Decision Making

Introduction

Decision making is the actual selection from among alternatives of a course of action.

Decision making is involved in various functions of management. Hence, it is a step in planning. Planning occurs in managing organizations or in personal life whenever choices are made in order to gain a goal in the face of such limitations as time, money, and the desires of other people. The steps involved in planning are:

1. Being aware of opportunity

2. Establishing objectives

3. Premising

4. Determining alternative courses of action

5. Evaluating alternative courses

6. Selecting a course

7. Formulating derivative plans

Developing Alternatives

Planning comes into picture whenever a goal is to be attained. Choice of goal itself is a planning problem. If we assume that there is a goal to be achieved, the next step in the planning is to develop planning premises. Premises are planning assumptions, the future setting in which planning takes place. We can term them as the environment of plans in operation. Premises include forecast data of a factual nature, applicable basic policies, and existing company plans.

Developing alternative courses of action is taken as the first step in decision making. Managers have to develop alternative courses for any decision to be made. A sound adage for the manager is that, if there seems to be only one way of doing a thing, that way is probably wrong. More rationally, a planning priniciple called principle of alternatives can be specified. In every course of action, alternatives exist, nd effective planning involves a search for the alternative representing the best path to a desired goal.

The ability to develop alternatives is often as important as making a right decision among alternatives. Ingenuity, research, and perspicacity are required to make sure that the best alternatives are considered before a course of action is selected.

Principle of Limiting Factor

Chester Barnard has written, "the analysis required for decision is in effect a search for the "strategic factors."

Stategic factors and limiting factors are synonyms but Barnard suggests that we use the term limiting factor for physical things and when personal or organizational action is the element, we should use the term strategic factor. When we want to achieve some goals of system, we examine its parts or factors. Strategic factors or limiting factors are those parts or factors which if changed would accomplish the desired purpose if other factors or parts remain unchanged. The principle of limiting factor says, if in developing alternatives, the more an individual can recognize and solve for those factors that are limiting or critical to the attainment of a desired goal, the more effectively and efficiently he can select the most favorable alternative.

Discovery of limiting factor lies at the basis of selection from alternatives and hence of planning.

Process of Evaluation

After a reasonable number of alternatives have been developed, the next step in decision making is evaluating these alternatives. In most decisions, there are certain tangible factors to be assessed in terms of dollars, man-hours, machines hours, units of output, rates of return on investment, or some other quantitative unit. There are other factors that can be hardly quantified. However, both the tangible and intangible factors must be weighed in deciding upon a course of action.

Basis for Selection Among Alternatives

Experience

Business Research and Analysis

Operations Research

Experimentation

Evaluating the Decision's Importance

Size or length of commitment: If a decision commits the enterprise to heavy expenditure of funds it should be subjected to suitable attention at top management level.

Flexibility:Decisions involving inflexible courses of action need attention.

Certainty of goals and premises: Production decisions based on order backlog are more routine in comparision to made to stock decisions.

Quantifiability of variables: If variable can be quantified decision making is more routine.

Human impact: Where the human impact of a decision if great, its importance is high.

 Rationality in Decision Making

Economics is a subject that is developed under the assumption that people take rational decisions. When is a person thinking or deciding rationally? A rational decision making implies that the decision maker has a clear understanding of all alternative courses of action by which the goal sought can be reached under existing circumstances and limitations. The decision maker also must have the knowledge to analyze the alternatives in light of the goal sought with a desire to find out the best solution that effectively and efficiently satisfies the goal achievement.

Herbert Simon proposed that managers may not achieve complete rationality in many decisions. It is difficult to recognize all alternatives to reach a goal and also it may not be possible to analyze all alternatives. Hence managers resort to satisficing and find solutions that appear satisfactory to them and their associates in the circumstances.

Creativity and Innovation

Developing alternatives and finding novel ways that are profitable alternatives requires creative thinking. Weihrich and Koontz explain creative thinking as four step process.

1. Unconscious scanning
Allowing the mind to think over the problem and do its process without a conscious effort.

2. Intuition
Intuition is an answer to the problem that is thrown up by the mind. This is the output of the unconscious scanning effort.

3. Insight
Insight also an idea that comes up during investigations to solve a problem. They are to be captured immediately on paper to make us of them later.

4. Logical formulation or verification
Intuition as well as insight is to be tested through logic or experiment. The logical verification is done first by the person himself and then by inviting critiques from others.

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Video Lecture - Presentation - Making Great Decision

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http://www.youtube.com/watch?v=uA0ZGe-OLK4
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Updated 29.5.2012

Original knol - http://knol.google.com/k/narayana-rao/decision-making/ 2utb2lsm2k7a/ 188

Management - Definition and Process

Definition of Management: Its Nature and Purpose

Management of an organization is the process of establishing objectives and goals of the organization periodically, designing the work system and the organization structure, and maintaining an environment in which individuals, working together in groups, accomplish their aims and objectives and goals of the organization effectively and efficiently (Narayana Rao). (3rd December 2008, Version 1 of this article)

The above definition was a modification of the definition given by Koontz and O'Donnell.

The definition implies the following.

(i) Management is a process.
(ii) Management applies to every kind of organization, government, profit making, or nonprofit making.
(iii) It applies to managers at all levels in the organization.
(iv) Management is concerned with effectiveness and efficiency.  Effectiveness is producing the product or service the customer wants in business context with the required functional benefits and product attributes at the price he is willing to pay. Efficiency is minimization of resources to produce the saleable output.

Weirich and Koontz

Weihrich and Koontz defined Management and explained it as follows in the tenth edition of their book Management: A Global Perspective (p.4).

"Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently and accomplish selected aims." This definition needs to be expanded:

1. As managers, people carry out the managerial functions of planning, organizing, staffing, leading, and controlling.
2. Management applies to any kind of organization.
3. It applies to managers at all organizational levels.
4. The aim of all managers is the same: to create a surplus.
5. Managing is concerned with productivity; this implies effectiveness and effciency.

Functions of Management

The process of management can be better understood by breaking it down into the five basic functions of a manager – planning, organizing, resourcing, leading and controlling. All the management concepts, principles, theories and techniques can be grouped under these five functions.

Management Functions at Different Organizational Unit Levels

All managers carry out managerial functions. However the proportion of time spent for each function may differ from level to level. The top managers may spend more time on planning in choosing the corporate objectives and business unit objectives and in developing the work system and the organization structure. The first level supervisors may spend more time in leading the staff under them and in doing operational control.

Managerial Skills

Managers require four kinds of skills: technical, human, conceptual and design.

1. Technical skills are knowledge of and proficiency in working with the tools and specific techniques on given processes. For example, mechanics work with tools, and their supervisors should have the ability to train them how to use these tools and periodically evaluate and improve the skills of the staff under them. Similarly accounts use various formats of accounting records like journal, ledger, trial balance, balance sheet and use various procedures like entry, posting, reconciliation and reversing etc. and the supervisor of the accountants has to know these records and procedures to train the staff under him and evaluate their work for accuracy. The first level supervisors have to demonstrate or use their technical skills on a day to day basis as managers.

2. Human skills are the concepts, methods and techniques that facilitate working with people. Managers have to create an environment in which people feel comfortable, motivated, secure, and committed to the objectives and goals of the group or the organizational unit in which they are members.

3. Conceptual skill is the ability to see the “big picture.” It is the ability to recognize significant issues or elements in a situation and to understand the relationships among these key issues.

4. Design skill is the ability to solve problems in ways that benefit the enterprise. To be effective managers in the organization must be capable of doing more than just seeing a problem (If they merely confine their attention to the problem, they become ‘problem watchers’ and they will not fulfill their responsibility). They Must have, in addition to the skill of identifying key problems, the skill of a good design engineer to work out a practical solution to a problem in the light of the realities they face in the situation.


The intensity or frequency with which these groups of skills are applied varies with the managerial level.

First line supervisors use their technical skills on a day to day to basis to observe the working of the staff in the department or section and guide them in carrying out the allotted tasks as per the specification of the customer or the design and in proper use of machines and tools. Quality and quantity control on a continuous becomes the important responsibility of first line supervisors and technical skills play a very important part in this role.

At the top level, conceptual skills and design skills have to be employed to recognize the opportunities and threats that keep on emerging in the environment. Solutions to benefit from the opportunities and contain the ill effects of threats have to be developed.

My article in my blog on the same topic

http://nrao-mgmt-smi-handbook.blogspot.com/2007/10/principles-of-management-chapter-1.html

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Video Introduction to Management

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Related Knols

Principles of Management – Koontz and O’Donnell

Planning - A Management Process

Decision Making

Resourcing - A Function of Management

The concepts of Leadership and Management

Leardership

Gestalt Techniques in Supervision and Management

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Original post - http://knol.google.com/k/narayana-rao/management-definition-and-process/ 2utb2lsm2k7a/ 547

Managerial Skills

Principles of Management Revision Articles Series

Managerial skills are identified and links are given to knols containing detailed explanation of various skills. Number of videos are also available on various managerial skills.

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Introduction

Managerial skills are classified as technical, human and conceptual by Katz.

For a manager managing any activity, the actual work involved in the activity is technical skill.

Ability to communicate with other persons in the department or organizations and the ability to understand their desires and persuade them to ones point of view are human skills. Conceptual skills are understanding of how customers of the department or organization react as a group to various activities.

Similarly a manager has to understand how suppliers to his department react as a group. Here economic consequences, political consequences, and social consequences come into play and a manager must be able to visualize all these likely outcomes in coming out with his objectives, strategies and tactics. (http://arulmj.tripod.com/mgrlskls.html).

In words of Katz, the administrator needs: (a) sufficient technical skill to accomplish the mechanics of the particular job for which he is responsible; (b) sufficient human skill in working with others to be an effective group member and to be able to build cooperative effort within the team he leads; (c) sufficient conceptual skill to recognize the interrelationships of the various factors involved in his situation, which will lead him to take that action which achieves the maximum good for the total organization.

I define engineering management using this explanation. Engineering management refers to management of those functional areas of an organization where the main skills applied are related to engineering and technology.

To understand the idea of managerial skills, we need to understand the meaning of the word skill.

Skill - Dictionary meanings   

a: the ability to use one's knowledge effectively and readily in execution or performance b: dexterity or coordination especially in the execution of learned physical tasks
a learned power of doing something competently: a developed aptitude or ability
http://www.merriam-webster.com/dictionary
 
skill: Definition
Ability and capacity acquired through deliberate, systematic, and sustained effort to smoothly and adaptively carryout complex activities or job functions involving ideas (cognitive skills), things (technical skills), and/or people (interpersonal skills). 
http://www.businessdictionary.com/definition/skill.html

 

Noun: skill  skil
An ability that has been acquired by training
- accomplishment, acquirement, acquisition, attainment
Ability to produce solutions in some problem domain
"the skill of a well-trained boxer"
http://www.wordwebonline.com/en/SKILL

Skill
The familiar knowledge of any art or science, united with readiness and dexterity in execution or performance, or in the application of the art or science to practical purposes; power to discern and execute; ability to perceive and perform; expertness; aptitude; as, the skill of a mathematician, physician, surgeon, mechanic, etc.
http://www.dictionary.net/skill
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Managerial Skills – A View

 

The above dictionary definitions indicate that  skill denotes the ability to perform a task effectively and efficiently. The ability to use one's knowledge effectively and readily in execution or performance points out it. The meaning, "The familiar knowledge of any art or science, united with readiness and dexterity in execution or performance," also denotes it.

So managerial skill is to be understood as the ability to perform managerial tasks effectively with readiness and dexterity.  Skills requires knowledge and ability to apply that knowledge competently and efficiently has to be acquired by practice. A skilled person is one who has done the job effectively number of times and in the process of doing so, improved his efficiency at the job.

Various authors identified certain tasks of management discipline. Some authors have identified a list of managerial skills many of them being the tasks of management..
The book by William R. Tracey, Leadership Skills can be used to develop an understanding of  managerial skills.

 

Leadership Skills by William R. Tracey, Amacom 1990

 

Main Chapters

 

1. Forecasting: prelude to planning
2. Strategic planning
3. Budgeting
4. Marketing
5. Innovating
6. Resolving conflict
7. Disciplining
8. Rewarding
9. Improving Productivity
10. Managing costs
11. Managing time
12. Managing change
13. Managing ethics
14. Developing yourself

15. Leading

Managerial Skills

Whetten and Cameron provided an empirical derivation of effective leadership skills. They are:
1. Verbal communication (including listening)
2. Managing time and stress
3. Managing individual decisions
4. Recognizing, defining, and solving problems
5. Motivating and influencing others
6. Delegating
7. Setting goals and articulating a vision
8. Self awareness
9. Team building
10. Managing conflict

David A. Whetten and Kim S. Cameron, Developing Management Skills, Harper Collins, New York, 1991.

Profit Sense - An Important Managerial Skill

I now feel profit sense is an important managerial skill. Every manager should spot profit opportuniites and evaluate them for assuring that the profit is there in the proposal and select the best portfolio of  profitable projects and initiatives for his department or section.

Links to Knols with Material on Managerial Skills

 
1. Forecasting: prelude to planning
2. Strategic planning
What is Business Strategy?
3. Budgeting
Budget, Budgeting and Budgetary Control
4. Marketing
The Marketing Concept - Kotler
5. Innovating
6. Resolving conflict
7. Disciplining
8. Rewarding
9. Improving Productivity
Earlier link was provided to 7 Principles for Improving Workflow. A new link is to be given now.

10. Managing costs
11. Managing time
12. Managing change
13. Managing ethics
14. Developing yourself
15. Leading

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Videos on Managerial Skills

Managerial Skills Videos - Knol Book

Your browser does not support iframes.

 A Recent Book Recommended for Trainers and Self Learners

Training in Interpersonal Skills - Book Information and Review

http://nraomtr.blogspot.com

Original Knol - Number 428

Resourcing - A Function of Management

Koontz and O'Donnell outlined Planning, Organizing, Staffing, Directing and Controlling as the five functions of management and explained the process of management of these five functions.

In the place of staffing, using the word resourcing, could be a better description of management function at the current stage.

A plan to achieve something (objective) is to be  converted into an organizational plan that has resources,  facilities and people. The manager has to acquire these resources to set up the organization to implement his plan. Acquisition of human resources is staffing. But normally in modern business, the manager has to acquire money resources or finance. Then he has to  acquire land, buildings, machinery, materials and various other services. Then comes directing and resource allocation.

During control phase, replanning takes place, reorganization can take place, resource adjustment (resource acquisition or disposal) may take place, and redirecting may take place to achieve the goals set forth for a period.

Planning involves choosing a direction and an intermediate destination. It has to be a profitable and a useful endeavor. In the process of planning cost benefit analysis is done.  Organizing follows and the means by which one reaches the chosen destination is defined during this activity of management.

Organizing is a process of

• determining, grouping and structuring activities
• creating roles for individuals for effective performance at work
• allocating necessary authority (over resources) and responsibility for results for each role
• determining detailed procedures and systems for different problem areas such as coordination, communication, decision-making, motivation, conflict resolution and so on.

The resources required to achieve a goal are to be identified during the organizing step of management. How many operators are required and how many supervisors are required is a function of technology employed in the organization and this decision has to be taken during the process of organization. Resourcing follows the organizing phase in the acquiring of the resources planned in the organizing phase. Organizing this way is just the planning stage. Resourcing is the stage during which all resources planned in the organizing stage are acquired by the manager.

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Resource Planning 

Resource planning is an economic decision and entrepreneurs have to use it. It is discussed adequately in economics.

Choice of Inputs by the Firm

Every firm or entrepreneur has to decide how much of each input it should employ: how much labor, capital, land, energy, various materials and services.

The fundamental assumption that economists make in this context is that of cost minimization. Firms are expected to choose their combination of inputs so as to minimize the total cost of production.

Least-cost Rule: To produce a given level of output at the least cost, a firm will hire factors until is has equalized the marginal product per dollar spent on each factor of production. This implies that

Marginal product of labor/price of labor  = Marginal Product of Capital Equipment/Price of capital equipment = ...

Thus the firm will choose a factor combination or resource combination that minimizes the total cost of production.  (Source: http://nraomtr.blogspot.com/2011/12/economic-theory-of-production-and.html  )

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Recognition of Role of Resources in Management Process by Various Authors of Principles of Management or Management Process Books

Ernest Dale

Goals and Resources

Once objectives have been set,the planners must decide how far they can proceed toward them in view of the resources available, which include the money on hand, the money that sales will bring, and the funds that may be obtained by borrowing or selling equities. The decision to borrow or sell new stock will, of course, be part of the planning process and will depend on the return expected on the investment.

Finally, the planners must decide on the allocation of the funds to the various company activities and the way in which these funds will be used to generate greater income in the form of sales.  The volume of sales is, in fact, the key factor in all corporate planning.

Ernest Dale, Graduale School of Business, University of Virginia, Management: Theory and Practice, McGraw-Hill Book Company, New York, 1965, p.352, Chapter 22. Planning and Forecasting.

An intersting entry in Wikipedia - Resource Management

In organizational studies, resource management is the efficient and effective deployment for an organization's resources when they are needed. Such resources may include financial resources, inventory, human skills, production resources, or information technology (IT). In the realm of project management, processes, techniques and philosophies as to the best approach for allocating resources have been developed. These include discussions on functional vs. cross-functional resource allocation as well as processes espoused by organizations like the Project Management Institute (PMI) through their Project Management Body of Knowledge (PMBOK) methodology to project management. Resource management is a key element to activity resource estimating and project human resource management. Both are essential components of a comprehensive project management plan to execute and monitor a project successfully

Source:   http://en.wikipedia.org/wiki/Resource_management

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Resourcing and Resouce Planning Departments

Office of Resource Planning, Universit of Regina

http://www.uregina.ca/orp/

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Original knol - http://knol.google.com/k/narayana-rao/resourcing-a-function-of-management/ 2utb2lsm2k7a/ 2345

Planning - A Management Process

Principles of Planning (Koontz and O'Donnel)

Related to Purpose and Nature

Principle of contribution to objectives
          Every plan has to contribute positively toward the accomplishment of enterprise objectives.

Principle of efficiency of plans
          Efficiency is measured by the contribution of the plan to objectives of the enterprise minus the costs and unsought for consequences in formulating and implementing the plan.

Principle of primacy of planning
          Planning is the primary prerequisite for all other functions of management. Every action of the manager follows a planning step.

Principles Applicable to Structure of plans

Principle of planning premises
          If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.

Principle of policy framework
          If more policies, appropriate to the organization, are expressed in clear terms and form and if manages understand them, the plans of the enterprise will be more consistent.

Principle of timing

          If plans are structured to provide a network of derivatives plans in sequence, there will be more effectiveness in attainment of enterprise objectives.

Principles in Applicable to Process of Planning

Principle of alternatives
          Select the plan which is the most effective and the most efficient to the attainment of a desired goal.

Principle of limiting factor
          Consider limiting factor in generating alternatives and selection from alternatives.

The commitment Principle
          Planning can cover a period over which commitment of resources can be clearly visualized.

The Flexibility Principle
          Building flexibility in planning is beneficial, but cost of building flexibility needs to be evaluated against the benefits.

The Principle of navigational change
          Manager needs to periodically check events of the plan and redraw plans to maintain the move toward a desired goal.

Principle of competitive strategies
          In a competitive arena, it is important to choose plans in the light of what competitor will or will not do and navigate based on what competitors are doing or not doing.


 Detailed Discussion of Planning by Koontz and O'Donnell

Koontz and O'Donnell discussed the managerial function of planning in six chapters in the fourth edition of their text. The chapters are:

The nature and purpose of planning
Objectives
Planning premises
Decision making
Policy making
Planning in action

The Nature and Purpose of Planning

Every manager has to select objectives for his enterprise, department, section, unit or group. Based on the objectives he has to set goals for a specific period and make plans that contain ways of reaching the set goals. Planning in general is explained as generating alternatives and selection of the most suitable alternatives from among them for solving a problem. The problem in this context has positive connotation also. How to achieve growth is a problem which has a positive implication only.

Therefore planning is deciding in advance what to do, how to do it, when to do it, and who is to it.

Types of Plans

Objectives

Objectives are the ends toward which the activity of an organization is aimed.

Goals

Goals represent the rate at which objectives of an organization are achieved. Goals quantify the objective with a time frame. For example, if a country has the objective of switching to unconventional sources of energy, the goals could specified as so many gigawatts of energy by end of year 2012. 

Values

Grand strategies

According to R.N. Anthony strategies result from the processes  of deciding "on objectives of the organization", "on changes in these objectives", "on the resources used to attain these objectives", and "on policies that are to govern the acquisition, use, and disposition of these resources." The main meaning and usefulness of grand strategies are to describe a type of planning program of a broad nature which gives over-all direction to the other and more detailed programs of an enterprise.

The emphasis in grand strategies is on the pattern of basic objectives of the organization and goals and the major policies and plans for achieving them.

The purpose of grand strategy of an enterprise is to determine and communicate, through a system of major objectives and policies, a picture of what kind of enterprise is envisioned. A framework is given in the grand strategy which is a useful plan to guide company thinking.

Koontz and O'Donnell give the opinion that strategy is not a new type of plan actually. It is a program. But the concept of strategy is practically very useful and its importance in guiding detailed planning justify its separation as a different type of plan.

Competitive strategies

Competition exists where two or more persons strive for the same goals under conditions in which not all can gain from them. Competitive strategy is a plan made in the light of the plans of a competitor. The plans are made either with an estimate of plans or competitor or plan is a reaction to the strategic move of competitor either announced or executved.  To estimate the competitor's plans, a manager has to put himself in his competitor's place and develop a set of plans for his competitor, using the knowledge has regarding the objectives and the circumstances in which the competitor is operating. No doubt some industrial espionage will be tried to get an understanding of competitor's plans.

Policies

Policies are general statements which guide or channel thinking in decision making of subordinates. Policies delimit an area within which a decision is to be made and assure that the decision will be consistent with and contribute to objectives. Policies tend to predecide issues, and avoid repeated analysis. Polices are based on analysis and once pronounced avoid repeated analysis

Procedures

Procedures are plans and they establish a method of handling activities. They specify a chronological sequence of required actions.

Rules

A rule is the simplest type of plan. A rule requires that a specific and definite action be taken or not taken with respect to a situation.

Programs

A program is a complex of policies, procedures, rules, task assignments assembled to carry out a given course of action. A program is supported by necessary capital and operating budgets.

Budgets

A budget is a plan. It is a statement of expected results expressed in numerical terms.

Objectives  

Objectives are referred to some authors with different terms. Purposes, missions, goals or targets are the terms used to refer to objectives. Mission is usually used in military enterprises and occasionally in churches and government. "Goals" and "targets' often carry the notation of specific quantitative end. Sometimes the end can be qualitative also. Koontz and O'Donnel used the chapter on objectives to discuss all the various types of terms used in relation to objectives.

Social objectives

It is interesting to note that the discussion of objectives is started with the section social objectives.The obectives of a private enterprise have to be in harmony with the ends for which a society is organized. Whenever the actions and objectives of a private enterprise are thought be against the objectives of the society, legal action is initiated to regulate it or suppress it.

United States has a statement of nation purpose set forth in the Declaration of Independence. The preamble of the Constitution of USA states:

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

All subordinate enterprises in USA, be it a school, church, hospital, government agency or business firm should have objectives which are harmonious with and supportive to national objectives.

Enterprise Objectives

The plural form is used to stress the fact that enterprises have mutliple objectives. Drucker asserted that there are eight areas in which objectives of performance and results have to set by all enterprises. They are: Market Standing, Innovation, Productivity, Physical and Financial Resources, Profitability, Manager Performance and Development, Worker Performance and Development, and Public Responsibility.

For each area or function that company identifies as necessary for survival there has to be ojective.

Principles to be followed in setting objectives

1. Objectives have to be practically achievable. The organization must be able to do some thing to achieve each objective that it has set.

2. The objectives have to support the enterprise purpose, its contribution to the customer.

3. If long range objectives and short range objectives are specified, there must be integral relationship between them.

4. At various points of time prioritization among objectives may be required.

5. Objectives have to be specific and actionable and verifiable

6. Objectives have to planned. There are the result of planning process or activity.

7. Objectives have to be communicated to those charged with building plans to meet them. 

Reference

Principles of Management – Koontz and O’Donnell

Related Knols

Principles of Management – Koontz and O’Donnell

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Originally posted on Knol (Knol no. 456)
http://knol.google.com/k/planning-a-management-process

The Process of Management

Management - Definition

Weihrich and Koontz defined Management and explained it as follows in the tenth edition of their book Management: A Global Perspective (p.4).

"Management is the process of designing and maintaining an environment in which individuals, working together in groups, effectively and  efficiently,  accomplish selected aims." This definition needs to be expanded:

1. As managers, people carry out the managerial functions of planning, organizing, staffing, leading, and controlling.
2. Management applies to any kind of organization.
3. It applies to managers at all organizational levels.
4. The aim of all managers is the same: to create a surplus.
5. Managing is concerned with productivity; this implies effectiveness and effciency.

Definition suggested by Narayana Rao

Management of an organization is the process of establishing objectives and goals of the organization periodically, designing the work system and the organization structure, and maintaining an environment in which individuals, working together in groups, accomplish their aims and objectives and goals of the organization effectively and efficiently (Narayana Rao). (3rd December 2008, Version 1 of this article)

The above definition was a modification of the definition given by Koontz and O'Donnell.

The definition implies the following.

(i) Management is a process.
(ii) Management applies to every kind of organization, government, profit making, or nonprofit making.
(iii) It applies to managers at all levels in the organization.
(iv) Management is concerned with effectiveness and efficiency.  Effectiveness is producing the product or service the customer wants in business context with the required functional benefits and product attributes at the price he is willing to pay. Efficiency is minimization of resources to produce the saleable output.

Functions of Management or Process of Management

Koontz and O'Donnell classified the functions of management or process of management into PLANNING, ORGANIZING, STAFFING, LEADING AND CONTROLLING.

Management is an art and it is doing things in the light of realities of a situation. The organized knowledge underlying this practice is referred to as science and this body of knowledge can be expressed through principles of management. This is the thought of Koontz and O'Donnell. Principles are identified for each function of management.

Planning

Every manager has to select objectives for his enterprise, department, section, unit or group. Based on the objectives he has to set goals for a specific period and make plans that contain ways of reaching the set goals. Planning in general is explained as generating alternatives and selection of the most suitable alternatives from among them for solving a problem. The problem in this context has positive connotation also. How to achieve growth is a problem which has a positive implication only.

Therefore planning is deciding in advance what to do, how to do it, when to do it, and who is to it. Planning bridges the gap from where we aer to where we want to be in a desired future.

Planning involved decision making. It is selecting the courses of action that a company or other enterprise, and every department of it, will follow.

Types of Plans

Objectives

Objectives are the ends toward which the activity of an organization is aimed.

Goals

Goals represent the rate at which objectives of an organization are achieved. Goals quantify the objective with a time frame. For example, if a country has the objective of switching to unconventional sources of energy, the goals could specified as so many gigawatts of energy by end of year 2012. 

  

 Grand strategies

According to R.N. Anthony strategies result from the processes  of deciding "on objectives of the organization", "on changes in these objectives", "on the resources used to attain these objectives", and "on policies that are to govern the acquisition, use, and disposition of these resources." The main meaning and usefulness of grand strategies are to describe a type of planning program of a broad nature which gives over-all direction to the other and more detailed programs of an enterprise.

The emphasis in grand strategies is on the pattern of basic objectives of the organization and goals and the major policies and plans for achieving them.

The purpose of grand strategy of an enterprise is to determine and communicate, through a system of major objectives and policies, a picture of what kind of enterprise is envisioned. A framework is given in the grand strategy which is a useful plan to guide company thinking.

Koontz and O'Donnell give the opinion that strategy is not a new type of plan actually. It is a program. But the concept of strategy is practically very useful and its importance in guiding detailed planning justify its separation as a different type of plan.

Competitive strategies

Competition exists where two or more persons strive for the same goals under conditions in which not all can gain from them. Competitive strategy is a plan made in the light of the plans of a competitor. The plans are made either with an estimate of plans or competitor or plan is a reaction to the strategic move of competitor either announced or executved.  To estimate the competitor's plans, a manager has to put himself in his competitor's place and develop a set of plans for his competitor, using the knowledge has regarding the objectives and the circumstances in which the competitor is operating. No doubt some industrial espionage will be tried to get an understanding of competitor's plans.

Policies

Policies are general statements which guide or channel thinking in decision making of subordinates. Policies delimit an area within which a decision is to be made and assure that the decision will be consistent with and contribute to objectives. Policies tend to predecide issues, and avoid repeated analysis. Polices are based on analysis and once pronounced avoid repeated analysis

Procedures

Procedures are plans and they establish a method of handling activities. They specify a chronological sequence of required actions.

Rules

A rule is the simplest type of plan. A rule requires that a specific and definite action be taken or not taken with respect to a situation.

Programs

A program is a complex of policies, procedures, rules, task assignments assembled to carry out a given course of action. A program is supported by necessary capital and operating budgets.

Budgets

A budget is a plan. It is a statement of expected results expressed in numerical terms

Organizing

Organizing is the grouping of activities necessary to attain the objectives, the assignment of each grouping to a manager with authority necessary to supervise it,and the provision for coordination horitzonally and vertically in the enterprise structure.

Formal Organization and Informal Organization

Formal organization means the intentional structure of roles specified through  a formal organization structure chart.

Informal organization is any joint personal activity without conscious joint purpose, even though contributing to joint results (Chester Barnard).

Important concepts in organizing

1. Principles of span of control

2. Departmentation: By numbers, by time (shifts), by function, by territory, br product, by customer segment, by maketing channels, by process (in manufacturing).

3. LIne and staff relationships

4. Delegation

Staffing

The managerial function of staffing is defined a filling positions in the organization structure through identifying work force requirements, inventorying the people available, recruitment, selection, placement, promotion, appraisal, compensation, and training of people.

Leading

The managerial function of leading is defined as the process of influencing people so that they will strive willingly and enthusiastically toward the achievement of organizational goals.

Important Concepts

Behavioral model of man

Motivation

Maslow's hierarchy of needs

McCleland's needs

Vroom's Expectancy Theory of Motivation

Reinforcement theory

Job enlargement

Job enrichment

Leadership

Styles of leadership

Managerial grid

Situation leadership or contingency theory of leadership

Communication

Controlling

The managerial function of controlling is the measurement and correction of performance in order to make sure that enterprise objectives and plans devised to attain them are accomplished.

Control of overall performance


Article that supports the first lecture of Review of Research in Management

Principles of Management Revision/Review Articles - List

http://nraomtr.blogspot.com/search/label/Principles%20of%20Management

Management: Definition and Process

Evolution of Management Thought and Theory - Review Notes

Process of Management

Planning: A Management Process

The Nature and Purpose of Planning - Review Notes

Objectives and Goals - Review Notes

Strategies, Policies, and Planning Premises - Review Notes

Business Firm and Society - The External Environment, Social Responsibility and Ethics - Review Notes

Decision Making

Decision Making - Review Notes

Summary - Principles of Planning


The Nature of Organizing - Review Notes

Departmentation in Organizations - Review Notes

Line-Staff Authority and Decentralization - Review Notes

Effective Organizing and Organizational Culture - Review Notes

Summary - Principles - Organizing


Human Resource Management and Selection

Performance Appraisal and Career Strategy

Manager and Organization Development

Summary - Principles - Staffing


Resourcing; A Function of Management

Human Factors and Motivation

Leadership - Koontz and O'Donnell - Review Notes

Supervision - Introduction - Public Administration Point of View

Committes and Group Decision Making - Review Notes

Communication - Koontz and O'Donnell - Review Notes

Summary of Principles - Directing - Leading

The System and Process of Controlling - Review Notes

Control Techniques and Information Technology

Productivity Control

Overall Control and Preventive Control - Review Notes


Summary - Principles of Controlling










Global and Comparative Management

Organizing - Global Management Issues - Review Notes

Staffing - Global Management Issues

Leading - Global Management Challenges

Controlling - Global Management Challenges - Review Notes



Management and Entrepreneurship: Science, Theory and Practice

Managerial Skills

Principles of Management - List

Peter Drucker - Business Organization - Economic Function - Social Responsibility

Peter Drucker on Scientific Management - Industrial Engineering

Scientific Approach, Engineering Approach, Management Approach

SHAREHOLDER VALUE MANAGEMENT THEORY REVIEW





Updated 14.7.2012

Principles of Management – Koontz and O’Donnell

__________________________________________

Principles of Management Revision Article Series

Planning, Organizing, Staffing, Leading and Controlling - Functions of Management.
Harold Koontz and Cyril O’Donnell, in their book, Principles of Management: An Analysis of Managerial Functions, clearly described the principles to be used in performing various functions of management.

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Harold Koontz and Cyril O’Donnell, in their book,  Principles of Management: An Analysis of Managerial Functions, clearly described the principles to be used in performing various functions of management.

Managers have to set in a procedure to revise these principles periodically so that they can recollect the relevant principles when performing the managerial tasks and explicitly consider the relevance and application of these principles in their practice.

Many of us use them implicitly. But a professionally educated and trained manager must use them explicitly. He has to ensure that these principles are applied and if any exceptional situation is there, managers should ignore the principles consciously and be clear in their mind they chose not to use them due to the exceptional nature of the situation.

 

The need for Principles of Management

To Increase Efficiency
To Crystallize the Nature of Management
To Improve Research
To Attain Social Goals

Principles of Planning

Related to Purpose and nature

Principle of contribution to objectives
          Every plan has to contribute positively toward the accomplishment of enterprise objectives.

Principle of efficiency of plans
          Efficiency is measured by the contribution of the plan to objectives of the enterprise minus the costs and unsought for consequences in formulating and implementing the plan.

Principle of primacy of planning
          Planning is the primary prerequisite for all other functions of management. Every action of the manager follows a planning step.

Principles Applicable to Structure of plans

Principle of planning premises
          If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.

Principle of policy framework
          If more policies, appropriate to the organization, are expressed in clear terms and form and if manages understand them, the plans of the enterprise will be more consistent.

Principle of timing

          If plans are structured to provide a network of derivatives plans in sequence, there will be more effectiveness in attainment of enterprise objectives.

Principles Applicable to Process of Planning

Principle of alternatives
          Select the plan which is the most effective and the most efficient to the attainment of a desired goal.

Principle of limiting factor
          Consider limiting factor in generating alternatives and selection from alternatives.

The commitment Principle
          Planning can cover a period over which commitment of resources can be clearly visualized.

The flexibility Principle
          Building flexibility in planning is beneficial, but cost of building flexibility needs to be evaluated against the benefits.

The Principle of navigational change
          Manager needs to periodically check events of the plan and redraw plans to maintain the move toward a desired goal.

Principle of competitive strategies
          In a competitive arena, it is important to choose plans in the light of what competitor will or will not do and navigate based on what competitors are doing or not doing.

Principles of Organizing

Principles in Relation to Purpose

Principle of unity of objectives
          An organization structure is effective if it as a whole, and every part of it, make possible accomplishment of individuals in contributing toward the attainment of enterprise objectives.

Principle of efficiency
          An organization or organization structure is efficient if it is structured to make possible accomplishment of enterprise objectives by people with minimum unsought consequences or costs.
         

Principles  Related to the Cause of Organizing

Span of management Principle
          There is a limit at each managerial position on the number of persons an individual can effectively manage. But this number is not a fixed number and it will vary in accordance with underlying variables of the situation.

Principles in Developing the Structure of Organization

The scalar Principle

          The more clear the line of authority from the ultimate authority for management in an enterprise (CEO)  to every subordinate position, the more effective will be decision making and organization communication at various levels in the organization.

Principle of delegation

          Authority is a tool for managing to contribute to enterprise objectives. Hence authority delegated to an individual manager should be adequate to assure his ability to accomplish results expected of him.

Principle of responsibility

          The responsibility of the subordinate to his superior for authority received by delegation is absolute, and no superior can escape responsibility for the activities of his subordinate to whom he in turn has delegated authority.

Principle of parity of authority and responsibility

The responsibility exacted for actions taken under authority delegated cannot be greater than that implied by the authority delegated, nor should it be less.

Principle of unity of command

          The more completely an individual has a reporting relationship to a single superior, the less the problem of conflict in instructions and the greater the feeling of personal responsibility.

         

The authority level Principle

          Maintenance of authority delegation requires that decisions within the authority competence of an individual manager be made by him and not be referred upward in the organization.

Principles in Departmentizing Activities

Principle of division of work

        The better an organization structure reflects a classification of the tasks and activities required for achievement of objectives and assists their coordination through creating a system of interrelated roles; and the more these roles are designed to fit the capabilities and motivations of people available to fill them, the more effective and efficient an organization structure will be.

Principle of functional definition

        The more a position or a department has clear definition of results expected, activities to be undertaken, organization authority delegated, and authority and informational relationships with other positions, the more adequately individual responsible can contribute toward accomplishing enterprise objectives.

Principle of separation

        If an activity is designed to be a check on the activities of another department, the individual charged with such activity cannot adequately discharge his responsibility if he reports to the department who activity he is expected to evaluate.

Principles in the Process of organizing

Principle of balance

    the application of principles or techniques must be balanced in the light of the over-all effectiveness of the structure in meeting enterprise objectives.

Principle of flexibility

    The task of managers is to provide for attaining objectives in the face of changing environments. The more provisions are made for building organization flexibility, the more adequately organization structure can fulfill its purpose.

Principle of leadership facilitation

    The more an organization structure an authority delegations within it make possible for various managers to design and maintain an environment for performance, the more it will facilitate leadership abilities of managers.

Staffing Principles

Related to the Purpose of Staffing

Principle of staffing objectives

    

    The positions provided by the organization structure must be staffed with personnel able and willing to carry out the assigned functions.

Principle of staffing

    The quality of management personnel can be ensured through proper definition of the job and its appraisal in terms of human requirements, evaluation of candidates and incumbents, and appropriate training.

The process of staffing

Principle of job definition

    Specifications for the job rest on organization requirements andon provision for incentives to induce effective and efficient performance of the tasks involved.

Principle of managerial appraisal

    Performance must be appraised against the management action required by superiors and against the standard of adherence in practice to managerial principles.

Principle of open competition in promotion

    Managers should be selected from among the best available candidates for the job, whether they are inside or outside the enterprise.

Principle of management development

    The objective of management development is to stengthen existing managers. The most effective means of developing managers is to have the task performed primarily by a manager's superior.

Principle of universal development

    The enterprise can tolerate only those managers who are interested in their continuous development.

Principles of Directing

Related to the Purpose of Directing

Principle of harmony of objectives

    Effective directing depends on the extent to which individual objectives in cooperative activity are harmonized with group objectives.

Principles  Applicable to Process of directing

Principle of unity of command

    The more completely an individual has a reporting relationship to a single superior, the less the problem of conflict in instructions and the greater the feeling of personal responsibility for results.

Principle of direct supervision

    Effective direction requires that management supplement objective methods of supervision with direct personal contact.

Principle of supervisory techniques

    Since people, tasks, and organizational environment vary, techniques of supervision will be most effective if appropriately varied.

Principles of Delegation

Principle of functional delegation

    The more a position or department has clear definitions of results expected, activities to be undertaken, organization authority delegated, and authority and informational relationships with other positions, the more adequately individuals responsible can contribute toward accomplishing enterprise objectives.

Principle of delegation by results expected

    The authority delegated to an individual managers should be adequate to assure his ability to accomplish the results expected of him.

Principle of absoluteness of responsibility

    No superior can escape, through delegation, responsibility for the activities of subordinates, for it is he who delegated authority and assigned duties.

Principle of parity of authority and responsibility

    The authority delegated has to be consistent with the responsibility assigned to a subordinate.

Principles of Control

Related to the purpose of control

Principle of assurance of objective

    The task of control is to assure accomplishment of objectives by detecting potential or actual deviation from plans early enough to permit effective corrective action.

Principle of efficiency of controls

    The more control approaches and techniques detect and illuminate the causes of potential or actual deviations from plans with the minimum of costs or other unsought consequences, the more efficient these controls will be.

Principle of control responsibility

    The primary responsibility for the exercise of control rests in the manager charged with the execution of plans.

Principle of direct control

    The higher the quality of managers and their subordinates, the less will be the need for indirect controls.

(The principle may termed as principle of reduced controls. A superior can spend less time in control activities if he has more higher quality managers and their subordinates in his department.)

Principles related to Structure of control

Principle of reflection of plans

    The more controls are designed to deal with and reflect the specific nature and strucuture of plans, the more effective they will serve the interests of the enterprises and its managers.

Principle of organizational suitability

The more controls are designed to reflect the place in the organization structure where responsibility for action lies, the more they will facilitate correction of deviation of events from plans.

Principle of individuality of controls

    Controls have to be consistent with the position, operational responsibility, competence, and needs of the individuals who have to interpret the control measures and exercise control. 

Process of control

Principle of standards

    Effective control requires objective, accurate, and suitable controls.

Principle of critical-point control

    Effective control requires attention to those factors critical to appraising performance against an individual plan.

The exception Principle

    The more a manager concentrates his control on exceptions, the more efficient will be the results of this control.

Principle of flexibility of controls

    If controls are to remain effective despite failure or unforeseen changes in plans, flexibility is required in the design of controls.

Principle of action

Principle of Action

    Control is justified only if indicated or experienced deviations from plans are corrected through appropriate planning, organizing, staffing and directing.

References

Harold Koontz and Cyril O’Donnell, Principles of Management: An Analysis of Managerial Functions,  4th Ed., McGraw-Hill, New York, 1968

Harold Koontz and Cyril O’Donnell, Principles of Management: An Analysis of Managerial Functions, 2nd  Ed., McGraw-Hill, New York, 1959

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