UNIT II

PLANNING AND ORGANISING

Planning - Steps in Planning Process - Scope and Limitations - Forecasting and types of
Planning - Characteristics of a sound Plan - Management by Objectives (MBO) - Policies and
Strategies – Scope and Formulation - Decision Making - Types, Techniques and Processes.
Organisation Structure and Design - Authority and Responsibility Relationships - Delegation
of Authority and Decentralization - Interdepartmental Coordination - - Impact of Technology
on Organisational design - Mechanistic vs. Adoptive Structures - Formal and Informal
Organisation. Control: meaning, function, Process and types of Control.

PLANNING
Planning is an important managerial function in that there is no choice between
planning and no planning. The choice is only in regard to the method and techniques used to
plan. It is anybody’s knowledge that we plan many things in our day to day lives. We plan to
go on a holiday trip, plan our careers, and plan our investments and so on. Organizations are
no exception. Lot of planning is done by managers at all levels. Planning is the basic process
by which we use to select our goals and determine the means to achieve them. Lot of
information has to be gathered andprocessed before a plan is formulated. In other words, a plan
is like a jigsawpuzzle. All the pieces have to be put together properly, so that they makesense.
Planning is necessarily forward looking. It is looking into the future. It bridges the gap
between where we are and where we want to go. It involves visualizing a future course of
action and putting it in a logical way. Let us look at the following observations about planning.
✓ “Failure to plan is planning to fail”.
✓ “Planning is outlining a future course of action in order to achieveobjectives”.
✓ “Planning is looking ahead”.
✓ “Planning is getting ready to do something tomorrow”.
✓ “Plan is a trap laid down to capture the future”.

STEPS INVOLVED IN PLANNING PROCESS

1. Perception of Opportunities: Perception of opportunities is not strictly a part of the

planning process. But this awareness of opportunities in the external environment as well as
within the organization is the real starting point for planning. It is important to take a
preliminary look at possible future opportunities and see them clearly and completely. All
managers should know where they stand in the light of their strengths and weaknesses,
understand the problems they wish to solve and know what they gain. Setting objectives
depends on the awareness. Planning requires realistic diagnosis of the opportunity situation.
2. Establishing Objectives: This is the second step in the planning process. The major
organizational and unit objectives are set in this stage. This is to be done for the long term as
well as for the short range. Objective specify the expected results and indicate the end points
of what is to be done, where the primary emphasis is to be placed and what is to be
accomplished by the various types of plans.
 Organizational objectives give direction to the major plans, which by reflecting these
objectives define the objective of every major department. Major objectives, in turn, control
the objectives of subordinate departments and so on down the line. In other words, objectives
from a hierarchy. The objectives of lesser departments will be more accurate if subdivision
managers understand the overall enterprise objectives and the derivative goals. Managers
should also have the opportunity to contribute their ideal to setting their own goals and those
of the organization.
3. Planning Premises: After determination of organizational objectives, the next step is
establishing planning premises that is the conditions under which planning activities will be
undertaken. Planning premises are planning assumptions the expected environmental and
internal conditions Thus planning premises are external and internal.
External premisesinclude total factors in task environment like political, social,
technological, competitors, plans and actions, government policies. Internal factors include
organization‘s policies, resources of various types, and the ability of the organization to
withstand the environmental pressure. The plans are formulated in the light of both external
and internal factors. The nature of planning premises differs at different levels of
planning. At the top level, it ismostly externally focused. As one moves down the
organizational hierarchy the composition of planning premises changes from external to
internal. The major plans both old and newwill materially affect the future against which
the managers at lower units must plan.
4. Identification of Alternatives: The fourth step in planning is to identify the alternatives.
Various alternatives can be identified based on the organizational objectives and planning
premises. The concept of various alternatives suggests that a particular objective can be
achieved through various actions. For example, if an organization has set its objectives to grow
further, it can be achieved in several ways like expanding in the same Field of business or
product line diversifying in other areas, joining hands with other organizations, or taking over
another organization and so on.
Within each category, there may be several alternatives the most common problem is not
finding alternatives but reducing the number of alternatives so that the most promising may be
analyzed. Even with mathematical techniques and the computer, there is a limit to the number of
alternatives that can be thoroughly examined. The planner must usually make a preliminary
examination to discover the most fruitful possibilities.

5. Evaluation of Alternatives: The various alternative course of action should be analyzed in

the light of premises and goals. There are various techniques available to evaluate alternatives.
The evaluation is to be done in the light of various factors. Example, cash inflow and outflow,
risks, limited resources, expected pay back etc.; the alternatives should give us the best chance
of meeting our goals at the lowest cost and highest profit.
6. Choice of Alternative Plans: This is the real point of decision-making. An analysis and
evaluation of alternative courses will disclose that two or more .ire advisable and beneficial.
The fit one is selected.
7. Formulation of Supporting Plan: After formulating the basic plan, various plans are
derived so as to support the main plan. In an organization there can be various derivative plans
like planning for buying equipment, buying raw materials, recruiting and training personal,
developing new product etc. These derivative plans are formulated out of the basic or main
plan and almost invariably required to support the basic plan.
8. Establishing Sequence of Activities: After formulating basic and derivative plans, the
sequence of activities is determined so those plans are put into action. After decisions are made
and plans are set, budgets for various periods and divisions can be prepared to give plans more
concrete meaning for implementation. The overall budgets of an enterpriserepresent the sum
total of income and expenses, with resultant profit or surplus, and budgets of major balance
sheet items such as cash and capital expenditures.

CHARACTERISTICS OF A SOUND PLAN

A sound plan should have the following characteristics:
(a) Primacy: Planning is an important managerial function that usually precedes
other functions. Obviously, without setting the goals to be reached and the lines of actions to
be followed, there is nothing to organize, to direct, or to control in the enterprise. But this
should not lead us to think that planning is isolated from other managerial functions.
(b) Continuity: Planning is a continuous and never-ending activity of a manager to
keep the enterprise as a going concern. One plan begets another plan to be followed by a series
of other plans in quick succession. Actually, a hierarchy of plans operates in the enterprise at
any time. Planning gets used up where tomorrow becomes today and calls for further planning
day in and day out. Again, the incessant changes make re-planning a continuous necessity.
(c) Flexibility: Planning leads to the adoption of a specific course of action and the
rejection of other possibilities. This confinement to one course takes away flexibility. But if
future and assumptions upon which planning is based prove wrong, the course of action is to
be modified for avoiding any deadlock. Accordingly, when the future cannot be molded to
conform to the course of action, the flexibility is to be ingrained in planning by way ofadapting
the course of action to the demands of current situations.

(d) Consistency: Planning is made by different managers at different times.

Maintenance of consistency or the unity of planning is oneof its essential requirements.
Objectives provide the common focus forunifying managerial action in planning. Moreover,
policies and procedures introduce a consistency of executive behaviour and action in matters
of planning.
(e) Precision: Planning must be precise with respect to its meaning, scope and nature.
As guides to action, planning is to be framed in intelligible and meaningful terms by way of
pinpointing the expected results. Planning must be realistic in scope rather than being dreams
indicating pious desires. As planning errors are far more serious and cannot be offset by
effective organizing or controlling, the accuracy and precision is of outmost importance.
(f) Pervasiveness: Planning is a pervasive activity covering the entire enterprise and
every level of management. Planning is not the exclusive responsibility of top management
only. But it extends to middle and lower managements as well. Although top managers are
mostly preoccupied with planning because of the wider scope of operational and decision
making authority, planning is of equal importance to every manager.
MANAGEMENT BY OBJECTIVES
Management guru Peter Drucker is credited with being the first to introduce
Management by Objectives (MBO) as an approach for increasing organizational effectiveness.
He observes that every manager, from the highest to the lowest levels in the organisation,
should have clear objectives to pursue.
 According to him, such a process would enable each manager to have a clear
understanding of what the organisation expects of him or her and how their individual
objectives are integrated with the overall organizational objectives. George Odiorne has done
substantial research work on MBO and further popularized the concept.
To quote George Odiorne, “MBO is a process whereby the superior and subordinate
managers of an organisation jointly identify the common goals, define each individual’s
major areas of responsibility in terms of the results expected of him, and use these resources as
guides for operating the unit and assessing the contribution of each of its members”. Different
goals are sought to be achieved by the introduction of MBO in organizations. MBO, as a
management tool, thus, is so versatile that it is used;
✓ to integrate the organizational goals with the individual goals;
✓ as a motivational technique wherein individuals are driven towards the achievement
of goals;
✓ to appraise the performance of managers; and
✓ to control the activities as they are performed.
POLICIES
Decision-making is the primary task of a manager. While making decisions, it is
common that managers consult the existing organizational policies relevant to the decisions.
Policies provide the basic frame work within which managers operate. Policies exist at all
levels in the organisation. Some may be major company policies affecting the whole
organisation while others may be minor in nature affecting the departments or sections within
the departments. Thus, policies are, intended to provide guidance to managers in decision-
making. It may be remembered that a policy is also a decision. But it is a one time standing
decision in the light of which, so many routine decisions are made.
Policy Formulation
As mentioned earlier, the basic intention of policies is to help executive thinking in decision-
making. Policies are formulated for all the key functional areas of business like production,
marketing, finance, personnel and so on. Effectiveness and consistency of decisions in all these
areas depend on how well the policies are formulated and understood. A policy is aplan.
Therefore, the steps involved in policy formulation are similar to the steps in planning. Though
policies vary in respect of scope, the process of policy formulation usually involves the
following steps
a. Corporate Mission -Corporate mission specifies the purpose for which the organisation
exists. It relates the organisation to the environment in which it operates. It is natural,
therefore that all the activities of the organisation are geared towards the achievement of the
mission. The mission statement provides the direction to the organisation. As such, thorough
understanding of the corporate mission is the starting point for policy formulation.
b. Appraisal of the Environment -Environment appraisal in a systematic way is the key for
successful formulation of the policies. Correct appraisal of the environment enables the
organisation to integrate its activities with the needs of the society. As such, the nature of the
environment, the various dynamics of it have to be analysed. It includes collection of relevant
information from the environment and interpreting its impact on the future of organisation.
c. Corporate Analysis - While the focus in environmental appraisal is on the internal factors
of the business, corporate analysis takes into account the internal factors. Corporate analysis
discloses strengths and weaknesses of the organisation and points out the areas that have
potential. This is an inward-looking exercise.
d. Identification of Alternatives - The above two steps – environmental appraisal and
corporate analysis popularly known as SWOT (Strengths, Weaknesses, Opportunities and
Threats) analysis will help identifying the alternative policies. For example, the objective of
the organisation is expansion. This may be achieved by several ways, diversification of the
activities, acquisition of existing businesses, and establishment of subsidiaries abroad and so
on. Again, if diversification is chosen, it has to be decided whether it is into related or unrelated
business. The alternative policies thus identified have to be evaluated in the light of the
organizational mission and objectives.
e. Choice of the Right Policy -This stage involves choosing the right policy from among the
several policy options that suits the organizational objectives. The Corporate history, personal
values and attitude of the management and the compulsions in the environment, if any,influence
the choice of the policy.

f. Policy Implementation -Effective implementation of the policy requires designing suitable

organisational structure, developing and motivating people to contribute their best, designing
effective control and information systems, allocation of resources, etc. At times, polices may
have to be revised in line with the changes in the environment. Further, polices need to be
monitored constantly during the implementation stage so that inadequacies if any, may be
corrected at the appropriate time.
DECISION MAKING
Decision-making in simple may be defined as “the selection of a future course of action
from among various alternatives. It presupposes the existence of various alternatives. It is in a
way a choice between alternatives. In other words, if there are no alternatives, there is no
choice. Therefore, the question of decision-making and the associated dilemma do not arise.
Thus, the following characteristics emerge from the definition of decisionmaking.
Type of Decisions taken by managers may be classified under various categories
depending upon the scope, importance and the impact that they create in the organisation. The
following are the different types of decisions:
Programmed and Non-programmed
Decisions Programmed decisions are normally repetitive in nature. They are theeasiest
to make. Usually, these decisions are taken in consultation with the existing policy, rule or
procedure which are already laid down in the organisation. For example: making purchase
orders, sanctioning ofdifferent types of leave, increments in salary, settlement of normal
disputes, etc. Managers in dealing with such issues of routine nature usually followthe
established procedures. On the other hand, non-programmed decisions are different in thatthey
are non-routine in nature. They are related to some exceptional situations for which there are
no established methods of handling such things. For example: Issues related to handling a
serious industrial relations problem, declining market share, increasing competition, problems
with the collaborator, growing public hostility towards the organisation fall in this category.
Problems like these have to be handled in a different way.
 While different managers reach thesame solution in the case of programmed decision
because they are guided by the same policy or procedure, the solutions may widely differ in
the case of non-programmed decisions. As one moves up in the hierarchy, many of the
decisions that managers make are non-programmed in nature. It is important to note that the
effectiveness of a manager lies in handling exceptional situations. Such situations call for
ingenuity and sound judgment. Surprisingly, many managers get bogged down in the routine
issues at the cost of the non- routine issues. The saying that “routine drives out the non-routine”
instead of the other way round is true in many organizations. Such a tendency results in
devoting less time for the important issues.
Operational and Strategic Decisions
Operational or tactical decisions relate to the present. The primary purpose is to achieve
high degree of efficiency in the company’s ongoing operations. Better working conditions,
effective supervision, prudent use of existing resources, better maintenance of the equipment,
etc., fall in this category. One the other hand, expanding the scale of operations, entering new
markets, changing the product mix, shifting the manufacturing facility from oneplace to the
other, striking alliances with other companies, etc., are strategic in nature. Such decisions will
have far reaching impact on the organisation. Usually, operating decisions do not need
intensive deliberations and huge resources and are taken by managers at the lower levels while
strategic decisions require extensive deliberations and huge resources and are taken by top level
managers. The focus in the operationaldecisions is on the short-run or immediate present, while
it is on the long-run in the case of strategic decisions.
Organizational and Personal Decisions
Decisions taken by managers in the ordinary course of business in their capacity as
managers relating to the organizational issues are organizational decisions. For example:
decisions regarding introducing a new incentive system, transferring an employee,reallocation
or redeployment of employees etc. are taken by managers to achieve certain objectives. As
against such decisions, managers do take some decisions which are purely personal in nature.
However, their impact may not exactly confine to their selves and they may affect the
organization also. For example: the manager’s decision to quit the organization, though
personal in nature, may impact for the organization.
Individual and Group Decisions
It is quite common that some decisions are taken by a manager individually while some
decisions are taken collectively by a group of managers. Individual decisions are taken where
the problem is of routine nature, whereas important and strategic decisions which havea bearing
on many aspects of the organisation are generally taken by a group. Group decision making is
preferred these days because it contributes for better coordination among the people concerned
with the implementation of the decision. Decisions may also be further classified under major
and minor decisions and simple and complex decisions. However, a detailed description of
these types is not necessary because they are almost all similar to the already discussed
programmed and non-programmed decisions in respect of importance and impact.
Techniques of Decision-Making
Now-a-days, different techniques are used by managers in making decisions. These
techniques, if used properly, would contribute for the effectiveness of the decisions. Some of
the important techniques are discussed below.
Brainstorming: Brainstorming is the oldest and widely followed technique for encouraging
creative thinking. It was originally developed by A.F. Osborn. It involves the use of a group.
The success of the technique lies in creating a free and open environment where members of
the group participate without any inhibitions.
It starts on the premise that when people interact in a free environment, the possibility for
creative ideas to emerge to higher continuous interaction through free discussions may result
in spontaneous and creative thinking. The larger are the number of solutions, the fairer are the
chances in locating an acceptable solution. Established research proves that one hour
brainstorming session is likely to generate 50- 150 ideas.
Of course, most of them may be impracticable; at least, some of them merit serious
consideration. This group process isnot without limitations. It consumes lot of time and
therefore is an expensive exercise. Secondly, it emphasizes only quantity of solutions, which
more often than not prove to be superficial. By overcoming the above limitations, a modern
manager can use this as an effective tool.
Synectic’s: Synectic’s is a new concept developed by William J.J. Gordon. The term
‘Synectic’s’ is derived from a Greek word which means “Fitting together of diverse elements”.
It starts on the premise of encouraging that this concept encourages novel thinking for the
development of alternatives through putting together different ideas which are distinct from
each other. A given problem is presented to a group of people with different backgrounds and
varied experiences. It is the responsibility of the group leader to present the problem and lead
the discussion in order to stimulate creative solutions. This approach ensures on the spot
evaluation of ideas. The leader who is a technical expert assists the group in evaluating the
feasibility of their ideas. Experience shows that Synectic’s is less widely used than
Brainstorming. When the problem is tough and challenging, this approach is used for effective
decision-making.
Operations Research: The origin and development of operations research is attributed to
military operations and applications during Second World War. The war put tremendous
pressure on the use of available scarce resources for various strategic and tactical operations.
The success of operations research in developing effective options is instrumental in making
this approach dependable in decisionmaking process. Operations Research employsoptimizing
models like Linear Programming, Project Management, Inventory Control, Decision Theory
and Waiting Line Theory. Operations Research is the systematic method of studying the basic
structure, functions and relationships of an organisation as an open system. It aims at
developing optimal solution with limited resources in a given situation.
The six steps in its approach to problem solving are:
✓ identification of a problem;
✓ construction of a mathematical model to investigate the problem;
✓ developing a good solution;
✓ testing of the model in the light of the data available;
✓ identifying and setting up of control points;
✓ implementation of the option as a solution to a critical problem (putting a solution to
work)
In essence, Operations Research attempts to develop the best solution that will contribute to
organisational goals.
ORGANISATION STRUCTURE AND DESIGN
The managerial function organizing may be understood as “defining and grouping the
activities of the enterprise and establishing authority, responsibility and relationships among
them”. It results in the creation of a structure most appropriate for the organization’s objectives
and other internal and external factors. The best structure is the one that enables the
organization to interact effectively with its environment, to efficiently channelize the efforts of
its people, to make efficient use of its resources. Thus, while planning specifies the objectives,
organizing facilitates the accomplishment of objectives.
AUTHORITY
Authority is a legal power which is possessed by a person from his superior officers
and with the help of which he succeeds in getting the things done by his sub-ordinates.
Authority is the key to managerial functions. If the managers do not possess required authority,
they will not be able to perform their duties properly. A manager is in a position to influence
his subordinates only by the use of his authority. It is the authority which enables him to
discharge the important functions of planning, coordination, motivation and controlling etc. in
an enterprise. If proper authority is not vested in him, he cannot perform these functions in
the required manner and he cannot be held responsible for all thesefunctions in the
absence of proper authorities. It is only the authority by virtue of which he dominates his sub-
ordinates and gets work done by them.
Definitions
✓ "Authority is the right to give order and the power to exact obedience". – HenriFayol
✓ "Authority is the power to command, to act or not to act in a manner deemed by the
possessor of the authority to further enterprise or departmental performance". – Koontz
and O'Donnell
DELEGATION OF AUTHORITY
Delegation is the process by which authority is granted to a subordinate by hissuperior.
But for delegation of authority, organizations would remain forever small. Delegation is the
only solution to cope with the increasing work load of managers as the organization grows.
Because of the constraints of time and ability, a manager cannot perform all the tasks himself.
Therefore, he delegates certain of the tasks to the subordinate and gets them done. Before
proceeding further to understand the process of delegation, it is appropriate to examine, in
brief, the concepts of authority and responsibility.
Authority is the right to command. It is the discretion power vested with a manager to
use the organizational resources. Managers acquire authority by virtue of the rank or title
associated with their position. Authority is granted to the individuals in a formal way in the
organization. It flows from the top to down in the organization structure.
Responsibility, on the other hand is the obligation to perform the tasks and accounts for
their satisfactory completion. It is implied that an individual is expected to fulfill certain job
requirements when he or she accepts a position in the organization. In other words, the
individual is answerable for the results of the task to be performed. In contrast to authority,
responsibility of an individual in the organization is always upwards, that is, the subordinate
is responsible to his or her superior.
 FORMAL AND INFORMAL ORGANIZATION
Formal organization, which refers to the structure of well-defined jobs, each bearing a
definite measure of authority, responsibility and accountability, is not capable of
accomplishing organizational objectives all alone. It needs the help of informal organization
for this purpose. In other words, informal organization, which does not appear on the
organization chart, supplements the formal organization in achieving organizational goals
effectively and efficiently.
FORMAL ORGANIZATION
Chester I Barnard defined formal organization as “a system of consciously coordinated
activities or forces of two or more persons”. A formal organization is deliberatelydesigned to
achieve specific objectives. It refers to the structure of well-defined jobs, each bearing a
definite measure of authority, responsibility and accountability. The structure is consciously
designed to enable the people of the organization to worktogether for accomplishing common
objectives. Thus, formal organization is more or less an arbitrary structure to which the
individual must adjust. It tells him to do certain things in a specified manner, to obey orders
from designated individuals and to cooperate with others. Coordination also proceeds to a
prescribed pattern in the formal organization structure. The formal organization is built around
four key pillars; namely,
✓ Division of Labour,
✓ Scalar and Functional Processes,
✓ Structure
✓ Span of Control.
These may also be called principles of formal organization. Division of labour and
specialization is the basic principle of formal organization. The whole work is divided into a
number of small operations and each operation is performed by a different person so that
there is maximum specialization. The scalar and functional processes imply the growth of the
organization both vertically and horizontally. The structure of the organization refers to the
overall arrangement in the organization which ensures proper balance between difference parts
of the organization and secures the execution of all operations and the achievement of
organizational objectives. The span of control refers to the number of subordinates directly
reporting and accountable to one superior.
Formal organization is the official hierarchy as it appears on paper. It is the basis and official
version of the organization. Formal organization possesses the following characteristics:
✓ It is deliberately impersonal;
✓ It is based on ideal relationships;
✓ It is based on the rabble hypothesis of the nature of man.
These characteristics have also been criticized by many authors. Firstly, as formal
organization is deliberately impersonal, emotions and sentiments of individuals are ignored in
determining the interactions, communication and accountability. But human beings cannot live
without social relations and, that is why, they develop informal relations. Secondly, it is based
on ideal relationships, human being is thought to be rational and economic beings. Further, it
is assumed that there would be no unofficial channel of communication.
But it is very difficult to find suchideal relationships in actual life. Lastly, it is based on the
rabble hypothesis of the nature of man. It is assumed that there will always be the same kind
of reaction if human beings are punished or rewarded. But the individuals are not always
motivated by the same rewards or punishments in the same manner. Formal organization is
deliberately construed to achieve some goals. It sticks to the goals (as laid down by the
originators). Goals are not easily changeable with the passage of time. This is another point of
criticism put forward by its critics. The rules and regulations of the organization may be too
rigid that it becomes difficult to achieve the goals. Moreover, formal organization does not
consider the goals of the individuals. Because of these reasons formal organization usually
gives birth to informal groups which cannot be separated from it. As a matter of fact, there is
a close relationship between the formal and informal organizations. Management should not
ignore informal organization (informal group, informal leader, informal communications, etc.,)
but it should use it to achieve the organizational goals.
INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the organization
based on personal attitudes, emotions, prejudices, likes, dislikes, etc. These relations are not
developed according to procedures and regulations laid down in the formal organization
structure. Generally, large formal groups give rise to small informal or social groups. These
groups may be based on some similarities that people of a large group see among the members
of the group with respect to tastes and preferences, socio-cultural background, temperaments,
attitudes, etc, these groups are not preplanner, but they develop automatically within the
organization according to its environment.
Informal organizations are small groups and these groups can overlap because a person may
be a member of several different informal groups. A manager cannot abolish the informal
groups since he does not create them. Informal relations will always support and supplement
the formal one. There are certain disadvantages also of informal organizations. They put
resistance to change and conform to old practices. The communication in informal organization
is very fast. Sometimes, itcreates rumours which may prove dangerous to the enterprise.
Modern authors on organization behaviour view organizations as consisting of both types of
relationships, i.e., formal and informal. It is true that while laying out an organization plan,
management can only develop formal structure of relationships, but organization is not only a
form chart or structure of relationships. Formal organization, no doubt, is an important part of
the organization. But informal organization is also not less important. If handled properly, it
will help in performing the activities of the organization very efficiently and effectively. In
short, informal relations are complementary to formal relations and procedures laid down in
the organization structure. Both formal and informal organizations are necessary for any group
action just as two blades are essential to make apair of scissors workable.
DECISION MAKING PROCESS:
✓ The analyses of these definitions present the following facts.
✓ Identify the purpose or goal, based on which decision has to be made.
✓ Analyze the set of circumstances, conditions or ground realities which set the norms
for decision- making.
✓ Decision – making is a process of identifying the issues, collecting information and
data, analyze the, and generate or develop necessary inputs for developing alternative
solutions.
✓ Develop alternative solutions to solve the problem or ways to deal with the situation.
✓ Evaluate the alternative solutions and choose the best solution.
✓ Implement the selected solution.
Process of Decision- Making
✓ Problem Awareness
✓ Problem diagnosis
✓ Development of alternative solutions
✓ Evaluation of alternative solutions
✓ Selection of the best solution
✓ Implementation of the decision
Problem awareness

✓ Mostly individual employees identify the problems in various areas.

✓ Individuals, when they get a ‗gut feeling ‘that something is wrong, they identify the
problem.
✓ The awareness of a problem mostly occurs to employees at the grass- root level like
sales people, machine operator, finance assistants, human resource assistant ‘s act.
✓ Internal performance measurements like level of turnover or profit performance.

Problem diagnosis
✓ After the individual employees are aware of the problem and it is informed to the
managers, managers will gather the information and define the problem.
✓ Information may be explored to determine the facts of the problem in detail.
✓ Such information may be gathered on a verbal and informal basis.
✓ Rationalize the information and stimuli relevant to the problem so as to classify the
situation.
✓ Act diplomatically to establish peer groups or those of political support for individual
views of the problem.
Development of alternative solutions
✓ After the problem is diagnosed clearly; the tendency of managers is that of searching
for readymade solutions.
✓ Through memory search in which the managers seek for known, existing or attempted
solutions.
✓ Passive search which entails waiting for possible solutions to be offered.
✓ This process of developing solutions takes place through discussions, debates,
consultations and brainstorming sessions and by sharing management wisdom and
experience.
Evaluation of alternative solutions
After the alternative solutions are developed, the solutions have to be formally
evaluated based on their inherent strengths and weaknesses and also based on the
environmental threats and opportunities for implementations.
The solutions are to be ranked on the basis of their weights in terms of strengths and
opportunities after eliminating the non- viable solutions in view of their weaknesses and
environmental threats for implementation
Selection of the best solution
✓ After the formal evaluation and ranking is completed, the managers tend to re-evaluate
the solution based on the managerial judgment followed by political bargaining as the
formal evaluation is not the predominant criterion for assessing the feasibility in
practice.
✓ Therefore, the techniques for evaluation of solutions also include social and political
process.
Implementation of the decision
Implementation of the selected solutions is a part of the decision- making process as
the process may be required to be recycled due to impediments in the process of
implementation.
The managers should secure the support of the top management for allocation of
resources; time act, regarding the implementation of the decision.
DIFFERENCES BETWEEN FORMAL AND INFORMAL ORGANIZATION
The formal and informal organizations differ from each other in the following respects:
Origin: The reason and circumstances of origin of both formal and
informalorganizations are totally different. Formal organizations are created by conscious
managerial decisions. But informal organizations arise naturally within the formal
organizationbecause of the tendency of the individual to associate and interact. Management
has no hand either in emergence or in abolition of informal groups.
Purpose: Formal organizations are created for realizing certain welldefined objectives.
But informal groups are created by organizational members for their social and psychological
satisfaction. There may be a conflict between the goals of the formal organizations and those
of the informal groups.
Activities: Activities in case of formal organization are differentiated and integrated
around the objectives of the enterprise and are formalized into work units or departments on a
horizontal basis. Individuals are fitted into jobs and positions and work groups as a result of
managerial decisions. In case of informal organization, there are no specific activities. They
arise from time to time as result of interactions and sentiments of the individuals. Informal
groups may be based on common taste, language, culture or any other factor
Structure: Formal organization is hierarchical, pyramid shaped and bureaucratic in
structure with well-defined positions, rigid delineation of roles and superior – subordinate
relationships on impersonal basis, enforcement of organizational order through a set ofpolicies,
procedures, and rules, conscious emphasis on status, differential based on authority, narrow
and downward oriented communication system, etc. On the other hand, informal organization
is looks like a complicated and common social network of interpersonal relationships. Informal
organization is loosely structure, with only unwritten norms of
behavior enforced by consent. Communication is informal and multi directional. There are no
rigid status differentials.
Membership. In a formal organization, every individual belongs to one work group
only and works under one superior. But in case of informal organization, one person can be a
member of more than one group, according to his choice. He may be a leader in one group and
a follower in another. There is no rigidity about group membership.
Orientation: In case of formal organization, values, goals and tasks are dominantly
economic and technical and they are concerned with productivity, profitability, efficiency,
survival and growth. But in the case of informal organization, values goals and tasks are
dominantly psycho-social, setting around individual and group satisfaction, affiliation,
cohesiveness and friendship.
Norms of Behavior: In a formal organization, individuals are required to behave in the
prescribed manner in their work situations. They are expected to behave in a rational manner.
Deviations from the standard norms are dealt with according to the processes of organizational
law and order. There is also a system of rewards and punishments. But in case of informal
organization, individual behavior and group behavior influence each other. Behavior is more
natural and social.
Interactions cut across formally established positions and relationships and there is free
exchange of feelings and ideas. An informal organization develops its own norms of behaviour
and a system of rewards and punishments to ensure adherence of group norms.
CONTROLLING
Controlling is an important function of management. It is the process that measures
currentperformance and guides it towards some predetermined objectives.
TYPES OF CONTROL
Feedback Control: This process involves collecting information about a finished task,
assessing that information and improvising the same type of tasks in the future.
Concurrent control: It is also called real-time control. It checks any problem and examines
it to take action before any loss is incurred. Example: control chart.
Predictive/ feedforward control: This type of control helps to foresee problem ahead of
occurrence. Therefore, action can be taken before such a circumstance arises.
Behavioral control: Behavioral control involves direct evaluation of managerial and
employee decision making, not the results of managerial decisions. Behavioral control
identified rewards for a wide range of criteria, such as in a balanced scorecard. When thereare
many external and internal factors, behavioral control and appreciative rewards are more
appropriate that may affect the relationship between manager’s decisions and organizational
performance. They are also suitable when managers must coordinate resources and capabilities
across different business units.
Financial and non-financial controls: Financial controls involve the management of a firm’s
costs and expenses so that they can be controlled in relation to budgetary amounts. Thus, in
this way management determines which aspects of its financial position, such as
profitability, sales or assets, are most important for the organization, tries to forecast them
through budgets, and then compares actual performance to budgetary performance. Does. At
a strategic level, total sales and indicators of profitability will be relevant strategic controls. An
increasing number of organizations are measuring customer loyalty, referral, employee
satisfaction and other such performance areas that are not financial. Unlike financial control,
the non-financial related control monitor aspects of the organization that are not promptly
financial in nature, but are expected to lead to positive performance outcomes in the future.
The principle behind such non-financial controls is that they can provide managers with a
glimpse of the progress of the organization before measuring financial results. And thistheory
has some practical support. A highly satisfied customer is the best predictor of future sales in
many of its businesses, so it regularly tracks customer satisfaction.
MECHANISTIC VS ADOPTIVE STRUCTURES

Mechanistic Adoptive

Individual specialization: Employees Tasks are more interdependent. Emphasis

work separately and specialize in one on relevance of tasks and organizational
task objectives.

Simple integrating mechanisms: Complex integrating mechanisms: task

Hierarchy of authority well-defined forces and teams are primary integrating
mechanisms

Centralization: Decision-making kept Decentralization: Authority to control

as high as possible. tasks is delegated.
Most communication is vertical. Most communication latera

Standardization: Extensive use made Mutual Adjustment: Face-to-face contact

of rules & Standard for coordination.
Operating Procedures Work process tends to be unpredictable

Much written communication Much verbal communication

Informal status in org based on size Informal status based on perceived

of empire brilliance

Organization is a network of Organization is network of persons or

positions, corresponding to tasks. teams. People work in different capacities
Typically each person corresponds to simultaneously and over time
one task

IMPACT OF TECHNOLOGY ON ORGANIZATIONAL DESIGN

 Three factors have been found to have an effect on the design of an organization. The
most appropriate design for an organization seems to be contingent on such variables as its
environment, the complexity of its technology and its size. The organization’s environment is
an external variable, its technology has internal as well as external aspects; and its size is
principally an internal factor.
Environment Variability: In assessing the possible impact of the environment on its design,
an organization must consider the amount of variability in its environment – that is, the
degree of change with which it must be prepared to cope. It must consider the frequency of
change, the magnitude of change, and the predictability of change. An organization’s
environment may be stable, changing or turbulent.
Stable Environment: A stable environment is one that experiences little or not unexpected or
sudden changes. Products require only minor changes, if any, and the market shows very few
fluctuations. For whatever reasons, the product attracts neither regulatory attention nor
technological innovation. Consequently, organizations in a stable environment remain
virtually unchanged for a long time. But stable environments are becoming scarcer. It is
difficult to think of many organizations that have made the same product with the same
process and sold it in essentially the same way for a long time.
Dynamic Environment: Dynamic environment is characterized by trends that are
predictable. Thus, organizations can be prepared to adjust to the changes when they occur.
For example, the environment of many service firms could be characterized as changing.
Trends in demand for services often depend on the social fabric of society. Values and tastes
certainly change over time, but these changes do not usually occur so unexpectedly or so
rapidly that service firms cannot adjust to them. The characteristic flexibility of service firms
helps them adapt rapidly to such changes. Firms that produce products can also predict trends
in the environment.
James Thompson
Several years after Woodward’s British studies, an American researcher, James D.
Thompson divided technologies into three categories on the basis of years of observation in
different organizations. He labeled technologies as long-linked, mediating or intensive.
Long-Linked Technology:
Thompson’s long-linked technology is characterized by a series of sequential tasks that
must be performed in a specified order. The assembly line is an example of long-linked
technology. This category closely parallels Woodward’s large-batch and mass-production
technology.
Mediating Technology:
Is a process that brings together groups that need to be interdependent for the desired
action to take place. For example, banking is a mediating technology; it facilitates the
interaction between depositors and borrowers. Employment and other talent search agencies
connect suppliers of specialized labor with buyers. This type of technology is intermediate in
flexibility. It allows for some standardization but can also adjust its output in response to
variations in the needs of the parties it seeks to link
Intensive Technology:
An intensive technology involves the application of specific skills, techniques or
services in order to make a change in an input. This type of technology describes custom
work and is consistent with Woodward’s unit production technology. The value of an intensive
technology is its flexibility.
Size
The impact of the sheer size of an organization on its design has attracted a great deal
of research attention. It seems obvious that organizations change as they get larger and that
more complex designs become necessary. But the research results are not unanimous. This may
be due in part to the fact that size has been measured in a variety of ways.
PERCEPTION
Perception is an intellectual process of transforming sensory stimuli to meaningful
information. It is the process of interpreting something that we see or hear in our mind and
use it later to judge and give a verdict on a situation, person, group etc.
It can be divided into six types −
✓ Of sound − The ability to receive sound by identifying vibrations.
✓ Of speech − The competence of interpreting and understanding the sounds of
language heard.
✓ Touch − Identifying objects through patterns of its surface by touching it.
✓ Taste − The ability to receive flavor of substances by tasting it through sensory organs
known as taste buds.
✓ Other senses − They approve perception through body, like balance, acceleration,
pain, time, sensation felt in throat and lungs etc.
✓ Of the social world − It permits people to understand other individuals and groups of
their social world. Example − Priya goes to a restaurant and likes their customer
service, so she will perceive that it is a good place to hang out and will recommend it
to her friends, who may or may not like it. Priya’s perception about the restaurant is
good.
LEARNING
Learning can be defined as the permanent change in behavior due to direct and
indirect experience. It means change in behavior, attitude due to education and training,
practice and experience. It is completed by acquisition of knowledge and skills, which are
relatively permanent.
FACTORS AFFECTING LEARNING
Learning is based upon some key factors that decide what changes will be caused by
this experience. The key elements or the major factors that affect learning are motivation,
practice, environment, and mental group. Coming back to these factors let us have a look on
these factors −
• Motivation − The encouragement, the support one gets to complete a task, to achieve
a goal is known as motivation. It is a very important aspect of learning as it acts
 gives us a positive energy to complete a task. Example − The coach motivated the
players to win the match.
• Practice − We all know that” Practice makes us perfect”. In order to be a perfectionist
or at least complete the task, it is very important to practice what we have learnt.
Example − We can be a programmer only when we execute the codes we have written.
• Environment − We learn from our surroundings; we learn from the people around
us. They are of two types of environments – internal and external. Example − A
child when at home learns from the family which is an internal environment, but when
sent to school it is an external environment.
• Mental group − It describes our thinking by the group of people we chose to hang out
with. In simple words, we make a group of those people with whom we connect. It can
be for a social cause where people with the same mentality work in the same direction.
Example − A group of readers, travellers, etc.
PERSONALITY
Personality is one of the indicators of individual differences. It is a commonly used
term. However, we need to understand it in a proper way as it has implications in many fields
including our academic success, interpersonal relationship, social behavior and job
performance. Personality traits also impact our physical as well as psychological health and
well-being. They are strong correlates of our happiness across temporal and situationalfactors.
Individual differences are also studied in other aspects such as intelligence, creativity,interests
(educational and vocational) and leadership.
INDIVIDUAL DIFFERENCES
Individual differences, as the term suggests, refers to how individuals differ from each
other. Different people have different interests; and their behavior is influenced by these
interests, likings, disliking’s, values and beliefs etc. Even if we are of the same age group or
gender, we are aware of how we differ from others and, others are also aware of these
differences. For instance, you may like dancing and gossiping with friends, but your friend
may not like these, she may prefer painting and interacting with a few friends only. Further,
your friend may be good in playing football, but you may not be that skilled in football. If
you take note of people around you, you will find many such differences. One student is good
in language whereas another student in the same class may be good in science. Thus, we find
individual differences in personality, intelligence, interest, motivation and so on.

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