Unit II :Planning, Decision Unit II :Planning, Decision Making and Organizing.Making and Organizing.

PLANNING.PLANNING.Faculty:Dr.T.K.Raman,PhD.Faculty:Dr.T.K.Raman,PhD.

PLANNING.PLANNING.

After Completing your Lessons on After Completing your Lessons on PLANNING, you should understand:-PLANNING, you should understand:-1.What managerial planning is & why it is 1.What managerial planning is & why it is

important.important.2.The various types of plans and how they relate to 2.The various types of plans and how they relate to

one another.one another.3.The logical steps in planning.3.The logical steps in planning.4.How the steps in planning constitute a rational 4.How the steps in planning constitute a rational

approach to setting objectives and selecting the approach to setting objectives and selecting the means of reaching them.means of reaching them.

5.The meaning of the commitment principle.5.The meaning of the commitment principle.6.The importance of reviewing plans periodically.6.The importance of reviewing plans periodically.

Ensure that everyone understand the group’sEnsure that everyone understand the group’spurposes and objectives and also the methods topurposes and objectives and also the methods toachieve them. For this you have to design anachieve them. For this you have to design anenvironment for the effective performance ofenvironment for the effective performance ofindividuals working together in groups.individuals working together in groups.Planning involves selecting missions &Planning involves selecting missions &objectives and actions to achieve themobjectives and actions to achieve them. . PlanningPlanningalso strongly implies managerial innovationalso strongly implies managerial innovation..

TYPES of PLANS.TYPES of PLANS.

1.Purpose or Missions. 1.Purpose or Missions. THEY THEY 2.Objectives. 2.Objectives. AREARE 3.Strategies. 3.Strategies. LIKE LIKE 4.Policies. 4.Policies. AA5.Procedurers. 5.Procedurers. HIERARCHY.HIERARCHY.6.Rules. 6.Rules. HIERARCHYHIERARCHY 7.Programmes 7.Programmes OFOF8.Budgets. 8.Budgets. PLANS.PLANS.

STEPS IN PLANNING.STEPS IN PLANNING.

1.Being Aware of Opportunity.1.Being Aware of Opportunity.2.Setting Objectives or Goals.2.Setting Objectives or Goals.3.Considering Planning Premises.3.Considering Planning Premises.4.Identifying Alternatives.4.Identifying Alternatives.5.Comparing Alternatives in the light of 5.Comparing Alternatives in the light of of Goals sought.of Goals sought.6.Choosing an Alternative.6.Choosing an Alternative.7.Formulating Supporting Plans.7.Formulating Supporting Plans.8.Numberizing Plans by making Budgets.8.Numberizing Plans by making Budgets.{Refer 3.11-Fig.3.4 for more details}{Refer 3.11-Fig.3.4 for more details}

Commitment Principle.Commitment Principle.

Commitment Principle Implies that long –range planning is notCommitment Principle Implies that long –range planning is notreally planning for future decisions but, rather ,planning forreally planning for future decisions but, rather ,planning forfuture impact of today’s decisions. In other words, a decision is afuture impact of today’s decisions. In other words, a decision is acommitment ,normally of funds, direction of action or reputation.commitment ,normally of funds, direction of action or reputation.And decisions lie at the core of planning. While studies andAnd decisions lie at the core of planning. While studies andanalyses preceded decisions, any type of plan implies that someanalyses preceded decisions, any type of plan implies that somedecision has been made. Indeed ,a plan does not really exist asdecision has been made. Indeed ,a plan does not really exist assuch until a decision has been made. Knowing this ,the astutesuch until a decision has been made. Knowing this ,the astutemanager will recognize the validity of gearing longer-termmanager will recognize the validity of gearing longer-termconsiderations to present decisions. To do otherwise is toconsiderations to present decisions. To do otherwise is tooverlook the basic nature of both planning and decision making.overlook the basic nature of both planning and decision making.

Application of Commitment Application of Commitment Principle.Principle.

There is no uniform or arbitrary length of time for There is no uniform or arbitrary length of time for which a company should plan or for which a given which a company should plan or for which a given programme or any of its parts should be planned. An programme or any of its parts should be planned. An airplane company embarking on a new commercial airplane company embarking on a new commercial jet aircraft project should probably plan this jet aircraft project should probably plan this programme for at least 12 years ahead, with 5 or programme for at least 12 years ahead, with 5 or 6years for engineering and development and at least 6years for engineering and development and at least as many more years for production and sales, in order as many more years for production and sales, in order to recoup total costs and make reasonable profit.to recoup total costs and make reasonable profit.

See Figure 3.6 in page 3.17See Figure 3.6 in page 3.17

Planning-SUMMARY.Planning-SUMMARY.

1.Planning involves selecting missions and objectives and the action to 1.Planning involves selecting missions and objectives and the action to achieve themachieve them..

2.Plans requires decision making that is , choosing from among the alternative 2.Plans requires decision making that is , choosing from among the alternative future courses of action.future courses of action.

3.Planning and controlling are closely interrelated.3.Planning and controlling are closely interrelated.4.Thereare many types of plans, such as purposes and missions, objectives or 4.Thereare many types of plans, such as purposes and missions, objectives or

goals, strategies, policies, procedures,rules,programs and budgets.goals, strategies, policies, procedures,rules,programs and budgets.5.Once aware of an opportunity, a manager plans rationally by establishing 5.Once aware of an opportunity, a manager plans rationally by establishing

objectives, making assumptions about the present and future environment, objectives, making assumptions about the present and future environment, finding and evaluating alternative courses of action and choosing a course finding and evaluating alternative courses of action and choosing a course to follow like a plan & supporting budget, with attention to the total to follow like a plan & supporting budget, with attention to the total environment.environment.

6.The commitment principle says that plans should cover a period of time, 6.The commitment principle says that plans should cover a period of time, long enough to fulfill commitments involved in decisions made. Short long enough to fulfill commitments involved in decisions made. Short range plans should be coordinated with long range plans.range plans should be coordinated with long range plans.

Summary of major principles or Summary of major principles or Guides of planning.Guides of planning.

The Purpose and Nature of Planning:-The Purpose and Nature of Planning:-Principle of contribution to objectives, Principle of objectives, Principle ofPrinciple of contribution to objectives, Principle of objectives, Principle ofprimacy of planning, Principle of efficiency of plans. (Refer 6.13)primacy of planning, Principle of efficiency of plans. (Refer 6.13)

The Structure of Plans:-The Structure of Plans:-Principle of planning premises & Principle of the strategy andPrinciple of planning premises & Principle of the strategy andpolicy framework.policy framework.

The Process of Planning:-The Process of Planning:-Principle of the limiting factor, The commitment principle &Principle of the limiting factor, The commitment principle &Principle of Navigational change.Principle of Navigational change.(see 8.14)(see 8.14)

Management by ObjectivesManagement by Objectives

Defined as:Defined as:

‘ ‘A comprehensive managerial system that integrates A comprehensive managerial system that integrates many key managerial activities in a systematic many key managerial activities in a systematic manner and that is consciously directed toward the manner and that is consciously directed toward the effective and efficient achievement of an effective and efficient achievement of an organizational and individual objectives.’ organizational and individual objectives.’

All individuals do not share this view of MBO as a All individuals do not share this view of MBO as a system ofsystem of

managing. Some still define MBO in a very narrow managing. Some still define MBO in a very narrow limited way.limited way.

HOME WORK.HOME WORK.

TAKING A PLANNING TAKING A PLANNING PROBLEM THAT NOW FACES PROBLEM THAT NOW FACES YOU,PROCEED TO DEAL YOU,PROCEED TO DEAL WITH IT IN ACCORDANCE WITH IT IN ACCORDANCE WITH THE PLANNING STEPS WITH THE PLANNING STEPS OUTLINED IN THIS CHAPTER.OUTLINED IN THIS CHAPTER.

STRATEGIC PLANNING STRATEGIC PLANNING PROCESS.PROCESS.

KEY ELEMENTS:-KEY ELEMENTS:-

1.INPUTS.1.INPUTS.

2.ENTERPRISE PROFILE.2.ENTERPRISE PROFILE.

3.ORIENTATION of TOP MANAGERS.3.ORIENTATION of TOP MANAGERS.

4.PURPOSE and OBJECTIVES.4.PURPOSE and OBJECTIVES.

5.EXTERNAL ENVIRONMENT.5.EXTERNAL ENVIRONMENT.

DECISION MAKING.DECISION MAKING.

After Completing this chapter ,you should After Completing this chapter ,you should understand:understand:

1.What decision making is .1.What decision making is .2.The Principle of limiting factor.2.The Principle of limiting factor.3.The nature and process of evaluation of 3.The nature and process of evaluation of

alternatives.alternatives.4.Three approaches for selecting from alternatives.4.Three approaches for selecting from alternatives.5.The nature of programmed and unprogrammed 5.The nature of programmed and unprogrammed

decisions.decisions.6.Modern approaches to decision making in the 6.Modern approaches to decision making in the

light of uncertainties. light of uncertainties. 7.Factors determining the importance of the 7.Factors determining the importance of the

decision.decision.8.The utility of decision support systems (DSSs).8.The utility of decision support systems (DSSs).9.The systems approach to decision making.9.The systems approach to decision making.

What Decision Making is ?What Decision Making is ?

Decision Making is Defined as :Decision Making is Defined as : ‘‘SELECTION OF A COURSE OF ACTION FROM SELECTION OF A COURSE OF ACTION FROM

AMONG ALTERNATIVES.' AMONG ALTERNATIVES.' It is at the core of planning. Plans get translated intoIt is at the core of planning. Plans get translated intoaction only when a decision –a commitment ofaction only when a decision –a commitment ofresources,directioin,or reputation-has been made. Theresources,directioin,or reputation-has been made. Themain job of a manager is to take decision on what to bemain job of a manager is to take decision on what to bedone, who to do it, and when,where,and occasionallydone, who to do it, and when,where,and occasionallyeven how it will be done. Decision making is, however ,even how it will be done. Decision making is, however ,only a step in planning.only a step in planning.

Principle of Limiting Factor.Principle of Limiting Factor.

Limiting factor refers to the factors that stand in way ofLimiting factor refers to the factors that stand in way ofaccomplishing a desired objective. It is necessary toaccomplishing a desired objective. It is necessary torecognize the limiting factors in a given situation sorecognize the limiting factors in a given situation sothat it is possible to narrow the search for alternativesthat it is possible to narrow the search for alternativesthat are required in overcoming the limiting factors.that are required in overcoming the limiting factors.The principle of limiting factor is asThe principle of limiting factor is as

follows: follows: By recognizing and overcoming By recognizing and overcoming thosethose

factors that stand in the way of a goal, the factors that stand in the way of a goal, the bestbest

alternative course of action can be selected.alternative course of action can be selected.

The Nature & Purpose The Nature & Purpose of Evaluation of Alternativesof Evaluation of Alternatives

1.Quantitative and Qualitative Factors .1.Quantitative and Qualitative Factors .

2.Marginal Analysis.2.Marginal Analysis.

3.Cost Effectiveness Analysis.3.Cost Effectiveness Analysis.

Three Approaches for SELECTING Three Approaches for SELECTING an alternativean alternative

(i) Experience.(i) Experience.

(ii) Experimentation.(ii) Experimentation.

(iii) Research and Analysis(iii) Research and Analysis

The Nature of programmed & The Nature of programmed & unprogrammed decisions.unprogrammed decisions.

A Programmed Decision applies to structured or routineA Programmed Decision applies to structured or routineproblems. It relies primarily on previously establishes criteria. Itproblems. It relies primarily on previously establishes criteria. Itis in effect decision making by precedent.is in effect decision making by precedent.Eg:Withdrawing cash from ATM machine/Recording standardEg:Withdrawing cash from ATM machine/Recording standardinventory items.inventory items.A Non Programmed Decision is used for unstructured ,novel, andA Non Programmed Decision is used for unstructured ,novel, andill defined situations of a non-recurring nature.ill defined situations of a non-recurring nature.Eg:Marketing of a small video camera by Kodak.Eg:Marketing of a small video camera by Kodak.STRATEGIC DECISIONS IN GENERAL ARESTRATEGIC DECISIONS IN GENERAL ARENONPROGRAMMED DECISIONS,SINCE THEYNONPROGRAMMED DECISIONS,SINCE THEYREQUIRE SUBJECTIVE JUDGMENTS.REQUIRE SUBJECTIVE JUDGMENTS.

Modern Approaches to Decision Modern Approaches to Decision Making in the light of Uncertainties.Making in the light of Uncertainties.1.Risk Analysis1.Risk Analysis: An intelligent decision maker: An intelligent decision makerwould like to know the size & nature of the riskwould like to know the size & nature of the riskinvolved in choosing a course of action involved in choosing a course of action Eg:Specialists coming Eg:Specialists coming

with best estimateswith best estimates

2.Decision Trees:2.Decision Trees: Depicts in the form of a tree the Depicts in the form of a tree thedecisionpoints,chance events, and probabilities involved decisionpoints,chance events, and probabilities involved in various courses that might be undertaken.in various courses that might be undertaken.3.Preference Theory (Utility Theory)3.Preference Theory (Utility Theory) explains the explains theindividual attitude toward risk ;assumed that theindividual attitude toward risk ;assumed that thedecision makers allow the statistical probabilities asdecision makers allow the statistical probabilities asapplied to decision making.applied to decision making.

Factors Determining Factors Determining the Importance of the Decision.the Importance of the Decision.

Managerial Decisions should not only be correct butManagerial Decisions should not only be correct butalso economic as far as possiblealso economic as far as possible. . The following guideline will be useful:The following guideline will be useful:1.Less important decisions.1.Less important decisions.2.Extent of responsibility.2.Extent of responsibility.3.Size of resources involved.3.Size of resources involved.4.Degree of flexibility.4.Degree of flexibility.5.Degree of certainty of goals and premises.5.Degree of certainty of goals and premises.6.Impact of decisions.6.Impact of decisions.{Refer Page 6.9}{Refer Page 6.9}

The Utility of The Utility of Decision Support Systems (DSSs)Decision Support Systems (DSSs)

DSSs use computers to facilitate the decision DSSs use computers to facilitate the decision making process of semi structured tasks. It is making process of semi structured tasks. It is not to replace the managerial judgment ,but to not to replace the managerial judgment ,but to support it and to make the decision process support it and to make the decision process more effective.DSSs also help managers react more effective.DSSs also help managers react quickly to changing needs.quickly to changing needs.

MIS (Management Information Systems)& MIS (Management Information Systems)& DSSsDSSs

-similarities & differences.-similarities & differences.

The Systems Approach The Systems Approach to Decision Makingto Decision Making

Decisions cannot usually be made ,of course ,in aDecisions cannot usually be made ,of course ,in aclosed –system environment. Many elements ofclosed –system environment. Many elements ofthe environment of planning lie outside thethe environment of planning lie outside theenterprise. Every dept. or section of an enterpriseenterprise. Every dept. or section of an enterpriseis a sub system of the entire enterprise; Managersis a sub system of the entire enterprise; Managersof these units should be responsive to the policies &of these units should be responsive to the policies &programs of the units as well of the total enterprise.programs of the units as well of the total enterprise.Thinking and attitudes of the employees must be takenThinking and attitudes of the employees must be takeninto account whenever a manager makes a decision.into account whenever a manager makes a decision.

Comparison: MIS & DSSComparison: MIS & DSSMIS MIS (Management Information System(Management Information System)) V/SV/S DSS DSS (Decision Support System)(Decision Support System)

Focus on Structured tasks& routine decisions Focus on semi structured tasks, Focus on Structured tasks& routine decisions Focus on semi structured tasks, requiring.requiring.

e.g. use of procedures ,decision rules . Managerial judgment.e.g. use of procedures ,decision rules . Managerial judgment.

Emphasis on data storage. Emphasis on data manipulation Emphasis on data storage. Emphasis on data manipulation ..

Often only indirect access to data by managers. Direct data access by Often only indirect access to data by managers. Direct data access by managers.managers.

Reliance on computer expert. Reliance on manager’s own Reliance on computer expert. Reliance on manager’s own judgment.judgment.

Access to data possibly requiring a wait for Direct access to computer and Access to data possibly requiring a wait for Direct access to computer and data..data..

manager's turnmanager's turnMIS manager not completely understanding the Manager knowing decision MIS manager not completely understanding the Manager knowing decision

environment.environment.Nature of the decision.Nature of the decision.Emphasis on Efficiency. Emphasis on Effectiveness. Emphasis on Efficiency. Emphasis on Effectiveness.

Chapter SummaryChapter Summary

Decision making is the process of selecting a course of actionDecision making is the process of selecting a course of actionfrom alternatives; it is the core of planning. Mangers must makefrom alternatives; it is the core of planning. Mangers must makechoices on the basis of limited or bounded rationality-learningchoices on the basis of limited or bounded rationality-learningabout the situations. From the various alternatives, managersabout the situations. From the various alternatives, managersshould narrow them down to those few that deal with limitingshould narrow them down to those few that deal with limitingfactors; these are the ones that stand in the way of achieving afactors; these are the ones that stand in the way of achieving adesired objective. Alternatives are then evaluated in terms ofdesired objective. Alternatives are then evaluated in terms ofquantitative and qualitative factors. Programmed decisions arequantitative and qualitative factors. Programmed decisions aresuited for structural problems and routine decisions, mainly madesuited for structural problems and routine decisions, mainly madeby lower –level managers& non managers.NonProgrammedby lower –level managers& non managers.NonProgrammeddecisions are used for unstructured problems and non routinedecisions are used for unstructured problems and non routinedecisions are made especially by the upper level managers.decisions are made especially by the upper level managers.

Factors that determine the Factors that determine the importance of a decision are:-importance of a decision are:-

(a) The size of the commitment(a) The size of the commitment

(b) The flexibility or inflexibility of plans.(b) The flexibility or inflexibility of plans.

(c) The certainty or uncertainty of goals and (c) The certainty or uncertainty of goals and premises.premises.

(d) The degree to which variables can be (d) The degree to which variables can be measured.measured.

(e) The impact on people.(e) The impact on people.

ORGANIZING.ORGANIZING.The Nature & PurposeThe Nature & Purpose

After completing this chapter, you should understand:After completing this chapter, you should understand:

1.The purpose of an organization structure.1.The purpose of an organization structure.2.The meaning of ‘Organizing’ & ‘Organization’.2.The meaning of ‘Organizing’ & ‘Organization’.3.The distinction between Formal & Informal 3.The distinction between Formal & Informal

organization.organization.4.The Organization structures and their levels.4.The Organization structures and their levels.5.The concept of span of a management.5.The concept of span of a management.6.The nature of entrepreneuring and 6.The nature of entrepreneuring and

intrapreneuring.intrapreneuring.7.The logic of organizing and its relationship to 7.The logic of organizing and its relationship to

other managerial functions.other managerial functions.8.That organizing requires taking situations into 8.That organizing requires taking situations into

account.account.

ORGANIZATION ORGANIZATION must incorporate:-must incorporate:-

1.Verifiable objectives as part of planning.1.Verifiable objectives as part of planning.

2.A clear idea of the major duties or activities involved.2.A clear idea of the major duties or activities involved.

3.An understood area of discretion or authority so that 3.An understood area of discretion or authority so that the person filling the role knows what can be the the person filling the role knows what can be the accomplished goals.accomplished goals.

In addition to make a role work out for effectively,In addition to make a role work out for effectively,

provision should be made for supplying neededprovision should be made for supplying needed

information & other tools necessary for performanceinformation & other tools necessary for performance

in that role.in that role.

Formal & Informal Organization.Formal & Informal Organization.

Formal OrganizationFormal Organization : :means the intentional structure of means the intentional structure of

roles in a formally organized enterprise. Formal organization doesn't mean roles in a formally organized enterprise. Formal organization doesn't mean ‘rigid’‘rigid’

& it must be flexible. There should be room for discretion, for advantageous& it must be flexible. There should be room for discretion, for advantageousUtilization of creative talents and for recognition of individual likes& Utilization of creative talents and for recognition of individual likes&

capacities incapacities inthe most formal of organization.the most formal of organization.

Informal Organization: Informal Organization: means a net work ofmeans a net work of

personal and social relations not established or required by thepersonal and social relations not established or required by theformal organization but arising spontaneously as people associateformal organization but arising spontaneously as people associatewith one another .Any personal activity without conscious jointwith one another .Any personal activity without conscious jointpurpose ,even though contributing to joint results. E.g.: Playingpurpose ,even though contributing to joint results. E.g.: PlayingChess during lunch time may aid in the achievement of organizationChess during lunch time may aid in the achievement of organizationgoals. goals.

LOGIC of ORGANIZING:LOGIC of ORGANIZING:SIX STEPS.SIX STEPS.

1.Establishing enterprise objectives.1.Establishing enterprise objectives.2.Formulating supporting objectives, policies and plans.2.Formulating supporting objectives, policies and plans.3.Identifying and classifying the activities necessary to 3.Identifying and classifying the activities necessary to

accomplish these.accomplish these.4.Grouping these activities in the light of the human and material 4.Grouping these activities in the light of the human and material

resources available and the best way, under the circumstances resources available and the best way, under the circumstances of using them.of using them.

5.Delegating to the head of each group the authority necessary to 5.Delegating to the head of each group the authority necessary to perform the activities.perform the activities.

6.Tying the groups together horizontally and vertically through 6.Tying the groups together horizontally and vertically through authority relationships and information flows.authority relationships and information flows.

Organizational Environment forOrganizational Environment for

ENTREPRENEURING & ENTREPRENEURING & INTRAPRENEURING.INTRAPRENEURING.

EntrepreneuringEntrepreneuring: Apply to managing small business or even : Apply to managing small business or even large business and to managers carrying out entrepreneuring large business and to managers carrying out entrepreneuring roles through which they initiate changes to take advantage of roles through which they initiate changes to take advantage of opportunity. Commitment for systematic innovation is the opportunity. Commitment for systematic innovation is the main goal.main goal.

Intrapreneuring: Intrapreneuring: Apply to persons who focus on Apply to persons who focus on innovation and creativity and who transforms a innovation and creativity and who transforms a dream or an idea into a profitable venture by dream or an idea into a profitable venture by operating operating within within the organizational environment.the organizational environment.

Entrepreneur does the same thing but Entrepreneur does the same thing but outsideoutside the theorganizational setting.organizational setting.Some thinkers doesn’t demark these differences.Some thinkers doesn’t demark these differences.

Principle of SPAN of management & the Principle of SPAN of management & the

factors determining an effective SPANfactors determining an effective SPAN..

The Principle of Span of the managementThe Principle of Span of the management

states: That there is a limit to the number ofstates: That there is a limit to the number of

subordinates a manager can effectivelysubordinates a manager can effectively

supervise, but the exact number willsupervise, but the exact number will

depend on the impact of several underlyingdepend on the impact of several underlying

factors. Span cannot be uniform in anyfactors. Span cannot be uniform in any

organizationorganization

Basic Questions for Effective Basic Questions for Effective Organizing:Organizing:

1.What determines the span of management and hence the 1.What determines the span of management and hence the levels of organization?levels of organization?

The Principle of the span of The Principle of the span of management statesmanagement states

that there is a limit to the number ofthat there is a limit to the number ofsubordinates a manager can effectivelysubordinates a manager can effectivelysupervise ,but the exact number will supervise ,but the exact number will

depend ondepend onthe impact of several underlying the impact of several underlying

factors.factors.

Q:2.What determines the basic framework of Q:2.What determines the basic framework of departmentation and what are the strengths departmentation and what are the strengths

weaknesses of the basic forms ?weaknesses of the basic forms ?

i)i) Departmentation by TimeDepartmentation by Time: Grouping : Grouping activities on the basis of time-Shifts-for activities on the basis of time-Shifts-for economic, technological or other reasons. economic, technological or other reasons. Can be seen in Hospitals where round the Can be seen in Hospitals where round the clock activities are undertaken. Steel furnace clock activities are undertaken. Steel furnace –continuous and you can see even three –continuous and you can see even three shifts.shifts.

Advantages & Disadvantages see page 8.2)Advantages & Disadvantages see page 8.2)

ii)Departmentation by Enterprise ii)Departmentation by Enterprise FunctionFunction

Grouping activities : Grouping activities : Production: Production: Purchase of Raw Purchase of Raw materials, Package materials,Despatch materials, maintaining materials, Package materials,Despatch materials, maintaining machines, controlling the labor force at the production centers, machines, controlling the labor force at the production centers, paying excise duty, Inventory Control Etc..paying excise duty, Inventory Control Etc..

Selling :Selling :Finding customers, market survey,knowingcompetitors, Finding customers, market survey,knowingcompetitors, pricing, billing & realizing the money, Servicing. pricing, billing & realizing the money, Servicing.

Financing: Financing: Raising theRaising the money, collection, safeguarding, money, collection, safeguarding, accounting , spending Etc..accounting , spending Etc..

Advantages &Disadvantages : Page 8.2 see Figure 8.1 too.Advantages &Disadvantages : Page 8.2 see Figure 8.1 too.

iii) Departmentation by Territory or iii) Departmentation by Territory or Geography.Geography.

E.g.: Marketing organization or Banking net E.g.: Marketing organization or Banking net works grouping state wise/region wise/zone works grouping state wise/region wise/zone wise Etc..wise Etc..

Advantages vs. DisadvantagesAdvantages vs. Disadvantages

see 8.4 See Fig 8.2 toosee 8.4 See Fig 8.2 too

iv) Customer Departmentation.iv) Customer Departmentation.

Primary interest in customers-as they are the keyPrimary interest in customers-as they are the keyto the way activities are grouped when each ofto the way activities are grouped when each ofthe different things an enterprise does for themthe different things an enterprise does for themis managed by one dept head.is managed by one dept head.E.g. commercial Bank differentiating toE.g. commercial Bank differentiating toCommunity –city banking, Corporate banking,Community –city banking, Corporate banking,Institutional banking, Real Estate &MortgageInstitutional banking, Real Estate &Mortgageloans, Agricultural banking etc.. loans, Agricultural banking etc.. See 8.6 for Fig & Advantages & Disadvantages.See 8.6 for Fig & Advantages & Disadvantages.

v) Process or Equipment v) Process or Equipment Departmentation. Departmentation.

PresidentPresident Engineering Production Marketing Finance PersonalEngineering Production Marketing Finance Personal

II

I See Page 8.7I See Page 8.7

Punch presses Welding ElectroplatingPunch presses Welding Electroplating

Advantages:-Advantages:- Disadvantages:-Disadvantages:-Achieves economic advantage. Coordination of depts. difficult.Achieves economic advantage. Coordination of depts. difficult.

Uses specialized technology. Responsibility for profit is at the top.Uses specialized technology. Responsibility for profit is at the top.

Utilizes special skills. Is unsuitable for developing general managers.Utilizes special skills. Is unsuitable for developing general managers.

vi) Departmentation by Product.vi) Departmentation by Product.

Grouping activities on the basis of product or product lines Grouping activities on the basis of product or product lines

growing in multiline& large scale enterprises. Differentgrowing in multiline& large scale enterprises. Different

products–Product Managers, Sales & Service managers.products–Product Managers, Sales & Service managers.

Managerial job becomes complex.Managerial job becomes complex.

Advantages DisadvantagesAdvantages Disadvantages

Attention & effort on product line. Requires more persons withAttention & effort on product line. Requires more persons with

managerial abilities .managerial abilities .

See 8.8 See 8.8

MATRIX ORGANIZATIONMATRIX ORGANIZATION

It is the combination of Functional & ProductIt is the combination of Functional & Product

patterns of departmentation in the samepatterns of departmentation in the same

organization structure. More used in engineeringorganization structure. More used in engineering

functions & seldom used in Product marketingfunctions & seldom used in Product marketing

Organization. See Fig 8.6Organization. See Fig 8.6

Problems with matrix management.Problems with matrix management.

1.State of Conflict between functional & project managers as1.State of Conflict between functional & project managers as

both compete for limited resourcesboth compete for limited resources..2.Role conflict, role ambiguity and role overload may lead in2.Role conflict, role ambiguity and role overload may lead in

stress for the functional & project managers & team members.stress for the functional & project managers & team members.

3.An imbalance of authority & power as well as vertical and3.An imbalance of authority & power as well as vertical and

horizontal influence of the project and functional managers.horizontal influence of the project and functional managers.

4.Because of potential conflicts, managers may want to protect4.Because of potential conflicts, managers may want to protect

themselves against blame by putting everything in writing, whichthemselves against blame by putting everything in writing, which

increases administration costs.increases administration costs.

5.Matrix organization requires many time –consuming meetings.5.Matrix organization requires many time –consuming meetings.

See 8.12 See 8.12

Guidelines for making Matrix Guidelines for making Matrix Management Effective. Management Effective.

1.Define the objective of the project or task.1.Define the objective of the project or task.

2.Calarify the roles,authorities,and responsibilities of managers 2.Calarify the roles,authorities,and responsibilities of managers and team members.and team members.

3.Ensure that influence is based on knowledge and information, 3.Ensure that influence is based on knowledge and information, rather than on rank.rather than on rank.

4.Balance the power of functional and project managers.4.Balance the power of functional and project managers.

5.Select an experienced for the project who can provide leadership.5.Select an experienced for the project who can provide leadership.

6.Undertake organization and team development.6.Undertake organization and team development.

7.Install appropriate cost, time and quality controls that report 7.Install appropriate cost, time and quality controls that report deviations from standards in a timely manner.deviations from standards in a timely manner.

8.Reward project managers and team members fairly.8.Reward project managers and team members fairly.

CHAPTER SUMMARYCHAPTER SUMMARY1.Formal organization is the intentional structure of roles. Informal 1.Formal organization is the intentional structure of roles. Informal

Organization is a net work of personal and social relations neither Organization is a net work of personal and social relations neither established nor required by a formal authority but arising established nor required by a formal authority but arising spontaneously.spontaneously.

2.The term of ‘span of management' refer to the number of people a 2.The term of ‘span of management' refer to the number of people a manager can effectively supervise. A wide span of management manager can effectively supervise. A wide span of management results in few organizational levels and a narrow span results in results in few organizational levels and a narrow span results in many levels.many levels.

3.There is no definite number of people a a manager can always 3.There is no definite number of people a a manager can always effectively supervise; the number depends on several underlying effectively supervise; the number depends on several underlying factors. They include (a) the degree of subordinate training required factors. They include (a) the degree of subordinate training required and possessed (b) the clarity of authority delegated ( c) the clarity of and possessed (b) the clarity of authority delegated ( c) the clarity of plans (d) the rate of change (e) the use of objective standards (f) the plans (d) the rate of change (e) the use of objective standards (f) the effectiveness of communication technique (g) the amount of effectiveness of communication technique (g) the amount of personal contact needed and (h) the level in the organization.personal contact needed and (h) the level in the organization.

4.The steps in organizing include (a) formulating 4.The steps in organizing include (a) formulating objectives,subobjectives, policies, plans to achieve the ends (b) objectives,subobjectives, policies, plans to achieve the ends (b) identifying and classifying activities (c) grouping these activities (d) identifying and classifying activities (c) grouping these activities (d) delegating authority (e) coordinating authority as well as informal delegating authority (e) coordinating authority as well as informal relationshipsrelationships