TyroCity: Business Studies XII

Meaning and Importance of Decision Making

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Meaning of decision-making
Decision-making is a process of selecting the best among the different alternatives. It is the act of making a choice. There are so many alternatives found in the organization and departments. Decision-making is defined as the selection of choice of one best alternative. Before making decisions all alternatives should be evaluated from which advantages and disadvantages are known. It helps to make the best decisions. It is also one of the important functions of management. Without other management functions such as planning, Organizing, directing, controlling, staffing can’t be conducted because in this managerial function decision is very important. According to Stephen P. Robbins, “decision-making is defines as the selection of a preferred course of action from two or more alternatives.”

Importance of decision-making
1. Implementation of managerial function: Without decision-making different managerial function such as planning, organizing, directing, controlling, staffing can’t be conducted. In other words, when an employee does, s/he does the work through decision-making function. Therefore, we can say that decision is important element to implement the managerial function.

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

3. Evaluation of managerial performance: Decisions can evaluate managerial performance. When decision is correct it is understood that the manager is qualified, able and efficient. When the decision is wrong, it is understood that the manager is disqualified. So decision-making evaluate the managerial performance.

4. Helpful in planning and policies: Any policy or plan is established through decision making. Without decision making, no plans and policies are performed. In the process of making plans, appropriate decisions must be made from so many alternatives. Therefore, decision making is an important process which is helpful in planning.

5. Selecting the best alternatives: Decision making is the process of selecting the best alternatives. It is necessary in every organization because there are many alternatives. So decision makers evaluate various advantages and disadvantages of every alternative and select the best alternative.

6. Successful; operation of business: Every individual, departments and organization make the decisions. In this competitive world; organization can exist when the correct and appropriate decisions are made. Therefore, correct decisions help in successful operation of business.

Maslow’s need hierarchy theory

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

All human behavior is directed towards fulfilling their needs. Abhram Maslow’s needs hierarchy theory is based upon the needs of human beings. According to this theory, each and every people have certain needs. In response to that need, s/he is motivated to do work. Human needs have hierarchy. That’s why to motivate any people to work. The need of that person should be fulfilled according to hierarchy because as one need of that person is satisfied, another need will be created respectively. The needs have been classified in a hierarchy as follows:

Physiological needs: These needs are fundamental or basic need of human being such as food, water, clothes, shelter etc. Without these needs human being cannot survive. Therefore, these needs are necessary to operate the human life. In organization, the manager can provide the adequate lighting, comfortable temperatures and ventilation etc to motivate the employees at first. These are the lowest order needs and assume top priority
Safety/ security needs: An individual wants to be free from the fear of losing job, food, shelter etc which is known as safety or security needs. It is second important need because after fulfilling physiological need people want the safety and security needs. These needs may be job security, old age provision, pension plans, insurance, security from risk etc
Social needs: It is the third hierarchy of needs which comes after fulfilling safety or security needs. Man is social in nature. Therefore, human beings always want to live in society or group which loves him/her the most. These needs include love, affection, friendship, social acceptance etc. So a manager can initiate participation of the employees as part of association to motivate the people.
Esteem/ego needs: After fulfilling the social needs of people, they now want esteem needs by which they can have some special and unique place or status for him/her. They want to be prestigious and respected which is known as esteem or ego need. It is the second last need of Maslow’s need hierarchy theory. This need includes self-confident, self-respect, prestige, power, status, job title etc. So s/he wants to be strong and want to have immense power from which s/he can get self-satisfaction. A manager can provide the attractive job position to employees to fulfill esteem or ego needs.
Self-actualization needs: Maslow said that self actualization is the last and highest need in his hierarchy. After all needs are fulfilled especially including esteem/ego needs they now want or desire to help others. It is maximization of one’s potential. In this need people want to be satisfied in their desire. It includes challenging jobs, creativity, risk bearing capacity etc.

Factors affecting decentralization

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Factors affecting decentralization of authority

1. Size – size of the organization, terms of sales number, plans, number of employees affects the decentralization of authority. It is observes that the speed and adequacy of decision making, flexibility and efficiency are enhanced through decentralization of authority in case of very large multi product, diverse and complex organization. Therefore in larger size of organization, there will be more dispersion of authority

2. History and age– the size of organization, the degree of decentralization depends upon history and ages of organization. If it is organized by an individual then in such kind of organization, there will be centralization of authority. But in case of business activities when there is merging being done there is decentralization of authority. In any organization, relatively high degree of centralized authority may be needed when new values and viewpoint are establishes by the executives

3. Philosophy of top management– decentralization of authority depends upon philosophy of top management. it is seen that in the owners managed enterprise there is delegation of authority but in professionally managed enterprise decentralization of authority is seen.

4. Competent personnel– competent personnel affect decentralization of authority. more personnel at lower level more policy of decentralization of authority,

5. Strategy and organization environment– strategy and organization environment influences market, technological environment, competition. It is the basis of determining decentralization of authority and centralization of authority.

6. Nature and management function– the degree of decentralization of authority is influenced by nature and management functions. Generally functions like production and sales are more decentralized and finance, personnel, research and development are highly centralized.

7. Control techniques– decentralization of authority is more when control technique is good. When control system is reliable, there is better and higher decentralization of authority to the lower level.

8. Dispersion of organizational plans– decentralization of authority also depends upon dispersion of organizational plans of the organization. Organization has officer of different types located at different places. That’s why decentralization of authority becomes necessary.

Process of motivation

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

1. Unsatisfied needs and motives: it is the first process of motivation. This stage involves unsatisfied needs and motives. Such unsatisfied needs can be activated by internal stimulus such as hunger and thirst. They can also be activated by external stimulus such as advertisement and window display

2. Tension: this stage involves tension. Unsatisfied needs create tension in the individual. Such tension can be physical, psychological, and sociological. In this situation, people try to develop objects that will satisfy their needs.

3. Action to satisfy needs and motives: this stage involves action of people to satisfy needs and motives. Such tension creates strong internal stimulus that calls for action. Individual engages in action to satisfy needs and motives for tension reduction. For this purpose, alternatives are searches and choice is made, the action can be hard work for earning more money

4. Goal accomplishment: this stage involves goal accomplishment. Action to satisfy needs and motives accomplishes goals. It can be achieved through reward and punishment. When actions are carried out as per the tensions, then people are rewarded others are punished. Ultimately goals are accomplished.

5. Feedback: this is the last stage for motivation. Feedback provides information for revision or improvement or modification of needs as needed. Depending on how well the goal is accomplished their needs and motives are modified. Drastic changes in environment necessitate the revision and modification of needs

Techniques of motivation

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

1. Financial incentives: First techniques of motivation are financial incentives as money is indicator of success. Therefore, it fulfills psychological safety and status need as people satisfy their needs by money. Wages, salary motivates employees to perform better.

2. Job enlargement: Under this technique, task assigned to do job are increased by adding simile task. So the scope of job enlargement is high for the motivation of subordinates. It is also known as horizontally leading of job.

3. Job enrichment: Under this technique jobs are made challenging and meaningful by increasing responsibility and growth opportunities. In such technique of motivation, planning and control responsibility are added to the job usually with less supervision and more self evaluation. It is also called vertical leading.

4. Job rotation: it refers to shifting an employee from one job to another. Such job rotation doesn’t mean hanging of their job but only the employees are rotated. By this it helps to develop the competency in several jobs which helps in development of employees.

5. Participation: Participation refers to involvement of employee in planning and decision-making .it helps the employees feel that they are an asset of the organization which helps in developing ideas to solve the problems.

6. Delegation of authority: Delegation of authority is concerned with the granting of authority to the subordinates which helps in developing a feeling of dedication to work in an organization because it provides the employees high morale to perform any task.

7. Quality of work life: It is the relationship between employees’ and the total working environment of organization. It integrates employee needs and well-being with improves productivity, higher job satisfaction and great employee involvement. It ensures higher level of satisfaction.

8. Management by Objectives: It is used as a motivation and technique for self-control of performance. By this technique supervisor and subordinates set individual and organizational goals. Each individual’s responsibilities are clearly defined which would help identify the skill sets one has to make the best use of the same to meet organizational mission and vision. This also helps the organization function effectively.

9. Behavior modification: The last technique of motivation is behavior modification. It develops positive motivation to the workers to do the work in desired behavior in order to modify behavior.

Functions of managerial leader

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Leader is true representative of the organization who represents the organization to those working for it as well as to the outside world. A leader functions as a chain between management and staff. S/he represents management before the workers and work before the management
A leader must establish organizational goals. It is the primary function of the leader. S/he also should participate with superior to get it done
When the skill and knowledge of the subordinates are not used properly a managerial leader must provide the guideline and effective path as motivational factor to them
A leader must act like a captain to the team, must win the confidence of most of the colleagues and encourage team work.
The leader must design proper system of communication and communicate authority and responsibility to its subordinates so that they can know about their work
A managerial leader must understand problems and feelings of the subordinates and try to solve them tactfully
A leader must maintain good relationship with subordinates and other people
A good managerial leader must facilitate change in the organization whenever and wherever necessary.
A leader has the responsibility to control, supervise and see different departments to achieve organizational goals
A leader should be able to evaluate the performance of subordinates. There must be provision of both reward and punishment.

Importance of direction

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

1. Integrative force: direction integrates the activities of employees. It is mainly concentrated about what, when, where and who to do the work. Without integration none of the activities can be fulfilled. Effective operation can be achieved only when the efforts of all employees are integrated.

2. Initiate the action: in direction, a manager motivates the subordinates to perform the activities. When an employee receives the direction, his or her initiative will be started to do work.

3. Improves efficiency: direction consists of motivation, leadership and communication. When all these managerial tools are implemented the potentiality of employees is fully utilized from which they perform high performance.

4. Facilitates change: change always comes in an organization. Healthy change is important. Some people do not want the condition of change. But change is inevitable. Direction is an important function of management that gives the orders and motivates the personnel for change.

5. Helps in stability and growth: direction is an integrated activity of motivation, leadership and communication. These activities help in stability of the organization. When these activities are used, the capabilities are utilized which helps in flexibility and growth of the organization.

6. Helps to achieve the organizational goals: the manager gives the direction to do work and it gives knowledge, information and goals of the organization. When all people know about the goals it helps on achieving the organizational goals effectively.

7. Means of motivation: when direction is effective and meaningful, the employees are properly motivated. Direction works for motivating people to contribute maximum efforts. It brings positive feeling towards the organization.

Principles of direction

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

1. Principle of harmony of objectives: every organization set the objectives and these objectives are to be fulfilled with the help of people working in the organization. Therefore, managers must try to bring harmony between individual and organizational goals

2. Unity of command: The individual who works in the organization get direction from his/her superior. The subordinates must get direction from only one superior to reduce conflict and confusion which is called unity of command.

3. Direct supervision: When superior direct the subordinates with face to face communication it is known as direct supervision. It helps to increase the morale of employees and it helps to develop quick feedback and necessary information

4. Appropriate leadership style: proper leadership means the skill of leading that depends upon the characteristics of leader, features of subordinates and the situation. It is the process of influencing human behavior in achieving organizational goals without dissatisfaction of any employees

5. Maximum individual contribution: The employees’ capacity should be used fully with effective direction by encouragement not irritation with proper design direction style.

6. Effective communication: without effective communication, direction is not possible. Mainly, communication may be downward or upward in an organization. Downward communication carries the order, ideas, instruction to the subordinates and upward communication carries the order, ideas, and instruction from the subordinates.

7. Effective control: without effective control organization can’t be operated. Effective control helps to coordinate and supervise the activities and other mechanism.

8. Effective motivation: Motivation is the act of inspiring and encouraging the people to do work. Employees must be motivated to achieve the goals. Without motivation , direction cannot be complete

9. Flow of information: information is most important asset in any organization. When information is blocked, then there can be failure. On the other hand, information is useful to issue the order, ideas, and instruction.

10. Follow- up: direction is a continuous managerial process. It involves constant and continuous supervision, counseling, advice, instructions etc in the employees’ activities. Merely issuing orders is not sufficient but management should find out whether the subordinate is working or not.

Steps in decision making process

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Steps in decision-making

1. Identification of problems: the first step of decision-making is identification of problems. First of all, managers must identify the problem. The problem has to be found and defined. Symptoms are identified and problems should be judged, symptoms are not problems. They are warning signs of problems. So, managers should search for symptoms for identification of problems. Such symptoms can be falling of sales, profit etc. It is said that problem identified is half solved is identification of problem should be effective.

2. Analysis of problem: after identification of problems, the problem should be analyzed by the decision maker. It is the assembly of fact and clarifying it. Relevant information must be collected and analyzed according to the complexity and nature of problems.

3. Developing the alternative solution: after identification and analysis of problems different probable solutions have to be developed which is known as developing the alternative solutions. There may be many alternative past experience, expert opinion, discussions etc. which may be helpful to develop the alternative.

4. Evaluation of the best alternative: after developing the alternative solution evaluation of the best alternative is done. It is determined that which alternative has how much advantage and disadvantages. in other words, alternatives are evaluated in so many factors like cost factors, risk , benefits, facilities etc. therefore it is very important.

5. Selection of the best alternative: after evaluating alternative, the best alternative is to be selected from various alternative. After developing alternative, the managers should taste each of them by imagining things that he has already put in effect. He should try to foresee the desirable consequences of adopting each alternative. It is done for best selection. Therefore, it is very important.

6. Implementation of the best alternative: after selection of the finest alternative, it must be used in the organization effectively. Effectiveness of decisions in achieving the desired goals depends upon its implementation. It they are not implemented effectively then best results can’t be obtained. Therefore, proper implementation of the best alternative is necessary.

7. Review of implementation: it is the last step of decision-making process. When the implementation of the best alternative is reviewed, the process of decision-making is finished. The result of implementation should be monitored and evaluated through which effectiveness can be measured.

Components of direction

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Aspects of direction
Direction is an integration of motivation, leadership, communication and coordination. It is an important function of management which is related to issue orders to staff.

1. Motivation: it is the process of inspiring and encouraging the people to do work. It is a skill of using the capability of manpower for the organization. It is a mental and physical presence of employee to do work. Effective motivation helps to raise the effective direction. Therefore, motivation is important aspect of direction.

2. Leadership: it is another important aspect of direction. It is defined as the process of influencing people to perform work effectively. In other words, it influences the behavior of employees or subordinate. According to time, situation and behavior of followers, a leader must conduct his followers. Therefore, it is an important aspect of direction.

3. Communication: communication means transferring information from one person to another. In other words when the information is transmitted from one person to another and information receiver easily take the information, it is known as communication. It includes sending message and receiving message. After sending message receiver receives the message and understands it. Therefore, message receiver responds and reacts about the message. In an organization manager must develop an effective communication system so that s/he may give instruction and guidance to the subordinates and motivate them to do the work to the best of their ability.

4. Coordination: it is also an important aspect of direction. When the coordination activity is not conducted effectively. Direction is not effective. Coordination is the process of linking activity of resources and various departments so that desired goal can be achieved easily. It is inter-related with all managerial function.

5. Supervision: it is another important aspect of direction. Direction is not only to issue order but also supervising job of subordinates. It is an important function of every manager. So the manager’s duty is to look after their work and examine that whether they have done according to the order issued or not and also help in solving their work problems.

Concept of direction

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Concept of direction
Direction is an important function of management which is related to inspiring, instructing and guiding human factors in the organization to achieve organizational activities and objectives. A superior direct and control the subordinates and instruct the manpower which yields better performance. Direction is the guideline inspiration which is provided from higher position to lower position. It is also an important function of management. It is useful to coordinate the activities. Therefore, it is defined as the skill of influencing employees.

Difference between Delegation and Decentralization of Authority

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Difference between delegation and decentralization of authority

Bases	Delegation of authority	Decentralization of authority
Nature	Process of transferring authority and creation of responsibility between superior and subordinates is called delegation. It can take place without decentralization	Decentralization is delegation of and dispersion of authority. It is not possible without delegation of authority
Purpose	It minimizes the burden of managers of unit, departments or plant	It prepares the organizational participants of the organization
Relationship	Relationship is between superior and immediate subordinates are indicated	Relationship is between top level, management, departments and units
Techniques	It is technique of management used to get the things done through others	It is both philosophy and technique of management
Parties	It is confined to manager and subordinates	It involves all managers at all level and relates relationship between departments, sections and units.
Responsibilities	Authority is only delegated, not responsibilities	Superior is relieved from responsibilities too
Necessity	Very important to management process	It is optional and situational as per the need
Control	Control remains in hand of superior who supervise the activities of subordinates	Control is delegated and decentralized to the departmental managers
Withdrawal of authority	It can be withdrawn by delegator at any time	Withdrawal of authority is not simple.