Introduction to Management PDF

Chapter one Introduction 1.1. Definition of Management Different authors defined Management in many different ways. According to some of them:  Management is the process of achieving results through efficient utilization of organizational resource  A process and fun...

Chapter one Introduction 1.1. Definition of Management Different authors defined Management in many different ways. According to some of them:  Management is the process of achieving results through efficient utilization of organizational resource  A process and function carried out by one or more individuals.  Management is the art of getting things done with and through others.  Process of planning, organizing, staffing, leading and controlling the work of organizational members and using all available resources to reach the stated organization goals. It is impossible to provide a single, comprehensive, universally accepted definition of management. The different orientations about the definitions of management is because: i. Management has various aspects, that all of which cannot be represented by a single definition. ii. The theorists who gave the definitions had different areas of interest or training, and all defined management from their perspective (engineering, sociology, psychology, mathematics, etc.) iii. Management as a discipline is young and there is a lack of clarity of concepts and principles. Despite all the above reasons for different definitions, the definitions are not contradictory or mutually exclusive. Management is the synthesis of all the definitions given by different theorists. From the definitions of management, the authors have indicated certain elements in common. The most salient ones are the following.  Management is a (continuous) process  Management consists of activities 1   The activities lead to selected and set objectives  The coordination of activities involves people.  The activities focus on designing and maintaining an environment  The coordination aims at the achievement of results.  Effective and efficient utilization of resource Management activities are undertaken by a group of individuals called managers. Managers are: o Those people who are responsible for carrying out major activities of management (management activities) o Individuals in organization who hold positions of authority and make decision about the allocation of resources. They are people in an organization that make people productive. 1.2. Organizations  Organizations are social units (a group of two or more people) deliberately constructed or structured in certain fashion to attain a set of goals. Why organizations are needed? A). Organizations serve society This is because organizations are social institutions that reflect certain culturally accepted values and needs. They allow people to live together in civilized way and to accomplish goals as a society. They serve society by making the world a better and safer and more pleasant place to live. B). Organizations accomplish objectives Organizations enable the society to reach certain specified goals that would otherwise be much harder or even impossible to achieve. C). Organizations preserve knowledge Organizations such as colleges, Universities, museums are essential because they store and protect most of important knowledge the civilization of the world has gathered. They serve as a bridge between past, present and future generation. They also add knowledge by developing new and more efficient ways of doing things. 2 D). Organizations provide careers They provide their employees with a source of livelihood, personal satisfaction and self- fulfillment. Organizations are frame work for management. Decisions are made in organizations rather than by individuals acting single. This implies organization & Management are inseparable. 1.3. Significance of management The significance of management can be considered from three perspectives. These are; 1. Development of the nation. Management touches socio-economic and political aspects of the human being. The development of a nation is closely related with management. This is because the development of nations largely depends on the performance of all organizations, and the performance of organizations in achieving their objectives in turn depends, to a large extent, on its management. * Good management lead to successful attainment of organizational goal, successful performance of organization contributes in the development of nation. 2. From Managers perspective. The study of management for those who aspire to managerial position provides the body of knowledge that helps them to become more efficient. 3. From non- managerial perspective. For those who do not plan on careers in management, the study of management can give them a great deal insight in to the way their bosses (managers) behave and the internal activities of the organization. 3 Organizations are critical for management to exist and management is also critical for organization to survive 1.4. Management functions Management functions are a set of interrelated activities and some times called management process. They are five in number. These are: 1) Planning- process of setting goals & choosing the means to achieve those goals. 2) Organizing- Process of arranging and allocating work, authority (the right to influence others) and resource among organizations members so that they can achieve organizations goals. 3) Staffing- is the Process of obtaining and maintaining capable and competent candidates to fill all job position. It involves the recruitment, selection, development, and retention of employees with appropriate qualifications for positions created by managers. 4) Leading – process of directing and influencing (the capacity to affect other’s action) organizational members to achieve organizational goals. It involves guiding (directing), influencing, and motivating employees to perform (accomplish) essential tasks 5) Controlling- process of ensuring that actual activities conform to planned activities. It enables to check whether activities are working according to the plan. The following figure represents the management process. 4  Planning Organizing Controlling Staffing Leading NB Management processes do not occur in step-by - step fashion. That means managers do not plan on Monday, organize on Tuesday, staff on Wednesday, lead on Thursday and control on Friday. That means managers perform their duties side by side (at the same time). 1.5 Managers and Level of Management 5 Managers may also be defined as those people in organization who are responsible to carryout major activities of management. Managers could be categorized in different groups or types based on hierarchical position and scope of activities for which they are responsible. II). Hierarchical position. Managers form hierarchical positions, are divided in to three distinct but over lapping levels. These are: Top level management, Middle level management and Lower level management. 1. Top Level Management  As the name indicates they come at the top of organizational hierarchy  Responsible for the overall management of organization  They determine the form of an Organization and define its over all character, mission & direction. They shape organizations goal and do what is necessary on the highest levels to achieve those goals.  Top managers provide resources, monitor progress and make strategic decision  Officially represent the organization to the external environment. They guide the interactions with its environment.  Top Mgt is composed of a comparative small group of executives.  In general, Top mangers handle complex and varied jobs. Example Chief Executives, President of University, General Manager of bank 2. Middle Level Management  AS the name indicates they are positioned between Top and Lower Level Management  Occupy roles positional between first line and top-level Management.  Responsible for implementation of polices and plans developed by top management.  They are charged with integrating the activities of different groups so that they operate in harmony. They transfer information and materials among different groups and coordinate organization's activities.  They supervise and coordinate the activities of lower level mangers. 6   Serve an as a link (bridge) between top management and supervisory (operational or first line or lower level) management. Example: Finance, Personal, production, Marketing, General Service, purchasing managers 3. Lower Level Management  They are found at the bottom of organization's hierarchy. Also called first line, supervisory or operational level management  They are responsible for directly managing operating (non- managerial) employees and resources.  They devote much portion of their time on supervisory (day -to -day activities of the organization).  They are the only managers who do not manage other managers.  They comprise the largest managerial group in most organization. Example, Forman, Supervisors, Nurse Head The following figure shows the management levels 7  Top Mgt m m M gt Middle Level Management Lower level Management II). Scope of activities for which the managers are responsible. By range/scope of activities for which they are responsible, managers are categorized in to General Managers and Functional Managers. 1) General Managers They are responsible for all activities of the organization They are the top executive officers of the organization. Their decision affects virtually broader areas of the organization. Example, General Manager of bank, President of University, Dean of College etc 2) Functional Managers Functional managers are responsible for only one organizational activity such as production, marketing, finance, personnel etc. In other words they are responsible for some specialized areas. 1.6 Management Skills Managers at every level perform all management functions. The amounts of time they devote to each activity however vary by management level. To perform management functions, managers need to posses a number of specific managerial skills. Managerial 8 skills are interrelated in practice, but can be considered separately as Conceptual Skills, Human /Interpersonal skill and Technical skills. 1) Conceptual skills  Represent the ability of managers to organize, to coordinate, and integrate all of organization's interest and activities.  Depend on manager's ability to think in abstract. It is the capacity of the manager to understand the cause and effect relationship among parts of the organization.  Conceptual skill involves the ability of managers to see the organization as a whole (holistic manner) and understand and how its parts depend on one other, and anticipating how a change in any of its parts will affect the whole.  Conceptual skills involve visualizing the different parts and a level of the organization in relation to its overall objectives.  It allows managers to think strategically, to see "big picture” and make abroad based decision that serve the overall organization.  Obviously very critical for top level management 2) Interpersonal/ Human/ Skills  Involve the ability of the manager to work with, communicate with, understand and motivate individuals and groups in organizations.  It is the ability of the manager to understand motivation and group process.  Equally necessary at all levels of management 3) Technical Skills Technical skill refers to the knowledge to perform specific tasks. Technical skills are generally associated with ability to use the tools, procedures, and techniques of specialized area. In other words technical skill is the ability of the manager to use specific knowledge, techniques and resources in performing work. It represents the mechanics (operation) of job.Highly important for first line management Note successful managers are likely to have all of the three skills. However, the proportion of each skills requirement varies by level of management. Technical skill is more required by lower level management while conceptual skill is more needed by top- level management. Middle level managers require all skill proportionally. The following 9 diagram shows the relative proportion of management skills required at the three levels of management Top Mgt Middle Mgt Lower Mgt Technical Human Conceptual Skill Skill Skill 1.7. Managerial Roles Managers should fulfill many roles in performing their managerial duties. A role is an organized set of behavior that belongs to an identified job in an organization. Role could be defined as the expected behavior of oneself in performing his/ her duties in an organization. Managerial roles are ten in number. They are interrelated and can be separated and grouped in to three major categories. These are: Interpersonal roles, Informational roles and Decisional roles. The following table illustrates and defines the managerial roles. Main Role Sub Role Description/definition Performing symbolic /ceremonial duties Figure Head Representing organizational unit in all matters Interpersonal Role of formality. Liaison Interacting with people both within and outside organization Leader Guiding, influencing and motivating followers/subordinates 10  Monitor Gathering both internal and external information Informational Role Disseminator Transmitting information internally within the organization Spokes Person Transmitting information externally in to the organization environment Entrepreneur Initiating changes to improve organizational performance Disturbance Dealing with unforeseen events and crisis and handler giving solution Decisional Role Resource Giving decision where people, money, allocator materials and information should be allocated. Negotiator Bargaining with other various individuals and representative of other units or other organizations (usually for non-routine activities) 11 Note the manager's position is the starting point for defining managerial role (position). Formal authority and status generate certain interpersonal roles. The interpersonal role in turn determines the informational role of the manager. Finally, the access to information, authority and status place the manager at a certain point in the organizational decision- making process. 1.8. Managerial and Organizational Performance Organizational performance measures how well the organization achieves the stated objectives. Managerial performance measures how well the manager determines and achieves appropriate objectives. Managerial and organizational performance can be measured by two interrelated terms called effectiveness and efficiency.  Effectiveness is the ability to set right goals and the degree to which those goals are achieved. In short it refers to "doing the right thing." Efficiency refers to the economical manner in which goal oriented operations are carried out. In short efficiency means "doing things right." It is measured by comparing the resource deployed (inputs utilized) to the result obtained (out put).It is the ratio of out put to input. The ratio of output to input greater than one (1) means the organization or the manager is efficient. 1.9. Management Science or Art Management is both an art and science. The development and use of mathematical models by managers in realm of certainty makes management science. On the other hand the dependency of managers on their experience and creativity in making decision makes management an art. 12  Summary Management affects the life of all individuals in an organization. Good knowledge and practice of management enable managers to perform their managerial duties. Knowledge of management by operational employees enables them to understand how the superior behave in the organization. In the broadest sense management determines the development of a nation as development of a nation is greatly affected by how well the organizations of the nation are performing. Management is universal. This implies management practice is applied in all types of organization (business, governmental, social institutions etc) Organizations are managed by one or more peoples who are called managers. Managers decide how organizations resource should be allocated. Successful managers must: 1) Understand the work to be performed (the management functions) 2) Understand the organized set of behavior to be performed(the managerial roles),and 3) Master the skills involved in performing the job(the management skills) Review Questions 1) Name and describe basic management functions 2) Describe the skills required to perform the work of managers 3) Discuss the significance of management 4) Management and organization are inseparable. Explain 5) How does one decide who is and who is not a manager in a given organization? For example is the operator of a one person business, such as a corner grocery store a manager. Explain 13  Chapter 2 Schools of Management Thought Management as a practice is as old as human life (civilization). From ancient times to the present, human beings have made efforts to understand the nature of organizations and the behavior of those who run them. However, the development of management thought is relatively a modern concept. Management was not emerged as a recognized discipline until the 20 th century. The age of industrial revolution in the 19 th century and subsequent emergence of large corporate organizations called for new approaches to management. During this period, previous management approaches (methods) no longer applied. No longer could managers make decision on-the-spot and maintain records in their heads. This is because, the industrial revolution of the 19th century had shifted the economy (USA) from a mainly agrarian one to an economy heavily involved with manufactured goods and industrial markets. This necessitates the need to standardize work methods for measuring work, and understand the psychological and physical aspects of a job such as monotony and fatigue. The environment that led to emergence of management thought is the subject of this chapter. Before directly discussing management thought, let us have some insight about the contributors to management thought and the historical force that shape management. 2.1. Contributors to management thought Contributors to the evolution of management are comprised of three groups. These are: 1) Practicing managers who described their own experiences and generalized principle from those experiences, which they believed, could be applied in similar situations. 2) Social and behavioral scientists who study management as a social phenomena using scientific methods. 3) Engineers, sociologists, psychologists, economists, political who represent a middle ground between management as practice and management as science perspective to studying management. 2.2 Historical forces shaping management Three major forces that affect management are social, political and economic. 1) Social forces- the aspects of a culture that guide the influence relationship among- their values, needs and standards of behavior, 2) Political forces- the influence of political and legal forces on people and organizations 3) Economic forces- forces that affect the availability, production and distribution of society’s resources among competing users, 14 2.3. Approaches to management thought There are five approaches to management thought. The schools of management (approaches to management) are “highly related”. These movements are not sharply demarcated for there is considerable commonality among them. Each of them is discussed briefly bellow. 2.3.1. The classical school The ideas of the writers under the classical school represent the first well development framework of management. The classical school is further grouped in to three categories. 2.3.1.1. Scientific Management The thought (approach) was formulated to increase productivity and make the work easier by scientifically studying work methods and establishing standards. The major contributors are. Frederic W.Taylor, Frank and Lilian Gilbeth,Henery Gant & and Harrington Emerson. Frederic Taylor played the dominant role, and he is usually referred to as the father of scientific management. Taylorism of course, is a term used by many people to mean scientific management. The primary aim of scientific management t was maximizing profits and minimizing costs of production. The guiding principle was “getting the most out of the workers” Taylor developed a strong dislike for waste and inefficiency. He observed what he called soldiering, a term describing the actions of employees who intentionally restrict output because they feared they if all the work was completed they would be laid off. Taylor quickly understands that the wage system of that time which mostly based on attendance and position was the major factor for soldiering. Taylor believed a piece-rate system would work if the workers believed the standard had been fairly set and the management would stick to the standard. Taylor based his management system on production- line time studies. The system was also called time and motion studies. He used scientific and empirical methods rather than tradition and custom for setting work standards. Based on time and motion study Taylor and his associates developed the following basic principles. Basic principles of scientific management 15 1. The development of management of scientific method of designing jobs. The principle involves gathering, classifying and tabulating data to arrive at the “One best way” to perform task or a series of tasks. 2. The scientific selection of workers. The principle involves the scientific “selection and progressive training and development of employees” so that each worker would be given responsibility for the task for which he/she is best suited. 3. Bringing together scientifically selected employees and scientifically developed methods of doing jobs by providing advice and explaining all issues. 4. A division of responsibility between management and labor. The principle underlines division of responsibility between management and a worker is very essential. The principle also stress that management should work together with the workers to enhance intimacy, friendship and cooperation between them. Taylor and other scientific management pioneers believed scientific management would benefit both management and employees equally: management could achieve more work in a given amount of time; the employee could produce more-and hence earn more- with little or no additional effort. In summary, Taylor and his associates believed employees could be motivated by economic rewards, provided those rewards were related to individual performance. Accordingly, Taylor and scientific management were often criticized (attacked) as being inhuman (viewing workers as factor of production who are motivated by material rewards) and aimed only at increasing output. 2.3.1.2. Classical theory of management The classical theory of management also called administrative management. Henri Fayol, a Frenchman, was the pioneer of the school of thought. He was concerned with upper rather than lower levels of management and with organizational concept rather than techniques of production. Unlike the scientific management the guiding principle of administrative management was “Getting the most out of management”. Fayol was the first to outline what we call today management functions. He listed management functions as; planning, organizing, commanding, coordinating, and controlling. To day Fayol’s greatest contribution is considered to be his theory of management principles and elements. Fayol identified the following fourteen “principles of management”. 1) Division of labor. It is the concept of specialization of work. It refers to breaking down large tasks into their components parts and assigning workers to each part. It suggests the more people specialize; the more efficiently they can perform their job 2) Authority- the right to give orders and the power to exact obedience. Managers must give order so that they can get things done. 16 3) Discipline- represents obedience, good behavior and outward marks of respect. Organizational members need to respect the rules and agreements that guide the organization. To Fayol, discipline results from good leadership, fair agreements and judicially enforced penalties for infractions (non-compliance) 4) Unity of command- indicates each employee must receive instructions from only one person. Fayol believed that when an employee reported to more than one manager, conflicts in instructions and confusion of authority would result. 5) Unity of direction- refers of those operations within the organization that have the same objective should be directed by only one manager using one plan. For example, the personnel department of a company should not have two directors, each with a different hiring policy. 6) Subordination of individual interest to the common (general). Implies the interest of employees should not take precedence over the interest of organization as a whole: the interest of one person or group should be subordinate to those at the organization. 7) Remuneration – represents compensation of personnel for service rendered. It denotes compensation should be both fair to employees and employers. 8) Centralization – process of concentrating decision-making authority to the center. Decreasing the role of subordinates in decision-making is centralization: increasing the role is decentralization. Fayol believed management should retain final responsibility, but should at the sometime give their subordinates enough authority to do their jobs properly. 9) Scalar of chain- often called hierarchy is the chain of supervisors ranging from the ultimate authority to the lowest ranks. Hierarchy refers to the line of authority from top-level management to lower level management. 10) Order- indicates materials and people should be in the right place at the right time. People, in particular, should be in the jobs or positions they best suited to. 11) Equity- combines kindliness and justice or resulted from kindness and justice. Managers should be both friendly and fair to their subordinates. 12) Stability of staff- means creating an atmosphere of suitability of permanent status (tenure) for employees. High employee turnover rate undermines the efficient functioning of an organization. 13) Initiative- indicates subordinates have to be given the freedom to conceive and carry their plans even though some mistakes may result. 14) Esprit de corps- denotes a sense of harmony and unit among the members of an organization. Fayol, suggested the use of verbal communication instead of formal written whenever possible. 2.3.1.3. Bureaucracy The theory was formulated by a German sociologist known as Max Weber. Bureaucracy is a system of administration of organization by the instrumentality (means) of departments or bureaus. Max Weber defined bureaucracy without the negative connotations it has today to denote inefficacy. He understands bureaucracy as rational and most efficient kind of organization ever devised. Bureaucracy, according to Weber, is a very rational form of organization. Rationality 17 implies that an organization’s structure is based on rules and procedures which are intended to help it achieve its objectives. Such rules provide a system of order within which the work of an organization can be conducted. According to Weber, the ideal bureaucratic model has the following basic characteristics. 1. Officials are organized in a clearly defined hierarchy of offices 2. Administrators are selected on the basis of qualification, for posts in bureaucracy 3. Each office has a clearly defined area of competence. The limits, rights, and posers of positions are clearly defined to prevent overlap. 4. Officeholders are personally free and subject to authority only so for as their official duties are concerned. 5. Promotion of office holders is based on seniority or achievement or combination of both. 6. Office holders are guided by stable rules and policies. Rules and policies promote efficiency and ensure continuity. They facilitate orderly, rational, and equal treatment of clients. Without them, administrators would operate unfairly and inconsistently. 7. The job of office holder is /her sole or main occupation. They are paid fixed salaries and have person rights. Strict rules prevent officials from receiving financial and non-financial rewards from outside bodies, thus preventing (or at least making difficult) the complex web of corruption. 8. Official are subjected to strict discipline and control. They don’t own the materials and equipment that they are working with. Advantages and disadvantages of the model Advantages 1) The distinct rules allow the organization to act with precision and sometimes with speed. The hierarchical arrangements and the rules and regulations of bureaucracies help them achieve grater degree of efficiency. Bureaucratic organizations serve large number of persons in an orderly and systematic way 2) Bureaucratic organizations have high degree of predictability of out comes. Since bureaucracies operate on the basis of codified rules and polices, their decisions are predictable and free from arbitrariness. It also prevents duplication of efforts. 3) Bureaucratic organizations exhibit a high degree of impersonality. Both the employees and clients of the organization are treated fairly Disadvantages 1) Over-rigidity or inflexibility- deviation from established ways of doing things are not accepted. This implies organization face difficulty to adapt changing conditions and special circumstance. In other word bureaucratic organizations do not easily adapt to the changing conditions and special circumstances. 2) One-way communication- in bureaucratic organization communication usually flows from top to lower in organization hierarchy. Lower level employees face difficulty to communicate with an administrator at the top sine his/her message will be screened, diverted, or stopped some where along the chain of command. 18 Contributions and Limitations of the classical school Contribution 1) Laid foundation for later development in management theory. 2) Identified key management process, functions and skills that are still recognized as such today 3) Focused attention on management as a valid subject of scientific inquiry. Limitations. 1) More appropriate for stable and simple organizations than for today’s dynamic and complex organizations. 2) Often prescribed universal procedures are provided which are not really appropriate in some setting 3) Less concern for employees and viewing employees as tools than resources. 2.3.2 Neo classical school Contrary to the classical management thought which viewed organization and jobs from a mechanistic point of view (worker as cogs within those machines), the theory placed much more emphasis on individual attitudes and behaviors and on group processes in the work place. It recognized the importance of behavioral processes in the work place. The approach emphasized the interactions of people in an organization. In this school concentration is made on motivation, communications, and work group and other behavioral related topics. It was developed partly because the classical approach sometimes failed to improve efficiency and harmony. Contributors are: Mary Parker Follet, Elton Mayo, Abraham Maslow, and Douglas McGregor 2.3.2.1 The Human Relations movement The movement was started as a reaction particularly against the doctrines and practices of scientific management. The movement was generated by:  The growing strength and militancy of labor unions  The Hawthorne experiments of Elton Mayo  The theoretical and empirical evidences from social science The movement focused attention on the human element in the in the work place. They emphasized that workers (labor) is not a commodity to be bought and sold. They must be considered in the context of the work group of which they are a part. Their relationship with their fellow workers and their bosses influence their behavior, morale and productivity. The human relation movement opposed to the classical schools; which focus on the formal organization structures, paid attention both to formal and informal organization. An informal organization is voluntary in origin, its purpose is nit clear, at least to numbers, it has no hierarchy 19 of positions and it ceases to exist when its present members left. The informal organization consists of social relationship among employees. Unlike, the classical school which conceived communication mainly as the transmission of orders and information from higher to lower levels in organization, the human relation movement viewed communication as the life blood of the organization. They emphasized the flow of information freely up, down, and horizontally both in formal and informant structure. 2.3.2.2. Organizational Behavior Theorists who developed this model have noted that many of the assertions of the human relations work were simplistic, inadequate description of work behavior. Organizational behavior theorists take a holistic view of behavior by considering individual group and organization process. The scope of Organizational behavior includes such issues as: the needs people seek to achieve in their work the formal and informal organization of the work place motivation and job satisfaction, leadership, group dynamic communication, organization politics, interpersonal conflict, etc Generally speaking, organization behavior,  Focuses on employee behavior in an organizational context  Draws from an interdisciplinary base and recognizes the complexities of human behavior in organizational settings.  Provides important insights in to motivation, group dynamics, and other interpersonal process in organization, focused managerial attention on these some processes.  Challenged the view that employees are tools and furthered the belief that employees are valuable resources. 2..3.2.3. The Quantitative management Quantitative management theory applies quantitative techniques to managerial problem solving and decision making situations. It emphasized the application of quantitative or mathematical approaches to management problems. The use of statistical analysis, liner programming for the allocation of resources, the development of models before implementing an idea, production scheduling techniques, and financial analysis are all examples of modern-day implementation of the quantitative approach. An area not addressed effectively by this approach is the human relation side of the organization. There are two interrelated branches of quantitative approach. 2.3.2.3.1. Management Science Management science, not scientific management, focuses specifically on the development of mathematical model, equations and similar representation of reality. 2.3.2.3.2. Operational Management 20 Operations management is somewhat less mathematical and statistically sophisticated than management science and can be applied more directly to managerial situations. Generally, operational management is concerned with helping the organization produce its products or services more efficiently and can be applied to a wide range to problems. Contributions and Limitations of the quantitative management school Contributions  The development of sophisticated quantitative techniques to assist in decision making  Application of models has increased awareness and understanding of complex process and situations  Quantitative management theory has been very useful in planning and controlling. Limitations  Can not fully explain the behavior of people in organization  Mathematical sophistication may come at the expense of other important skills.  Models may require unrealistic or unfounded assumptions 2.3.4. Modern approach to management 2.3.4.1. The system approach (Theory) The “system” concept is a relatively recent approach. A system can be seen as a complexity of element standing in interaction. System can be conceptualized as an organized, unitary whole composed of two or more interdependent parts, components and delineated by identifiable boundaries from its environmental supra-system. Thus “system” represents a interrelated set of elements functioning as a whole. The system approach is built on the premise that the manager of an organization must understand all the various systems that compose the entire operation. This approach views organization as a total system comprised of a group of interrelated department contributing to a single purpose. In an organization action by one part affects all others. Consequently, managers must adopt a broad perspective to their jobs, viewing the organization as dynamic whole when solving problems. Features of system 21 1. Components – are the smallest meaningful units (elements) that interact with each other to fulfill the purpose (s) of the system. 2. Subsystems - are relatively smaller systems that exist within a large system. A subsystem is a set of components interrelating for a purpose. 3. Boundary – the component that separates the system from its environment and filters the inputs to and the outputs from the system. The boundary may be a physical component (e.g. Skin of organism, boarder of country) or it may be intangible zone such as the outer limits of a social group. The boundaries of an organization are determined primarily by functions and activities of the organization. Organizational boundaries provide a degree of autonomy and independence through their filtering and buffering functions. 4. Flow – it represents the movement of inputs from the environment, the transformation process within the system and the exit of outputs form the system. 5. Purpose- The purpose of the system is the function(s) the system performs in relation to adjacent system or a large system of which it is a part. 6. Feed back – is the spot at which the work of the system can be assessed and if necessary corrected. 7. Openness and closeness- an open system is one with a highly permeable while a closed system is one with relatively impermeable boundary, which does not promote interactions with its environment. Openness and closeness is a matter of relative comparison since there is no fully open and total closed system. 8. Equifinality – in an open system characteristics, which suggests that, an organization can reach the same point through any of several routes. The concept negates the “one best way of achieving objectives”. 9. Differentiation – Many systems grow through internal elaboration. Systems appear to move in the direction of greater differentiation and a higher level of organization- a tendency of specialization among internal subsystems. 10. Coordination – functions of components and subsystem are coordinated in order to achieve major objectives of the system to which they belong. 22 11. Equilibrium and disequilibrium – Each system exists in various particular patterns of relationships among its components and the filtering condition of its boundary at a given point in time. Two general states of systems are equilibrium and disequilibrium. Equilibrium is a state of stability or balance in a system. A social system, as an open system, is explained by continual interactions among its systems and with its environment in a “steady state” or dynamic equilibrium. On the other hand, disequilibrium, as opposed to the concept of equilibrium, is a state of instability or imbalance in a system. 12. Synergy (Holism) – The concept “synergy” means that the whole is greater than the sum of the parts. In terms of organizational system, synergy means that as separate units within an organization cooperate and interact, they become more productive than of each had acted in isolation. 2.3.4.2 Contingency approach The contingency approach is based on the premise that the actions or the approaches managers should take depend on the situation and its variables. It argues that there is no one best way to manage. The approach holds that universal solutions and principles cannot be applied to all organizations. The best management approach depends on the situation. The approach seeks to match different situations with different management methods. The approach is increasing popular in recent yours and is supported by some research results. The contingency approach helps to understand the interdependence of Organization parts (people, task & management) and enables people to choose the best way to intervene in fitting the parts together. The major contribution of contingency theory to organizational design is, its premises that there are a number of ways to solve problems and that situational circumstance are important. 23 While system theory provide the broad framework for understanding organization (high degree of generalization) contingency views tend to be more concrete and to emphasize more specific characteristics and patterns of interrelationship among subsystems. The contingency view attempts to understand how organizations operate under varying conditions and in specific circumstances. Contingency views are ultimately directed toward suggesting organizational design and managerial actions most appropriate for specific situations. System concepts and directed toward a broad model for understanding all organization. Contingency views recognize that the environment and internal subsystems of each organization are somewhat unique and provide a basis for designing and managing specific organizations. The contingency theory suggests the manager may make use of all valid tools, techniques concepts and theories of the classical, behavioral, and quantitative schools of thought. Finally, the contingency orientation reminds managers that a tool, technique, concept, or theory that works perfectly in one setting more or situation may not be appropriate in different circumstances. The basic assumption of the contingency view is, “there should be congruence between the organization and its environment and among the various sub-systems”. Chapter summary All schools of management thought have contributed much for the development of management as a recognized discipline. All management schools are not clearly demarcated. They have common elements. The orientation or focus of each management theory however varies. Both the classical and human relations approaches to management believed in the one best way and tend to concentrate on limited aspects of the organization. The classical school focused attention on the formal structure, technical requirements of the organization and general sets of principles. There was an assumption of rational and logical behavior. The behavioral approach focused attention on the informal organization, and the psychological and social needs of people at work. The ultimate objective of this approach is to enhance organizational success by building appropriate relationship with people. 24 The quantitative management theory applies quantitative techniques (mathematical model) to solve managerial problems and decision-making situations. The approach did not address effectively the human relation side of the organization. The system approach to management placed emphasis on the socio-technical approach, the interrelationship of sub-systems and multiple channels of interaction, and recognized the importance of the external environment. In other words the system approach views the organization as a whole and involves the study of the organization in terms of the relationship between technical and social variables within the system. Changes in one part, technical or social, will affect other parts and thus the whole system. The main premise of the theory is that to understand fully the operation of the entity, the entity must be viewed as a system. The contingency approach to management emphasizes that what a manager do in practice depends on, or contingent upon, a given set of circumstances- a situation. In essence, this approach emphasizes “if-then” relationships: “if” this situational variable exists, “then” this is the action a manger probably would take. In general, the contingency approach attempts to outline the conditions or situations in which various management methods have the best chance success. This approach is based on the premise that, although there is probably no one best way to solve a management problem in all organizations, there probably one best to solve any given management problem in any one organization. Review Questions 1. Identify and discuss major trends in approaches to management thought. 2. Assess critically the relevance of scientific management to present day management. Give examples 3. Discuss briefly the contribution and limitation each management school 4. Give suggestions and evidence for the existence of management practices in Ethiopian history. 5. Evaluate the application of the system approach to analysis the work of organizations. 6. Discuss briefly the contingency approach to management thought. 25  7. Discuss the extent to which the study of the development of management thought has any practical value to the manager. Chapter 3 3. Planning and Decision- Making 3.1 Planning 3.1.1. Definition and Nature of Planning All Managers must engage in planning. Planning is the process of setting goals and choosing the means to achieve those goals. It is the process of determining how the organization can get where it wants to go. It could be defined as the process through which managers determine goals 26 and devise the means for utilizing resources to accomplish them. Shortly, planning means preparing today for tomorrow. In planning process mangers:  Establish goals  Anticipate future development  Identify course of actions required to attain the goals  Determine the time frame It is important to note that even the scope and complexity of planning may differ from one institutional level to another the planning process is essentially the same. Moreover, planning as a key management function enables managers to decide (answer six basic questions) in regard to any intended activity. These are: 1. What is to be done? (Goal) 2. Who is to do it? (People who perform the goal) 3. When is to be done? (Time frame) 4. Where is to be done? (place) 5. How is to be done? (Steps & methods to reach goals) 6. How much? (Resource required necessary to reach the goal) The planning function can be characterized as follows: 1)Planning is the primary management function. Planning occurs before organizing, staffing, directing and controlling. Planning provides direction and a common sense of purpose for the organization. It helps to determine the operation and how those operations will affect the organization before commitments are made. 2)Planning is a continuous process. Planning deals with the future, and the future by its nature is uncertain. Since the future events may not be exactly as predicted, then, plans do not acquire finality because revisions are needed to be made in responses to changes taking place in the environment internal and external environment 3) Planning concerns all managers. Planning is the responsibility of all managers. However, the amount of time and span of plan vary by management level. Top-level managers are responsible for planning for relatively larger unit of the organization; devote a larger part of their time to planning, and the time span of their plans also tends to be larger than that of managers at lower levels. 4) Plans are arranged in hierarchy. Plans first set for the entire organization called the corporate plan. The corporate (strategic) plan provides framework for the formulation of divisional, departmental, and sectorial goals. 5) Planning is future oriented. All types of plans established by managers affect future effectiveness of the organization, as decisions made activities undertaken in the present continue to have their impact in to the future. 27  6) Planning is antithesis of status quo. Planning is undertaken with the conscious purpose of attaining a position for the company that would not be accomplished otherwise. Planning, therefore, implies change in organizational objectives, polices, producers, marketing strategies, and so fourth. However, planning itself is affected by unforeseen environmental changes. 7) Flexibility- planning allows managers the opportunity to adjust the organization to the environment instead of merely to react to it. 8) Planning is action – oriented. Plans that are blue print should necessarily followed by action they should not be paper tigers. As occasion needs, plans need to be translated in to action. The elements of planning are:  Objectives – specify future goals  Actions- specify, preferred means to achieve objectives  Resources- constraints on course of action. Budgeting identifies the resources and resource limits.  Implementation – assigning and directing personnel to carry out the plan. 3.1.2. Importance of Planning Planning has a number of importance to organization. With out plans, manager cannot know how to organize people and resources effectively. They may not even have a clear idea of what they need to organize. Without a plan they cannot lead with confidence or expect other to follow them. And without a plan, managers and their followers have little chance of achieving other goals or knowing when and where they stray from their path. More specifically, sound planning benefits managers because: 1) Planning establishes coordinated effort. It gives directions to management when every one knows where the organization is going and what they are expected to contribute to achieve the objectives; there should be increased coordination, and teamwork. 2) Planning is a way to reduce uncertainty through anticipating change. Planning also clarifies the consequences of the actions management might take in response to change. Planning forces managers to look a head, anticipate changes, consider the impact of these changes, and develop appropriate responses. 3) Planning can reduce overlapping and wasteful resources and activities. Coordination before the fact is likely to uncover waste and redundancy. 4) Planning establish The objectives or standards that are to be used to facilitate control Planning also  Facilitate professional growth  Provide the frame work for the organization  Aid in delegating authority 28   Aids communication flow  Build confidence  Minimize risk by reducing uncertainties  Indicate limits of responsibility 3.1.3. Characteristics of a Good Plan Sound (good) plan is characterized by the followings. 1) Objectivity- planning should, first of all be based on objective thinking and it should be factual, logical and realistic. 2) Futurity- since a plan is a forecast of some future action, it must have the quality of futurity; other wise it has little valve as a basis for action. 3) Flexibility- because no one can foresee the future, plans must have flexibility. They must smoothly and quickly adjust to changing conditions without seriously losing their effectiveness. 4) Stability- is related to flexibility. A stable plan will not have to be abandoned because of long-term changes in the company’s situation. 5) Comprehensiveness- organizations plan must be comprehensive enough to provide adequate guidance, but not so detailed as to be unduly restrictive. 6) Clarity and simplify- although a good plan must be comprehensive, it should also be simple. A plan should not be ambiguous. Lack of clarity makes understanding & implementation difficult. 3.1.4. Organizational Objectives. Organizational are the ends toward which organization activity is amid. They are statements that identify what the organization hopes to accomplish. Organizational objectives make the company’s mission tangible and measurable. Good organizational objectives should be specific, achievable, measurable, operational (realistic) and time targeted. Setting organizational objectivists is important for several reasons. First, people usually perform better when they have specific objective to achieve. Second; when an employee’s performance is in adequate it is often because the person either thinks he/she is doing what is expected or does not know what the objectives are. Third, objectives link planning and control. As products of the planning process, objectives specify in concrete terms what each unit and individual in an organization is to achieve. These objectives then become the standards against which actual performance can be compared and controlled. 3.1.5. The Planning Process Planning is a logical and systematic activity. The planning process indicates the major steps that are taken in planning. It involves a series of steps. The steps are interrelated and there is no rigid boundary between or among the steps, and one is base for the other. The planning process consists of the following steps: 29 1) Understanding of the existing situation. In preparing plan for their organization managers need to understand and have adequate knowledge about both the internal and external environment. 2) Forecasting- since planning is deciding what is to be done in the future, managers need to obtain necessary information about what the future will look like. 3) Establishing objectives. Organization objectives give direction to the major plans, which, by reflecting these objectives, define the objective of every major department. Objectives specify the expected results, and indicate the end points of what is to be done, where the primary emphasis is to be placed, and what is to be accomplished by organizational network. 4) Determine Alternative Courses of action. Constructing a list of possible course of action that will lead to objective/goal. 5) Evaluating the alternatives. Listing and considering the advantages and advantages and disadvantages each of possible course of action. 6) Selecting a course of action (selecting the best solution) This step refers to selecting the course of action that has the most advantages and fewest disadvantages. This is the point at which the plan is adopted the real point of decision- making. 7) Formulating derivative plan. When decision is made, planning is seldom complete, and a seventh step indicated. Derivative plans are almost invariably required to support the basic plan. 8) Numbering plans by budgeting. Converting the activities in plan in to budget. Estimating budget to carry out the plan. 9) Implementing the Plan. After the optimum alternative has been selected, the manager needs to develop an action plan to implement it. The manager must determine who will be involved, what resource will be assigned how the plan will be evaluated, what type and degree of authority will be granted to achieve the ends, by what date the tasks to be initiated and completed and what reporting procedures are to be used. 10) Controlling and evaluating the results. Once the plan is implemented, the manager must monitor the progress that is being made, evaluate the reported results, and make any modifications if necessary. 3.1.6 Types of Plan Plans can be classified on different bases or dimensions. The following are the most important ones: -  Scope /breath dimension  Repetitiveness, and  Time dimension 3.1.6.1 Classification of plans based on Scope or breadth Based on their scope or breadth plans can be classified into three categories: - 30 1. Strategic planning 2. Tactical planning and 3. Operational planning A). Strategic Planning Strategic planning is the process through which manages determine the organizations basic mission and the set of means for archiving this mission. Strategic planning the process of analyzing and deciding on: the organizations mission, objective, major course of action (Strategies), and major resource allocation. Strategic planning is prepared by top-level-executives by taking in to account internal environment (strengths and weakness) and external environment (threat and opportunities). Strategic plans: -  are organizational wide  establish the organizations over all goals  tend to be the long term success and direction of the organization (mostly long-large in its time frame)  are performed (done) by top level managers.  Expressed in relatively general non-specific terms B) Tactical Planning Tactical planning is the process through which managers design coherent groups of activities to accomplish a strategy. It is a means of translating strategies in to short-term tactics. In other words, tactical planning refers to the process of action plans planning refers to the process of action plans through which strategies are executed. Tactical plans: -  Facilitate objectives, because they are prepared as a performance targets.  Translate the strategic plans into measurable tactical objectives.  Tend to be short-term, usually not more than two years.  Prepared by middle level managers who are responsible in 31  directing departments, divisions on order similar sub-units of the organization. Examples: -  Developing annual budget for each department, division, project  Choosing specific means of implementing strategic plans.  Deciding on course of action for improving current operation C) Operational Planning Operational planning is the process through which managers design specific activities and steps to accomplish objectives. It is most specific and detailed. It is made at the operational level and concerned with the day-to-day, week-to-week activities of the organization. First-level- managers are responsible for accomplishing (preparing) the operational planning. Operational Planning is narrow in scope and short lived, usually a few months. Examples are Production schedules, sales Plan, lesson plans etc… The following figure summarized the scope of organizational plans and type of managers responsible for each planning type. 32 It is important to note that the three types of plans (strategic, Tactical and operational) interact each other. Strategic plans cannot be accomplished without the implementation of tactical and operational plans. Tactical and operational plan on the other hand, do not make sense if they are not coordinated through a broader strategic plan. Managers, therefore have to ensure that there is a mutual interaction among them. 3.16.2. Classification of plans based on Repetitiveness Based on repetitiveness plans can be classified in to two as (1) Single use and (2) Standing plans. Single Use Plans Single use plans are developed to deal with “one short” situation for a given purpose or a given period of time and then discarded. It is “prepared for unique one-of- a- kind of situations” and discarded once they achieve their objectives (they are not used over and over again). The most common forms of single use plans found in organization are budget, Project and Program. Budget A budget is statement of expected results expressed in numerical terms. Budget is usually defined as financial plans for allocating resources to complete organizational activity. It is also expressed in terms of labor hours, units of production, or machine-hours; or in any other numerically measurable term. It may deal with operations as the expense budget does; it may reflect capital outlays, as the capital expeditions budget, does or it may show cash flow, as the Cash budget does. Project Projects are single use plans that are either smaller in scale than programs or part of a program. Though project is usually considered merely as a part of a general program, project in its self can be planned to fulfill distinct objectives. Generally, Project enables to breakdown a complex activity in to smaller and manageable activities. Program A program is plan that out line a variety of interdependent activities that must be coordinated to achieve an objective. A program contains all the activities necessary for achieving the objective, they clarity who is responsible for each activity, and they identity the order and timing for each 33 activity. They involve complex activities necessary to carry out a given course of action. All the supporting programs (projects) of a main programs call for coordination and timing, since the failure of any part of this network of supporting means delay for the major program as well as unnecessary costs and loss of profits. Example:-  Expansion, program of hospital  Expansion program of a college  Food self sufficiency program  Family planning program. Standing plans Standing plans are those plans that can be used again and again. They are long-range plans. They are used over and over again (frequently) to help guide the actions of the organization. Standing plan is a “predetermined course of action under taken under specified circumstances. They enable top management to provide a clear guideline for middle and lower level management. Standing plans include: Mission or purpose, Goal or objectives, Policy, Procedures, Method, and Rule. Mission or purpose The mission or purpose is the general statement that identifies the basic functions or task or any part of it. Mission can also be defined as the purpose of existence of the organization. For example, the mission of business generally is the production and distribution of goods and service. The purpose of a university is teaching and research. Objective (goal) Objective are statements of organization targets or the end results that administrator (managers) seek to achieve. They are the ends, toward which activity of the organization is aimed. They represent not only the end point of planning but also the ends toward which other management functions (organizing, setting, leading and controlling) are aimed. 34 Organizational objectives reflect management responsibilities and the position in the organizational structure. At the top-level management, objectives are strategic and related to long-large planning issues, where as tactical and operational objectives are related to medium and short large plans respectively. It is important to note that objectives should be “specific, measurable, realistic, achievable, and time targeted for achievement. Strategies Strategies are ways and means to achieve the established objectives. Strategies are major course of action that the organizational plans to take in order to achieve objectives. Strategies do not attempt to outline exactly how the organization is to achieve its objectives. They finish a framework for guiding thinking and action. It is important to notice that every objective must have at least one strategy. This means that management should at least have one stated course of action to accomplish every objective. Polices While objectives refer what is to be done, polices focus on how organizational objectives will be achieved. Polices provide a general guideline to action. It is a framework for managers to follow in decision-making and handling problem situational. Polices define an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to an objective. Polices are mainly prepared by top management. Polices should be clear and understandable, stable over time and communicated to every one involved. They must also allow for some discretion. Other wise, they would be rules. In other words polices should not interpreted as a kind of “ten commandments” which do not leave room for discretion. This does not mean also polices are limit less. Procedures 35 Whereas polices are general framework to attain the organizational objectives, procedures are specific steps required to achieve goals. Procedures show chronological sequences of required action (show sequence of activities). They guides to action, rather than to thinking and they detail the exact manner in which certain activities must be accomplished. They are numerous at the lower level and help in the implementation of polices. Well-established procedures provide specific instructions in handling organizational operations. Methods Where as a procedure shows a series of steps to be taken, a method is only concerned with the single operation, with one particular step, and it tells exactly how this particular step is to be performed. That is a method is more detailed. Examples:-“how the users prepare materials requisition”, how vendors (suppliers) are selected”. Rules A rule is a statement that tends to restrict actions or prescribe specific activities with no discretion. In other words a rule is a specification for actions that must be taken, or must note be taken in particular circumstances. They spell out specific required actions or no actions, allowing no discretion. They are usually the simplest type of plan. They are designed to be clear and unambiguous. Difference between Rules and procedure Rules do not specify a time sequence while procedures do  Rules may or may not part of procedure  Rules specify action must be taken or must not be taken while Procedures do not. Difference between Rules and polices  Polices guides decision making with discretion while rules do not.  Though rules also serve as guides, they do not allow discretion in there application. 3.1.6.3 Classification of plans based on time All planning deals with the future and the future is measured in time. Hence, it is convenient and acceptable to think of different kinds of planning in terms of 36 the time periods for which the planning is intended. We can classify plans into three based on time as: - 1.Long range plans 2. Intermediate plans and 3. Short range plans Long range planning Long large planning has longer time horizon; it is not concerned with immediate future but distant future. It is concerned mainly with the future direction of the organization. The time may range usually from 5-10 years. Short Range planning Short large plans are not prepared separately. They are complementary of long-range plans. They constitute the steps toward the implementation of long-range plans. The period is generally is generally 1 year; some times it can go up to 2 years. Intermediate –Range Planning Intermediate Range planning ranges between long and short range planning. Note: - What is long or what is short range cannot be generally defined. In most of the cases it depends on the size of the organization and the type of business. For example, for a wheat farmer it takes six months to harvest and this period can be considered as a short range. But for an orange farmer a harvest may take 6-7 years and it can be taken as in short range. 3.2. Decision- Making 3.2.1 Nature of decision making Decision-making is the process of defining problems, generating alternative solutions, choosing one alternative, and implementing it. It is a rational choice among alternatives. That is by its nature, decision-making involves a choice, and decision situations are choice situation. Although each of us makes decisions every day, it is particularly vital function of managers. It is enables administrators (managers) to solve social, economic and political problem. 37 Decision-making is universal: It is a part of all managers’ jobs. All managers make decisions constantly while performing the management functions (planning...controlling). Because decision-making is such an important element of a manager’s job, it is necessary to utilize a conscious rational decision making process. A manager who makes decision on a whim (emotional feeling) will not achieve success than managers who consciously works through the decision making process. 3.2.2 Decision making process. Decision-making is an affair of the mind, an intellectual process. It consists of a sequence of steps starting with an input (a problem) and ending with an output (action). A problem is the deference between what is and what should be. In this sense, decision-making process is a system of inputs, processes and outputs. In other words, decision-making involves several steps that lead managers towards optimal solution. Hence, managers are required to solve organizational problems, which are caused by changing situations and unusual circumstances using the following rational decision making steps. 1) Define the objective Define the objective is an integral part of the rational decision making process. Well-defined operational objectives would be essential in detecting and identifying problems to be solved by the decision maker. 2). Diagnose and define the problem. Recording the kind and nature of the problem that exists within an organization is the most important and difficult in decision-making process. It is essential to examine problems thoroughly, recognize symptoms and identify causes. It is important to note that symptoms provide clues to existing or potential problems, and when they are diagnosed correctly, managers can correctly define the right problems to solve. Problem diagnoses sets the tone for the other steps in decision-making, it also determines the extent of is effectiveness. 3) Identification of alternative course of action. Decision-making situations are problem situations that involve choice, At this point managers need to look for, develop, and list as many possible alternatives (choices) which represent feasible courses of action courses of action for dealing with the problem at head. 38 4) Analyze the alternatives. The purpose of this step is to decide on the alternative merits of each of the alternatives. The process involves screening alternatives, examining the advantages of each course of action, and analyzing each alternative. These can be done by using appropriate method; sufficiency, feasibility and realism. Sufficiency- An alternative is viable if it is sufficient to solve the problem. Feasibility- many alternatives that are intuitively feasible turn out to be impossible given the organization resources constraints. As alternative is feasible only if it can be implemented within the constrained faced (resources & other factors) Realism- An alternative may be feasible yet unrealistic. An organization faces constraints that limit choices, and while an option may be feasible. It may not be realistic given the prerogatives of managers or some other limiting criteria. 5) Making choice (Select the best alternative or combination of best alternative). After assessing decision maker must make a decision that is optimal. The optimal choice will be one that generates that greatest the possible benefits with the fewest negative consequences. In other words managers must select the alternative that offers the fewest disadvantage and the most advantages. Sometimes the optimal solution is a combination of the alternatives. 6) Implement the solution. The solution needs effective implementation to yield the desired results. Every one involved with the decision must know what he/she must do, how to do it, why and when. In order to implement the decision successfully managers must:  Develop action plan  Consider the resource involved in decision making  Assign specific responsibilities for decision implementation.  Anticipate problems that might occur during decision implementation 7) Follow-up and evaluate the decision. Follow-up and evaluation (controls) are needed to guide actions toward desired results. The system should provide feedback on how well the decision was implemented, what the results are (positive or negative), and what adjustments are necessary to get the results that were wanted when the solution was chosen. Effective managers use control and feed-back mechanisms not only to ensure results but also to provide information for future decisions. 3.2.3. Types of decisions 39 There are two categories of decisions. These are programmed and non-programmed decisions. Programmed Decisions Programmed decisions are those that are made in predictable circumstances and have predictable results. Results are predicable because similar decisions have often been made before under similar and recurring circumstances. When problems are of repetitive and routine nature, and developed and used to solve these problems each time they occur. Programmed decisions are, therefore, based on policy, directives, procedures and rulers. Non- programmed Decision Non programmed decisions are those that are made in unique circumstances and often have unpredictable results. While programmed decisions can be anticipated, non-programmed decisions must be dealt with as they occur. They require more time and effort and involve more uncertainty than programmed decisions. They have been traditionally handled by general problem solving processes, judgment, intuition, and creativity. Modern management techniques for non-programmed decisions are much less developed than for programmed decisions. The number of programmed and non-programmed decisions a manager makes varies according to his/her level in the organization. Top management focuses on non-programmed decisions; middle management handles mostly programmed decisions (though non programmed decisions occasionally arises), and lower level management handles programmed decisions almost exclusively. 3.2.4. Decision making under different conditions Managers make dictions under there different conditions. These are: 1) Decision making under certainty. In this situation, the decision maker can calculate the precise outcome for each alternative. Here, the external conditions are identified adequately and very predictable. Decision making under certainty seldom occurs, however, because external conditions seldom are perfectly predictable and because it is impossible to try to account for all possible influences on any given outcome. 2) Decisions under risk. 40 These are decision situations in which probabilities can be assigned to the expected outcomes of each alternative. In this situation, some ideas of the relative outcome are known. The probabilities are determined either objectively subjectively. 3) Decision under Uncertainty. Under a situation of uncertainty the decision maker has no knowledge concerning the probabilities associated with different possible outcomes. In this condition, managers have only a meager data base, they do not know whether they or not the data are reliable, and they are very unsure whether or not situation may change. More over, they can not evaluate the interaction of the different variables. 3.2.5. Toward more effective decision-making. The followings are the major guidelines for making effective decision. 1) Use information effectively. Using information effectively is one way to reduce confusion and improve decisions because it is the quality of timely information that helps manages make good decisions. 2) Enhance systems for decision making. Creating sound full working system and continuous improvement of the system is essential for effective decision-making. Therefore; managers at every level are responsible for creating systems, not simply work within them if they are to be successful in decision making. 3) Empower those who must implement decision. Empowerment means not only including employees in decision making, but also ensuring that they are given both the resources necessary to implement decisions and the responsibility for getting the job done. The main benefit of empowerment is improved cooperation, those who feel empowered are more likely to accept and understand origination decisions. 4) Communicate Effectively. Decisions must be understood by those who carry them out as well as by those at higher echelons who must evaluate performance. Clear (effective) communication is crucial to gain acceptance. Communicating expectations for performance, detailing decisions, and explaining changes and adaptations are all essential for organization success. 5) Delegate Pragmatically. 41 Assuring timely and more accurate decision-making at critical points in operations consists basically of shifting authority downward. Pragmatic delegation suggests that mangers define who is best suited to make decisions on the basis of several criteria. People with experience in solving problems, who have access to information, and who are in the best position to implement decisions are the best candidates for decision making authority. 1. Review Questions 2. Why is planning called the primary functions of management? 3. Why is planning an important management task? 4. What is/are the differences between single use and standing planning 5. What questions you need to address in plan preparation? 6. What is decision making? Describe how it is important to organizational success. 7. Decision making is a system of inputs, process, and outputs. Explain? 8. Describe the main features of programmed and non programmed decisions. 9. If you are asked to make a decision on some specific organization issue, what is the first thing you need to consider? Why? 10. When should you use programmed and non-programmed decision-making? 11. Distinguish among the decision situations of certainty, risk and uncertainty? UNIT FOUR Organizing Organizing is bringing together and coordinating human and physical resources to accomplish the objectives established in the planning process. Since no one can do everything needed to achieve an organization’s goals, gobs must be created and arranged in a way that gets things done. Organizing involves developing a structure to coordinate the efforts of different people. The purpose of the organizing function is to coordinate effort through the design of a structure of task and authority relationships. The two key concepts are design and structure. Design implies that managers make conscious effort to predetermine the way in which work is done by employees; structure refers to relatively stable relationships and aspects of the organization. The organizing function is the process of breaking down the overall task in to individual assignments and then bringing those assignments together in units or departments and delegating authority to a unit, or department, manager. Thus, we can describe the organizing function in terms of dividing tasks in to jobs, and delegating authority. Put more specifically, the organizing function has the following four distinct activities. 1. It determines what work activities have to be done to accomplish organizational objectives 2.It classifies the type of work needed and groups the work in to manageable work units 3. It assigns the work to individuals and delegates the appropriate authority 42 4. It assigns a hierarchy of decision-making relationships. Organizing results in an organization structure that can be thought of as a framework that holds the various functions together according to the pattern determined by management. Organization structure is a formal framework that shows a set of tasks assigned to individuals and departments, reporting relationships including lines of authority, decision-responsibility, number of hierarchical levels and span of management or span of control, and the design of systems to effectively coordinate employees across departments. Organization structure is simply a diagram or chart of all the positions in an organization and their formal relationship to one another. The immediate value of organization chart is to illustrate an organization’s overall shape or configuration in a comprehensive manner. An organization chart shows:  The hierarchical structure that is typical of most organizations;  The number of management layers;  Degrees of authority, status, and compensation (indicated by a position’s location in relation to other positions);  How an organization’s activities are departmentalized;  The work being done in each position;  Relations between superiors and subordinates-who reports to whom;  How many subordinates report directly to each manager;  Career pathways to the top; and  Formal channels of communication. An organization chart does not show: The ongoing dynamic of workplace behaviour-organization charts are static; Interaction between people who have no official reporting relationships; Personal preferences and coalitions; Informal communication channels; and Interference by others. The Importance of Organizing The fundamental benefits of organizing include the following: 43   It promotes collaboration and negotiation among individuals in a group. Thus, it improves communication within the organization.  It sets clear-cut lines of authority and responsibility for each individual or department. It helps employees to know their responsibilities and concentrate on the key tasks at hand. It specifies who is responsible for what.  It improves the directing and controlling functions of managers.  It develops maximum use of time, human and material resources. It also enables for proper work environments for individuals in pursuit of common goals.  It enables the organization to maintain its activities coordinated so that the efforts of managers and employees can be well integrated and directed toward an end.  It encourages employees’ creativity, decision-making and independent thinking based on well-defined policies, rules and procedures  It helps to adopt new technologies. Effective managers continuously react to changes, rescheduling the activities of the organization and reorganize the resources  It reduces external and internal problems through controlling and planning units of the organization and  It helps to attain organizational goals and provides scope for diversification, innovation and adoption Principles of organizing There are same common principles of organizing in all organizations. These principles are: 1. The lines of authority should be clearly stated and should run from the top to the bottom of the organization. 2. Each person in the organization should report to only one boss (the principle of unity of command). 3. The responsibility and authority of each supervisor should be established clearly in writing. 4. The higher authorities are responsible for the acts of their subordinates’. Top manager or immediate superior is accountable for the acts of their subordinates. 44  5. The authority and responsibility should be delegated as far down the hierarchical line as objectively possible. 6. The number of levels of authority should be as few as possible to make communication easier. 7. The principle of specialization should apply whenever possible. Every person should be assigned a single function whenever possible. 8. The line functions and the staff functions should be kept separate. 9. The span of control (number of employees under one manager) should be reasonable and well established. 10. The organizing should be simple and flexible to easily manage and quickly adapt to changing conditions. Basic concepts of Organizing Organizing involves arranging human and physical resources to help attain organizational objectives. Organizing is the development of jobs and the arrangement of them in to a structure that will assure the duties are accomplished in a coordinated way. 1.Work Specialization Organizations perform a wide variety of tasks. A fundamental principle to perform these tasks more effectively is work specialization. The concept of work specialization is traced back to Adam Smith’s discussion of discussion of division of labour and his conclusion was specialization increases employees’ productivity. Division of labour is dividing large tasks in to smaller packages of work to be distributed among several people. It describes the degree to which tasks in an organization are divided into separate jobs. Division of labour is the most fundamental principle of organizing. It involves breaking down a task in to its most basic elements, training workers in performing specific duties, and sequencing activities so that one person’s efforts build on another’s. Each employee performs the same task over and over again. Specialization has both advantages and disadvantages. Advantages of specialization Specialization of labour has the following advantages, among other thing: 45 Maximizes the output of workers and machines because employees perform small and well-defined tasks. Allows employees to master the task in the shortest time. Alternatively, by concentrating on a specific activity people can become more efficient, become highly proficient, and develop their skills to the utmost in a relatively short time. Employees can be selected with the appropriate ability and attitude for the task to be performed. It is easier to find qualified workers since fewer skills are required for specific job. Allows human labour to be interchangeably used. In other words, it contributes greatly to organizational efficiency higher degree of standardization across tasks. Create many, different and often narrow jobs, which help for effective managerial coordination. Training is easier with specialization and takes shorter period. Production instruction and controls are simple as work assignments are consistent It can save time that is always lost in changing from one job to another. This is because of the fact that human body and mind simply cannot swich from one task to another without losing some efficiency. Disadvantages of specialization The following are the disadvantages of specialization, among other things. Specialization limits the flexible use of workers from one type of work to another. Workers may be over qualified for the job. Thus, they loose self-esteem, motivation, and sense of accomplishment and results in dissatisfaction manifested often through high labour turnover and absenteeism. They feel bored and fatigue because they perform only a single, tiny, and repetitive or monotonous job. Once the task is mastered, it offers no challenge. Specialization causes workers to think in terms of their department or function instead of the company. It creates communication barriers. Specialists develop their own language and customs, which can hamper communication across department lines. 46  Different specialists often formulate rules, policies, and procedures that conflict with those of other operational units. Specialization leads to time-orientation confusion. Production departments, for instance, are commonly short-run oriented whereas; research and development departments are concerned with long-term performance of their efforts. Span of Management (Span of Control) The concept span of control refers to the optimum number of subordinated an executive can effectively supervise. It is the number of immediate subordinates who report directly to a manager. It determines how closely a supervisor can monitor subordinates and it is directly related to the horizontal dimension of managers control. According to the classical school of management, the number of subordinates to be controlled by any executive is from 6-8 persons. Others recommended that the span of control to be between 4-7 subordinates per manager. However, the majority argues that as one goes up in the organization hierarchy, he/she should have to deal with smaller number of subordinates. This is because top executives should deal with a great variety of complex issues and ill-structured problems. Likewise, middle-level managers have a narrow span of control than supervisory level managers. Thus, it is advisable to compare the advantages and disadvantages of wide and narrow span of control. Wide Span of Management A flat organization structure is characterized by an overall broad span of control, horizontal dispersion, and fewer hierarchical levels. It is resulted from supervising relatively large number of subordinates Wide Span of Control Production manager Forman A Forman B Forman C Forman D Forman E Forman F 47. Advantages of Wide Span of Management Wide span of management has the following advantages, among other things: Expedites communication between managers and subordinates; Forces managers to delegate greater responsibility and authority to their subordinates that provide them opportunities to take initiative, responsibility, and utilize and develop their abilities. This intern helps to develop competent and self-reliant managers; Broadens the scope of the managers operation and management can emphasize on executive training and development; and Shortens the channels of communication and reduces the possibility of distortions and delay. Narrow Span of Management This is when supervisors need to involve closely with subordinates. It is a tall organization structure characterized by narrow span of management and a relatively large number of hierarchical levels. The manager manages small number of immediate subordinates. The following organization chart depicts this type of organization structure. Narrow Span of Management Production manager Forman G Forman H Forman Forman B Forman Forman D Forman E Forman F A C 48  Advantages of Narrow Span of Management Narrow span of management as well has the following advantages, among other things: It makes close supervision possible. There will be more effective managing of subordinates; It is easy to coordinate and control activities; and It expedites more personalized and close contact between superiors and subordinates. Factors Determining the Span of Management Superior Related Factors: The following are some of the superior related factors that affect the span of control: Manager's personality: if managers strongly need to share power, they may prefer a wider span of control. Some managers develop reputations as empire builders and attempt to increase their spans; The manager's abilities and competencies: an experienced, well-trained and knowledgeable manager can handle many problems; Fatigue tolerance: physical and mental fatigue may limit manager's capacity for control. The greater the physical or mental demands of a job, the narrower the span of control; Supervisory style: If a manager defines tasks and responsibilities to subordinates clearly, he can supervise them by the exception principle and can have wider span of management; Non-supervisory activities: The more time spent on non-supervisory activities such as long-range planning and outside assignments, the less time a manager has for subordinates and the narrower the span of control; and Delegation of authority: Managers can supervise a relatively larger number of subordinates if they delegate adequate authority to them. Subordinate Related Factors The following are some of the subordinate related factors that affect the span of control: Ability and competence: If subordinates are experienced, well trained, and knowledgeable to perform their tasks, they should be able to resolve difficulties by themselves or with one another thereby reducing their need for supervision and increase their supervisor's span of control. Motivation and commitment: Motivated employees take initiative and responsibility, utilize and develop their skills committed to their job, devote more time and effort and need less of their supervisor's time. Need for autonomy: Subordinates with high need for autonomy prefer to make decisions by themselves (wider span) and vice versa is true for those who take every problem to their superior for decision-making. 49  Organizational Factors The following are some of the