PLANNING & DECISION-MAKING

1. Planning
1.1 Definition
1.2 Steps
1.3 Importance
1.4 Components
 1. PLANNING
1.1 DEFINITIONS

Koontz and O'Donnell, “Planning is deciding in advance what to do, how to

do it, when to do it, and who is to do it.“

James Stoner defines “Planning is the process of establishing goals and a

suitable course of action for achieving those goals."
 1. PLANNING
1.2 STEPS IN PLANNING PROCESS
The planning process involves the following steps:

Analysis of Environment

Setting Goals

Framing Alternative Plans

Selecting Best Plan

Implementation

Review of Performance
 1. PLANNING
1. Analysis of Internal Environment:
The management needs to analysis the internal environment prevailing in
the organization. The internal environment consists of manpower,
machines, materials, management philosophy, management labor
relations, etc. Such analysis would indicate the strengths and weaknesses
of the organization. For instance, when the employees are competent and
disciplined; it becomes strength of the organization, if not, it becomes a
weakness.

The management needs to enhance strengths and correct weaknesses.

The weaknesses of employees can be corrected through training,
counselling and motivation.
 1. PLANNING

2. Analysis of External Environment:

A thorough analysis of external environment must be undertaken. For
instance, the planner has to collect data about consumer preferences,
government policies, competitive conditions, etc. Such analysis would reveal
opportunities to be grabbed and threats to be faced by the organization.

For instance, if a competitor comes up with an innovative product, it may be

a threat. Therefore, the firm needs to modify its existing product or come up
with innovative one.
 1. PLANNING

3. Setting Objectives:
Once the environmental factors are analyzed (SWOT analysis), the next step
is to set objectives. Objectives are set in all the key areas of operations, i.e.,
production, marketing, finance, personnel, and so on.

Objectives should be SMART - Specific, Measurable, Achievable, Realistic

and Time bound.

For instance, the objective of the production department can be - "To

produce 10,000 units of Product 'X' during the year 2017."
 1. PLANNING

4. Framing Alternative Plans:

After setting objectives, the next step is to determine alternative plans. It is
to be remembered that it is always advisable to prepare alternative plans
rather than preparing a single plan.

For instance, to increase the market share, the manager can make
alternative plans such as:
Plan I → Increase in advertising.
Plan II → Improvement in after-sale-service.
Plan III → Increase in incentives to dealers, etc.
 1. PLANNING

5. Studying Alternative Plans:

Once alternative plans are determined, they are to be evaluated in terms of
costs, benefits, risks, etc. There must be cost-benefit analysis of every
alternative plan. This is because; some plans may be more costly to
implement, but more beneficial to the organization.

Some other plans may be less expensive, but may not yield desired returns.
Therefore, one should study the pros and cons of the alternative plans.
 1. PLANNING

6. Selecting the Best Plan:

Once, the plans are analyzed or evaluated, the next step is to select the best
feasible plan from the alternatives. Generally, the alternative plan which
gives maximum benefit at minimum cost is selected.

While selecting the best course of action, the planners must consider certain
factors:
• Availability of resources.
• Image of the company
• Management Philosophy
• Objectives of the Firm, etc.
 1. PLANNING

7. Formulation of Derivative Plans:

Several operating plans are required to implement the overall plan. Such
operating plans are short range plans or sub-plans which are useful in day-
to-day operations. Programs, budgets, schedules, etc., are examples of
derivative plans.

8. Establishing the Sequence of Activities:

Once, the derivative plans are prepared, the next step is to work out the
sequence and timing of activities involved in each subplan. The sub-plans
need to be integrated so as to achieve the goals as per the plan. The manager
will then get a clear picture of the final plan.
 1. PLANNING

9. Implementation:
The various plans of the organization are communicated to those whose
participation is required to implement them. Implementation involves:
• Organizing resources
• Directing Subordinates
• Motivating Subordinates.

For effective implementation of the plan, it is essential that the employees

clearly understand --what is to be done, how it is to be done, when it is to be
done, and who needs to do it.
 1. PLANNING

10. Review:
Plans are periodically monitored to find out whether the performance is
taking place as per the planned targets. If necessary, plans are revised in the
light of changing environment and objectives of the organization.
 1. PLANNING
1.3 IMPORTANCE OF PLANNING

The need and importance of planning can be explained with the help of its
advantages:

1.Minimizes Risks:
Planning helps to minimize or reduce risks. Potential risks are forecasted
and necessary protective devices are decided well in advance. If the risks
occur, then the protective devices are put into practice. The protective
devices are the contingency plans that help to reduce risks.
 1. PLANNING

2. Facilitates Coordination:
The plans of one department are coordinated with the plans of all other
concerned departments. This brings in unity among the various
departments of the organization. In other words, the concerned
departments work in close harmony in the implementation of the plans.

3.Facilitates Organizing:
Planning enables a manager to organize the resources properly. If required,
he may make arrangement for additional resources in order to achieve the
planned targets. Depending upon the targets, the manager will make proper
arrangement of resources,
 1. PLANNING

4.Facilitates Proper Direction :

Planning provides proper schedules or time table or to when the activities
need to be conducted. This facilitates the manager to direct his subordinates
as and when required. Clear directions can be given to the subordinates so
that they undertake the right tasks at the right time.

5.Facilitates Control:
A plan provides a yardstick (target) against which actual performance can
be compared. Such comparison will enable to find out the deviations from
the plans. If deviations are noticed, the manager may take the right
corrective steps at the right time.
 1. PLANNING

6. Generates Efficiency:
Planning enables optimum utilization of resources. All the resources - i.e.,
physical, financial and human resources are put to their best use. The
optimum utilization of resources enables a company to achieve highest
possible returns at lowest possible costs.

7. Encourages Innovation:
The planning process encourages creative thinking on the part of managers.
They strive to come out with innovative ways to achieve the results as per
the plans even during the tough times. The innovative ideas often bring best
results to the organization.
 1. PLANNING

8. Focus on Goals:
Planning is goal oriented in the sense that plans are developed and executed
to achieve certain goals. Every activity is directed towards the attainment of
goals. Activities are conducted in a systematic and smooth manner. There is
hardly any scope for haphazard activities.

9. Facilitates Decision-Making:
Normally, a manager frames alternative plans. After necessary analyses of
the plans, the best plan is selected. Thus, planning facilitates the choice of
the best plan. Accordingly, managers take decisions to organize, to direct,
and to control the activities.
 1. PLANNING
10. Motivates Personnel:
Professional managers frame the plans in consultation with the
subordinates. When there is active involvement of the subordinates in
planning, then they become highly committed to the achievement of the
goals. Also, plans provide a challenge for the superiors and subordinates to
achieve the targets. Thus, planning develops a motivated and dedicated
work-force in the organization.
 1. PLANNING
1.4 COMPONENTS OF PLANNING

In the process of planning, several plans are prepared which are known as
components of planning.

They can be broadly classified under two heads as follows:

Standing Plans
Single Use Plans

The Standing Plans are meant for repeated use as and when the occasion
demands. The standing plans include mission, objectives, strategies, policies,
procedures and rules.

The Single-Use Plans are used for a specific activity. The Single-use plans
include budgets, schedules, programs and projects.
 1. PLANNING
The various types of plans or components are briefly stated as follows:

1. Mission:
Every organization needs to have a mission. The mission is a statement
that reflects the vision, the basic purpose and philosophy of the
organization. The mission statement gives a clear idea of the long-run
commitment of an organization.

Examples of Mission Statement:

 College/Educational Institution:
'To develop overall personality of the students through quality education.’
OR
'Our Institution will continue to inspire lives for a better world through
excellence in academics, research and social activities’.

 Pharmaceutical Company:
'To be a global company by producing quality drugs at affordable prices.'
 1. PLANNING
2. Objectives/Goals:
Organizational objectives are derived from the mission of the organization.
Objectives are the ends towards which actions are directed. The objectives
act as the base of the planning process.

Every department in the organization has its own goals. The goals of every
department must contribute to the attainment of the organizational goals.

For example: the goals of marketing department include: increase in market

share, increase in profits, improved company image, and improved
customer service.
 1. PLANNING
3. Strategies:
The word strategy comes from the Greek word 'strategos' which means “the
art of the general. In the words of Harold Koontz, - "Strategy is the
determination of the basic long-term objectives of an enterprise and the
adoption of action and allocation of resources necessary to achieve these
goals.“

Strategy is a broad long term plan for moving the organization from the
present position to the desired position in future.

It provides answers to questions like:

(a) What is the present position of the organization?
(b) What should be the future position of the organization?
(c) What must be done to attain the desired future position?
 1. PLANNING
4. Policies:
Policies are the statements that guide decision making. Policies define the
boundaries within which decisions can be made.

Examples of policy statement:

 The expenditure on advertising in a year not to exceed 5% of current

year's estimated sales revenue (Advertising Expenditure Policy).

 Credit period not to exceed 15 days (Credit Policy).

 1. PLANNING
5. Procedures:
In the words of Harold Koontz, “Procedures are plans that establish proper
method for undertaking activities.“

Procedure is an established way of performing the work. It consists of series

of steps that are required to perform a particular activity.

Example of Advertising Procedure:

 Planning the advertising campaign.
 Preparing the advertising campaign
 Placing the advertising campaign in the media.

Example of Employee Selection Procedure:
 Advertising the job.
 Systematic conduct of tests and interviews.
 Selecting the right candidate.
 1. PLANNING
6. Rules:
Harold Koontz states, “Rules spell out specific actions or nonactions
allowing no discretion." Rules are specific statements of what should be
done and what should not be done in certain situations.

Examples of Rules:
 No gambling in the company's premises
 No smoking in the company's premises

Rules are to be differentiated from policies. A policy provides guidelines for

action by defining areas of discretion. Although rules also serve as guides,
they do not allow any discretion in action.
 1. PLANNING
7. Programs:
A program is a comprehensive plan designed to implement the policies and
accomplish the objectives. It is a combination of goals, policies, procedures,
rules, and other elements necessary to carry out a specific course of action.

They are single-use plans designed to accomplish a specific objective. It

clearly indicates the steps to be taken, the resources to be used, and the time
period within which the task is to be completed.

Examples of programs include:

 Advertising program
 Training program
 Expansion program, etc.
 1. PLANNING
8. Budgets:
A budget is a single-use plan. According to H. Weihrich and H. Koontz “A
budget is a statement of expected results expressed in numerical terms. A
budget may be expressed in financial terms; in terms of labor-hours, units of
product, or machine hours; or in any other numerically measurable terms.“

Theo Haimann states “A budget is a plan which expresses the anticipated

results in numerical terms.“
A budget aids not only in planning but also in controlling activities. For
instance, sales can be measured and compared against the planned estimates
(sales budget), and if there are deviations, control measures can be taken.

Examples of budgets include: cash budget, sales budget, production budget,

expense budget, capital expenditure budget, advertising budget, and so on.
 1. PLANNING
9. Schedules:
A schedule is a time-table for activities. It indicates the start time, and the
completion time for each and every activity.

The main objective of scheduling is to ensure the start and completion of

each operation / activity on time.
 1. PLANNING
10. Projects:
It is a single-use plan. Project approach is followed when the work to be
done is of special nature, requiring expertise from different departments or
when the work is of complex nature or when the cost involved is very high.
Separate teams may be assigned to specific projects.

Examples:
 Advertising Campaign in an ad agency
 Construction of a building
 Market Research Project
 Product Launch Project
2. Management by Objective
2.1 Meaning of MBO
2.2 Steps in MBO Process
2.3 Advantages of MBO
 2. Management by Objective
2.1 Meaning of MBO:
Management by Objective is also referred to as Management by Results
(MBR). MBO is a management model that aims to improve performance of
an organization by clearly defining objectives that are agreed to by both
management and employees. When subordinates are involved in setting
objectives, they are more likely to fulfill their responsibilities in achieving
the objectives.

The term MBO was first popularized by Peter Drucker in 1954 in his book
“The Practice of Management.’

George S. Odiorne defines MBO“as a process whereby the superior and

subordinate jointly identify its common goals, define each individual's
major areas of responsibility in terms of the results expected of him, and use
these measures as guides for operating the unit and assessing the
contribution of each of its members."
 2. Management by Objective

2.2 Steps in MBO:

1. Analysis of Environment:
The superior and subordinate must analyze the internal and external
environment to conduct SWOT analysis:
(a) Analysis of Internal Environment:
The superior and subordinate analyze the internal environment before
setting goals. The analysis of internal environment involves analysis of:
 Management Philosophy
 Manpower Capabilities
 Management-Employee Relationship
 Human Resource Policies
 Organizational Strategy
 Technology and Processes, etc.
The analyses of internal environment indicate strengths and weaknesses
of the organization. The top managers need to correct weaknesses and
make efforts to improve strengths.
 2. Management by Objective

(b) Analysis of External Environment:

The superior and subordinate need to analyze the external environment.
The analysis of external environment involves analysis of:
 Government Policies
 Competitors' Strategies
 Customer Requirements
 International Environment, etc.
The analyses of external environment indicate opportunities and threats.
The managers must consider the opportunities and threats in setting the
goals.
 2. Management by Objective

2. Collectively Formulating Goals:

On the basis of SWOT analysis, the superior and subordinate jointly decide
and formulate the goals of a particular activity. The goals are set in Key
Result Areas (KRAs) in various functional areas - production/ operations,
marketing, finance, and human resources.

Examples:
The marketing department may set the goal – “To achieve 20% market
share of Brand Bee in the year 2018.”

The finance department may set the goal – “To reduce bad debts to 2% in
the year 2018".
 2. Management by Objective

3. Collectively Formulating Plans:

The superior and subordinate jointly formulate action plan(s) to achieve
goals. Generally, alternative plans are framed.

For instance, to increase the market share, the alternative plans may
include:
Plan I – To increase advertising expenditure by 30% during the year.
Plan II - To introduce additional features of the product.
Plan III- To increase the warranty period to 5 years.
 2. Management by Objective

4. Evaluating the Alternative Plans:

The superior and subordinate evaluate the alternative plans before selecting
the best plan. The managers conduct analysis of costs and benefits of each
and every plan.

The costs are measured in terms of production, administration and

distribution costs.

The benefits are measured in terms of profits, market share, corporate

image, etc.
 2. Management by Objective

5. Selecting the Best Plan:

On the basis of cost-benefit analysis of the alternative plans, the superior
and subordinate select the best plan. They select that plan which would give
higher benefits at lower costs.

The managers may reserve back-up plan in the event of the first plan facing
some problems or constraints in implementation
 2. Management by Objective

6. Implementation of Plan:
The subordinate implements the plan with the support and guidance of the
management. In implementing the plan, the managers undertake the
following activities:
 Organizing the resources
 Directing the subordinates
 Motivating the subordinates to implement the plan effectively.

7. Measurement and Comparison of Performance:

The superior and subordinate periodically (say every month or so)
measures the actual performance. For this purpose, reports of actual
performance are prepared. The actual performance is then compared
against planned targets. The comparison will indicate deviations, if any.
 2. Management by Objective

8. Causes of Deviations:
If there are deviations, especially, shortfalls in the targets, the superior and
the subordinate study the causes of deviations. The deviations may be due to
internal or external factors.

For instance, the shortfall in sales may be due to internal factors such as
over-targeting, faulty pricing, ineffective promotion, 175 defective
distribution strategy, etc. The causes may be due to external factors such as
aggressive sales promotion by the competitors, changes in customer
preferences etc.
 2. Management by Objective

9. Corrective Measures:
The superior and the subordinate list out corrective measures to overcome
deviations. The corrective measures are analyzed. Cost-benefit analysis is
undertaken for every corrective measure. Accordingly, the best corrective
measure is selected.

10. Follow-up/Review:
In the final stage, the management undertakes annual review of the
performance. At the performance review, the superior acts as a guide rather
than a judge to take stock of the performance. If deviations occur, the
superior and subordinate may re-set the goals.
 2. Management by Objective

2.3 Advantages of MBO

1. Aids Planning:
MBO technique facilitates planning. The management and subordinates
carefully analyze the internal environment and external environment.
The analysis of internal environment indicates Strengths and Weaknesses
and the analysis of external environment reveals Opportunities and
Threats (Challenges).

On the basis of SWOT or SWOC analysis, the management and

subordinates set the goals in key result areas. Accordingly, plans are
made to achieve the goals.
 2. Management by Objective

2. Facilitates Control:
MBO facilitates effective control. The subordinates implement the plan. The
actual performance is compared against the planned targets. The
comparison may indicate deviations. If deviations occur, corrective
measures are taken. If necessary, the superior and subordinates may reset
the goals.

3. Innovation:
The subordinates are responsible for successful implementation of the plan.
The subordinates are rewarded for successful implementation. Therefore,
the subordinates may come up with innovative ideas for effective
implementation of the plan. Generally, innovation gives competitive
advantage in the market.
 2. Management by Objective

4. Corporate Image:
MBO involves proper planning and controlling of activities. The
subordinates get active support from the superiors or top management.
Therefore, MBO enables the organization to achieve better results. Due to
higher performance, the image of the firm improves in the minds of various
stakeholders, such as customers, employees, dealers, shareholders, and
others.

5. Team Work:
There is good interaction between the management and subordinates in
setting goals, and in monitoring of performance. - The constant interaction
helps to develop good relations between the superior and subordinates.
Good relations in turn lead to better team work. Team work brings success
to the organization.
 2. Management by Objective

6. Optimum Use of Resources:

MBO technique facilitates optimum use of resources. The management and
employees carefully set the targets in key result areas, and accordingly
frame plans. The subordinates implement the plans under the guidance of
the management. The employees are motivated for higher performance.

Thus, there is optimum use of resources such as:

 Physical Resources
 Capital Resources
 Manpower
 2. Management by Objective

7. Concentration in Key Result Areas:

Under MBO, goals are set in Key Result Areas relating to
production/operations, marketing, finance and human resources. Activities
are directed to attain the goals set in Key Result Areas. Emphasis is placed
on results rather than mere activities. Therefore, MBO is a result oriented
activity which focuses achievement of goals in key result areas.

9. Succession Planning:
Under MBO technique, junior managers develop good skills in planning,
organizing, directing and controlling while handling their tasks under the
guidance of senior managers. Thus, the MBO technique facilitates
succession planning in the organization. The junior managers can be
promoted to higher level posts as and when the need arises.
3. Management By Exception
3.1 Meaning
3.2 Advantages of MBE
 3. Management By Exception
3.1 Meaning:
MBE is a management technique by which managers' focus only on those
events or activities which deviate significantly from standards. Managers
intervene only when employees fail to meet performance standards. MBE
enables managers to focus valuable time on more important activities such
as strategic planning and control.

Lester Bittel defines MBE 'It is a system of identification and

communication that signals the manager when his attention is needed;
conversely, it remains silent when his attention is not required’.

William Coventry states 'It means that only those facts and figures, which
differ from the norms and, therefore, relate to exceptional circumstances,
need be referred to the top. Where everything continues to proceed
according to plan, there is obviously no point in top management being
involved.’
 3. Management By Exception
Examples:
1. Only those debtors having outstanding dues for over 2 months will get
a warning letter to pay the dues.

2. Only those public complaints regarding pollution matters will be

looked by the senior level managers and not by junior level managers.

3. Only those brands whose market share has declined will be

investigated by top level managers.

4. Employees' disputes over promotion policy of the organization will be

looked into by the Chief Human Resource Officer.

5. Quality defects in products of more than 0.1% will be investigated by

Chief Production Manager.
 3. Management By Exception

3.2 Advantages Of MBE

MBE provides several benefits to the organization:

1. Automation of Routine Matters:

MBE facilitates automation of routine matters. Routine matters such as
billing, tracking of inventories, tracking of receivables and payables, etc.,
can be computerized with the help of data support systems.
Automation or computerization helps to reduce the burden of repetitive
decision-making on the part of managers. Only those activities that require
human judgement may be decided by the managers.
 3. Management By Exception

2. Business Expansion:
MBE facilitates business expansion. Managers are free from routine
activities. Therefore, they can focus on those activities which are critical to
the success of the organization. MBE saves lot of time and energy of the
managers.

Therefore, the managers can focus on productive activities such as:

• Product Development
• Market Development
• Human Resource Development, etc.

All the above activities would enable the firm to get higher returns, and to
expand the business activities. The firm can introduce new products, enter
in new markets, and so on.
 3. Management By Exception
3. Concentration on Core Issues:
The main advantage of MBE technique is that it enables the managers to
concentrate on core or vital issues. Managers can focus on productive
activities that bring higher returns to organization. For instance, the top
managers can focus on strategic planning and control. Routine activities can
be supervised or monitored by the lower level managers.

4. Delegation of Authority:
MBE technique facilitates delegation of authority to lower levels. The
superiors transfer the authority or decision-making powers to the
subordinates, especially in the case of routine matters. Delegation of
authority enables the superior to concentrate on challenging tasks, because
the routine activities are delegated to subordinates. Delegation also leads to
quicker decisions and faster actions on the part of subordinates. The
subordinates need not consult the superior in respect of delegated work.
Therefore, the subordinate can take quick decisions and act promptly to
achieve the targets.
 3. Management By Exception

5. Ensures Succession Planning:

MBE technique facilitates succession planning. The junior managers handle
the routine jobs, and they become well versed with planning, organizing,
directing and controlling activities. Thus, the MBE technique enables the
organization to get competent managers from within the organization to fill
up positions at the higher levels whenever the need arises.

Conclusion:
MBE technique enables top managers to focus on core areas that require
key attention rather than dealing with minor issues. However, MBE is not a
panacea. It should be applied depending on the situation. Management
should ensure that MBE does not become the only way to manage.
4. Management Information System
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4.1 Concept
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4.2 Features
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4.3 Components
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 4. Management Information System
4.1 Concept/Meaning

Communication is essential to undertake managerial functions and to link

the enterprise with its external environment – customers, dealers, suppliers,
investors, and others. The MIS provides the communication link and
enables the enterprise to effectively manage the organization.

H. Weihrich and H. Koontz define MIS as a formal system of gathering,

integrating, comparing and analyzing, and dispersing information internal
and external to the enterprise in a timely, effective, and efficient manner.
 4. Management Information System
4.2 Features of MIS

1. Systematic Process:
MIS involves a systematic process of gathering, integrating, comparing
and analyzing information for effective decision making.

The process of MIS involves the following steps:

 Gathering data of internal and external environment.
Classification of data into different categories.
 Combining or integrating related data.
 Comparing the data - period wise, product wise, activity wise,
competitors' wise, market segments wise, etc.
 Analyzing the data.
 Transmitting the data to managers or decision- makers.
 4. Management Information System
4.2 Features of MIS

2. Scope:
The use of MIS began in late 1960s and gained significance since 1990s.
Originally, MIS was used for electronic data processing (EDP). The MIS
provided information for forecasting sales, tracking inventories, tracking
accounts payable and receivable, and other data that would help managers
in managing the enterprise.

Over a period of time, the scope of MIS broadened to include:

 Customer relationship management (CRM)
 Decision support systems (DSS)
 Enterprise resource planning (ERP)
 Resource management including human resource management (HRM),
Enterprise performance management (EPM), Supply chain management
(SCM) ,Project management ,Database retrieval applications etc.
 4. Management Information System
4.2 Features of MIS

3. Components:
MIS is a computer system which consists of 6 components:
Hardware, Software, Data (information for decision making), Procedures
(design, development and documentation), People (individuals, groups, or
organizations), Network Resources.

4. Continuous in Nature:
The MIS activity is continuous in nature. There is a constant need to collect
and analyze relevant data relating to the environment such as competitors'
strategies, consumer requirements, trends in the international environment,
changes in Government policies, etc.
 4. Management Information System
4.2 Features of MIS

5. Report Generation:
MIS is used not only to store data, but it is also used to generate reports.
MIS provides specific templates for various types of reporting. Accordingly,
the MIS users can obtain the type of report required.
When prompted by the user, the system compiles the report required,
inserting data into the template, and then printing the report for decision
making.

6. Accessibility and Integration:

The MIS functions with open access. Open access means that the primary
MIS can be connected or integrated with other systems within the
organization. It enables to make changes to data from different sources and
from multiple locations. Thus, a firm can make decisions from a wide array
of information.
 4. Management Information System
4.2 Features of MIS

7. Scalability:
An important feature of MIS is that organizations can purchase a small
version of a system and subsequently upgrade it, as and when required, if
the funds permit. As the business expands, firms can add increased data
capabilities as well as system features to the initial system. Thus, the
business firm need not purchase an entirely new system every few years.

8. Professional Approach:
There is a need to adopt professional approach towards MIS. The
organization must select and train the MIS staff.
 4. Management Information System

4.3 Components of MIS

A management information system (MIS) is made up of six components -

people, procedures, data resources, network resources, hardware, and
software.

These six components integrate to perform input, process, output, feedback

and control, so as to achieve organizational objectives.
 4. Management Information System
1. People:
People consist of computer device operators, support staff (to ensure smooth
functioning of the computers), network administrators, system specialists and the
end-users.

A computer device operator is the employee of the organization, who operates the
computer device. He feeds the data, and retrieves the processed data as and when
required by the organization. He may contact the support staff or system
specialist for smooth functioning of the computer system.

The support staff are responsible for the monitoring the computer system for
smooth functioning, so that the computer device operators operate the computers
without problems.

A network administrator, also called as a systems administrator, is responsible for

keeping an organization's computer network up to date and running smoothly.
Any company or organization that uses multiple computers or software platforms
needs a network administrator to coordinate the different systems.
 4. Management Information System

Computer system specialist works in a variety of industries providing technical

support for computer systems. He has complete technical knowledge of the
system operations. He may provide training to the computer operators.

The end-users are people who use an information system or the information it
produces. The end-users can be managers, accountants, salespersons, engineers,
clerks, and customers. The end-users use the processed data for decision-making
 4. Management Information System
2. Procedures/Processes:
Procedure refers to a set of rules and guidelines for the use of a computer based
information system. Procedures can be laid down by the management either on their
own or with the help of consultants.
Procedure depends on the nature of the organization. This means, procedures are
different for different organizations. For instance, a banking organization will have its
own procedures for selection of personnel, opening a new account, sanctioning loans,
etc., whereas, an educational institution may have its own procedures for admission of
students (online applications and/ or offline applications), selection of teachers (demo
lecture, personal interview, etc), conducting examination, assessment of papers, etc.
Procedures may vary from one department to another according to the requirements.
For example, a production department requires information on raw materials,
condition of machinery, etc., whereas, the sales department may require information
on number of units to be sold, the market areas where the goods to be sold, etc.
Therefore, different departments have to lay down their procedures in different ways
so that the MIS can help in retrieving the data as per requirement of a particular
department
 4. Management Information System

3. Network Resources: Network resources consist of server computers, client

computers, and communication/transmission media. It is to be noted that
Internet, Intranet, and Extranet are types of network resources. The network
resources include both hardware and software.

A server is a computer designed to process requests and deliver data to other

computers over a local network or the internet.

A client computer refers to computer hardware or software that accesses the data
made available by a server.

Communication/transmission media are the pathways used by servers and client

computers in a network. They may include wired and wireless media. The wired
media include fiber optic, and co-axial cables. The wireless media include WiFi,
and mobile network..
 4. Management Information System
4. Data Resources:
Data resources include raw data and processed data (database). Data can take many
forms, including: Traditional alpha-numeric data, which is composed of numericals,
alphabets and other characters that describe business transactions and other events
and entities. Text data, which consists of sentences and paragraphs used in written
communication. Image data, such as graphic shapes and figures. Audio data, the
human voice and other sounds.

Data resources must meet the following criteria:

• Comprehensive: All data about the subject are actually present in the database.
• Non-redundant: Each piece of data exists only once in the database.
• Structured Data: The data are stored in a systematic way so as to minimize the cost
of processing and storage.

The data resources of Information Systems are broadly classified into:

• Databases - processed and organized data.
• Knowledge- in the form of facts, rules, and case examples about successful business
practices.
 4. Management Information System

5. Hardware:
Hardware consists of input and output device, processors and storage devices.
Hardware devices are the physical parts of MIS.
The input devices are keyboard, scanners, mouse, sensors, etc.
The output devices are monitor, printer, network devices, etc.
The processors (Intel Pentium, i5, i7, etc) speeds up the processing of data into
information.
The storage devices are the hard drives, cloud storage, etc., which stores files,
directories, and other data.
 4. Management Information System
6. Software:
Software consists of various programs and applications. The software is divided
into two major groups, (wherein all programs fit in) - system software and
applications software.

System software refers to the operating system, i.e. DOS, Windows, Linux, Mac
OS, etc. The operating system is the most important program that runs on a
computer. Every general-purpose computer must have an operating system to
run other programs and applications.

Computer operating systems perform basic tasks, such as recognizing input from
the keyboard, sending output to the display screen, keeping track of files and
directories on the storage drives, and controlling peripheral devices, such as
printers.

Applications software (such as Microsoft Word/Excel, Google Chrome, You Tube,

Skype, Whats app, CRM, ERP such as SAP, etc.) refers to specialized software
for accomplishing specific tasks.
5. Decision Making
5.1 Definition
5.2 Essentials of Decision Making
5.3 Techniques of Decision Making
5.4 Steps in Decision Making

https://bbamantra.com/decision-making-process/
For reference
 5. Decision Making
5.1 Definition:

Almost every management action involves decision-making. Claude George Jr.

states “In the final analysis, managers are paid for doing only one thing - Making
Decisions. In fact, the job of managing is the job of decision-making.“

James Stoner defines decision-making as "the process of identifying and selecting

a course of action to solve a specific problem.'
 5. Decision Making
5.2 Essentials of Decision Making:

1. Proper Definition of the Problem:

There must be proper definition of the problem or of the opportunity. When the
problem or the opportunity is well defined, it would be easier for the management
to come up with alternative solutions to solve the problem or to grab the
opportunity.

2. Systematic Collection of Data:

Sound decisions are based on factual information. Therefore, the manager must
collect relevant data to make decisions. Generally, data are collected from
secondary sources or readily available sources, because secondary data is easily
available and can be obtained at lower cost.
However, if the secondary data is insufficient or irrelevant, the manager may
collect the data from primary sources. After collection of data, there must be
proper processing of data, analysis of data, and interpretation of data in order to
make sound decisions.
 5. Decision Making

3. Rational Decisions:
As far as possible, the managers need to make rational decisions. Complete
rationality of decisions may not be possible due to limitations of time, changing
environment and other factors. However, managers need to frame alternative
decisions, analyze the alternatives, and then select the best possible decision.

4. Integrated Approach:
There is a need to adopt integrated approach in decision making, wherever
required. The decision-maker needs to make decisions considering the effects on
other departments or activities.
For instance, when a marketing manager makes a decision to extend credit
period to the customers in order to increase sales, there is a need to consult the
finance manager, because the extension in credit period may increase bad debts,
and also block the funds during the extend period.
 5. Decision Making

5. Participation of Subordinates:
It is advisable to involve subordinates in decision-making wherever required. The
manager may consult the subordinates before making a decision, especially those
decisions which affect the subordinates. When subordinates are consulted for
decision-making, the manager would get active cooperation of the subordinates in
implementation of the decision.

6. Proactive Decisions:
Nowadays, professional managers need to be creative and proactive in decision-
making, to gain competitive advantage in the market. Proactive decision-making
is essential in al functional areas.
Proactive decisions give the first mover advantage to the organization. For
instance, leading car makers in India like Maruti Suzuki comes up with
innovative designs or models to maintain the competitive advantage.
 5. Decision Making
7. Periodic Review:
Management must undertake periodic review of implementation of the decisions.
The actual performance needs to be compared with the planned performance. If
there are deviations, the managers must take quick decisions to come up with
corrective measures.

8. Flexibility of Decisions:
Decisions like plans must be flexible. If a particular decision cannot be
implemented due to certain circumstances, it can be modified depending on the
situation.
For instance, a firm may have decided to launch a new project with heavy
investment. The firm had planned to obtain funds from the primary market for
project funding. However, due to poor financial climate, the firm may find it
difficult to obtain funds from the primary market. In such situation, the firm
may postpone the launching of the new project or may find out alternative
sources of funding.
 5. Decision Making

9. Cost-effective Decisions:
Managers need to make cost-effective decisions. The benefits of decision-making
must generate higher returns than the costs incurred on implementation.
Therefore, the managers need to select the most appropriate decision depending
on the situation.
 5. Decision Making

5.3. Techniques of Decision Making:

I] Programmed Decision-Making Techniques:
A programmed decision is used for repetitive activities. Normally, the lower level
managers make such decisions to solve routine but complex problems.

Some of the important quantitative techniques are explained as follows:

 5. Decision Making

1. Linear Programming:
It is based on the assumption that a linear or straight-line relationship exists
between variables and that the limits of variations can be determined. For
example, in a factory, the variables may be units of output per worker, material
cost per unit of output, etc.
All such variables have linear relationships, within certain limits. By solving
linear equations, one can establish the optimum work/output in terms of cost,
time, manpower or machine utilization, etc. The linear technique is useful,
especially in cases where input data can be quantified and objects are subject to
definite measurement.
 5. Decision Making

2. Game Theory:
Game theory is the study of people or organizations making interdependent
choices. According to game theory, two or more decision-makers adapt to each
other's moves or decisions. Game theory is used in business decisions such as
competitive pricing.
For instance, Pepsi Corporation may increase the price of its Cola drink, with the
expectation that its competitor (Coca Cola) may also do the same.
 5. Decision Making

2. Game Theory:
Game theory is the study of people or organizations making interdependent
choices. According to game theory, two or more decision-makers adapt to each
other's moves or decisions. Game theory is used in business decisions such as
competitive pricing.
For instance, Pepsi Corporation may increase the price of its Cola drink, with the
expectation that its competitor (Coca Cola) may also do the same.
 5. Decision Making

3. Simulation:
This technique is used for decision-making in respect of complex problems. The
likely behavior of events and variables is observed in an artificial or simulated
situation. The effect of decision-making is observed in a simulated situation
rather than in a real situation.
For example, an advertising agency may judge the effectiveness of an advertising
campaign by screening to a selective audience in a mini theatre at a shopping
complex, before releasing the campaign on the television network.
 5. Decision Making

4. Queuing Technique:
This technique is useful to solve problems relating to waiting line or waiting list in
the case of railway reservations, cash collection counters at shopping centres,
admissions to colleges, etc.
For instance, at the time of college admissions, more counters can be set up for
receiving applications and for collection of fees.
The objective of this technique is to determine the optimum number of service
facilities required and the cost of such services.
 5. Decision Making
5. Network Techniques:
Managers use the network techniques like the PERT and CPM in case of complex
projects, where several activities are required to be completed. With the help of
such techniques, the complex projects can be completed as per the schedule.
The manager can find out the critical path (the activity that takes the longest
time) and monitor or speed up the critical path so that the project gets completed
on time.

6. Probability Decision Theory:

A probability is a statistical measure of a chance that a certain event or outcome
will occur. The theory of Probability Decision is based on the assumption that
there is a chance of a certain event or outcome to take place.
Based on available data and subjective judgement on the part of the manager,
various probabilities are assigned to alternative courses of action. The likely
outcomes or events of different alternatives are evaluated and the most likely
alternative is selected.
 5. Decision Making

7. Payoff Matrix:
Payoff matrix is a statistical technique, which enables managers to make a choice
of the best alternative. A payoff represents the return or reward for selecting the
best alternative. The best alternative can be a combination of several alternatives
or an individual alternative.
For instance, a manager may take a decision to increase sales and profits by
increasing advertising, improving quality of the product, improving packaging of
the product, reduction in price, etc. Each alternative or a combination of
alternatives may provide an expected payoff.
 5. Decision Making

8. Decision Tree:
Decision tree is an extension of payoff matrix. Decision tree is a graphic method
by which a decision maker can work out alternative solutions available to him,
their outcomes and probabilities associated with each of them, and evaluate the
comparative outcomes to find out the optimum solution.
For instance, a cloth manufacturer may find out that there is a good demand for
readymade garments. He may then decide whether to manufacture and distribute
only cloth or undertake the manufacture and distribution of readymade garments
as well. In order to make this decision, the manufacturer should collect
information about the anticipated payoff of various actions and probabilities of
such outcomes occurring.
 5. Decision Making

II] Non-Programmed Decision-Making Techniques

Non-programmed decisions are used for unstructured situations or problems of a

non-recurring nature. The non-programmed decisions require subjective
judgement. The top management deals with such decisions.

The following are some of the important techniques for non-programmed

decisions:
 5. Decision Making
1. Brainstorming Technique:
The brainstorming technique to solve problems was developed by Alex F. Osborn.
The purpose of this technique is to generate new or creative solutions to solve
problems. In a brainstorming session, multiple ideas are generated. One person's
ideas would stimulate someone else, and the combined power of the group can
generate greater number of ideas.
The following are the essentials of brainstorming session:
• Encourage free flow of ideas.
• No ideas are ever criticized.
• Emphasis to be placed on quality of ideas.
• The improvement of ideas by others is to be encouraged.
In a typical brainstorming session, a group of persons, say five to ten, sit across a
table to generate ideas. The leader of the group puts across the problem. All
possible ideas are generated to solve the problem. The ideas are recorded for
discussion and analysis, and finally the best idea is selected.
 5. Decision Making
2. Nominal Group Technique:
It is a variation of brainstorming technique. In NGT, the group members think
independently. Each person comes up with his own ideas independently. This
technique restricts initial interaction among the group members. The interaction
takes place only when the ideas are presented by each and every member of the
group.

3.Delphi Technique:
This technique is similar to brainstorming technique, except that the group
members do not meet face to face. The group members are located at different
places, may be in several parts of the state or country or even in other countries.
The members may interact with each other through tools like videoconferencing.
group
 5. Decision Making
4. Quality Circles:
Dr. Ishikawa Kaoru first popularized the concept of quality circles in Japan in
the early 1960s. A QC is a small group of employees from the same work area or
department that volunteers to meet regularly in order to identify, analyze, and
solve work related problems.
QC members provide suggestions to the management for improvement or for
solving the problems. Generally, the management of professional firms accept the
suggestions and take quick decisions to improve the problem area.

5. Heuristic Technique:
It is a method of decision-making that uses rules of thumb (heuristics), to find
solutions or answers. For example, consumer durable companies sell on
installment basis on the assumption that people can regularly pay in installments
rather than in lump sum at one time.
 5. Decision Making
5.4. Steps in Decision Making:
1

6 2

5 3

4
5. Decision Making

END