual line of command, in a matrix organisation.
• “Matrix organisation represents a combination of functional departmental organisation and
project organisation”.
• Different project managers share resources and authority with functional heads.
• When one project is over; its personnel and resources are diverted to some new project.
Advantages:
1. It is oriented toward end results
2. Professional identification is maintained
3. Pinpoints product-profit responsibility
Disadvantages:
1. Conflict in organisation authority exists
2. Possibility of disunity of command exists
3. Requires manager effective in human relations.
VI. STRATEGIC BUSINESS UNIT (SBUs)
• Companies have been using an organizational device generally referred to as a strategic
business unit (SBU).
• SBUs are distinct little businesses set up as units in a larger company to ensure that a certain
product or product line is promoted and handled as though it were an independent business.
• In some cases companies have also used the device for a major product line. Occidental
Chemical Company, for example, used it for such products as phosphates, alkalies, and resins.
• Generally a business unit must meet specific criteria. An SBU, for example must:
1. Have its own mission, distinct from the mission of other SBUs,
2. Have definable groups of competitors,
3. Prepare its own integrative plans, fairly distinct from those of others SBUs,
4. Manage it resources in key areas, and
5. Have a proper size- neither too large nor too small.
FEATURES OF STRATEGIC BUSINESS UNITS
The main features of strategic business units are:
• They are present in the organizational structure: SBUs are a distinct division or unit within a
company's organizational structure, with their own specific goals and objectives. They are typically
created to manage a specific product or service, market, or customer segment, and are given
autonomy to make decisions and allocate resources in order to achieve their goals.
• They are organizational units without separate legal personality: SBUs are not separate legal
entities and do not have their own legal status. They are a part of the parent company and operate
under its legal and financial structure.
• They utilize "product-market" strategy: SBUs typically have a specific product or service
offering and target market that they focus on. They are responsible for developing and
implementing strategies to grow and compete in their specific market or segment.
• Type of activity performed by them is of crucial and decisive importance for the whole
company: The activities and performance of an SBU are considered important for the overall
success of the company. This is why SBUs are given autonomy to make decisions and allocate
resources in order to achieve their goals.
• Functional and decision-making autonomy include: laboratory testing, production preparation,
production, finance, accounting and marketing: This allows them to be more responsive to market
conditions and to make decisions that are tailored to their specific product or service offering and
target market.
• SBU has divisional structure, which is determined by the size of production, technology and
research activities, financial and accounting processes, and marketing activities: This allows the
SBU to be more efficient and effective in managing its specific product or service offering and
target market.
USE OF STRATEGIC BUSINESS UNITS:
Strategic business units (SBUs) are used when a company wants to focus its efforts and resources on
specific areas of its business, and when it wants to give autonomy to those areas to make decisions and
allocate resources in order to achieve their goals. Some situations when a company may consider using
SBUs include:
• Diversified product or service offering: When a company offers a wide range of products or
services, SBUs can help manage and focus efforts and resources on specific product lines or
services.
• Different target markets or customer segments: When a company serves different target
markets or customer segments, SBUs can help manage and focus efforts and resources on specific
markets or segments.
• Different geographic regions: When a company operates in different geographic regions, SBUs
can help manage and focus efforts and resources on specific regions.
• Different technologies or production processes: When a company uses different technologies or
production processes, SBUs can help manage and focus efforts and resources on specific areas of
the business.
• Poor performance of a specific business unit: When a business unit is underperforming, a SBU
can be created to manage and improve the performance of that unit.
• High growth potential in specific areas: When a company sees high growth potential in specific
areas of its business, SBUs can be created to manage and capitalize on that growth potential.
• To manage risk: When a company wants to manage the risk associated with a particular product,
service, or market, SBUs can be created to manage that risk.
Advantages of strategic business units
There are several advantages to using strategic business units (SBUs) in a company's organizational
structure, including:
• Focus: SBUs allow a company to focus its efforts and resources on specific areas of its business,
which can lead to better performance and growth in those areas.
• Autonomy: SBUs are given autonomy to make decisions and allocate resources in order to
achieve their goals, which can lead to faster and more efficient decision-making.
• Responsiveness: SBUs can be more responsive to market conditions and changes, which can
help the company stay competitive.
• Flexibility: SBUs allow a company to adapt to different markets, products, and services, which
can be beneficial for companies with a diverse portfolio of offerings.
 • Better decision-making: SBUs can make decisions that are tailored to their specific product or
service offering and target market, which can lead to better performance and growth.
• Improved accountability: SBUs provide clear lines of accountability and responsibility, which
can help the company identify and address performance issues more effectively.
• Better alignment with the company's strategy: SBUs can better align with the company's overall
strategy, which can lead to better performance and growth.
• Better coordination: SBUs can coordinate more effectively with other departments within the
company and also with suppliers, distributors, etc.
• Better allocation of resources: SBUs can better allocate resources to the products, services, or
markets that have the most potential for growth.
• Better risk management: SBUs can better manage risks associated with a particular product,
service or market.
Limitations of strategic business units
There are several limitations to using strategic business units (SBUs) in a company's organizational
structure, including:
• Complexity: SBUs can add complexity to a company's organizational structure, which can make
it more difficult to manage and coordinate the company's overall strategy and performance.
• Coordination difficulties: SBUs can create coordination difficulties between different units and
departments within the company, which can lead to inefficiencies and conflicts.
• Increased overhead costs: SBUs can increase overhead costs, as they require additional
resources and management to operate effectively.
• Limited flexibility: SBUs can limit a company's flexibility to respond to changes in the
marketplace, as they are focused on specific products, services, or markets.
• Decreased efficiency: SBUs can lead to decreased efficiency, as they may duplicate efforts and
resources among different units and departments within the company.
• Inability to capitalize on company-wide opportunities: SBUs may not have the resources or
expertise to capitalize on company-wide opportunities, resulting in missed growth opportunities.
• Reduced focus on the big picture: SBUs can lead to reduced focus on the big picture of the
company's overall strategy and performance.
• Risk of silo mentality: SBUs can lead to silo mentality, where each unit is focused on its own
goals and objectives, and not the company's overall goals.
• Risk of over-specialization: SBUs can lead to over-specialization, where a unit becomes too
focused on its own product, service, or market, and loses sight of the bigger picture.
• Risk of lack of inter-unit cooperation: SBUs can lead to a lack of cooperation and coordination
between units, which can result in missed opportunities and inefficiencies.

STAFFING
Meaning
Staffing is that part of management concerned with obtaining, utilizing, and maintaining capable
people to fill all positions in the organization from top-level to bottom level. It involves the scientific
and systematic procurement, allocation, utilization, conservation, and development of human
resources. It is the art of acquiring, developing, and maintaining a satisfactory and satisfied
workforce. Staffing is that function by which a manager builds an organization through the
recruitment, selection, and development of the individual, which also includes a series of activities.
It ensures that the organization has the right number of people and the right kind of people at the right
places, at the right time, and performing the right thing.
Definition
The managerial function of staffing involves manning the organizational structure through the proper
and effective selection, appraisal, and development of personnel to fill roles designed into the
structure.
Koontz and O’ Donell
The placement, growth, development of all those members of the organization whose function is to
get things done through the efforts of other individuals.
Theo Haimann
Staffing is the function by which managers build an organization through the recruitment, selection
and development of individuals as capable employees.
Mc Farland
Features of Staffing
Following are the features of staffing:
 • Staffing is an integral part of management: Staffing is an integral part of
management because an organization cannot exist without human resources.
• Pervasive: It is pervasive because staffing is performed by all managers at all levels
and in every department.
• Continuous Process: Staffing is a continuous process because it continues throughout
the life of the organization. It is required to meet the growing needs of an organization.
• Deals with a human being: Staffing deals with people because it is concerned with the
people at work and their relationships.
• Wide scope: Staffing has a wide scope because it includes a series of activities, like
workforce planning, recruitment, selection, and training.
• Multiple objective activity: It is a multiple objective activity because it has to fulfill
its responsibility towards the organization, employees and society.
Importance of Staffing
Following are the importance of staffing:
• Filling job with competent personnel: Staffing involve with proper arrangement of
people through proper recruitment and selection process. It helps with obtaining
competent staff for various jobs.
• Better performance: The performance of an organization depends on the quality of
persons employed in the organization. The function of staffing is significant because it
ensures higher performance by putting the right person in the right job at the right time.
• Survival and growth: Staffing is a very important function of management in
comparison to other functions because all the functions of an organization are performed
by the people. Competent and efficient workers bring an organization into existence and
ensure its survival and growth.
• Optimum utilization of human resources: The staffing process helps to ensure
optimum use of human resources by avoiding overstaffing. It prevents the
underutilization of personnel and higher labor cost. It also helps in avoiding disruption
of work by indicating in advance the shortage of personnel.
• Improve job satisfaction and morale: Proper staffing improves job satisfaction and
morale of employees through objective assessment and fair rewarding for their
contribution. It provides right kind of work atmosphere and culture to employees.

Staffing Process:
The staffing process helps to select the right person with appropriate skills, qualifications and
experience to recruit them to different positions and jobs in an organisation. Staffing means the process
of filling and keeping various roles in an organisation filled. In management, it means the process of
recruiting the right person at the right place to increase the efficiency of the organisation. An enterprise
with an efficient workforce cannot function properly, so staffing helps an enterprise to acquire a
workforce. It includes taking up different people to perform various functions in different departments.
It is an important process to run an organization or a business. This is the first and major step in human
resource management. Refer to the official website of Vedantu or download the app for an elaborate
and easy explanation.
Steps in Staffing Process
Staffing is a complicated process, and it involves various steps, It starts with workforce planning, and
ends with the proper recruitment of the employees. It also checks the performance of the employees
effectively. For successful staffing in an organisation, a manager has to perform various steps of staffing
that are as follows:
1. Planning the Manpower Requirements: The very first steps of staffing are to evaluate the
manpower requirement of an organisation to match the job and positions available in the
organisation. It also helps in determining the skills and qualifications required for a specific job
in the organisation.
2. Recruitment of Employees: Once the requirement is evaluated, the next step involves the
searching of prospective persons that are eligible for the job and inviting applicants to apply for
the positions. In this process, the employer advertises about the openings in the organisation
through various media, which makes it easy for the applicants to get to know about the job
vacancy and the required skills.
3. Selection of Employees: The selection process helps in screening the employees and
identifying the deserving candidate who will be suitable for a specified job. Therefore, it can
be said that the main objective of selection is to identify the right employee for the right job.
 4. Orientation and Placement: Once the right candidates are selected, the organization makes
the employees familiar with the working units and working environments through various
orientation programs. Then, the placement is done by putting the right candidate at the right
place which helps in the proper functioning of the organisation.
5. Training and Development: Once the placement is done, the next step involves the training
and development of employees. Training is an integral part of the staffing process, and it helps
the employees to develop their skills and knowledge.
6. Remuneration to Employees: It is the compensation given to the employees in monetary terms
in exchange for the work they do for the organization. It is given according to work done by
the employees.
7. Performance Evaluation: It is an assessment done to evaluate the attitude, behavior, and
performance of an employee. These steps of staffing also help in determining the success of the
whole recruitment process. It gives the management a clear picture of the success rate of the
entire recruitment procedure. This step includes elements like appraisal, promotion, and
transfer. The performance of the employee is assessed comparatively to the other employees
and also to his own previous performance. Based on these criteria, the employee gets a hike on
his pay or a promotion. Sometimes, employees are transferred to another location of the same
company and are generally attached with a level up in his position or given certain benefits.
8. Promotion of Employees: Promotion in simple words means the shifting of an employee to a
higher post demanding a more significant responsibility. It not only makes the employee
responsible but also keeps him motivated to do his work efficiently. With the promotion, the
monetary benefits that the employee receives are also increased, which makes him more
efficient to complete the work on time.
9. Transfer of Employees: As promotion is shifting of the employee to a higher post, transfer
refers to the shifting of employees to a different unit or department being in the same position,
This is done to develop new skills and knowledge of the employee.
Benefits of Staffing Process
The benefits of an effective staffing function are as follows-
• Staffing process helps in getting right people for the right job at right time. The function of staffing
helps the management to decide the number of employees needed for the organization and with
what qualifications and experience.
• Staffing process helps to improved organizational productivity. Therefore, through proper selection
of employees in the organization, it can increase the quality of the employees, and through proper
training, the performance level of the employees can also be improved.
• It helps in providing job satisfaction to the employees and thus keeps their morale high. With proper
training and development programmer, the employees get motivation and their efficiency improves
and they feel assured of their career advancements.
• It maintains harmony in the organization. Therefore with an overall performance of proper staffing
in an organization, the individuals are not only recruited and selected and but as a result, their
performance is regularly appraised and promotions made on merit which fosters harmony and peace
in the organization for the accomplishment of overall objectives of an organization.

DIRECTING
Introduction:
The process of instructing, guiding, counselling, motivating, and leading people in an organisation
to achieve the organisational goals is known as Directing.
Directing not only includes order and instructions by a superior to the subordinates but also
includes guiding and inspiring them. It encompassed many elements like motivation, leadership,
supervision, besides communication. It is a managerial function which is performed throughout the
life of an organisation.
Definition of Directing:
“Direction is telling people what to do and seeing that they do it to the best of their ability. It includes
making assignments, corresponding procedures, seeing that mistakes are corrected, providing on-the-
job instructions and of course, issuing orders.”
• Ernest Dale
“Direction is the impersonal aspect of managing by which subordinates are led to understand and
contribute effectively and efficiently to the attainment of enterprise objectives.”
• Koontz and O’Donnell
Technique of Directing
Direction in the organization is to be implemented in a methodical way. Various Techniques are used
that prove good when used as Direction in the organization.
Let us now discuss the various techniques used in the process of Direction:
1. Consultative Direction: Here the superiors in the organization system consults the decisions with
their subordinates or team members, before implementing it or putting it into action.
2. Free-Rein Direction: In this type of Direction, the educated and experienced subordinates take
decisions on their own. Decisions are relied on and they also take the accountability of the decision.
3. Autocratic Direction: Here the superior clearly sets the directions and gives precise orders to the
subordinates to accomplish a predetermined goal. He does not take the suggestions or viewpoints of the
subordinates.
4. Supervision: Supervision is only overseeing the subordinates at work. He gives a clear-cut
instruction about the work. Skills, group togetherness and coordination affect the direction of
supervision.
5. Motivation: In this type, the direction does not only limit till giving orders or instructions, it is rather
a force that creates a burning desire among the subordinates to perform the task. Motivation is the
driving energy that keeps the subordinates interested in the work, this can also be fulfilled by offering
them incentives.

Elements of Directing
Direction includes elements that affect the factor. We will further talk in brief about the elements of
motivation. The elements are discussed as under –
1. Motivation: Motivation is said to be the positive force that compels one to do a set work. It is a way
to initiate action among the subordinates to a defined goal. Motivation is actually the ‘stimulus to
achieve the goal’. Motivation hits the mental process, the attitude that gives rise to physical action which
will result in the accomplishment of a goal.
2. Communication: Communication is the process of passing information from one person to another.
In the directing process, communication is a must in a group. It should be checked mandatorily that
there happens to be effective communication that will help the form at the organizational level. As
communication, will only initiate a direction. To complete the circuit of communication, a single person
cannot fulfill it, he needs his fellow teammates to cooperate.
3. Leadership: Leadership is not about directing or giving orders, it is about the influence. The
characteristics a leader possesses must influence the group positively and hence this element is one of
the chief criteria for direction.
Directing in Management
Any institute, organization or firm needs management. Hence Management is to be issued using a
distinct directional process. To understand Directing in Management, we include the following points
in our discussion –
1. Pervasive Function: Directing is an all-round function. Every level of managers provides the
subordinates with guidance to complete the work.
2. Continuous Activity: Throughout the existence of an organization, direction is automatic.
3. Human Factor: To fulfill the sphere of Direction, human factor is the basic factor required. Humans
are engaged in delivering the instructions as well as in following those delivered instructions.
4. Creative Activity: Direction instills creativity. Direction makes things happen else the organization
will be without any work.
5. Executive Function: Direction initiates the workforce to work towards a defined goal, and thus it is
said to be an executive function.
6. Delegate Function: Direction is a delegative function, while the superiors delegate responsibilities
to their subordinates they fulfill the direction.

Importance of Directing in Management

Like planning, organizing, and controlling, directing is also an important tool for managers. All the
activities in an organization start with directing in order to achieve the common organizational
objective. With directing, managers can instruct and guide their team members on how to perform a
particular task. Read the following points to understand the importance of directing in management:
1. Provides Balance and Stability: Managers have to work with their team members to achieve
organizational objectives. However, sometimes individual goals can cause conflicts among employees
and the management. With direction, managers can acknowledge the efforts of their employees with
rewards and recognition. This way, employees can achieve their individual goals as well as the
organizational objectives.
2. Improves Efficiency: With direction, managers can motivate and encourage employees to work
more efficiently to achieve a common objective. With motivation, people work to the best of their
abilities, which improves the overall efficiency of the team.
3. Improves Communication: Direction encourages effective communication between the employees
and the management. It ensures free flow of communication in the company, which avoids errors and
mistakes that restricts the company from achieving its goals.
4. Creates Flexibility: The direction function allows the organization to cope with the changing
situations through leadership and communication. For example, if there is a change in the use of
technology, the production process will change too. With effective directing, managers will be able to
deal with these changes and improve the efficiency of operations. Sometimes, employees are against
the changes that take place in the company. Managers can talk to them about their issue and help them
adapt to the change.
5. Integrates Employee Efforts: In an organization, the performance of an employee can affect the
performance of the entire organization. Managers assign interrelated work to their employees,
integrating their efforts in order to achieve the main objective. With directing, managers can supervise
and guide employees on what to do and how to do it.
6. Initiates action: The primary aim of direction is to guide employees to work towards achieving the
goals of the company. Also, direction makes all the other functions of management, such as planning
and organizing, more effective. Directing initiates action as managers instruct the employees and
supervise their work.

CONTROLLING
Control is the last phase in the management process.
• Once the plans are formulated,
• The organisation structure designed,
• Competent personnel (staffing) secured,
• Management in action (directing), ie implementing of plans and controlling of performance,
communications begin to flow, efforts co-ordinate, leading and motivating get things done
through others.
• Controlling assures the accomplishment of goals and objectives.
Objectives of controlling:
1. To bring actual operational performance on the right track
2. Locating deviations
3. Analyzing deviations
4. Undertaking remedial action
5. Preventing occurrence of deviations
6. Cost control and profit maximization
7. Helping achieve co-coordinated action
8. Maintaining discipline.

The process of control

-------------------- 1. Objectives

2.Standard
No normal
Corrected deviation
Performance comparison
3.Performance

5.Corrective action -------------------------------------4.Measurement

If necessary

Determination of standards:
Standards

Tangible standards Intangible standards (not measured)

Physical (mhr, color of goods) Employee morale(absence from duty)
Cost (direct& indirect) Consumer satisfaction (after-sales service)
Revenue (average sales per customer) Corporate image(goodwill)
Capital (rate of return) Product leadership (quality of goods)
Programme (improving the cost control)

Characteristics/features/nature of controlling or control:

1. Controlling makes for a bridge:
• Controlling makes for a bridge between the standards of performance and their realistic
attainment.

Standards controlling as a bridge Attainment of standards

2. Planning is the basis of controlling

• The standards of performance (which are starting point of the controlling process) are laid down
in plans.
3. Controlling is pervasive managerial exercise
• All managers, at different levels in the management hierarch, perform this function, in relation
to the work done by subordinates under their inchargeship.
• It could be generalized that delegation is the key to controlling.
4. Control is a continuous process
• It involves continuous review of performance and revision of standards of operations.
• Control is a process of regular measurement, comparison and verification.
5. Action is the essence of control
• An effective control system facilitates timely action to adjust performance to predetermined
standards so that there is minimum wastage of resources.
• Action also includes modification or improvement of existing plans.
6. Controlling is based on information feedback
• On the reports on actual performance done by operators.
• Information or feedback enables the manager to determine how far the actual operations is
proceeding according to plans or standards and where remedial actions are needed.
7. Control aims at future
• Control involves a post-mortem of what has happened and is in that sense looking back. But
the control action seeks to regulate events in future as past is uncontrollable.
• Control is thus both backward-looking and forward-looking.
• Past is the basis for regulating action in future. It is looking at future through the eyes of past.

Steps in controlling or control process

1. Desired 8.implementation 7.corrective action 6.analysis of

Performance of correction plan causes of
Deviations

2. Actual 3.measurement 4. Comparison of 5.identification of

Performance of performance actual and standard deviation

1. Establishment of standards
• The process of controlling commences with the determination of standards of performance,
for all phases of the organizational activity.
• Standards may be stated in physical terms such as units of output, man-hours worked, etc.,
or in monetary terms such as sales, costs, profits, etc.
• Standards may also be of a qualitative nature e.g company image.
 • Time standards: machine hours, man-hours
• Capital standards: current ratio
• Monetary standards: income, sales, profits, costs etc.
• Quantitative standards: units of production, unit of sales
• Intangible standards: morale of employees, competence of managers etc.
Requirements of ideal standards:
i. Standard must be practical
ii. Standards must be scientific
iii. Standards must be simple to understand
iv. Standards must be expressed in numerical terms
v. Standards must concentrated on results
vi. Standards must be flexible
2. Measurement of actual performance
• The results of operation are measured and evaluated in comparison with the standards.
• Ideally, measurement should be such that deviations may be detected in advance of occurrence
and avoided by appropriate action.
• Effective methods of observation, inspection and reporting are required.
• Measurement must be:
i. Clear, simple and rational
ii. Relevant
iii. Direct attention and efforts and
iv. Reliable, self-announcing and understandable without complicated interpretation.
3. Comparison of actual performance against standard and locating deviation
• It involves two steps
i. Finding out the extent of deviations and
ii. Identifying the causes of such deviations
• Management may have information relating to work performance, data, charts, graphs and
written reports, besides personal observation to keep itself informed about performance in
different segments of the organisation.
• When the standards are achieved, no further managerial action is necessary and control process
is complete.
4. Analysis of variances
• Comparison of actual performance with standards will reveal deviations.
• Critical deviations are analyzed to diagnose their cause and their impact on the organization
• Remedial action can be possible only when the causes of the trouble spots have been identified.
Find causes of deviations:
i. External environment factors
ii. Internal environment factors
iii. Organizational defects
iv. Imperfections in planning
v. Staffing defects
vi. Flaws in directing techniques
5. Corrective of deviations
• This is the last steps in the control process which required that actions should be taken to
maintain the desired of control in the system or operation.
• Control action may be
i. Review of plans and goals and change therein on the basis of such
review.
ii. Change in the assignment task
iii. Change in existing techniques of direction and
iv. Change in organisation structure provisions for new facilities.
Types of control: Control

Based on elements Based on stages

Strategic control Operational control

Feedback Feed forward Concurrent

Control Control Control

I. Based on elements:
1. Strategic control
• It is the process of taking into account the changing planning premises, both external and
internal to the organisation on which the strategy is based continuously evaluating the strategy
as it is being implemented, taking corrective action to adjust the strategy to the new
requirements.
• Aim: proactive continuous questioning of the basic direction of the strategy.
• Basic question: are we moving in right direction
• Focus: external environment
• Time horizon: long-term
• Main techniques: environmental scanning, information gathering questioning and review.

2. Operational control
• It is concerned with action or performance and is aimed at evaluating the performance of the
organisation as the whole or its different components- strategic business units, deviations and
departments.
• It can be exercised at different stages of work performance
• Basic question: how are we performing
• Aim: internal environment
• Time horizon: short term
• Main techniques: budgets, schedules and MBO.

II. Based on stages:

Feed forward Concurrent

Control Control

Inputs Processing Outputs

Feedback
-------------------------------------------------------------- Control

Flow of information
---- Corrective action
a) Feed forward (predictive) control
• Control monitors critical inputs and suggests preventive measures in the form of corrective
action
• Correcting inputs – budgets
b) Feedback control
• Feedback monitors or evaluates output variables and suggests remedial or corrective action.
• Correcting inputs – morale of employees, reducing cost etc
c) Concurrent control
• It measures enable us to take timely action before larger damage take place.
• Example: quality control used in production operations enable us to take immediate corrective
action before additional products are produced.
Control areas:
1. Control over polices – formulating policy
2. Control over organisation structure – organisation chart and manuals are used
3. Control over personnel – morale, synergy
4. Control over cost – actual cost > standard cost =unfavorable, vice versa
5. Control over wages and salary – programme of job evaluation
6. Control over method and manpower – individual performance, working time
7. Control over line of product – rationalize the line of products
8. Control over capital expenditure – capital budgeting
9. Control over R &D – technical, monetary, personnel
10. Control over external relation – these are regulated by public relations department
11. Over all control – control over each segment of the organisation.

COMMUNICATION
Concept:
• Communication means sharing ideas in common.
• Communication is the process of passing information and understanding from one person to
another to bring about commonness of interest, purpose and efforts.
• The five basic aspects of communication, i.e., speaking, listening, writing, reading, and
observing are the important for success in communication.
Definition:
• “Communication is the process of passing information and understanding from one person to
another”. - Keith Davis
• “Communication is an exchange of facts, ideas, opinions or emotions by two or more persons”.
–Newman and Summer.

Process of Communication:
1. Sender – the person who wishes to speak out or send or transmit a written message.
2. Message- the subject matter of communication (opinion, order, appeal, suggestions etc.)
3. Encoding –the act of putting the message is suitable words, charts or other symbols of transmission.
4. Transmission -the act of saying, sending or issuing the message.
5. Medium-the medium (channel) used to transmit the message.
6. Receiver-the person for whom the message is sent.
7. Decoding- the act of understanding the message exactly as it has been sent.
8. Feedback (response)-the reaction, reply or response which the receiver of the message sends to the
sender.

Sender message encoding transmission medium

Feedback
Decoding receiver

Types of Communication

On the basis of relations On the basis of flow direction

 Formal informal downward upward sideward

According to expression

Oral written gesture

I. On the basis of relation:

1. Formal communication:
• It follows the course laid down in the organisation structure of the enterprise.
• Members of the enterprise are supposed to communicate with each other strictly as per the
channels laid down in the structure.
• Generally, orders, instructions, decisions of the superior officer, etc. are communicated through this
channel

2.Informal Communication (or grapevine communication)

• This communication has no formal manner of routing.
• It might spread from any person to any person, in any manner and in any direction, like the
structuring of a grapevine.
• Jumping of communication channels takes place because of informal relations between
members of the organisation.
• It may be conveyed by a gesture, nod, smile etc.

A comparison between formal and informal communications

Basis of Formal communications Informal communications

Distinction
1. Speed It is slow. The rate of slowness of this It is very fast. It spreads like an
type of communication depends on epidemic as it might proceed from
the length of the scalar chain. It is not any person to any person, in any
suitable in emergency situations. manner. It is suitable for
transmitting useful information, in
emergency situations.

2. Authenticity It is most authentic, as it takes place It is least authentic as it spreads in a

via the official scalar it chain. grapevine manner. (Rumors)

3. Nature It is impersonal and official. It is a It is personal and unofficial. It

source of tension to individuals in, relieves individual of tension, in
many cases. many cases.
4. Planning It is preplanned. It helps people It is wholly unplanned. It is
understand their jobs and is the basis contingent in nature.
of smooth. “no communication; no
functioning of organisation.
5. Feedback Feedback to communication may or Immediate feedback is there. People
may not be there. In fact, people at can freely express their opinions
lower levels might not be able to about informal communication,
without fear or favour.
 express themselves freely on many It is wholly uncontrollable. Not
6. Control organizational issues. possible to modify as the source of
It is controllable by management. It communication may not be known
could be subject to modification, at all.
subsequently.
7. Distortion There are distortions in informal
Distortions in communications are not communication according to the
possible, especially when it is in whims and prejudices of
writing. individuals.
8. Record- It is mostly oral. No records of it
keeping It is mostly written. Records of could be kept.
communication could be easily kept,
for future reference. It is not easily traceable.
9. Fixation of As the source of communication is Responsibility for communication
responsibility known responsibility for could not be fixed on any individual.
communication could be easily fixed
on individual. Question of resistance to this type
10. Resistance It being official, usually meets with communication does not arise, as it
resistance, on the part of employees. is social and personal in nature.
Confidential information could not
11. Secrecy of Confidential information does not be confidential like an epidemic.
confidential leak. It could be kept restricted.
matters
It is quite flexible and depends on
12. Rigidity or It is based on the plans, rules and personal likes and dislikes. (ever
flexibility policies of the organisation, which are changing)
quite fixed. It supports the formal
13.Mutual It does not support informal communication.
support. communication

III. According to Expression

1. Oral communications or verbal communication:

• It is a way of transmitting messages etc. through words spoken by the sender of communication
to the recipient of it.
• Communication is made direct face to face or through telephone or intercom system.
• Modes:
o Communicating through a face-to-face contact (sender-recipient)
o Communicating through mechanical devices (speaker, telephone, intercom)
o Sending oral messages through –peons, agents, servants
o Speaking to people through delivering lectures.
o An exchange of views at meeting, conferences, etc.
o Holding group discussions.
2. Written communication
• It is way of transmitting messages etc. through words reproduced in writing by the sender of
communication for the information of the recipient of it.
• It includes statements, circulars, letters, reports, memos, manuals etc.
• Modes:
o Sending letters by the sender to the recipient
o Communicating through publications in house journal, magazines, bulletins et.
o Communicating messages, news, etc. through notices displayed on notice boards.
3. Gesture communication
• Communication through gestures is often used as a means to make the verbal or written
communications more effective.
• One has only attend a meeting addressed by a trade union leader to see how he used the different
gestures – wave of hand pouting of lips, movement of eyes---to make his point.
• Gestures can be used to express one’s feelings, ideas or sentiments.
• For a subordinate in an enterprise, a handshake with the boss is enough to turn his head for
days, if not month.
III. On the basis of Direction
1.downward communication
• It moves downwards in an organisaiton, from the top management to middle and lower level
managements traveling via various links in the scalar chain.
• The communication flows from the superiors to the subordinates.
• Essentially, the purpose here is to communicate the policies, procedures, programmes, orders,
instructions, etc. to subordinates.
• Issuance of orders and instructions is the heart of downward communication i..e following
suggestions:-
-It must be complete, in all respect
-It must be issued in clear language
-It must be timely
-It must be rational
-It must be capable of implementation
-It must preferably be in writing.
-It must be brief and to the point.

-Orders
-----Top -Instruction
-Policies
-Procedures
-Programmes.

----Lower

2. Upward communication
• it proceeds upwards in an organisation from the lower level management to middle and upper
levels management, traveling via various links, in the scalar chains.
• This type of formal communication is really a feedback to downward communication.
• It includes reports, suggestions, reactions of workers, proposals, inquiries, complaints,
grievances, etc.
• Following forms:-
-Reports by subordinates, to superiors on work place.
-Grievances, problems or difficulties of subordinates forwarded to superiors, at
appropriate levels.
-Suggestions and ideas of subordinates to upper management, for kind considerations
and appropriate implementation.
-Clarifications sought by subordinates form superiors as to the orders and instructions
issued by the latter i.e superiors.

-Suggestions
-----Top -Grievances
-Reports
-Proposals
-Complaints
-Ideas.

----Lower

3. Sideward (horizontal) communication

• It takes place among managers, placed at the same rank, in the organisation.
• It is necessary for achieving co-ordination of actions of individuals, doing the similar type of
work, under managers of equal ranks.
• For example, a communication between two assistant production managers is an instance of
horizontal communication.
 • It used to improve. Understanding, coordinate efforts for achieving organisation objectives.
• It related to – task coordination/ understanding, problem solution/conflict resolution,
information sharing.

Supervisor

Upward communication downward communication

Subordinate Subordinate
Vertical communication

BARRIERS OF COMMUNICATION AND MEASURES TO OVERCOME THEM:

(R) Means Remedies
I. Organizational barriers:
1. Lengthy scalar chain:
• When the scalar chain, which is the basic route of travelling for all formal communications, is
too lengthy.
• (R) Cut short the scalar chain, in emergency situations.
• (R) Make use of and authorize the building of ‘gang planks’, as suggested by Henry Fayol.
2. Vaguely clarified authority-responsibility relationships
• When authority relationships among superiors and subordinates are not clearly defined;
superiors and subordinates, both might find confused as to whom to contact and convey their
problems, suggestion, etc.
• (R) Management must design a compact and well-defined organizational structure by means of
an organizational chart displayed at various organizational points.

3. Too wide a span of management

• Where, in an organisation, span of management is too wide the superior might not be able to
effectively communicate, with an unduly large number of subordinates.
• (R) The span of management must be reduced to the optimum level by the top management.
4. One-way communication system.
• The communication system is only a one-way track i.e only from the top management to
downwards at lower levels. (Lack of feedback)
• (R) Design and maintain a two-way communication network so as to allow upward
communication.
5. Irrelevant and out of context communication.
• The situation accounting for irrelevant and out of context communication, usually emerges
when organizational objectives are not clearly defined and organizational policies are
imperfect.
• (R) Organizational policies must be perfected by concerned higher authority so as not to let
subordinates exercise unnecessary discretion, while implementing those policies.
6. Lack of adequate communication facilities
• Adequate communication facilities like-telephone, intercom, peons, messengers, Photostat or
typing facilities –are not available.
• As a result, communication delays or bottlenecks arise, impairing with a free-flow of
communication.
• (R) Management must see to it that requisite facilities for communication are provided to needy
personnel in the organisation.
II. Linguistic Barriers
• i.e relating to language of communication,
1. Poor or harsh language
• When the communication –whether oral or written –is expressed in a poor or harsh language
the sentiments of the recipient are emotionally affected and resistance (or reaction) to such
communication is invited on his part.
 • (R) The sender must use polite and dignified language so as to touch the sentiments of the
recipient.
2. Vague language
• When language used in drafting a communication is vague (i.e the same word meaning
differently to different individuals)
• (R) Use of technical language must be avoided, as far as possible. The technical terms must be
explained or translated into the laymen’s language.
3. Faulty or misleading (Distortion)
• Sometimes managers, especially at middle levels, receive communications from the upper
levels which have to translated by them into some other simpler language for use of
subordinates and operators.
• Managers-poor translation art-might distort the original communication.
• (R) Only such managers as an adept in transaction work must be permitted to translate messages
into required languages.

Manager as a communication filter

III. Barriers on the part of the sender of communication

1. Badly expressed messages
• Poor organisation of ideas
• Lack of co-ordination
• Inadequate vocabulary
• Repetition
• Awkward sentences
• Careless omissions etc.
• (R) The sender must be an adept at drafting. The drafted message must look like an integrated
and compact piece to communication.
2.Distrust of the communication
• Many superiors, sending communications are distrusted by subordinates because the former
might be alleged for countermanding (i.e canceling) or modifying an original communication,
according to their own whims and prejudices.
• In such situations, even the genuine and honest communications, by such superiors are not
taken serious note of by subordinates who might throw such communications, in the ‘waste-
paper basket’.
• (R) Superiors gradually try to build their image of trust and confidence in the minds of
subordinates.
3. Superiority complex
• Many superiors suffer from superiority complex and would not like to talk to subordinates or
otherwise communicate with them.
• In such situations, not only does the work of the organisation suffer but also the subordinates
feel frustrated and degraded.
• (R) The superiors must give up their superiority complex as a sign of psychological health and
communicate with subordinates freely and in a friendly manner.
4. Egoistic communications
• Some superiors make egoistic communications to subordinates just to satisfy their false ego
and impress subordinates with their power, status and authority, in doing so.
• Such communications merely waste the time of both – the sender and the recipients and it makes
no meaningful.
• (R) Superiors must desist themselves from making egoistic communications bearing in mind
the old adage the ‘pride hath (has) a fall’.
5. Failure to communicate
 • ‘Communication-gap’ sometimes, superiors fail to communicate, even important messages or
news with subordinates either because of information overload’ or assuming that people already
know that which they intended to communicate to them.
• (R) Despite ‘information overload’, they must spare time for making relevant and required
communications.
6. Fear of challenge to authority
• Some superiors might be reluctant (or hesitant) to make even important communications to
subordinates fearing that any feedback or reaction to their communication might challenge their
authority.
• (R) They must gradually acquire ‘self-confidence’ and make better communications, in future.
7. Untimely communications
• Sometimes, communications by superiors may be untimely much in advance of time required
for their making them or making communications, just in the nick of time.
• (R) Superiors must only make timely communications neither before time nor unduly delayed.
IV. Barriers on the part of the recipient of communication
1.No attention
• So many recipients of communications pay no attention to it either because of tension created
by personal and family problems, or because of being overburdened with other emergency
issues.
• (R) Communication must be made short, simple and attractive to gain the immediate attentions
of the recipient.
2. Premature evaluation
• Many recipients, especially subordinates, go in for a pre-mature evaluation of the
communication even before the communication is fully communicated to them.
• (R) They must wait for the sender to complete the communication. This only requires patience
on the part of the recipients.
3. Individual perception
• Many recipients have their own perceptions and interpret messages in their own way of thinking
and to their own advantages. (Frustration)
• (R) Recipients must have a broad outlook and appreciate the viewpoint of the sender in making
the communication.
4. Fear of superiors
• Some recipients, especially subordinates, give a wrong or misleading feedback to
communication owing to fear of superiors or out of their sheer inferiority complex.
• (R) Subordinates must impart a free and impartial feedback to communicate.

V. Miscellaneous barriers to communication

1. Mechanical barriers
• In some cases, mechanical appliances, used in the communication process, might suffer from
mechanical defects leading to e.g distortion of messages owning to technical faults in telephone
lines or sudden disconnection to telephone link rendering communication incomplete etc.
• (R) For mechanical devices used in communication process, the management must care for
their maintenance and due repairs. It should be kept up-to-date.
2. Loss of transmission and poor retention
• There is usually a loss of contents of the message when it is in a course of transmission via
various links in the scalar chain especially when the communication is made verbally.
• (R) Emphasis of the sender must be on making written communication repeated reasonably
frequently to overcome these barriers.
3. Insuffiecinet period allowed
• It relates to
• Change of work i.e nature or type of work
• Change of place
• Change of shift
• Changeover to new methods of operation etc.
• (R) Management i.e sender of communication must provide for (or allow for) necessary
adjustment period to people to realize the intentions involved in making such communications.
DECISION-MAKING
INTRODUCTION:
• Decision-making is an integrated part of the human life
• The manager is a decision maker.
• He decide what specific actions
• selecting the best alternative course of action
DEFINITION:
1.“Decision-making is the selecting of an alternative, from two or more alternatives, to determine
an opinion or a course of action”. – Beorge R.Terry.
2.“Whatever a manager does, he does through making decisions”. -Peter F. Drucker.
FEATURES OF DECISION-MAKING:
1. Decision-making is goal-oriented
2. Decision is the choice of the best course among alternatives.
3. Decision-making is a mental process (thoughtful considerations).
4. Decision is aimed at achieving the objectives of the organization
5. It involves the evaluation of the available alternatives.
6. It may also be negative and may just be a decision not to decide.
7. Decision relates the means to the end.
8. Decision-making involves a certain commitment.
A MAJOR CLASSIFICATION OF THE TYPES OF DECISIONS:
1.Personal and Organization decisions:
• Personal decisions are those which are taken by managers concerning their personal life
matters.
• Organizational decisions are those which are taken by managers, in the context of organization
and for furthering the objectives of the organization.
2. Casual and routine decisions:
• Casual decisions only on some special issues concerning organizational life. E.g. a decision to
install a new piece of machinery.
• Routine decisions day-to-day operation of the organization. E.g. sending samples of a product
to the Govt. investigation center
3. Strategic and tactical decisions:
• Decision relating to designing of strategies are strategic decisions. Eg. Major capital
expenditure decision.
• For implementation purposes, strategies are translated into operational plans or tactical
decisions. Such tactical decisions are taken at middle and lower levels of management.
4. Policy and operative decision:
• A policy decision is a decision - guidance and instruction
• Policies are decided by superiors towards subordinates.
• Decisions of subordinates taken within the prescribed limits are called operative decisions.
5.Programmed and non-programmed decisions:
• Programmed decisions are normally of repetitive nature
• taken by lower level managers
• Non-programmed decisions are of non-repetitive.
• new branch, introducing a new product in the market etc.
5. Major and Minor decisions:
• Major decision: if it relates to the purchase of a big machine worth, say a lakh of rupees, it is a,
major decision.
• Minor decision: purchase of fountain pen ink a few reams are minor matters and may be decided
by the Office Superintendent.
6. Individual and collective decisions:
• An individual (not personal) decision is taken by a manager is his individual capacity, without
being consultation with any other person. (Autocratic)
• Collective decisions are those which are jointly taken by a group of managers forum.
(Democratic)

PROCESS OF DECISION MAKING:

I. Background steps:
1. Definition of the decision making problem:
• define the problem, before he takes any decision.
 • take care of many factors in defining the problem.
• Sufficient time should be spent on defining the problem.
2. Collection of data:
• A decision as good as the adequacy and quality of data are on which it is based.
• Accordingly management should proceed to collect necessary data for decision-making
purposes.
• Service of MIS in this regard may prove to be highly useful and valuable.
II. Technical Steps:
3. Development of alternatives:
• This step usually guided by SWOT analysis. Accordingly, management must develop those
alternative; which-
➢ Capitalize on the strengths of the company
➢ Overcome its weaknesses/limitation
➢ Lead to best exploitation of environment opportunities.
➢ Manage threats successfully.
4. Evaluation of alternatives:
• After development of alternative is critically evaluated in terms of its merits and limitations- to
get at the ‘net worth’ of each alternative.
The following criteria for evaluation-
• -Risk and resource implication associated with each alternative.
• -Cost-benefit analysis for each alternative.
i. Quantitative and qualitative factors:
• Quantitative factors: these are factors that can be measured in numerical terms, such as time
or various fixed and operating costs. (Tangible)
• Qualitative factors: factors are those that are difficult to measure numerically, such as the
quality of labour relations, the risk of technological change, or the international political
climate.
ii. Marginal Analysis:
• Evaluating alternatives may involve utilizing the techniques of marginal analysis to compare
additional revenues arising from additional costs.
• If the additional revenues of a larger quantity are greater than its additional costs, more profits
can be made by producing more.
• Marginal analysis can be used in comparing factors other than costs and revenues.
iii. Cost effectiveness analysis:
• An improvement on, or variation of, traditional marginal analysis is cost effectives, or cost
benefit, analysis.
• It seeks the best ratio of benefits and costs, this means, for example, finding the least costly
way of reaching an objective or getting the greatest value for given expenditure.
5. Selection of the best alternative:
• In making a selection of the best alternative, management may base its decision on any of the
following two bases:
- Experience (experience managers take better decision)
- Experimentation. (A sample of decision may be put to implementation on a trial basis)
III. Practical Steps:
6. Implementation of the decision:
• A decision remains only a ‘paper-decision’; unless and until it is put into practice.
• The following managerial aspects, to be taken care of:
- Communication of decision to those who are to implement it
- Making all resources and facilities available to the operators of the decisions
- Motivating people to implement the decision with enthusiasm.
- Exercising general supervision over the implementation of the decision.
7. Follow-up or feedback action:
• The implementation of decision leaves certain information for the decision-making process.
• The result of decision-execution can imply two sets of information.
i. That the decision-making process was right and should be continued.
ii. that the decision-making was wrong and or should be enriched with new
ways and techniques.

Objective
 X
Problem Fact finding Alternative Y Evaluation of
Z alternatives

Test Selection of best

Alternatives

Implementation
Feed back action

Decision-making process

Decision Making Tools and Techniques

1. SWOT Analysis
SWOT analysis is a strategy for determining a company’s or project’s strengths, weaknesses,
opportunities, and threats. In businesses, it is a common tool for making wise decisions. One might
perform a SWOT analysis by creating a decision analysis matrix to visually arrange the information
and honestly assess the facts. Check out the following highlights:
Opportunities:
• Identify the opportunities that the decision or project presents.
• Determine how to capitalise on the opportunities.
• Use the opportunities to enhance the outcome.
Strengths:
• Identify the decision’s or project’s strengths.
• Ascertain the benefits the choice has over alternative courses of action.
• Take advantage of the strengths to maximise the result.
Weaknesses:
• Reduce the bad effects by mitigating the flaws.
• Determine the decision’s or project’s shortcomings.
• Identify any drawbacks the choice has in comparison to other possibilities.
Threats:
• Identify the threats that the decision or project faces.
• Determine how to mitigate the threats.
• Use the threats to prepare for potential challenges.
2. Cost Benefit Analysis
Cost-benefit analysis is a process used to measure the benefits of a decision or taking action minus
the costs associated with taking that action. It is a versatile method that can be applied to virtually
any decision-making process, whether business-related or otherwise. The following are the steps
involved in conducting a cost-benefit analysis.
• Identify the decision or project to be analysed.
• List all the costs associated with the decision or project.
• List all the benefits associated with the decision or project.
• Assign a dollar value to each cost and benefit.
• Tally the total value of benefits and costs and compare them.
• Evaluate the results and make an informed, final recommendation.
3. Decision Trees
A decision tree is a visual tool for outlining the expenses, ramifications, and possible outcomes of a
complicated choice. Here are some key points of the importance of decision trees in the decision
making matrix:
• A decision tree’s base node, branches, internal nodes, and child nodes comprise its hierarchical
tree structure.
• They are especially useful for deriving conclusions from quantifiable data and making data-
driven decisions.
• Decision trees may be ineffective when used alone, but when coupled with other models, they
can produce effective tagging or boosting models.
• They are utilised in machine learning for both categorisation and regression problems.
 • Decision trees, which depict various actions and their possible results, assist in visualising the
decision-making process.
In a decision tree, a decision analysis matrix is often used with decision and chance nodes.
A decision making matrix can be used to evaluate options based on multiple criteria, and the results
can be used to create a decision tree that shows the potential outcomes of each option based on those
criteria.
4. Pareto Analysis
Pareto analysis is a decision-making technique that helps assess and prioritise different problems or
tasks by comparing the benefit of solving each one. It is based on the Pareto Principle, also known
as the 80/20 Rule, which states that 80% of problems may result from as little as 20% of causes.
Here are some key points to understand about Pareto analysis:
• Pareto analysis statistically distinguishes a small number of input variables with the greatest
influence on the output.
• It is a tool for comparing and strategically resolving challenges.
• The Pareto principle is used to discover the most critical factors affecting the firm’s success.
• The analytical technique starts with the most common business process issues and progresses
to the ones that occur the least frequently.
• The Pareto analysis aids in the prioritisation of issues or activities by concentrating on those
that will bring the most benefit.
5. Mind Mapping
The mind mapping method may be applied to decision-making to arrange concepts and data
graphically. It offers a technique to record and arrange ideas, and by dissecting things into their
constituent elements, it aids in user comprehension. Some key points are:
• Mind maps focus on one central idea based on tree structures and radial hierarchies.
• The central idea or concept is placed in the centre of the diagram, and then related ideas are
branched out from it.
• Mind maps can be used to develop new ideas or to break down and better understand existing
information.
• It can help to identify all the possible options and outcomes related to a decision.
Thus, mind mapping is a powerful tool that can improve decision-making by visually representing
ideas and information.
5. Fishbone Diagram
A fishbone diagram, also called an Ishikawa or cause-and-effect diagram, is a visual strategy utilised
in decision-making to identify the potential source of an issue or an effect. Follow these key points:
• The diagram has a fish-like structure, therefore called a fishbone diagram.s like a fish skeleton,
with the effect or problem at the head of the fish and the potential causes branching off like
bones.
• The diagram is typically created by a team of people who brainstorm the possible causes of the
problem or effect.
• The main categories of causes are typically listed on the diagram, such as people, processes,
equipment, materials, and environment.
6. Six Thinking Hats
Six Thinking Hats is a decision-making technique that helps individuals and groups to think more
effectively and thoroughly about a problem or decision. The technique involves wearing different
“hats” or perspectives to approach the problem from different angles. Here are the six hats and their
corresponding perspectives:
• Blue Hat: This hat represents control and organisation. Individuals focus on the big picture,
the process, and the overall direction of the discussion or decision-making process.
• White Hat: This hat represents facts and information. One can focus on data, statistics, and
objective information about the problem or decision.
• Black Hat: It represents critical thinking and caution. One can focus on potential risks,
drawbacks, and negative consequences of the problem or decision.
• Green Hat: This hat represents creativity and innovation. Individuals focus on generating new
ideas, solutions, and alternatives to the problem or decision.
• Yellow Hat: This hat represents optimism and positivity. One can focus on potential benefits,
opportunities, and positive outcomes of the problem or decision.
• Red Hat: This hat represents emotions and feelings. Individuals focus on intuition, gut feelings,
and emotional responses to problems or decisions.
7. Force Field Analysis
Force Field Analysis is a decision-making technique that helps identify the driving and resisting
forces that affect a particular situation. It is commonly used in change management initiatives in
companies. Some key highlights are:
• Situations are maintained by an equilibrium between driving forces that promote change and
resisting forces that hinder change.
• To achieve change, the driving forces must be strengthened, or the resisting forces weakened.
• The technique involves creating a force field diagram visually representing the driving and
resisting forces.
• Force Field Analysis reduces opposition and resistance to change and improves the quality of
decisions.
8. Delphi Method
The Delphi method is a decision-making process that involves a panel of experts. Here are some key
points:
• The goal is to reach a group consensus.
• The process involves several rounds of questions.
• Experts fill out questionnaires and provide their opinions.
• The gathered information is summarised in a report.
• Experts can examine other answers and change their minds.
• The method is often used for forecasting.
9. Decision Support Systems
• DSS systematises organisational data, analyses it, and presents it for use in company decision-
making.
• It is a computer program application that improves a company’s decision-making capabilities.
• SSs can have various functions and focuses depending on the industries and the professionals
employing them.
• Most DSSs comprise three key components: databases, models, and user interfaces.
10. Scenario Planning
Scenario planning is a strategic decision-making tool that helps organisations prepare for the future
by considering various possible outcomes. Here are some key points:
• Thai strategy varies from forecasting as it considers analysis run on trends and quality-based
data, besides running in-depth analysis on quantitative data and past performance.
• The process begins by analysing a project’s current status, future estimations, and potential
influencing factors to develop a set of plausible scenarios likely to occur.
• Scenario planning presents several alternative future developments rather than trying to show
one exact picture of the future.
• By visualising potential risks and opportunities, businesses can become proactive versus simply
reacting to events.
11. Cost of Quality
Cost of quality (COQ) is a methodology enabling companies to evaluate the extent to which their
resources are utilised for activities to avoid poor quality and enhance the quality of their products or
services. In decision-making, COQ can be used to evaluate the costs and benefits of different quality
control measures. Here are some key points to keep in mind:
• COQ includes both the cost of preventing defects and the cost of correcting them.
• The goal of COQ is to minimise the total cost of quality, not just the cost of defects.
• COQ can be used to identify areas where quality control measures can be improved.
• COQ can help decision-makers evaluate the trade-offs between different quality control
measures.
• COQ can be used to justify investments in quality control measures by demonstrating their
financial benefits.
12. Monte Carlo Simulation
Monte Carlo Simulation is a mathematical strategy leveraged to predict the potential outcome of an
uncertain scenario. It is a computer-operated technique in which a physical process is not simulated
once but many times.
Three basic phases are :
• Determine the issue’s parameters and the relevant inputs.
• Define each input variable’s probability distribution.
• Run the simulation and then examine the results.
13. Nominal Group Technique
The Nominal Group Technique (NGT) is a well-structured technique of team brainstorming that
motivates contributions from all the people involved and facilitates quick agreement on the relative
importance of issues, problems, or solutions. Here are the steps involved in the NGT:
• Team members begin by writing down their ideas on a specific problem or issue.
• Each member shares their ideas individually, and the group discusses them.
• The group then ranks the ideas based on their importance or relevance to the problem.
• The group discusses the top-ranked ideas and decides on the best solution or course of action.
• Finally, the group evaluates the decision and determines if any modifications are necessary.
14. Game Theory
Game theory is a mathematical framework for analysing decision-making involving multiple parties.
Here are some key points to help define game theory in decision-making:
• It can help decision-makers understand the incentives and motivations of other players and how
they might respond to different choices.
• Game theory can be used to identify optimal strategies for different players and to predict the
likely outcomes of different scenarios.
• It can also be used to study the effects of different rules or regulations on strategic behaviour
and to design mechanisms that encourage cooperation or discourage conflict.
• Game theory is widely used in economics, political science, psychology, and other fields to
study decision-making and strategic behaviour.