Unit II

Decision Making

1
 Definitions
• Choice about a “course of action”
-- Simon

• Choice leading to “a certain desired objective”

-- Churchman

• Knowledge indicating the nature of a

commitment to action
-- Holsapple and Whinston
2
 Simon’s Model of Problem
Solving
Simons model of decision-making has three stages:
1. Intelligence which deals with the problem identification
and the data collection on the problem.
2. Design which deals with the generation of alternative
solutions to the problem at hand.
3. Choice which is selecting the ‘best’ solution from
amongst the alternative solutions using some criterion. 

3
 Intelligence Phase
• The decision-maker identifies/detects the problem or opportunity.
• A problem in the managerial context is detecting anything that is
not according to the plan, rule or standard.
• An example of problem is the detection of sudden very high
attrition for the present month by a HR manager among workers.
• Opportunity seeking on the other hand is the identification of a
promising circumstance that might lead to better results.
• An example of identification of opportunity is-a marketing
manager gets to know that two of his competitors will shut down
operations (demand being constant) for some reason in the next
three months, this means that he will be able to sell more in the
market.
• Either in the case of a problem or for the purpose of opportunity
seeking the decision-making process is initiated and the first
stage is the clear understanding of the stimulus that triggers this
process.

4
• If a problem/opportunity triggers this process then the first stage deals with
the complete understanding of the problem/opportunity.
• Intelligence phase of decision-making process involves:
Problem Searching: For searching the problem, the reality or actual is
compared to some standards. Differences are measured & the differences
are evaluated to determine whether there is any problem or not.
Problem Formulation: When the problem is identified, there is always a risk
of solving the wrong problem. In problem formulation, establishing relations
with some problem solved earlier or an analogy proves quite useful.

5
 Design Phase

• Design is the process of designing solution outlines for the problem.

• Alternative solutions are designed to solve the same problem.
• Each alternative solution is evaluated after gathering data about the solution.
• The evaluation is done on the basic of criteria to identify the positive and
negative aspects of each solution.
• Quantitative tools and models are used to arrive at these solutions. At this
stage the solutions are only outlines of actual solutions and are meant for
analysis of their suitability alone.
• A lot of creativity and innovation is required to design solutions.

6
 Choice Phase

• It is the stage in which the possible solutions are compared against one
another to find out the most suitable solution.
• The ‘best’ solution may be identified using quantitative tools or qualitative
tools.
• This is not as easy as it sounds because each solution presents a scenario
and the problem itself may have multiple objectives making the choice
process a very difficult one.
• Also uncertainty about the outcomes and scenarios make the choice of a
single solution difficult.

7
 Example
A farmer with his wolf, goat, and cabbage
come to the edge of a river they wish to
cross. There is a boat at the river’s edge,
but of course, only the farmer can row.
The boat can only handle one animal/item
in addition to the farmer. If the wolf is ever
left alone with the goat, the wolf will eat
the goat. If the goat is left alone with the
cabbage, the goat will eat the cabbage.
What should the farmer do to get across
the river with all his possessions?
8
 Phase I: Intelligence

– Problem Identification and Definition

• What's the problem?
• Why is it a problem?
• Whose problem is it?

9
 Phase II: Design

– Problem Structuring
• Generate alternatives
• Set criteria and objectives
• Develop models and scenarios to
evaluate alternatives
• Solve models to evaluate alternatives

10
 Problem Solving

• State Space Search

– Initial State
– Goal State
– Operators

• Choosing representation and controlling the

application of operators requires decision
making

11
Problem Representation

L R

12
 States and Operators
• State = <Farmer/Boat location, Wolf location,
Goat location, Cabbage location>
• Operator
• <L,L,L,L> ----> <R,L,R,L>
• <R,L,R,L> -- <L,L,R,L>
• <L,L,R,L>--- <R,L,R,R>
• <R,L,R,R>-- <L,L,L,R>
• <L,L,L,R>--- <R,R,L,R>
• <R,R,L,R> -- <L,R,L,R>
• <l,R,L,R>--- <R,R,R,R>

13
 Phase III: Choice

– Solution
• Determine the outcome of chosen
alternatives
• Select the/an outcome consistent with the
decision strategy

14
 Decisions and Alternatives
• Alternatives
• where do they come from?
• how many are enough?
• Evaluation
• how should each alternative be evaluated?
• how reliable is our expectation about the
impact of an alternative?
• Choice
• What strategy will be used to arrive at a
choice?

15
 Decision Making Strategies
• Strategies:
– Optimizing
– Satisficing
– Quasi-satisficing
– Sole decision rule
– Selection by elimination
– Incrementalism and muddling through

16
 Decision Making Strategies
• Considerations
– Individual-focused vs. organization-focused
decisions
– Individual vs. group decisions
– Expensive-to-change vs. inexpensive-to-
change decisions

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 Optimizing
• Goal: select the course of action with the
highest payoff
– estimation of costs and benefits of every
viable course of action
– simultaneous or joint comparison of costs
and benefits of all alternatives
– high information processing load on
humans

18
 Observations
• Given high cost in time, effort, and money
• Decisions are made under severe time
pressure (``fighting fires'')
• Optimization on stated objectives may
result in sub-optimization on unstated, less
tangible objectives
• Therefore, people often
– Do not consider all alternatives
– Do not evaluate all alternatives thoroughly
and rigorously
– Do not consider all objectives and criteria
• Place more weight on intangible objectives and
criteria
19
 Satisficing
• Decision-makers satisfice rather than maximize
[Simon]. They choose courses of action that are
``good enough''---that meet a certain minimal
set of requirements
– Theory of bounded rationality: human beings
have limited information processing
capabilities
– Optimization may not be practical, particularly
in a multi-objective problem, yet knowing the
optimal solution for each objective and under
various scenarios can provide insight to make
a good satisficing choice
20
 Sole Decision Rule
• Tell a qualified expert about your problem and do
whatever he (she) says---that will be good enough''
[Janis and Mann]
• Rely upon a single formula as the sole decision rule
• Use only one criterion for a suitable choice
– e.g., do nothing that may be good for the enemy
• Impulsive decision-making usually falls under this
category

21
 Selection by Elimination

• Eliminate alternatives that do not meet the

most important criterion (screening;
elimination by aspects)
• Repeat process for the next important
criterion, and so on
• Decision-making becomes a sequential
narrowing down process

22
 Selection by Elimination
• ``Better'' alternatives might be
eliminated early on---improper weights
assigned to criteria
• Decision-maker might run out of
alternatives
• For complex problems, this process
might still leave decision maker with
large number of alternatives

23
 Incrementalism
• Often, decision-makers have no real
awareness of arriving at a new policy or
decision
– decision-making is an ongoing process
– the satisficing criteria themselves might
change over time
• Make incremental improvements over current
situation and aim to reach an optimal
situation over time
• Useful for ``fire-fighting'' situations

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 Heuristics and Biases
• Heuristics are “rules of thumb” that can
make a search process more efficient.
• Most common biases in the use of
heuristics
– Availability
– Adjustment and anchoring
– Representativeness
– Motivational

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 Evaluation Metrics
• Effectiveness: what should be done
– Easier access to relevant information
– Faster, more efficient problem recognition and
identification
– Easier access to computing tools and models
– Greater ability to generate and evaluate large set
of alternatives
• Efficiency: how should it be done
– Reduction in decision costs
– Reduction in decision time for same level of detail
in the analysis
– Better quality feedback
26
Management Concepts

27
 INTRODUCTION TO MANAGEMENT

SIGNIFICANCE OF MANAGEMENT

• Management is essential in all organized

efforts.
• Management is the dynamic, life giving
element in every organization
• Management is a critical element in
economic growth of a society/country.

28
 ORGANIZATION
• When two or more people work
in a structured way to achieve a
specific goal or a set of goals.

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 WHAT IS AN
ORGANISATION?
Organization is a deliberate
arrangement of people to accomplish
some specific task or tasks.

People
Deliberate Structure

Distinct Purpose

30
 GOALS OR OBJECTIVES
• The purpose that an organization
strives to achieve.

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 DEFINITIONS OF MANAGEMENT

There are as many definitions numbers of authorities

in this field.

 As per Mary Parker Follet:” The art of getting things

done through others.”

 As per George R. Terry: ”Management is a process

of planning, organizing, actuating and controlling
performed to determine and accomplish the
objectives by use of people and resources.

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Definition of management process
• Production or efficiency oriented
• Decision-oriented
• People-oriented
• Function-oriented

33
 Production oriented
• According to Taylor management define
as
“management is the art of knowing what
you want to do and then seeing that it is
done in the best and cheapest way.”

34
 Decision oriented
• “Management is simply the control over
the action of human beings for the
expressed purpose of attaining pre-
determined goals.”

35
 People oriented
• Lawrence appley define management as a
“management is the accomplishment of
result through the efforts of other people.”
• According to koontz “management is the
art of getting things done through and with
people formally organized group.”

36
 Function oriented
• According to Henry Fayol “ to manage is to
forecast and to plan, to organize, to
coordinate and to control.”

37
 In simple words of van Flrt
&Peterson
• “management as a set of activities
directed at the efficient & effective
utilization of resources in the pursuit of
one or more goals.

38
 Financial resources

Managerial activities Physical resources

Effective & efficient utilization

Human resources goals

Informational resources

39
 COMMENTS ON THE NATURE OF
MANAGEMENT
• Management is not just an art – it is also a science.
• Managers are required to do more than one function.
• Managers also perform non-managerial roles.
• Managerial functions are done in all organizations.
• Managerial functions are executed at all levels.
• Management functions have been defined using
different types and different number of words.
• Aim of all managers is to create a surplus.
• Managing is concerned with efficiency, effectiveness
and productivity.

40
 Nature of management
1. Multidisciplinary
2. Dynamic nature of principles
3. Relative , not absolute principles
4. Management science or art
5. Management a profession
6. Universality of management
7. Management is an integrative process
8. Management is necessarily activity based

41
 Feature of management
1. It is a process
2. It is a social process
3. Group efforts
4. Attainment of pre determine objective
5. It is a distinct entity
6. It is a system of authority
7. Universality of management
8. It is needed at all levels
9. It is a discipline
10. It is a integrative process
11. It is an art as well as science
12. It is a profession
42
 Importance of management
1. Achievement of group goals
2. Minimization of cost
3. Change and growth
4. Effective and smooth running of business
5. Higher profit
6. Provide innovation
7. Social benefits
8. Effective utilization of resources
9. Development of resources
10. Sound organization structure
11. Useful for developing countries
12. Integration various interest groups
13. Stability in the society

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SYSTEMS VIEW OF ORGANIZATIONS

• Organizations can be considered as open

systems that continually interact with the
external environment.
• The external environment is both a
supplier of resources as well as a source of
consumers and significantly influences the
operations and outcomes.

44
 SYSTEMS VIEW OF
ORGANISATIONS
Environment

Supplies Organization creates Consumes

# OPPORTUNITIES

RESCOURCE
INPUTS
TRANSFORMATION
OUTPUTS
PROCESS
Money Land Finished goods
Workflows turn
# THREATS

Materials Energy and/or services,

resources into
Machines Info Others
outputs
Methods Mgmt
Men

Consumer Feedback

GOAL INPUTS OF STAKE HOLDERS

Investors/Customers/Employees/Suppliers/Society/Government 45
 ORGANISATIONAL PERFORMANCE
PRODUCTIVITY,EFFICIENCY AND EFFECTIVENESS

 Resources and customers are two critical elements of

open system view of organizations.
 For organizational success the resources must be well
utilized and customers well served.
 The need for value creation is vital in this context.
 Value is created when resources are utilized in the
right way, at the right time and at minimum cost.

46
 ORGANISATIONAL
PERFORMANCE.

• If organizations add value to the

original cost of inputs then :
1)business organizations earn profit
2)non profit organizations add wealth
to the society.
• All organizations utilize a variety of
performance measures.

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 ORGANISATIONAL PERFORMANCE
Productivity

• Productivity is one of the most common

indicators of performance.
• Productivity is defined as the overall value
of goods and services produced divided by
the value of inputs needed to generate that
output.
• Productivity is also linked to efficiency and
effectiveness

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 ORGANISATINAL PERFORMANCE

Efficiency and Effectiveness

• Efficiency is the relationship between inputs
and outputs –minimizing wastes and
therefore cost of resources.
• Effectiveness is a measure of goal
attainment.
• Summing up: ORGANIZATIONS NEED TO
DO THE RIGHT THINGS IN A RIGHT WAY

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 ORGANISATIONAL
PERFORMANCE
Efficiency-Effectiveness Matrix
EFFECTIVE BUT INEFFICIENT EFFECTIVE AND EFFICIENT
HIGH

•Goals achieved •Goals achieved

ATTAINMENT

•Resources wasted •Resources well utilized

•Good revenue but high cost •Good revenue and low cost
•Marginal profit or loss •Good profit
GOAL

INEFFECTIVE AND INEFFICIENT EFFICIENT BUT INEFFECTIVE

•Goals not achieved •Goals not achieved
•Resources wasted •No wasted resources
•Poor revenue and high cost •Poor revenues and low cost
LOW

•Loss •Marginal profit or loss

POOR RESOURCE UTILISATION GOOD

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 FUNCTIONS OF MANAGEMENT

• The most well accepted framework for understanding

management is to break down the management
functions into its constituent processes:
– PLANNING
– ORGANISING
– STAFFING
– LEADING
– CONTROLLING
• Management is referred to as a process to emphasize
that ALL managers engage in certain INTER-RELATED
activities in order to achieve the desired goal.

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 PLANNING
IT IS THE FUNCTION THAT DETERMINES THE
FUTURE COURSE OF ACTION. IT INVOLVES:
• Setting missions, goals and objectives.
• Formulating the strategy to achieve the above.
• Answering the 5W’s and 2H’s in a general way for all
the units and the sub units of the organization.

k out a simplified 5W
What? What will be done? action, steps,
description
Why? Why will it be done? justification, reason
Where? Where will it be done? location

e questions, in the ord

When? When will it be done? time, dates, deadlines
Who? By whom will it be responsibility for action
done?
How? How will it be done? method, process
How much? How much will it cost to cost or expenses
make? involved
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• Allocating resources-human, physical
and monetary.
• Planning exercise to be done at all
levels.
• The time horizon for planning to be
on long term, medium term as well
as on short term basis

53
 ORGANISING
Organizing a business requires providing it with
all the necessary inputs at the place and at the
time they are required.

• Based on the requirement of the plan, design the

structure.
• The structure results from:
- identifying individual roles,
- grouping of work,
- integrating the total effort and
- establishing relationships.
• Organizational structure creates an environment
for human performance.

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 STAFFING
Staffing is a perpetual function requiring managers
to find the ‘right person for the right job.' This is a
dynamic situation since people are continually
leaving, getting fired, dying, promoted and
transferred. Building of human organization
involves:
– Identifying work force requirement.
– Inventorying available people.
– Selecting and recruiting new people.
– Planning careers of workforce.
– Training and developing the current incumbent
and his/her successor to enable them to perform their
tasks efficiently and effectively.
– Appraising and promoting.
– Setting compensation.

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 LEADING
• LEADING PREDOMINANTLY DEALS WITH
INTERPERSONAL ASPECTS OF MANAGING.
• MOST IMPORTANT OPPORUNITIES AS WELL AS
PROBLEMS FOR MANAGERS ARISE FROM PEOPLE.
• EFFECTIVE MANAGERS ALSO NEED TO BE EFFECTIVE
LEADERS.
• LEADING INVOLVES:
– Communication- it has to be a two - way traffic.
– Leadership- it is the process of guiding and influencing the
work of subordinates.
– Motivation- it arouses the desire in the workers to give their
best. It is an act of inspiring and stimulating.
– Motivation can be financial as well as non-financial.

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 CONTROLLING
IT IS ENSURING OUTCOMES OF ACTIONS
CONFORM TO THE ADOPTED PLANS.THIS
INVOLVES:
– Establish standards of performance.
– Compare current performance with standards.
– For any deviation take corrective action to
ensure the organizational goals are met.

57
 THE MANAGEMENT PROCESS IN
PRACTICE
• It is easier to understand a process, as complex
as management, when it is broken down into
parts and the basic relationships between the
parts are clearly identified.
• Descriptions of this kind are called models.
• In reality, managing is not as simplistic as made
to look during previous discussion on
management functions using models.

58
 THE MANAGEMENT PROCESS IN
PRACTICE
• The management process is the ongoing decisions
and work activities in which managers engage as
they plan, organize, lead and control.
• Various models are more intertwined than implied
by our earlier model.
• There is no simple cut-and dried beginning or
ending point as managers plan, organize, lead and
control.
• As managers ‘manage’ they are often involved in
some planning, some organizing, some leading and
some controlling,- and perhaps not even in that
sequential order.
• Different management processes seem to merge
into each other like a continuous river.

59
 THE MANAGEMENT PROCESS IN
PRACTICE
THE INTERACTIVE NATURE OF
MANAGEMENT PROCESS

PLANNING
Setting performance objectives
And how to achieve them.

ORGANISING CONTROLLING
Arranging tasks ,people and Measuring performance and
other resources to accomplish taking action to ensure
the work. desired results are achieved.

LEADING
Inspiring people to give their
best to achieve high
performance levels. 60
 Difference between management and
administration
Basis Administration Management

Nature of work Mainly concerned It puts the policies &

with the plans into action
determination of
objective & and
major policies of an
org.
Type of function Thinking or It is a doing or
determinative executive function.
function
Top level activity Middle level activity

Level of authority 61
Decision making Decision are generally It is a ‘doing’ or
influenced by public executive function
opinion, thinking or
determinative function
Main function Planning and Motivation and
organising controlling

Administrative & It needs administrative It require technical

technical ability rather than technical ability more than
ability administrative ability.
Co-ordination and Co-ordinates finance, It uses org. for
control production and achievement of the
distribution. Frame targets fixed by
org. structure & administration.
exercises control over
the enterprise.
62
 MANAGERIAL ROLES IN
ORGANISATION
• People working together in groups to achieve
some goal must have roles to play, like the
roles actors fill in a drama.
• These roles could be the one’s :
- They develop themselves
- Are accidental and haphazard or
- Well defined and structured by someone to
ensure people contribute in a specific way
to group efforts.

63
 MANAGERIAL ROLE IN
ORGANISATION
• H. Mintzberg’s study of five top
managers at work challenged several
long held concepts about a
manager’s job, like managers were
reflective thinkers, who carefully &
systematically processed information
before making decisions.

64
 MANAGERIAL ROLES IN
ORGANISATION
• Mintzberg discovered that:
- His managers engaged in a large number
of varied, unpatterned and short duration
activities.
- There was little time for reflective thinking
because managers faced constant
interruptions.
- Half of manager’s activities lasted less
than nine minutes each.

65
 MANAGERIAL ROLES IN
ORGANISATION
• In addition to above insights on what managers did,
Mintzberg categorised what managers do based on
what managers actually do on their jobs.

• Mintzberg concluded that managers perform ten

different but highly interrelated roles

• Management roles refer to specific categories of

managerial behaviour.

• Mintzberg’s ten managerial roles can be grouped as:

1. INTERPERSONAL ROLES
2. INFORMATIONAL ROLES
3. DECISIONAL ROLES
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 MINTZBERG’S MANAGERIAL ROLES
1.INTERPERSONAL
Role Description Examples of identifiable
activities
Figure Symbolic head; required to Greeting visitors,
head perform a number of routine duties signing legal
of a legal or social nature. documents.
Leader Responsible for motivation and Performing virtually all
activation of subordinates, activities involving
staffing, training and associated subordinates.
duties.

Liaison Maintains self developed network A sales manager

of outside contacts and informers conferring at a
who provide favours and marketing trade
information. Such networks are association meeting.
also developed and maintained Also receiving
within the organisation. information from H.R.67
manager of the org.
 MINTZBERG’S MANAGERIAL ROLES
2. INFORMATIONAL
Roles Description Examples of identifiable
activities
Monitor Seeks and receives wide Reading magazines &
variety of information to journals, studying
develop thorough reports.
understanding of organization
& the environment. Becomes
the nerve centre of internal and
external information.
Disseminat Acts as an ‘information Holding communication
or conduit’ to different members meetings, phone calls to
of the org. Some information relay information.
may require interpretation and
integration.
Spokespers Transmitting information to Holding board meetings.
on outsiders- plans, policies, Interviews with media.
actions, results etc. 68
 MINTZBERG’S MANAGERIAL ROLES
3. DECISIONAL
Role Description Examples of
identifiable activities
Entreprene Searches org. and its environment for Organising strategy &
ur opportunities and initiates ‘empowerment review sessions to
projects’ to bring about changes; develop new
supervises design of certain projects and programmes
oversees their execution.
Disturbance Responsible for corrective action when Organising strategy &
handler organisation faces important unexpected their review to deal
disturbances with
crises&contingencies

Resource Responsible for allocation of all Scheduling,

allocater organisational resources in effect, making requesting,
or approving all significant decisions authorising,budget,
programming,
subordinates work
Negotiator Responsible for representing the Participating in union
organisation at major negotiations contract negotiations
69
 MANAGERIAL ROLE IN ORGANISATION

EVALUATION OF MINTZBERG’S FINDINGS

Follow up studies validate and support Mintzberg’s

role categories:
1. Managers of all organisations & at all levels perform
similar roles.
2. However emphasis on different roles may change with
their organizational levels eg. Roles of figurehead,
disseminator, negotiator are important at higher
levels. Leader role is more important at lower levels.
3. Most of Mintzber’s roles align smoothly with the four
functions
4. All managers do some work that is not purely
managerial.
Mintzberg has clearly offered new insights into what
managers actually do .
70
 MANAGERIAL SKILLS
• A skill is an individual’s ability to translate
knowledge into action and is manifested in the
performance.
• People can be born with certain skills but it is very
much possible to develop them through appropriate
training and experience.
• In order to discharge his roles successfully a
manager should possess the following three roles:
1. Conceptual skills,
2. Interpersonal skills and
3. Technical skills.

71
 Conceptual Skills
• Conceptual skill is the ability to think analytically and
solve complex problems. It involves the ability to
break down problems into smaller parts, and to
recognize the influence or implications of any one
problem on others.
• Managers are increasingly required to deal with
more ambiguous problems, that have many
complications and long term consequences.
• The ability to understand the external and the
internal environment, conceptualize the issues
involved directly and indirectly and come out with a
decision or solution.

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 Human Relations Skill
• Human relations skill is the ability to work well
in co-operation with other people at all levels.
• This skill develops in the manager an ability:
1. To recognise the feelings and sentiments of
others,
2. To anticipate and judge the outcome of
various actions envisaged to be taken.
3. To examine his own concepts and values
which may enable him to develop correct
attitudes

73
 Technical Skills
• A technical skill is the ability to use a special
proficiency or expertise in one’s work.
• Engineers, doctors, tailors, accountants, market
researchers for example possess technical
skills.
• Technical skills can be initially acquired thru’
formal education and are further developed by
training and experience.

74
 Skill –mix at different management levels.

Lower level Middle Level Top level

managers managers managers
Conceptual skills-the ability to think analytically and achieve
integrative
Problem solving.

Human skills-the ability to work well in cooperation with other

people

Technical skills-the ability to apply expertise and perform

Special tasks with proficiency

75
 Difference between management and
organization
Management Organization

1) It is executive function which is It is organic function of putting

primarily concerned with the together the different parts of an
getting things done through others. enterprise into working order.

2) Planning, organization, staffing, Organization is one of the

motivation, direction, coordination important function of management.
and control are all function of
management.
3) Management function are Organisation is framework or
executed by bringing into being an edifice of management.
organisation.
76
 Cont….
4) It is like the entire body of It is like the nervous system of a
human being. human body.

5)There is different level of There is no such level in

management viz., top, middle and organisation.
lower.

6)Management uses the Organisation is the machine of

organisation determined by management in its achievement of
administration. the ends determined by
administration.

77
 The 3 Different Levels of Management 
•The term Levels of Management refers to the line of division that
exists between various managerial positions in an organization.
• As the size of the company and workforce increases, the number
of levels in management increases along with it, and vice versa.
•The different Levels of Management can determine the chain of
command within an organization, as well as the amount of authority
and typically decision-making influence accrued by all managerial
positions. 
•Levels of Management can be generally classified into three principal
categories, all of which direct managers to perform different functions. 
1. Administrative, Managerial, or Top Level of Management 
2. Executive or Middle Level of Management 
3. Supervisory, Operative, or Lower Level of Management 

78
1. Administrative, Managerial, or Top Level of Management 
• This level of management consists of an organization’s board of directors and the chief
executive or managing director.
• It is the ultimate source of power and authority, since it oversees the goals, policies, and
procedures of a company.
• Their main priority is on the strategic planning and execution of the overall business success. 
• The roles and responsibilities of the top level of management can be summarized as follows: 
– Laying down the objectives and broad policies of the business enterprise. 
– Issuing necessary instructions for the preparation of department-specific budgets, schedules, procedures, etc. 
– Preparing strategic plans and policies for the organization. 
– Appointing the executives for middle-level management, i.e. departmental managers. 
– Establishing controls of all organizational departments. 
– Since it consists of the Board of Directors, the top management level is also responsible for communicating with
the outside world and is held accountable towards an organization’s shareholders for the performance of the
enterprise. 
– Providing overall guidance, direction, and encouraging harmony and collaboration. 
–  

79
 2. Executive or Middle Level of Management 

• The branch and departmental managers form this middle management level.

• These people are directly accountable to top management for the functioning of
their respective departments, devoting more time to organizational and directional
functions.
• For smaller organizations, there is often only one layer of middle management, but
larger enterprises can see senior and junior levels within this middle section. 
• The roles and responsibilities of the middle level of management can be
summarized as follows: 
– Executing the plans of the organization in accordance with the policies and directives laid out by the
top management level. 
– Forming plans for the sub-units of the organization that they supervise. 
– Participating in the hiring and training processes of lower-level management.  
– Interpreting and explaining the policies from top-level management to lower-level management. 
– Sending reports and data to top management in a timely and efficient manner. 
– Evaluating the performance of junior managers. 
– Inspiring lower level managers towards improving their performance. 

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 3. Supervisory, Operative, or Lower Level of Management 
• This level of management consists of supervisors, foremen,
section officers, superintendents, and all other executives whose
work must do largely with HR oversight and the direction of
operative employees.
• Simply put, managers at the lower level are primarily concerned
with the execution and coordination of day-to-day workflow that
ensure completion of projects and that deliverables are met. 

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• The roles and responsibilities of the lower level of management can be
summarized as follows: 
– Assigning jobs and tasks to various workers. 
– Guiding and instructing workers in day-to-day activities. 
– Overseeing both the quality and quantity of production. 
– Maintaining good relations within lower levels of the organization. 
– Acting as mediators by communicating the problems, suggestions, and recommendatory
appeals, etc. of workers to the higher level of management, and in turn elucidating higher-
level goals and objectives to workers. 
– Helping to address and resolve the grievances of workers. 
– Supervising and guiding their subordinates.  
– Taking part in the hiring and training processes of their workers.  
– Arranging the necessary materials, machines, tools, and resources, etc. necessary for
accomplishing organizational tasks.  
– Preparing periodical reports regarding the performance of the workers.  
– Upholding discipline, decorum, and harmony within the workplace. 
– Improving the enterprise’s image as a whole, due to their direct contact with the workers.  

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 Levels of Management Summary
• An organization can have many different managers, across a variety of titles,
authority levels, and levels of the management hierarchy that we illustrated
above.
• In order to properly assign roles and responsibilities to all managerial positions, it
is important to recognize the key differences between low-level, middle-level, and
top-level management. 
• The key takeaways from this distinction are as follows: 
– Top-level managers are responsible for controlling and overseeing the entire organization. 
– Middle-level managers are responsible for executing organizational plans which comply with the
company’s policies. They act as an intermediary between top-level and low-level management.  
– Low-level managers focus on the execution of tasks and deliverables, serving as role models for
the employees they supervise.  
• All businesses are comprised of a vast array of different managerial tasks. When
these are coordinated properly, and there is a strong hierarchal manager system
in place, an organization can be extremely efficient in creating value through the
production of their products, services and overall workflow.  

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      STRUCTURED DECISION     
• These decisions are these that can be programmed and well defined. 
• They are essentially repetitive, routine and involve a defined. 
• They are essentially repetitive, routine and involve a definite procedure
for handling them so that they do not have to be treated each as if they
were new. 
• Structured decisions are also called programmable decisions involve
situations where the procedures decisions involve situations where the
procedures to follow when a decisions are structured or programmed by
the decisions procedures or decision rules developed for them. 
• A structured decision could possibly involve what is known as a
deterministic decision or an algorithmic decision.              
•  Exp.    Decision making of students results. decision about the payroll
systems etc

CHARACTERISTICS      :-
• Structured decisions can be delegated.
• The cost of taking such decisions is not as high as that of unstructured
ones.
• These decisions can be made with the help of computer systems. 84
 UNSTRUCTURED DECISION 
• These types of decisions are occasional and unique in nature. 
• There are no predefined procedures available to solve these problems
and a new analysis is required for each occurrence. 
• In top level managers are usually faced with more such unstructured
decision making situations. 
• They the strategic decision are non-repetitive vital and important and aim
of determining or changing the ends or means of the enterprise.
• Unstructured decisions are not simple. 
• They are usually quite complex in nature. So, there is no tried and true
method of handling them.
• Unstructured decisions are those in which the decision makes must
provide judgment evaluation and insight into the problem definition.
• The risk involved in taking decisions to solve the problems in this is
usually high. 
Exp. dealing with a labor issue or setting policy for the implementation
of a new technology.
Features of unstructured decision:-
• These decisions can not be delegated.
• The cost of taking such decisions is quite high. Compared to structured
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decisions. 
Formal Information System: 
•A formal organization is defined as an organization that has set rules and regulations.
•Examples of formal organizations include churches, hospitals, schools, companies, etc. In this kind of organization,
the tasks are carried out smoothly and efficiently.
•The formal organization has its own distinguishing characteristics.
•Some of them include having well-structured rules, hierarchical structure, definite policies, and objectives, etc.
•There are many advantages associated with working in a formal organization. In a formal organization, short-term
goals are completed efficiently as the employees work systematically.
•Moreover, there is coordination, and more emphasis is given to work.
• Now, there are disadvantages of working in a formal organization as well. The social needs of the employees are
completely ignored in the formal organization as the main emphasis is given to work and to achieve long-term goals.
•Sometimes the positive environment is not there as the employees are pressured by the workload.
•Due to this pressure, the work and the long-term goals of the organization are hindered.
•Apart from the disadvantages, a formal organization has efficiency, accurate division of labor, responsibility,
delegation, unity of command, etc.

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 Informal Information System
• it is an employee based system designed to meet personal and
vocational needs and to help in the solution of work related problems.
• It also funnels information upward through indirect channels. It works
within the framework of the business and its stated policies.
• An informal organization is defined as an organization that majorly
focuses on building social relationships.
• The main aim of the informal organization is to create a positive work
environment so that the goals of the company are achieved efficiently.
• Informal organization is a set of social relationships, communities,
networks, etc. The employees remain motivated as there is a positive
work environment, and the employees are provided with incentives/
promotions, etc.
• One of the major examples of an informal organization is the clubs or
social networks.

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• An informal organization aims to generate harmony among people and
work together to achieve the goals.
• Some of the informal organization features are that it does not have
policies, rules, or regulations; it is formed on the basis of personal
interactions, does not have any structured hierarchy, and is
spontaneously built.
• An informal organization promotes cultural values, social satisfaction
and promotes creativity. But on the other hand, it resists change, and
more pressure is given on the norms.

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 • Now, let us look at some of the significant contrasting points
between formal and informal organizations.
S.NO. INFORMAL ORGANIZATION INFORMAL ORGANIZATION

1. A formal organization is defined On the other hand, an informal

as an organization that has set organization is defined as an
rules and regulations to be organization that focuses on building
followed by the employees. social relationships and networks.

2. The main aim of a formal The main purpose of the informal

organization is to achieve the organization is to build social
long-term and short-term goals networks and create a positive work
of the organization. environment.

3. The formal organization has a An informal organization does not

hierarchical structure. have a hierarchical structure.
4. The formal organization is Informal organization is created
created by the management. spontaneously by the members. The
organization is made based 89 on
personal interactions.
S.N INFORMAL ORGANIZATION INFORMAL ORGANIZATION
O.
5. Achievement of goal is the priority Fulfilling the psychological and social
of a formal organization. needs of the employees is the priority
of the informal organization.

6. A formal organization is stable, An informal organization is

i.e., it continues for a long time. spontaneously made and is not stable.

7. Formal organization follows An informal organization has a

official communication. grapevine communication.
8. The employees are controlled by The employees are controlled by
rules, regulations, and protocols. values, morals, norms, and beliefs.

9. In a formal organization, the main In an informal organization, the main

focus is on work performance. focus is on building interpersonal
relationships.

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S.NO INFORMAL ORGANIZATION INFORMAL ORGANIZATION

10. There are different levels of All the members in the informal
authority in a formal organization. organization are equal.
The employees are bounded by the
hierarchical structure.

11. The size of the formal The size of an informal organization is

organization is large. small.
12. The group leadership of a formal The group leadership of an informal
organization is explicit. organization is implicit.
13. Vertical hierarchy is seen in a Lateral hierarchy is seen in an
formal organization. informal organization.
14. In a formal organization, the In an informal organization, the
emphasis is made on efficiency, emphasis is made on spontaneity,
discipline, consistency, etc. freedom, and building relationships.

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 Features of Formal Organization
• Definite Interrelationship: A formal organization has a definite and
mutual relationship among the employees. Every employee knows
who has to report to whom. Through this hierarchical structure, a
definite relationship is established among the employees.
• Rules and Regulations: A formal organization has rules and
regulations that have to be followed by all the employees. The goals
are achieved efficiently if one follows the rules and regulations.
• Division of Work: There are different departments working in the
organization. Thus, the division of work is done for working smoothly
and swiftly.
• Stability: A formal organization is stable in its work. It is deliberately
made, and several rules are set to achieve the organization's
objectives.

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Features of Informal Organization
• No Rules and Regulations: An informal organization has no rules
or regulations. It is spontaneously made based on the personal
interactions of people. Thus, no rules are set up during the
establishment of the organization.
• Communication: An informal organization has independent
channels of communication. There is no official way of passing on
information. However, the person with the lowest rank can be in
direct contact with the person of the highest rank. Thus, grapevine
communication is followed in an informal organization.
• No Stability: There is no stability in an informal organization. An
individual can be a member of another organization or group, which
makes this organization unstable.

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 Types Of Information System
•Whichever information system you plan to implement in your business,
here are the benefits it will offer:
– It will induce innovation in business activities through its research and
development.
– It will enable automation, reducing steps undertaken to complete a task.
– It helps keep the hardware, software, data storage, and networking system safe
and up to date.
1. Knowledge Work System
2. Management Information System
3. Office Automation System
4. Decision Support System
5. Transaction Processing System
6. Executive Support System

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 1. Knowledge Work System
• There are different knowledge management systems that an organization
implements to ensure a continuous flow of new and updated knowledge into
the company and its processes.
• A knowledge work system (KWS) is one that ease the integration of new
information or knowledge into the business process.
• KWS also offers support and resources to various knowledge creation
techniques, artificial intelligence applications, and group collaboration
systems for knowledge sharing, among others.
• It also uses graphics, visuals, etc., to disseminate new information. Below are
some of the applications that work on the core fundamentals of KWS.
– Designers often use computer-aided design systems (CAD) to automate their design
process.
– Financial workstations are used to analyze huge amounts of financial data with the help of
new technologies.
– Virtual reality systems are found in the scientific, education, and business fields for using
graphics and different systems to present data.

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 2. Management Information System

• The management information system provides aid to managers by automating

different processes that were initially done manually.
• Business activities like business performance tracking and analysis, making
business decisions, making a business plan, and defining workflow.
• It also provides feedback to the managers by analyzing the roles and
responsibilities.
• A management information system is considered a significant application that
helps managers immensely. Here are some of the advantages of the information
system:
– It enhances the efficiency and productivity of the company
– It provides a clear picture of the organization’s performance
– It adds value to the existing products, introduces innovation and improves product development
– It assists in communication and planning for business processes
– It helps the organization provide a competitive advantage
• Eg.)payroll processing, order processing, such as for an e-commerce
business, and invoicing

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 3. Decision Support System
• A decision support system is an information system that analyses
business data and other information related to the enterprise to offer
automation in decision-making or problem-solving.
• A manager uses it in times of adversities arising during the operation
of the business.
• Generally, the decision support system is used to collect information
regarding revenue, sales figures or inventory.
• It is used across different industries, and the decision support system
is a popular I
• Eg. GPS route planning. A DSS can be used to plan the fastest and
best routes between two points by analyzing the available
options.nformation system.

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 4. Office Automation System

• An office automation system is an information system that

automates different administrative processes like documenting,
recording data, and office transactions, among others.
• The office automation system is divided into managerial and clerical
activities.
• Here are some of the business activities that are done under this
type of information system:
– Email
– Voice mail
– Word processing

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 5. Transaction Processing System
• The transaction processing system automates the transaction collection,
modification, and retrieval process.
• The peculiar characteristic of this type of information system is that it
increases the performance, reliability and consistency of business
transactions.
• It helps businesses perform daily operations smoothly without hassle.
Eg. systems that manage sales order entry, airline reservations,

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 6. Executive Support System
• An Executive Support System or ESS helps top-level executives to plan and control
workflow and make business decisions.
• It is very similar to Management Information System or MIS.
Here are some of the unique characteristics of ESS:
– It provides great telecommunication, better computing capabilities, and effective display options to
executives.
– It enables them with information through static reports, graphs, and textual information on demand.
– It helps monitor performances, track competitors’ strategies, and forecast future trends, among others.
Examples
• External databases
• Technology reports like patent records etc.
• Market reports
• Confidential information about competitors
• Speculative information like market conditions
• Government policies
• Financial reports and information

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