DECISION MAKING

Managerial Decision making – the process of making a conscious choice between two or more rational
alternatives in order to select the one that will produce the most desirable consequences (benefits)
relative to unwanted consequences (costs).

Occasions for Decision originate in three distinct fields:

a) From authoritative communications from superiors:
b) From cases referred for decision by subordinates;
c) From cases originating in the initiative of the executive concerned.

Types of Decisions:

ROUTINE DECISIONS – focus on well-structured situations that recur frequently, involve standard
decision procedures, and entail a minimum of uncertainty.
Ex. Payroll processing, reordering standard inventory items, paying suppliers and so on.

NONROUTINE DECISIONS – deal with unstructured situations of a novel, nonrecurring nature, involve
incomplete knowledge, high uncertainty, and the use of subjective judgment or even intuition,
where “no alternatives can be proved to be the best possible solution in the particular problem.”

Level of Certainty:
Decisions may also be classified as being made under conditions of certainty, risk or uncertainty,
depending on the degree with which the future environment determining the outcome of these
decisions is known.

Management Science
a) A systems view of the problem – a viewpoint is taken that includes all of the significant
interrelated variables contained in the problem
b) The team approach – personnel with heterogeneous backgrounds and training work
together on specific problems
c) An emphasis on the use of formal mathematical models and statistical and quantitative
techniques.

A MODEL – is an abstraction or simplification of reality, designed to include only the essential features
that determine the behavior of a real system.
Types:
a) Physical model
b) Conceptual model
c) Mathematical model

Management Roles

Interpersonal Roles – perform duties that are ceremonial and symbolic in nature.

Figurehead Is symbolic head; required to perform a number of routine

duties of a legal or social nature.
Leader Is responsible for the motivation and direction of subordinates.
Liaison Maintains a network of outside contacts who provide favors
and information

Information Roles – managers collect information from organization and institutions outside their own.

Monitor Receives wide variety of information; serves as nerve center of

internal and external information of the organization.
Disseminator Transmits information received from outsiders or from other
subordinates to members of the organization.
Spokesperson Transmits information to outsiders on organization’s plans,
policies, actions, and results; serves as expert on organization’s
industry.

Decisional Roles –
Entrepreneur Searches organization and its environment for opportunities
and initiate projects to bring about change.
Disturbance handler Is responsible for corrective action when organization faces
important, unexpected disturbances.
Resource Allocator Makes or approves significant organizational decisions
Negotiator Is responsible for representing the organization at major
negotiations.

Management skills:

Technical Skills – encompasses the ability to apply specialized knowledge or expertise. Special knowledge
and practices of their field were learned through extensive formal education.
- professionals – engineers, surgeons

Human Skills – the ability to work with, understand, and motivate other people, both individually and in
groups.
-Many people are technically proficient but interpersonally incompetent, might be poor listeners,
unable to understand the needs of others, or have difficulty managing conflicts.
Manager must have good human skills to communicate, motivate, and delegate.

Conceptual Skills – managers have the mental ability to analyze and diagnose complex situations.
Decision making, requires managers to spot problems, identify alternative that can correct them,
evaluate those alternatives, and select the best one.

Four managerial activities:

1. Traditional Management – decision making, planning, and controlling.

2. Communication – Exchanging routine information and processing paperwork.
3. Human resource management – motivating, disciplining, managing conflict, staffing, and training.
4. Networking – Socializing, politicking, and interacting with outsiders.

Manager – is someone responsible for the work performance of one or more other persons in an
organization.

Levels of Management:

1. Top Managers – ensure that major performance objectives are set and accomplished in accord
with the organization’s purpose.
i. Should pay special attention to the external environment.
ii. Be alert to potential long-run problems and opportunities.
iii. Develop appropriate ways of dealing with them.

2. Middle managers – report to top managers and oversee the work of large departments or
divisions.
i. Should be able to develop and implement action plans consistent with higher
level objectives.
ii. They should be team-oriented and able to work well with peers to help
coordinate activities across the organization.

3. First line (Frontline) Managers – report to the middle managers and directly supervise non
managerial workers.
i. In charge of single work units and are expected to meet short term
performance objectives consistent with the plans of middle and top level
management.
Types of Managers:

1. Line Managers – are responsible for activities making direct contributions to the production of
the organizations basic goods or services.
2. Staff Managers – use special technical expertise to advise and support the efforts of line workers.
3. Functional Managers – are responsible for one area of activity such as finance, marketing,
production, personnel, accounting or sales.
4. General Managers – are responsible for complex organizational units that include many areas of
functional activity.
5. Administrators – are managers who work in a public or non profit organization.
Functions of management:

A. Planning – is the process of setting objectives and determining what should be done to
accomplish them.
B. Organizing - is the process of assigning tasks, allocating resources, and arranging the coordinated
activities to implement plans.
C. Leading – is the process of arousing enthusiasm to work hard and direct their efforts to fulfill
plans and accomplish objectives.
D. Controlling – is the process of measuring work performance, comparing results to objectives, and
taking corrective action as needed.

Management and Organizational Structure

Organization
> a plan for bringing assets into the position of greatest effectiveness or productivity
> consists of grouping of operations to achieve the advantages of specialization, the designation
of those who are to supervise each of these groups of operations and those who are to serve these
operations.
Management Structure
> The primary purpose is to facilitate the coordination and control over the activities of the
company.
Major Functions (Groups) of the Industrial Enterprise
1. Policy Group – responsible for the establishment of policies for all segments of the enterprise,
has direct operating responsibility for relations with stockholders, external investments, public
relations exclusive of customer and vendor relations and legal relations both internal and
external.

2. Administrative Group – includes all other functions, primarily internal in nature, which operates
under broad instruction or policies established by the top management or policy group

Administrative Functions
1. Product Development -

2. Purchasing – all activities connected to procurement from outside vendors of materials, parts,
supplies, equipment, and tooling. (procurement, Material investigation, subcontracting)

3. Industrial relations – employment, training and communications, health and safety, employee
service and benefits, labor relations, wage and salary administration

4. Manufacturing – includes the operations directly concerned with the making of the product,
including the processing of materials. (industrial engineering, plant service, plant engineering)

5. Marketing – distribution of a product. (Sales, promotion, service).

6. Internal Finance and other Office Services -

Organizational Structure
It defines how jobs and tasks are formally divided, grouped and coordinated. The type of
organizational structure would depend upon the type of organization itself and its philosophy of
operations. Basically, the structure can be mechanistic or organic in nature or a combination of
thereof. However, most organizational structures are still designed along mechanistic or classical
lines
Key Elements for Proper Organizational Structure
1. Work Specialization – to what degree are articles subdivided into separate jobs?

2. Departmentalization – on what basis of jobs will be grouped?

3. Chain of command – to whom individuals and groups report?

4. Span of control – up to how many individuals can manager efficiently direct?

5. Centralization vs. decentralization – who will be the sole maker of decisions?

6. Formalization – to what degree will there be rules and regulations to direct employees and
managers?

Types of Organization
 1. Line Organization – simplest form of structure and most common among small companies.
The authority is embedded in the hierarchical structure and it flows in a direct line from the top
of the managerial hierarchy down to different levels of managers and subordinates and further
down to the operative levels of workers. It clearly identifies authority, responsibility and
accountability at each level.
Advantage
1. Simplest
2. Unity of command
3. Better Discipline
4. Fixed responsibility
5. Flexibility
6. Prompt decisions

Disadvantage
1. Over reliance
2. Lack of specialization
3. Inadequate communications
4. Lack of coordination
5. Authority leadership

2. Line and Staff Organization – the functional specialists are added to the line, thus giving the line the
advantages of specialist. This type of organization is most common in our business economy and
especially among large enterprises. Staff is basically advisory in nature and usually does not possess and
command authority over line managers.
Two types of Staff
a. General Staff – usually similar to executives and serves as assistants to top management
b. Specialized Staff – provide expert staff advice and services to all employees on a company wide basis
- Advisory capacity
- Service capacity
- Control capacity
3. Functional Organization – originated with Fredrick W. Taylor and it permits a specialist in a given area
to enforce his directive within the clearly defined scope of his authority. The functional organization
features separate hierarchies for each function creating a larger scale version of functional departments.
Advantage
1. Specialization

2. Effective control

3. Efficiency

4. Economy

5. Expansion

Disadvantage
1. Confusion

2. Lack of coordination

3. Difficulty in fixing responsibility

4. Conflicts

5. Costly

6. Types of Organization

4. Line and Functional Staff Organization – through this type of organization, functional staff departments
were given responsibility and authority, within company policy established in consultation with the line
organization, over specialized activities such as inspection, time study, employment, purchasing, internal
transportation and shipping.