Essential Management Concepts: Decision Making & Structure

Decision-Making Conditions

Certainty

Certainty means that all the information the decision maker needs is fully available.

Risk

Risk means that a decision has clear-cut goals and that good information is available, but the future outcomes associated with each alternative are subject to some chance of loss or failure. However, enough information is available to estimate the probability of a successful outcome versus failure.

Uncertainty

Uncertainty means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete. Factors that may affect a decision, such as price, production costs, volume, or future interest rates, are difficult to analyze and predict. Managers may have to make assumptions from which to forge the decision, even though the decision will be wrong if the assumptions are incorrect.

Intuition

Intuition represents a quick apprehension of a decision situation based on past experience but without conscious thought.

The Political Model of Decision Making

The third model of decision making is useful for making nonprogrammed decisions when conditions are uncertain, information is limited, and there are manager conflicts about what goals to pursue or what course of action to take. Most organizational decisions involve many managers who are pursuing different goals, and they have to talk with one another to share information and reach an agreement. Managers often engage in coalition building for making complex organizational decisions.

Coalition

A coalition is an informal alliance among managers who support a specific goal.

Organizational Structure & Design

Organizational Structure: Core Concepts

Organization structure is defined as the framework in which the organization defines how tasks are divided, resources are deployed, and departments are coordinated. It encompasses:

• The set of formal tasks assigned to individuals and departments;
• Formal reporting relationships, including lines of authority, decision responsibility, number of hierarchical levels, and span of managers’ control; and
• The design of systems to ensure effective coordination of employees across departments.

Structure is a powerful tool for reaching strategic goals, and a strategy’s success often is determined by its fit with organizational structure.

Organizing

Organizing is the deployment of organizational resources to achieve strategic goals.

Work Specialization (Division of Labor)

Work specialization, sometimes called division of labor, is the degree to which organizational tasks are subdivided into separate jobs.

Organization Chart

An organization chart is the visual representation of an organization’s structure.

Authority, Responsibility & Delegation

Key Structural Elements

Chain of Command

The chain of command is an unbroken line of authority that links all employees in an organization and shows who reports to whom.

Span of Management (Span of Control)

The span of management is the number of employees reporting to a supervisor. Sometimes called the span of control, this characteristic of structure determines how closely a supervisor can monitor subordinates. Traditional views of organization design recommended a span of management of about 7 to 10 subordinates per manager.

Centralization vs. Decentralization

Centralization means that decision authority is located near the top of the organization. With decentralization, decision authority is pushed downward to lower organizational levels.

Responsibility

Responsibility is the duty to perform the task or activity as assigned.

Accountability

Accountability means that the people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command.

Delegation

Delegation is the process managers use to transfer authority and responsibility to positions below them in the hierarchy.

Line Authority vs. Staff Authority

Line authority means that people in management positions have formal authority to direct and control immediate subordinates. Staff authority is narrower and includes the right to advise, recommend, and counsel in the staff specialists’ area of expertise. Staff authority is a communication relationship; staff specialists advise managers in technical areas.